<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1996
REGISTRATION NO. 333-17143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
------------------------
MICROSOFT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1144442
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
ONE MICROSOFT WAY
REDMOND, WASHINGTON 98052-6399
(206) 882-8080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
ROBERT A. ESHELMAN, ESQ.
ONE MICROSOFT WAY
REDMOND, WASHINGTON 98052-6399
(206) 882-8080
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
RICHARD B. DODD, ESQ. ANDREW D. SOUSSLOFF, ESQ.
PRESTON GATES & ELLIS SULLIVAN & CROMWELL
5000 COLUMBIA CENTER 125 BROAD STREET
701 FIFTH AVENUE NEW YORK, NEW YORK 10004-2498
SEATTLE, WASHINGTON 98104-7078
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses relating to the distribution will be borne by the registrant.
Such expenses are estimated to be as follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission................... $261,364
NASD Filing Fees and Expenses (Including Legal Fees)..................... 37,500
Nasdaq National Market Listing Fee....................................... 50,000
Transfer Agent and Registrar Fees........................................ 3,000
Legal Fees and Expenses.................................................. 180,000
Printing Expenses........................................................ 85,000
Trustee Fees............................................................. 5,000
Accountant's Fees and Expenses........................................... 51,500
Miscellaneous Expenses................................................... 51,636
--------
Total.......................................................... $725,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XII of the Restated Articles of Incorporation of the Company
authorizes the Company to indemnify any present or former director or officer to
the fullest extent not prohibited by the Washington Business Corporation Act,
public policy or other applicable law. The Washington Business Corporation Act
(Sections 23B.08.510 through .570) authorizes a corporation to indemnify its
directors, officers, employees, or agents in terms sufficiently broad to permit
such indemnification under certain circumstances for liabilities (including
provisions permitting advances for expenses incurred) arising under the
Securities Act.
The directors and officers of the Company are entitled to indemnification
by the Underwriters against any cause of action, loss, claim, damage, or
liability to the extent it arises out of or is based upon the failure of each
Underwriter to comply with the Prospectus delivery requirements under the
federal securities laws or any applicable state securities laws or upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in this Registration Statement and the Prospectus contained herein, as the
same shall be amended or supplemented, made in reliance upon and in conformity
with written information furnished to the Company by such Underwriter through
Goldman, Sachs & Co. expressly for use therein.
In addition, the Company maintains directors' and officers' liability
insurance under which the Company's directors and officers are insured against
loss (as defined in the policy) as a result of claims brought against them for
their wrongful acts in such capacities.
II-1
<PAGE> 3
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE OR FOOTNOTE
- ----------- ------------------------------------------------------------------ ----------------
<C> <S> <C>
1.1 Underwriting Agreement............................................
3.1 Restated Articles of Incorporation................................ (1)
3.2 Bylaws............................................................ (2)
4.1 Form of Amendment to the Registrant's Restated Articles of
Incorporation designating the rights and preferences with respect
to the Series A Preferred Shares..................................
4.2 Form of Indenture with respect to the % Convertible
Subordinated Preferred Notes Due 1999.............................
5.1 Opinion of Preston Gates & Ellis..................................
8.1 Opinion of Preston Gates & Ellis..................................
12.1 Computation of Ratio of Earnings to Fixed Charges.................
13.1 Quarterly and Market Information Incorporated by Reference to Page
28 of 1996 Annual Report to Shareholders ("1996 Annual Report")... (3)
13.2 (Intentionally Omitted)...........................................
13.3 Management's Discussion and Analysis of Financial Condition and
Results of Operations Incorporated by Reference to Pages 16-19,
22, and 23 of 1996 Annual Report.................................. (3)
13.4 Financial Statements Incorporated by Reference to Pages 1, 15, 20,
21, 24-29, and 31 of 1996 Annual Report........................... (3)
23.1 Consent of Deloitte & Touche LLP.................................. (1)
23.2 Consent of Preston Gates & Ellis.................................. (4)
24.1 Power of Attorney................................................. II-4
25.1 Statement of Eligibility of Trustee...............................
</TABLE>
- ---------------
(1) Filed previously with the Registrant's Registration Statement on Form S-3
(Commission File No. 333-17143).
(2) Incorporated by reference to Microsoft's Form 10-K for the fiscal year ended
June 30, 1994.
(3) Incorporated by reference to Microsoft's Form 10-K for the fiscal year ended
June 30, 1996.
(4) Contained within Exhibit 5.1.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That the undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security holders
that is incorporated by reference in the prospectus and furnished
II-2
<PAGE> 4
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under
the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide
such interim financial information.
(3) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by a final
adjudication of such issue.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Redmond, State of Washington on December 16,
1996.
MICROSOFT CORPORATION
/s/ MICHAEL W. BROWN
--------------------------------------
Michael W. Brown,
Vice President, Finance; Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed below on December 16, 1996 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------------------------------------- --------------------------------
<C> <S> <C>
/s/ MICHAEL W. BROWN Vice President, Finance; Chief
- ---------------------------------------- Financial Officer (Principal
Michael W. Brown Financial and Accounting
Officer)
* Chairman, Chief Executive
- ---------------------------------------- Officer, Director (Principal
William H. Gates Executive Officer)
* Director
- ----------------------------------------
Paul G. Allen
* Director
- ----------------------------------------
Jill E. Barad
* Director
- ----------------------------------------
Richard A. Hackborn
* Director
- ----------------------------------------
David F. Marquardt
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------------------------------------- --------------------------------
<S> <C>
* Director
- ----------------------------------------
Robert D. O'Brien
* Director
- ----------------------------------------
William G. Reed, Jr.
* Director
- ----------------------------------------
Jon A. Shirley
*By /s/ MICHAEL W. BROWN
- ----------------------------------------
Michael W. Brown
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE OR FOOTNOTE
- ----------- ------------------------------------------------------------------ ----------------
<C> <S> <C>
1.1 Underwriting Agreement............................................
3.1 Restated Articles of Incorporation................................ (1)
3.2 Bylaws............................................................ (2)
4.1 Form of Amendment to the Registrant's Restated Articles of
Incorporation designating the rights and preferences with respect
to the Series A Preferred Shares..................................
4.2 Form of Indenture with respect to the % Convertible
Subordinated Notes Due 1999.......................................
5.1 Opinion of Preston Gates & Ellis..................................
8.1 Opinion of Preston Gates & Ellis..................................
12.1 Computation of Ratio of Earnings to Fixed Charges.................
13.1 Quarterly and Market Information Incorporated by Reference to Page
28 of 1996 Annual Report to Shareholders ("1996 Annual Report")... (3)
13.2 (Intentionally Omitted)...........................................
13.3 Management's Discussion and Analysis of Financial Condition and
Results of Operations Incorporated by Reference to Pages 16-19,
22, and 23 of 1996 Annual Report.................................. (3)
13.4 Financial Statements Incorporated by Reference to Pages 1, 15, 20,
21, 24-29, and 31 of 1996 Annual Report........................... (3)
23.1 Consent of Deloitte & Touche LLP.................................. (1)
23.2 Consent of Preston Gates & Ellis.................................. (4)
24.1 Power of Attorney................................................. II-4
25.1 Statement of Eligibility of Trustee...............................
</TABLE>
- ---------------
(1) Filed previously with the Registrant's Registration Statement on Form S-3
(Commission File No. 333-17143).
(2) Incorporated by reference to Microsoft's Form 10-K for the fiscal year ended
June 30, 1994.
(3) Incorporated by reference to Microsoft's Form 10-K for the fiscal year ended
June 30, 1996.
(4) Contained within Exhibit 5.1.
<PAGE> 1
EXHIBIT 1.1
MICROSOFT CORPORATION
__% CONVERTIBLE EXCHANGEABLE
PRINCIPAL-PROTECTED
PREFERRED SHARES, SERIES A
(PAR VALUE $0.01 PER SHARE)
------------------
UNDERWRITING AGREEMENT
December ___, 1996
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated,
As representatives of
the several Underwriters
named in Schedule I hereto,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Microsoft Corporation, a Washington corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of __________, and, at the election of the Underwriters up to __________
additional, __% Convertible Exchangeable Principal-Protected Preferred Shares,
Series A, par value $0.01 per share, of the Company (the "Series A Preferred
Shares"), convertible at the Company's election at maturity into common shares,
par value $0.000025 per share, of the Company (the "Common Shares") or at the
option of the Company exchangeable into the Company's ___% Convertible
Subordinated Notes due 1999 (the "Convertible Notes"), which at the holder's
election convert at maturity into the right to receive an amount of
consideration payable, at the Company's option, in either cash or Common Shares.
The aggregate of __________ Series A Preferred Shares to be sold by the Company
is herein called the "Firm Shares" and the aggregate of __________ additional
Series A Preferred Shares to be sold by the Company is herein called the
"Optional Shares." The Firm Shares and the Optional Shares which the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
<PAGE> 2
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-17143)
(the "Initial Registration Statement") in respect of the Shares, the
Convertible Notes and Common Shares that may be issuable upon
conversion of the Shares or the Convertible Notes has been filed with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"); the Initial
Registration Statement and any post-effective amendment thereto, each
in the form heretofore delivered to you, and, excluding exhibits to
such registration statement, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; no other
document (other than (i) the pre-effective amendments thereto and (ii)
a registration statement, if any, increasing the size of the offering
(a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Act, which became effective upon filing), with respect to the
Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or
the Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act,
including any document or information incorporated therein by
reference, is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the
Act to be part of the Initial Registration Statement at the time it was
declared effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective , each as
amended at the time such part of the registration statement became
effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant
to Rule 424(b) under the Act, including any document or information
incorporated therein by reference, is hereinafter called the
"Prospectus");
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
2
<PAGE> 3
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder,
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto, and as to
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(e) Neither the Company nor any of its "Significant
Subsidiaries" (as defined in Regulation S-X under the Act) has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital shares or long-term debt of the Company or any of its
Significant Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial
3
<PAGE> 4
position, shareholders' equity or results of operations of the Company
or any of its Significant Subsidiaries (a "Material Adverse Effect"),
otherwise than as set forth or contemplated in the Prospectus;
(f) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Washington,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction; and each Significant Subsidiary of the Company has been
duly incorporated and is validly existing as a corporation in good
standing (where the concept of good standing is applicable) under the
laws of its jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued capital shares of the Company
have been duly and validly authorized and issued, and are fully paid
and non-assessable; the Common Shares initially issuable upon
conversion of the Shares or the Convertible Notes have been duly and
validly authorized and reserved for issuance and, when issued and
delivered in accordance with the provisions of the Shares or the
Convertible Notes and the Indenture referred to below, will be duly and
validly issued, fully paid and non-assessable, and will conform to the
description of the Common Shares contained in the Prospectus; and all
of the issued capital shares of each Significant Subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable, and (except for directors' qualifying shares
and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(h) The Shares have been duly and validly authorized and when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and non-assessable, and will
conform to the description of the Series A Preferred Shares contained
in the Prospectus;
(i) The Convertible Notes have been duly authorized and, when
issued and delivered upon exchange of the Shares, will have been duly
executed, authenticated, issued and delivered and will constitute valid
and legally binding obligations of the Company entitled to the benefits
provided by the indenture to be dated as of December ..., 1996 (the
"Indenture") between the Company and Citibank N.A., as Trustee (the
"Trustee"), under which they are to be issued, which will be
substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and qualified under
the Trust Indenture Act and, when executed and delivered by the
4
<PAGE> 5
Company and the Trustee, the Indenture will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Convertible
Notes and the Indenture will conform to the descriptions thereof
contained in the Prospectus in all material respects;
(j) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
and the consummation of the transactions contemplated will not result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to
which the Company or any of its Significant Subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its Significant
Subsidiaries is subject, nor will such action result in any violation
of the provisions of the Restated Articles of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares, the Convertible Notes and the
Common Shares issuable upon conversion of the Shares or the Convertible
Notes;
(k) Neither the Company nor any of its Significant
Subsidiaries is in violation of its Restated Articles of Incorporation
or other charter instrument or By-laws or in default in the performance
or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under the
caption "Description of Series A Preferred Shares", "Description of
Convertible Notes", and "Description of Capital Shares", insofar as
they purport to constitute a summary of the terms of the Series A
Preferred Shares, the Convertible Notes and the Common Shares,
respectively, and under the captions "Certain U.S. Federal Income Tax
Considerations" and "Underwriting", insofar as they purport to describe
the provisions of the laws, legal proceedings, and documents referred
to therein, are accurate, complete and fair in all material respects;
5
<PAGE> 6
(m) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a Material Adverse Effect; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(n) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(o) Deloitte & Touche LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder; and
(p) The Company and its Significant Subsidiaries own or
possess valid licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights, know-how and trade secrets
necessary to conduct the business of the Company and its Significant
Subsidiaries in the manner in which it has been and is being conducted,
and except as set forth in the Prospectus neither the Company nor any
of its Significant Subsidiaries has received any notice of infringement
of or conflict with (and knows of no such infringement of or conflict
with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights, know-how or trade
secrets which, if determined adversely to the Company or any of its
Significant Subsidiaries, would individually or in the aggregate have a
Material Adverse Effect; and the inventions, products or processes
referred to in the Prospectus do not, to the best knowledge of the
Company, infringe or conflict with any right or patent, or any
invention, product or process which is the subject of a patent
application known to the Company, which if determined adversely would
have a Material Adverse Effect.
Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $................., the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of
6
<PAGE> 7
the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ................. Optional Shares, at the purchase price
per share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against payment by or
on behalf of such Underwriter of the purchase price therefor by wire transfer,
payable to the order of the Company in federal (same-day) funds. The Company
will cause the certificates representing the Shares to be made available for
checking and packaging at least twenty-four hours prior to the Time of Delivery
(as defined below) with respect thereto at the office of Goldman, Sachs & Co.,
85 Broad Street, New York, New York 10004 (the "Designated Office"). The time
and date of such delivery and payment shall be, with respect to the Firm Shares,
10:00 a.m., New York time, on December ___, 1996 or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing, and, with
respect to the Optional Shares, 10:00 a.m., New York time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of
the Underwriters' election to purchase such Optional Shares pursuant to Section
2 hereof, or such other time and date as Goldman, Sachs & Co. and the Company
may agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
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<PAGE> 8
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof,
including the cross-receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(i) hereof, will be
delivered at the offices of Preston Gates & Ellis, 701 Fifth Avenue,
Seattle, Washington 98104 (the "Closing Location"), and the Shares will
be delivered at the Designated Office, all at each Time of Delivery. A
meeting will be held at the Closing Location at 12:00 p.m., Seattle
City time, on the New York Business Day next preceding each Time of
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you ______ copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares or the Convertible Notes or the Common
Shares issuable upon conversion of the Shares or the Convertible Notes
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares or the Convertible Notes or
the Common Shares issuable upon conversion of the Shares or the
Convertible Notes for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so
as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as
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<PAGE> 9
may be necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required by the
Underwriters to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares or the Convertible
Notes or the Common Shares issuable upon conversion of the Shares or
the Convertible Notes and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, to notify you and upon your request
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares, the Convertible Notes or the Common Shares issuable upon
conversion of the Shares or the Convertible Notes at any time nine
months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver
to such Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company (other
than (A) in connection with
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<PAGE> 10
the acquisition of an enterprise or tangible or intangible property
other than cash where the securities of the Company so disposed of (i)
are not more than two percent of the aggregate of the outstanding
Common Shares and Common Shares issuable upon conversion or exercise of
rights pursuant to other outstanding securities, including the Series A
Preferred Shares and employee stock options, (ii) are "restricted
securities" as defined in Rule 144 of the Act, or (iii) are transferred
to one or more persons who agree in a writing reasonably acceptable to
Goldman, Sachs & Co. not to dispose of such securities during the
balance of the 90-day period after the date of this Prospectus, or (B)
pursuant to existing employee stock option and purchase plans or (C) on
the conversion or exchange of convertible or exchangeable securities
outstanding on the date hereof) which are substantially similar to the
Shares or the Common Shares, or securities which are convertible into
or exchangeable for, or that represent the right to receive, Shares or
Common Shares or any substantially similar securities, without your
prior written consent, except for the Shares offered in the Prospectus;
(f) During a period of five years from the effective date of
the Registration Statement, to furnish to you such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request;
(g) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(h) To use its best efforts to list, subject to notice of
issuance, the Shares and the Convertible Notes, and the Common Shares
issuable upon conversion of the Shares or the Convertible Notes, on the
National Association of Securities Dealers Automated Quotations
National Market
("Nasdaq");
(i) To reserve and keep available at all times, free of
preemptive rights, Common Shares for the purpose of enabling the
Company to satisfy any obligations to issue Common Shares upon
conversion of the Shares or the Convertible Notes; and
(j) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares, the Convertible Notes and the
Common Shares issuable
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<PAGE> 11
upon conversion of the Shares or the Convertible Notes under the Act and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Blue Sky Memoranda,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares, the
Convertible Notes and the Common Shares issuable upon conversion of the Shares
or the Convertible Notes for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with any Blue Sky surveys; (iv) all fees and expenses in connection with listing
the Shares and the Convertible Notes on Nasdaq; (v) the filing fees incident to,
and the fees and disbursements of counsel for the Underwriters in connection
with, securing any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost of preparing
stock certificates and the Convertible Notes; (vii) the cost and charges of any
transfer agent or registrar; (viii) the fees and expenses of the Trustee and any
agent of the Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Indenture and the Convertible Notes; and (ix) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section . It is
understood, however, that, except as provided in this Section, and Sections 8
and 11 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
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<PAGE> 12
(b) Sullivan & Cromwell, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of
Delivery, with respect to the incorporation of the Company, the
validity of the Indenture, the Shares, the Convertible Notes and the
Common Shares issuable upon conversion of such Shares or the
Convertible Notes, the Registration Statement, the Prospectus, and
other related matters as you may reasonably request, and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters; in giving such
opinion or opinions, such counsel may rely as to all matters of
Washington law upon the opinion of Preston Gates & Ellis referred to in
paragraph (c) of this Section 7;
(c) Preston Gates & Ellis, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation under the laws of the State
of Washington, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the Shares have been
duly and validly authorized and when issued will be fully paid
and non-assessable, and the Common Shares initially issuable
upon conversion of the Shares or the Convertible Notes have
been duly and validly authorized and reserved for issuance
and, when issued and delivered in accordance with the
provisions of the Shares or the Convertible Notes and the
Indenture, will be duly and validly issued, fully paid and
non-assessable, and the Shares conform, and the Convertible
Notes and Common Shares will conform, to the descriptions
thereof contained in the Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business,
so as to require such qualification, or is subject to no
material liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of public officials or officers of the
Company, provided that such counsel shall state that they
believe that both you and they are justified in relying upon
such opinions and certificates);
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<PAGE> 13
(iv) Each Significant Subsidiary of the Company has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of
capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares
and except as otherwise set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of public officials or officers of the
Company or its Significant Subsidiaries, provided that such
counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(v) To the best of such counsel's knowledge and
other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company
or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of
such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company;
(vii) The issue and sale of the Shares being
delivered at such Time of Delivery by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the Indenture and the consummation of the
transactions herein contemplated will not result in a breach
or violation of any of the terms or provisions of, or
constitute a default under, any material indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any
of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Restated Articles of Incorporation or
By-laws of the Company or any statute or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties;
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<PAGE> 14
(viii) The Convertible Notes have been duly authorized
by the Company, and, when executed by the Company and
authenticated by the Trustee in accordance with the terms of
the Indenture and delivered upon exchange of the Shares, will
constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture;
and the Convertible Notes and the Indenture conform to the
descriptions thereof in the Prospectus; the Indenture has been
duly authorized by the Company, duly executed and delivered by
the Company and the Trustee and constitutes a valid and
legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles; and the Indenture has been duly qualified
under the Trust Indenture Act;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement except for the
registration under the Act of the Shares, the Convertible
Notes and the Common Shares issuable upon conversion of the
Shares or the Convertible Notes;
(x) Neither the Company nor any of its Significant
Subsidiaries is (a) in violation of its Restated Certificate
of Incorporation or any other charter instrument, or By-laws
or (b) in default in the performance or observance of any
material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument, known to
such counsel, to which it is a party or by which it or any of
its properties may be bound, except, in the case of this
clause (b), for defaults that individually or in the aggregate
would not have a Material Adverse Effect;
(xi) The statements set forth in the Prospectus
under the captions "Description of Series A Preferred Shares",
"Description of Convertible Notes", and "Description of
Capital Shares", insofar as they purport to constitute a
summary of the terms of the Shares, the Convertible Notes and
the Common Shares issuable upon conversion of the Shares or
the Convertible Notes, under the caption "Certain U.S. Federal
Income Tax Considerations" and under the caption
"Underwriting" insofar as they purport to describe provisions
of the laws and documents referred to therein, are accurate,
complete and fair in all material respects;
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<PAGE> 15
(xii) The Company is not an "investment company" or
an entity "controlled" by an "investment company," as such
terms are defined in the Investment Company Act;
(xiii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act, or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder.
In addition, such counsel shall state that nothing has
come to their attention that would cause them to believe that,
when such documents became effective or were so filed, as the
case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or, in the case of other
documents which were filed under the Exchange Act with the
Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made when such documents were so filed, not
misleading;
(xiv) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the rules and regulations thereunder.
Although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus, except for
those referred to in the opinion in subsection (xi) of this
section 7(c), such counsel shall state that nothing has come
to their attention that would cause them to believe that, as
of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to such
Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need
express no belief) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any
15
<PAGE> 16
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no belief) contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
belief) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; and, other than one or
more post-effective amendments to the Registration Statement
containing the form of Restated Articles of Incorporation of
the Company as filed with the State of Washington and the form
of completed Indenture, they do not know of any amendment to
the Registration Statement required to be filed or any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required
to be described in the Registration Statement or the
Prospectus which are not filed or described as required.
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Deloitte & Touche LLP shall have furnished to
you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered
prior to the execution of this Agreement is attached as Annex I(a)
hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex II(b)
hereto);
(e) (i) Neither the Company nor any of its Significant
Subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital shares or long term
debt of the Company or any of its Significant Subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
shareholders' equity or results of operations of the Company and its
Significant Subsidiaries, otherwise than as set forth or contemplated
in the Prospectus, the effect of which, in any such case described in
Clause (i) or (ii), is in the judgment of Goldman, Sachs & Co. so
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<PAGE> 17
material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(f) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or on
the Nasdaq National Market; (ii) a suspension or material limitation in
trading in the Company's securities on the Nasdaq National Market;
(iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment
of Goldman, Sachs & Co. makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of copies of the
Prospectus;
(h) The Shares to be sold at such Time of Delivery shall
have been duly listed for quotation on Nasdaq, subject to notice of
issuance; and
(i) The Company shall have furnished or caused to be furnished
to you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder
to be performed at or prior to such Time of Delivery, as to the matters
set forth in subsections (a) and (f) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the
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<PAGE> 18
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of any Underwriter through Goldman, Sachs & Co. expressly for use therein and
provided, further, that the Company shall not be liable to any Underwriter under
the indemnity agreement in this subsection (a) with respect to any Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Shares to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus as then amended or supplemented (excluding
documents incorporated by reference) in any case where such delivery is required
by the Act if the Company has previously furnished copies thereof to such
Underwriter and the loss, claim, damage or liability of such Underwriter results
from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was corrected in the Prospectus (or the Prospectus
as amended or supplemented).
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to
18
<PAGE> 19
such indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to,
or an admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably
19
<PAGE> 20
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within 36 hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of 36 hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such
20
<PAGE> 21
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company except for the expenses to be borne by
the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
or if any Shares are not delivered by the Company as provided herein because the
condition set forth in Section 7(f) hereof has not been met, the Company shall
not then be under any liability to any Underwriter except as provided in
Sections 6 and 8 hereof; but, if for any other reason any Shares are not
delivered by or on behalf of the Company as provided herein, because the Company
failed to satisfy any of the conditions set forth in Section 7 hereof, other
than the condition set forth in 7(f), or because of any refusal or failure of
the Company to perform any agreement herein or to comply with any provisions
hereof, other than by reason of a default by an Underwriter, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall then be under no
further liability to any Underwriter except as provided in Sections 6 and 8
hereof.
21
<PAGE> 22
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address has been
supplied to the Company. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
22
<PAGE> 23
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
MICROSOFT CORPORATION
By: ___________________________
Name:
Title:
Accepted as of the date hereof
at New York, New York:
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
By: ______________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
23
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
OTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- --------------------
<S> <C> <C>
Goldman, Sachs & Co...............................
Morgan Stanley & Co. Incorporated.................
TOTAL.................................... =============== ====================
</TABLE>
24
<PAGE> 25
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in the related in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the
1
<PAGE> 26
five most recent fiscal years included in the Prospectus and included
or incorporated by reference in Item 6 of the Company's Annual Report
on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or
included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus or included in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the
2
<PAGE> 27
basis for the corresponding amounts in the audited
consolidated financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and
any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated
by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
3
<PAGE> 28
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
4
<PAGE> 1
EXHIBIT 4.1
FORM
OF
RESTATED ARTICLES OF INCORPORATION
OF
MICROSOFT CORPORATION
Pursuant to RCW 23B.10.070, the following Restated Articles of
Incorporation are hereby submitted for filing:
ARTICLE I
NAME
The name of the corporation is Microsoft Corporation.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the "Corporation" is 5000
Columbia Center, 701 Fifth Avenue, Seattle, Washington 98104-7078, and the name
of the registered agent at such address is PTSGE Corp.
ARTICLE III
PURPOSE
The Corporation is organized for the purposes of transacting any and
all lawful business for which a corporation may be incorporated under the
Washington Business Corporation Act, Title 23B of the Revised Code of
Washington, now or hereafter in force (the "Act").
<PAGE> 2
ARTICLE IV
CAPITAL SHARES
4.1 AUTHORIZED SHARES. The total number of shares of stock which the
Corporation shall have authority to issue is 4,100,000,000 shares, which shall
consist of 4,000,000,000 shares of common stock, $.000025 par value per share
("Common Shares") and 100,000,000 shares of preferred stock , $.01 par value per
share ("Preferred Shares"). Except as otherwise provided in accordance with
these Articles of Incorporation, the Common Shares shall have the unlimited
voting rights, with each share being entitled to one vote, and the rights to
receive the net assets of the Corporation upon dissolution, with each share
participating on a prorata basis.
4.2 ISSUANCE OF PREFERRED SHARES. The Board of Directors is hereby
authorized from time to time, without shareholder action, to provide for the
issuance of Preferred Shares in one or more series not exceeding in the
aggregate the number of Preferred Shares authorized by these Articles of
Incorporation, as amended from time to time; and to determine with respect to
each such series the voting powers, if any (which voting powers, if granted, may
be full or limited), designations, preferences, and relative, participating,
option, or other special rights, and the qualifications, limitations, or
restrictions relating thereto, including without limiting the generality of the
foregoing, the voting rights relating to Preferred Shares of any series (which
may be one or more votes per share or a fraction of a vote per share, which may
vary over time, and which may be applicable generally or only upon the happening
and continuance of stated events or conditions), the rate of dividend to which
holders of Preferred Shares of any series may be entitled (which may be
cumulative or noncumulative), the rights of holders of Preferred Shares of any
series in the event of liquidation, dissolution, or winding up of the affairs of
the Corporation, the rights, if any, of holders of Preferred Shares of any
series to convert or exchange such Preferred Shares of such series for shares of
any other class or series of capital stock or for any other securities,
property, or assets of the Corporation or any subsidiary (including the
determination of the price or prices or the rate or rates applicable to such
rights to convert or exchange and the adjustment thereof, the time or times
during which the right to convert or exchange shall be applicable, and the time
or times during which a particular price or rate shall be applicable), whether
or not the shares of that series shall be redeemable, and if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates, and whether any shares of that series shall be redeemed
pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.
4.3 FILINGS AND EFFECTIVENESS. Before the Corporation shall issue any
Preferred Shares of any series, Articles of Amendment or Restated Articles of
Incorporation, fixing the voting powers, designations, preferences, the
relative, participating, option, or other rights, if any, and the
qualifications, limitations, and restrictions, if any, relating to the Preferred
Shares of such
-2-
<PAGE> 3
series, and the number of Preferred Shares of such series authorized by the
Board of Directors to be issued shall be filed with the secretary of state in
accordance with the Washington Business Corporation Act ("WBCA") and shall
become effective without any shareholder action. The Board of Directors is
further authorized to increase or decrease (but not below the number of such
shares of such series then outstanding) the number of shares of any series
subsequent to the issuance of shares of that series.
4.4 TERMS OF % CONVERTIBLE EXCHANGEABLE PRINCIPAL-PROTECTED
PREFERRED SHARES.
4.4.1 Designation and Amount. The shares of such series shall
be designated " % Convertible Exchangeable Principal-Protected Preferred
Shares, Series A," and the number of shares constituting such series shall
initially be a maximum of . The shares of such series shall have a stated par
value of $.01 per share. Such series is herein sometimes referred to as the
"Series A Preferred Shares."
4.4.2 Preferred Dividends. (a) The holders of Series A
Preferred Shares shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds of the Corporation legally available therefor,
cash dividends ("Preferred Dividends") at the annual rate of $ per share,
payable quarterly in arrears on each , , and in each
year (each a "Dividend Payment Date"), commencing , 199 (and, in
the case of any accrued but unpaid dividends, at such additional times and for
such interim periods, if any, as determined by the Corporation's Board of
Directors). In the event that any Dividend Payment Date shall fall on any day
other than a Business Day (as defined in paragraph (b) of Section 4.4.3), the
Preferred Dividend due on such Dividend Payment Date shall be paid on the
Business Day immediately following such Dividend Payment Date. Preferred
Dividends shall begin to accrue from the date of initial issuance of the Series
A Preferred Shares. Preferred Dividends will cease to accrue on Series A
Preferred Shares on the Conversion Date (as defined in Section 4.4.3) or on the
date of their earlier exchange for Convertible Notes (as defined in Section
4.4.7). Preferred Dividends shall accrue on a daily basis whether or not in any
such quarterly period there shall be funds of the Corporation legally available
therefor and whether or not such Preferred Dividends are declared, but Preferred
Dividends accrued for any period less than a full quarterly period between
Dividend Payment Dates (or, in the case of the first Preferred Dividend, from
the date of initial issuance of the Series A Preferred Shares through the first
Dividend Payment Date) shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Accrued but unpaid Preferred Dividends shall
cumulate as of the Dividend Payment Date on which they first become payable, but
no interest shall accrue on accumulated but unpaid Preferred Dividends.
Preferred Dividends shall be payable to holders of record as they appear on the
stock transfer records of the Corporation on such record dates, which shall be
not more than 60 days nor less than 10 days preceding the payment dates, as
shall be fixed by the Board of Directors.
(b) So long as any Series A Preferred Shares are outstanding,
the Corporation may not (i) declare or pay any dividends (other than dividends
payable in Common Shares or other shares of the Corporation ranking junior to
the Series A Preferred Shares) to holders of Common Shares or shares of the
Corporation of any other class ranking on a parity with or junior
-3-
<PAGE> 4
to the Series A Preferred Shares, or (ii) make any distributions of assets
(directly or indirectly, by purchase, redemption or otherwise) to the holders of
Common Shares or shares of the Corporation of any other class ranking on a
parity with or junior to the Series A Preferred Shares, unless all accrued and
unpaid Preferred Dividends, including the full dividends for the then quarterly
dividend period, shall have been paid or declared and funds sufficient for
payment thereof set apart.
(c) No dividends may be paid upon or declared or set apart for
any Preferred Shares ranking on a parity with the Series A Preferred Shares for
any quarterly dividend period, unless at the same time a like proportionate
dividend for the same quarterly dividend period, ratably in proportion to the
respective annual dividend rates fixed therefor, shall be paid upon or declared
or set apart for the Series A Preferred Shares.
4.4.3 Conversion of Series A Preferred Shares.
(a) Automatic Conversion on Conversion Date. On , 1999
(the "Conversion Date"), unless previously exchanged for Convertible Notes, as
described in Section 4.4.5 below, each outstanding Series A Preferred Share
shall automatically convert into that number of Common Shares of the Corporation
determined by multiplying each Series A Preferred Share by the Exchange Rate.
However, in lieu of delivering Common Shares on the Conversion Date, the
Corporation may, at its option, convert each Series A Preferred Share into an
amount of cash (a "Cash Settlement") determined by multiplying the Current
Market Price of the Common Shares by the Exchange Rate. In either event, each
holder of Series A Preferred Shares will receive in cash any unpaid dividends
which have accrued to the Conversion Date. The Exchange Rate is equal to (i) if
the Current Market Price of the Common Shares is greater than or equal to $
per share (the "Threshold Price"), a ratio equal to the Threshold Price divided
by the Current Market Price, (ii) if the Current Market Price is less than the
Threshold Price but greater than the Initial Price, a ratio of 1.0, and (iii) if
the Current Market Price is less than or equal to the Initial Price, a ratio
equal to the Initial Price divided by the Current Market Price, subject in each
case to adjustments in certain events.
(b) Definitions. As used in this Article:
"Business Day" means any day other than a Saturday,
Sunday or a day on which banking institutions in the state of New York
are authorized or obligated by law or executive order to close.
"Closing Price" of a Common Share on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of such share as reported by
The Nasdaq National Market on such date, or, if it is not so reported,
as reported in the composite transactions for the principal United
States securities exchange on which the Common Shares are so listed,
or, if it is not so listed on a United States national or regional
securities exchange, the last quoted bid price of the
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Common Shares in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid
price is not available, the market value of a Common Share on such date
as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Corporation.
"Current Market Prices" except as used in Section
4.4.3(d)(ii) and (iii), means the average Closing Price per Common
Share of the Corporation on the 20 Trading Days beginning on the
twenty-second Trading Day immediately prior to, but not including, the
Conversion Date and ending on the second Trading Day immediately prior
to, but not including, the Conversion Date.
"Initial Price" means $________ per Common Share.
"Trading Day" means a day on which the Common Shares
(i) are not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the
close of business and (ii) has traded at least once on the national or
regional securities exchange or association or over-the-counter market
that is the primary market for the trading of such security.
(c) Notice of Election to Settle in Cash; No Fractional
Shares. The Corporation shall mail written notice of its election to settle the
conversion of the Series A Preferred Shares in cash to each holder of record of
Series A Preferred Shares not less than 30 Trading Days nor more than 45 Trading
Days prior to the Conversion Date. Upon surrender of certificates for Series A
Preferred Shares to be converted, as required herein (except in the case of a
Cash Settlement), the Corporation shall issue the number of full Common Shares
issuable upon conversion thereof. No fractional Common Shares will be issued
upon conversion, but in lieu thereof, in the sole discretion of the Board of
Directors, either such fractional interest shall be rounded up to the next whole
share or an amount will be paid in cash by the Corporation for such fractional
interest based upon the Current Market Price.
(d) Exchange Rate Adjustments. The Exchange Rate shall be
subject to adjustment from time to time as provided below in this paragraph (d).
All adjustments to the Exchange Rate shall be calculated to the nearest
1/10,000th of a Common Share.
(i) If the Corporation shall either:
(1) pay a dividend or make a distribution
with respect to Common Shares in Common Shares,
(2) subdivide or split its outstanding
Common Shares,
(3) combine its outstanding Common Shares
into a smaller number of shares, or
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(4) issue by reclassification of its Common
Shares any capital shares of the Corporation,
then, in any such event, the Exchange Rate in effect immediately prior
to the record date for any such dividend or distribution or the
effective date of any such subdivision, split, combination or
reclassification, as the case may be, shall be adjusted so that the
holder of a Series A Preferred Share shall be entitled to receive on
the conversion of such Series A Preferred Share, the number of Common
Shares of the Corporation which such holder would have owned or been
entitled to receive upon the happening of any of the events described
above had such Series A Preferred Share been converted at the Exchange
Rate in effect at the time of the record date for any such dividend or
distribution or of the effective date of any such subdivision, split,
combination or reclassification, as the case may be. Such adjustment
shall become effective at the opening of business on the Business Day
next following the record date for such dividend or distribution in the
case of a dividend or distribution, and shall become effective
immediately after the effective date in the case of a subdivision,
split, combination, or reclassification; and any Common Shares issuable
in payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date for such
dividend for purposes of calculating the number of outstanding Common
Shares under clauses (ii) and (iii) below.
(ii) If the Corporation shall, after the date hereof,
issue rights or warrants to all holders of its Common Shares entitling
them (for a period not exceeding 45 days from the date of such
issuance) to subscribe for or purchase Common Shares at a price per
share less than the Current Market Price of the Common Shares
(determined pursuant to paragraph (d)(v) of this Section 4.4.3) on the
record date for the determination of Shareholders entitled to receive
such rights or warrants, then in each case the Exchange Rate shall be
adjusted by multiplying the Exchange Rate in effect on such record date
by a fraction of which the numerator shall be the number of Common
Shares outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional
Common Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding on the
date of issuance of such rights or warrants, immediately prior to such
issuance, plus the number of Common Shares which the aggregate offering
price of the total number of Common Shares so offered for subscription
or purchase would purchase at such Current Market Price (determined by
multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such Current
Market Price). Common Shares owned by the Corporation or by another
company of which a majority of the shares entitled to vote in the
election of directors are held, directly or indirectly, by the
Corporation shall not be deemed to be outstanding for purposes of such
computation. Such adjustment shall become effective at the opening of
business on the Business Day next following the record date for such
rights or warrants. To the extent that Common Shares are not delivered
after the expiration of such rights or warrants, the Exchange Rate
shall be readjusted to the Exchange Rate which would then be in effect
had the adjustment made upon the issuance of such rights or warrants
been made upon the basis of the
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<PAGE> 7
issuance of rights or warrants in respect of only the number of Common
Shares actually delivered.
(iii) If the Corporation shall pay a dividend or make
a distribution to all holders of its Common Shares consisting of
evidences of its indebtedness or other assets (including capital shares
of the Corporation other than Common Shares but excluding any cash
dividends or any distributions and dividends referred to in clause (i)
above), or shall issue to all holders of its Common Shares rights or
warrants to subscribe for or purchase any of its securities (other than
those referred to in clause (ii) above), then in each such case the
Exchange Rate shall be adjusted by multiplying the Exchange Rate in
effect on the record date for such dividend or distribution or the
determination of shareholders entitled to receive such rights or
warrants, as the case may be, by a fraction, of which the numerator
shall be the Current Market Price of the Common Shares (determined
pursuant to paragraph (d)(v) of this Section 4.4.3) on such record
date, and of which the denominator shall be such Current Market Price
per Common Share less the fair market value (as determined by the Board
of Directors of the Corporation, whose determination shall be
conclusive) as of such record date of the portion of the assets or
evidences of indebtedness so distributed, or of such subscription
rights or warrants, applicable to one Common Share. Such adjustment
shall become effective on the opening of business on the Business Day
next following the record date for such dividend or distribution or the
determination of shareholders entitled to receive such rights or
warrants, as the case may be.
(iv) Anything in this paragraph (d) notwithstanding,
the Corporation shall be entitled to make such upward adjustments in
the Exchange Rate, in addition to those required by this paragraph (d),
as the Corporation in its sole discretion shall determine to be
advisable, in order that any share dividends, subdivision of shares,
distribution of rights to purchase shares or securities, or
distribution of securities convertible into or exchangeable for shares
(or any transaction which could be treated as any of the foregoing
transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) hereafter made by the Corporation to its shareholders
shall not be taxable.
(v) As used in this paragraph (d), the "Current
Market Price" of the Common Shares on any date shall be the average
Closing Price per Common Share of the Corporation on the 20 Trading
Days immediately prior to, but not including, the date of
determination.
(vi) In any case in which this paragraph (d) shall
require that an adjustment as a result of any event become effective at
the opening of business on the Business Day next following a record
date and the date fixed for conversion pursuant to paragraph (a) of
this Section 4.4.3 occurs after such record date, but before the
occurrence of such event, the Corporation may in its sole discretion
elect to defer the following until after the occurrence of such event:
(A) issuing to the holder of any Series A Preferred Shares surrendered
for conversion the additional Common Shares issuable upon conversion
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before giving effect to such adjustment; and (B) paying to such holder
any amount in cash in lieu of a fractional Common Share pursuant to
paragraph (c) of this Section 4.4.3.
(e) Notice of Adjustments. Whenever the Exchange Rate is
adjusted as provided in paragraph (d) hereof, the Corporation will file with the
transfer agent for the Series A Preferred Shares a certificate with respect to
such adjustment, make a prompt public announcement thereof and mail a notice to
holders of the Series A Preferred Shares setting forth the adjusted Exchange
Rate, the method of calculation thereof in reasonable detail and the facts
requiring such adjustment and upon which such adjustment is based.
(f) Reservation of Common Shares. The Corporation shall
reserve and at all times keep available, free from preemptive rights, out of its
authorized but unissued Shares, for the purpose of effecting the conversion of
the Series A Preferred Shares, such number of shares of its duly authorized
Common Shares as will from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Shares; provided, however, that the
Corporation shall not be obligated to keep such shares available with respect to
any Series A Preferred Shares during any time that the conversion of such Series
A Preferred Shares is prohibited under a contract or other agreement between the
holder of such Series A Preferred Shares and the Corporation.
(g) Payment of Taxes. The Corporation will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of Common Shares on the conversion of Series A Preferred
Shares pursuant to this Section 4.4.3; provided, however, that the Corporation
shall not be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of Common Shares in a
name other than that of the registered holder of Series A Preferred Shares
redeemed or converted or to be redeemed or converted, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
4.4.4 Adjustment For Certain Consolidations or Mergers. In
case of any consolidation or merger to which the Corporation is a party (other
than a merger or consolidation in which the Corporation is the continuing
corporation and in which the Common Shares outstanding immediately prior to the
merger or consolidation remain unchanged), or in case of any sale or transfer to
another entity of the property of the Corporation as an entirety or
substantially as an entirety, or in case of any statutory share exchange with
another entity (other than in connection with an acquisition in which the Common
Shares outstanding immediately prior to the share exchange remain unchanged),
each Series A Preferred Share shall, after consummation of such transaction, be
subject to (i) conversion at the option of the holder into the kind and amount
of securities, cash, or other property receivable upon consummation of such
transaction by a holder of the number of
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Common Shares into which such Series A Preferred Shares might have been
converted immediately prior to consummation of such transaction and (ii)
conversion on the Conversion Date into the kind and amount of securities, cash,
or other property receivable upon consummation of such transaction by a holder
of the number of Common Shares into which such Series A Preferred Shares would
have been converted if the conversion on the Conversion Date had occurred
immediately prior to the date of consummation of such transaction assuming in
each case that such holder of Common Shares failed to exercise rights of
election, if any, as to the kind or amount of securities, cash, or other
property receivable upon consummation of such transaction (provided that if the
kind or amount of securities, cash, or other property receivable upon
consummation of such transaction is not the same for each nonelecting share,
then the kind and amount of securities, cash, or other property receivable upon
consummation of such transaction for each nonelecting share shall be deemed to
be the kind and amount so receivable per share by a plurality of the nonelecting
shares). The kind and amount of securities into which the Series A Preferred
Shares shall be convertible after consummation of such transaction shall be
subject to adjustment as described above under paragraph (d) of Section 4.4.3
following the date of consummation of such transaction. The Corporation may not
become a party to any such transaction unless the terms thereof are consistent
with the foregoing.
4.4.5 Exchangeability. (a) The Series A Preferred Shares are
exchangeable in whole, or in part, at the option of the Corporation, for the
Corporation's ___% Convertible Subordinated Notes Due 1999 (the "Convertible
Notes") on any dividend payment date beginning on __________, 199__ at the rate
of $[initial price] principal amount of Convertible Notes for each Series A
Preferred Share outstanding at the time of exchange. The Corporation may effect
such exchange only if accrued and unpaid dividends on the Series A Preferred
Shares have been paid in full. An exchange of less than all of the outstanding
Series A Preferred Shares is permitted only if, immediately after giving effect
to such exchange, (i) the aggregate outstanding principal amount of the
Convertible Notes is not less than $250,000,000, (ii) accrued and unpaid
interest on the outstanding Convertible Notes has been paid in full and certain
other requirements as specified in the related indenture for the Convertible
Notes have been satisfied, and (iii) the aggregate liquidating distribution
amount for the outstanding Series A Preferred Shares is not less than
$250,000,000. The Corporation will mail written notice of its intention to
exchange to each holder of record of the Series A Preferred Shares not less than
30 Trading Days or more than 45 Trading Days prior to the date fixed for
exchange.
(b) Upon the date fixed for exchange of Series A Preferred
Shares for Convertible Notes (the "Exchange Date"), if the Corporation has taken
all action required to authorize the issuance of the Convertible Notes in
exchange for Series A Preferred Shares, Series A Preferred Shares so exchanged
will no longer be deemed outstanding and all rights relating to such shares will
terminate, except only the right to receive dividends accrued and unpaid to and
including the Exchange Date and the right to receive the Convertible Notes upon
surrender of certificates representing the Series A Preferred Shares.
(c) In the event that Series A Preferred Shares have been
exchanged for Convertible Notes pursuant to this Section 4.4.5, the provisions
set forth under paragraphs (d), (f) and (g) of Section 4.4.3 hereof shall apply
with respect to the Convertible Notes to the same extent and to the same effect
as they would have applied to the Series A Preferred Shares.
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4.4.6 Liquidation Rights. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series A Preferred Shares are entitled to receive out of the
assets of the Corporation, whether such assets are stated capital or surplus of
any nature, before any payment is made or any assets are distributed to holders
of Common Shares and of any other class of shares of the Corporation ranking
junior to the Series A Preferred Shares, liquidating distributions in the amount
of $ per Series A Preferred Share plus accrued and unpaid dividends, whether or
not declared, without interest. If upon any liquidation, dissolution or winding
up of the Corporation, the amounts payable with respect to the Series A
Preferred Shares and any other preferred shares ranking as to any such
distribution on a parity with the Series A Preferred Shares are not paid in
full, the holders of the Series A Preferred Shares and of such other preferred
shares shall share ratably in any such distribution of assets in proportion to
the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of Series A Preferred Shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation nor merger of the Corporation with another corporation nor a
sale or transfer of all or part of the Corporation's assets for cash, securities
or other property shall be considered a liquidation, dissolution or winding up
of the Corporation for these purposes.
4.4.7 Voting Rights. Except as indicated below or otherwise
required by law, holders of Series A Preferred Shares will have no voting
rights. If (i) at any time the equivalent of six quarterly dividends payable on
the Series A Preferred Shares are accrued and unpaid or (ii) the Corporation
fails to make any payment upon mandatory redemption of the Series A Preferred
Shares, the number of directors of the Corporation shall be increased by two and
the holders of all outstanding Series A Preferred Shares, voting separately as a
class, shall be entitled to elect the additional two directors to serve until
all dividends accrued and unpaid have been paid or declared and funds set aside
to provide for payment in full or the Corporation fulfills its mandatory
redemption obligation, as the case may be.
In addition, without the vote or consent of the holders of at
least two-thirds of the Series A Preferred Shares then outstanding, the
Corporation may not (a) create or issue or increase the authorized number of
shares of any class or series of shares ranking prior to the Series A Preferred
Shares either as to dividends or upon liquidation, dissolution or winding up, or
any security convertible into or exercisable or exchangeable for such Shares,
(b) purchase or redeem less than all of the Series A Preferred Shares then
outstanding when any dividends on the Series A Preferred Shares are in arrears,
or (c) amend, alter or repeal any of the provisions of the Articles of
Incorporation so as to affect any right, preference, privilege or voting power
of the Series A Preferred Shares or the holders thereof; provided, however, that
any increase in the amount of authorized Preferred Shares or the creation and
issuance of any other class of Preferred Shares, or any increase in the amount
of authorized shares of such class or of any other class of Preferred Shares, in
each case ranking on a parity with or junior to the Series A Preferred Shares
with respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to affect such
rights, preferences or voting powers.
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ARTICLE V
NO PREEMPTIVE RIGHT'S
Shareholders of the Corporation have no preemptive rights to acquire
additional shares of stock or securities convertible into shares of stock issued
by the Corporation.
ARTICLE VI
DIRECTORS
6.1 NUMBER. The number of directors of the Corporation shall be fixed
in the manner specified by the bylaws of the Corporation.
6.2 VACANCIES. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors shall be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, unless for any reason there are no directors in office
in which case they shall be filled by a special election by shareholders.
ARTICLE VII
ELECTION OF DIRECTORS
Shareholders of the Corporation shall not have the right to cumulate
votes in the election of directors.
ARTICLE VIII
SPECIAL SHAREHOLDER MEETINGS
Special meetings of the shareholders of the Corporation for any purpose
or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in the bylaws of the Corporation, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons.
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ARTICLE IX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, adopt, repeal,
alter, amend, and rescind the bylaws of the Corporation by a resolution adopted
by a majority of the directors.
ARTICLE X
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
except for:
(a) Acts or omissions involving intentional misconduct by the
director or a knowing violation of law by the director;
(b) Conduct violating Section 23B.08.310 of the Act (which
involves distributions by the Corporation);
(c) Any transaction from which the director will personally
receive a benefit in money, property, or services to which the
director is not legally entitled.
If the Washington Business Corporation Act is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent not prohibited by the Washington Business Corporation Act, as
so amended. The provisions of this Article shall be deemed to be a contract with
each Director of the Corporation who serves as such at any time while such
provisions are in effect, and each such Directors shall be deemed to be serving
as such in reliance on the provisions of this Article. Any repeal or
modification of the foregoing paragraph by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XI
MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS
A merger, share exchange, sale of substantially all of the
Corporation's assets, or dissolution must be approved by the affirmative vote of
a majority of the Corporation's outstanding shares entitled to vote, or if
separate voting by voting groups is required then by not less than a majority of
all the votes entitled to be cast by that voting group.
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ARTICLE XII
INDEMNIFICATION
12.1 DEFINITIONS. As used in this Article:
a. "Agent" means an individual who is or was an agent of the
Corporation or an individual who, while an agent of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. "Agent" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of an
agent.
b. "Corporation" means the Corporation, and any domestic or
foreign predecessor entity which, in a merger or other transaction,
ceased to exist.
c. "Director" means an individual who is or was a director of
the Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as a
director officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. "Director" includes, unless
the context requires otherwise, the spouse, heirs, estate and personal
representative of a director.
d. "Employee" means an individual who is or was an employee of
the Corporation or an individual, while an employee of the Corporation,
is or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise- "Employee" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of an
employee.
e. "Expenses" include counsel fees.
f. "Indemnitee" means an individual made a party to a
proceeding because the individual is or was a Director, Officer,
Employee, or Agent of the Corporation, and who possesses
indemnification rights pursuant to these Articles or other corporate
action. "Indemnitee" includes, unless the context requires otherwise,
the spouse, heirs, estate, and personal representative of such
individuals.
g. "Liability" means the obligation to pay a judgment,
settlement penalty, fine, including an excise tax with respect to an
employee benefit plan, or reasonable Expenses incurred with respect to
a proceeding.
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h. "Officer" means an individual who is or was an officer of
the Corporation (regardless of whether or not such individual was also
a Director) or an individual who, while an officer of the Corporation,
is or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. "Officer" includes, unless the context requires
otherwise, the spouse, heirs, estate and personal representative of an
officer.
i. "Party" includes an individual who was, is, or is
threatened to be named a defendant, respondent or witness in a
proceeding.
j. "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, derivative, criminal,
administrative, or investigative, and whether formal or informal.
12.2 INDEMNIFICATION RIGHTS OF DIRECTORS AND OFFICERS. The Corporation
shall indemnify its Directors and Officers to the full extent not prohibited by
applicable law now or hereafter in force against liability arising out of a
Proceeding to which such individual was made a Party because the individual is
or was a Director or an Officer. However, such indemnity shall not apply on
account of:
(a) Acts or omissions of a Director or Officer finally adjudged to
be intentional misconduct or a knowing violation of law;
(b) Conduct of a Director or Officer finally adjudged to be in
violation of Section 23B.08.310 of the Act relating to
distributions by the Corporation; or
(c) Any transaction with respect to which it was finally adjudged
that such Director or Officer personally received a benefit in
money, property, or services to which the Director or Officer
was not legally entitled.
Subject to the foregoing, it is specifically intended that Proceedings covered
by indemnification shall include Proceedings brought by the Corporation
(including derivative actions) Proceedings by government entities and
governmental officials or other third party actions.
12.3 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay Expenses in advance of the final disposition of a
Proceeding to Employees and Agents of the Corporation who are not also
Directors, in each case to the same extent as to a Director with respect to the
indemnification and advancement of Expenses pursuant to rights granted under, or
provided by, the Act or otherwise.
12.4 PARTIAL INDEMNIFICATION. If an Indemnitee is entitled to
indemnification by the Corporation for some or a portion of Expenses,
liabilities, or losses actually and reasonably
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incurred by Indemnitee in an investigation, defense, appeal or settlement but
not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, liabilities or losses to
which Indemnitee is entitled.
12.5 PROCEDURE FOR SEEKING INDEMNIFICATION AND/OR ADVANCEMENT OF
EXPENSES. The following procedures shall apply in the absence of (or at the
option of the Indemnitee, in lieu thereof), specific procedures otherwise
applicable to an Indemnitee pursuant to a contract, trust agreement, or general
or specific action of the Board of Directors:
12.5.1 Notification and Defense of Claim. Indemnitee shall
promptly notify the Corporation in writing of any proceeding for which
indemnification could be sought under this Article. In addition,
Indemnitee shall give the Corporation such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.
With respect to any such proceeding as to which Indemnitee has notified
the Corporation:
(a) The Corporation will be entitled to participate
therein at its own expense; and
(b) Except as otherwise provided below, to the extent
that it may wish, the Corporation, jointly with any
other indemnifying party similarly notified, will be
entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. Indemnitee's consent to
such counsel may not be unreasonably withheld.
After notice from the Corporation to Indemnitee of its
election to assume the defense, the Corporation will not be liable to
Indemnitee under this Article for any legal or other Expenses
subsequently incurred by Indemnitee in connection with such defense.
However, Indemnitee shall continue to have the right to employ its
counsel in such proceeding, at Indemnitee's expense; and if:
(i) The employment of counsel by Indemnitee has
been authorized by the Corporation;
(ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest
between the Corporation and Indemnitee in
the conduct of such defense; or
(iii) The Corporation shall not in fact have
employed counsel to assume the defense of
such proceeding,
the fees and Expenses of Indemnitee's counsel shall be at the expense
of the Corporation.
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The Corporation shall not be entitled to assume the defense of
any proceeding brought by or on behalf of the Corporation or as to
which Indemnitee shall reasonably have made the conclusion that a
conflict of interest may exist between the Corporation and the
Indemnitee in the conduct of the defense.
12.5.2 Information to be Submitted and Method of Determination
and Authorization of Indemnification. For the purpose of pursuing
rights to indemnification under this Article, the Indemnitee shall
submit to the Board a sworn statement requesting indemnification and
reasonable evidence of all amounts for which such indemnification is
requested (together, the sworn statement and the evidence constitute an
"Indemnification Statement").
Submission of an Indemnification Statement to the Board shall
create a presumption that the Indemnitee is entitled to indemnification
hereunder, and the Corporation shall, within sixty (60) calendar days
thereafter, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless: (1) within
such sixty (60) calendar day period it shall be determined by the
Corporation that the Indemnitee is not entitled to indemnification
under this Article; (2) such determination shall be based upon clear
and convincing evidence (sufficient to rebut the foregoing
presumption); and (3) the Indemnitee shall receive notice in writing of
such determination, which notice shall disclose with particularity the
evidence upon which the determination is based.
The foregoing determination may be made: (1) by the Board of
Directors by majority vote of a quorum of Directors who are not at the
time parties to the proceedings; (2) if a quorum cannot be obtained, by
majority vote of a committee duly designated by the Board of Directors
(in which designation Directors who are parties may participate)
consisting solely of two (2) or more Directors not at the time parties
to the proceeding; (3) by special legal counsel; or (4) by the
shareholders as provided by Section 23B.08.550 of the Act.
Any determination that the Indemnitee is not entitled to
indemnification, and any failure to make the payments requested in the
Indemnification Statement, shall be subject to judicial review by any
court of competent jurisdiction.
12.5.3 Special Procedure Regarding Advance for Expenses. An
Indemnitee seeking payment of Expenses in advance of a final
disposition of the proceeding must furnish the Corporation, as part of
the Indemnification Statement:
(a) A written affirmation of the Indemnitee's
good faith belief that the Indemnitee has
met the standard of conduct required to be
eligible for indemnification; and
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<PAGE> 17
(b) A written undertaking, constituting an
unlimited general obligation of the
Indemnitee, to repay the advance if it is
ultimately determined that the Indemnitee
did not meet the required standard of
conduct.
Upon satisfaction of the foregoing the Indemnitee shall have a
contractual right to the payment of such Expenses.
12.5.4 Settlement. The Corporation is not liable to indemnify
Indemnitee for any amounts paid in settlement of any proceeding without
the Corporation's written consent. The Corporation shall not settle any
proceeding in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the
Corporation nor Indemnitee may unreasonably withhold its consent to a
proposed settlement.
12.6. CONTRACT AND RELATED RIGHTS.
12.6.1 Contract Rights. The right of an Indemnitee to
indemnification and advancement of Expenses is a contract right upon
which the Indemnitee shall be presumed to have relied in determining to
serve or to continue to serve in his or her capacity with the
Corporation. Such right shall continue as long as the Indemnitee shall
be subject to any possible proceeding. Any amendment to or repeal of
this Article shall not adversely affect any right or protection of an
Indemnitee with respect to any acts or omissions of such Indemnitee
occurring prior to such amendment or repeal.
12.6.2 Optional Insurance, Contracts, and Funding. The
Corporation may:
(a) Maintain insurance, at its expense, to
protect itself and any Indemnitee against
any liability, whether or not the
Corporation would have power to indemnify
the individual against the same liability
under Section 23B.08.5 10 or .520 of the
Act;
(b) Enter into contracts with any Indemnitee in
furtherance of this Article and consistent
with the Act; and
(c) Create a trust fund, grant a security
interest, or use other means (including
without limitation a letter of credit) to
ensure the payment of such amounts as may be
necessary to effect indemnification as
provided in this Article.
12.6.3 Severability. If any provision or application of this
Article shall be invalid or unenforceable, the remainder of this
Article and its remaining applications shall not be affected thereby,
and shall continue in full force and effect.
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<PAGE> 18
12.6.4 Right of Indemnitee to Bring Suit. If (1) a claim under
this Article for indemnification is not paid in full by the Corporation
within sixty (60) days after a written claim has been received by the
Corporation; or (2) a claim under this Article for advancement of
Expenses is not paid in full by the Corporation within twenty (20) days
after a written claim has been received by the Corporation, then the
Indemnitee may, but need not, at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. To the
extent successful in whole or in part, the Indemnitee shall be entitled
to also be paid the expense (to be proportionately prorated if the
Indemnitee is only partially successful) of prosecuting such claim.
Neither (1) the failure of the Corporation (including its Board of
Directors, its shareholders, or independent legal counsel) to have made
a determination prior to the commencement of such proceeding that
indemnification or reimbursement or advancement of Expenses to the
Indemnitee is proper in the circumstances; nor (2) an actual
determination by the Corporation (including its Board of Directors, its
shareholders, or independent legal counsel that the Indemnitee is not
entitled to indemnification or to the reimbursement or advancement of
Expenses, shall be a defense to the proceeding or create a presumption
that the Indemnitee is not so entitled.
12.6.5 Nonexclusivity of Rights. The right to indemnification
and the payment of Expenses incurred in defending a Proceeding in
advance of its final disposition granted in this Article shall not be
exclusive of any other right which any Indemnitee may have or hereafter
acquire under any statute, provision of this Article or the Bylaws,
agreement, vote of shareholders or disinterested directors, or
otherwise. The Corporation shall have the express right to grant
additional indemnity without seeking further approval or satisfaction
by the shareholders. All applicable indemnity provisions and any
applicable law shall be interpreted and applied so as to provide an
Indemnitee with the broadest but nonduplicative indemnity to which he
or she is entitled.
12.7 CONTRIBUTION. If the indemnification provided in Section 12.2 of
this Article is not available to be paid to Indemnitee for any reason other than
those set forth in subparagraphs 12.2(a), 12.2(b), and 12.2(c) of Section 12.2
of this Article (for example, because indemnification is held to be against
public policy even though otherwise permitted under Section 12.2) then in
respect of any proceeding in which the Corporation is jointly liable with
Indemnitee (or would be if joined in such proceeding), the Corporation shall
contribute to the amount of loss paid or payable by Indemnitee in such
proportion as is appropriate to reflect:
The relative benefits received by the Corporation on
the one hand and the Indemnitee on the other hand
from the transaction from which such proceeding
arose, and
The relative fault of the Corporation on the one hand
and the Indemnitee on the other hand in connection
with the events which resulted in such loss, as well
as any other relevant equitable consideration.
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<PAGE> 19
The relative benefits received by and fault of the Corporation on the
one hand and the Indemnitee on the other shall be determined by a court of
appropriate jurisdiction (which may be the same court in which the proceeding
took place) with reference to, among other things, the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent the
circumstances resulting in such loss. The Corporation agrees that it would not
be just and equitable if a contribution pursuant to this Article was determined
by pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
12.8 EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Articles to indemnify or advance Expenses to Indemnitee with respect to
any proceeding.
12.8.1 Claims Initiated by Indemnitee. Initiated or brought
voluntarily by Indemnitee and not by way of defense, but such
indemnification or advancement of Expenses may be provided by the
Corporation in specific cases if the Board of Directors finds it to be
appropriate. Notwithstanding the foregoing, the Corporation shall
provide indemnification including the advancement of Expenses with
respect to Proceedings brought to establish or enforce a right to
indemnification under these Articles or any other statute or law or as
otherwise required under the statute.
12.8.2 Lack of Good Faith. Instituted by Indemnitee to enforce
or interpret this Article, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in
such proceeding was not made in good faith or was frivolous.
12.8.3 Insured Claims. For which any of the Expenses or
liabilities for indemnification is being sought have been paid directly
to Indemnitee by an insurance carrier under a policy of officers' and
directors' liability insurance maintained by the Corporation.
12.8.4 Prohibited by Law. If the Corporation is prohibited by
the Act or other applicable law as then in effect from paying such
indemnification and/or advancement of Expenses. For example, the
Corporation and Indemnitee acknowledge that the Securities and Exchange
Commission ("SEC") has taken the position that indemnification is not
possible for liabilities arising under certain federal securities laws.
Indemnitee understands and acknowledges that the Corporation has
undertaken or may be required in the future to undertake with the SEC
to submit the question of indemnification to a court in certain
circumstances for a determination of the Corporation's right to
indemnify Indemnitee.
12.9 SUCCESSORS AND ASSIGNS. All obligations of the Corporation to
indemnify any Director or Officer shall be binding upon all successors and
assigns of the Corporation (including any transferee of all or substantially all
of its assets and any successor by merger or other-wise by operation of law).
The Corporation shall not effect any sale of substantially all of its assets,
merger, consolidation, or other reorganization, in which it is not the surviving
entity, unless the surviving entity agrees in writing to assume all such
obligations of the Corporation.
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<PAGE> 20
ARTICLE XIII
CORPORATION'S ACQUISITION OF ITS OWN SHARES
The Corporation may purchase, redeem, receive, take or otherwise
acquire, own and hold, sell, lend, exchange, transfer or otherwise dispose of,
pledge, use and otherwise deal with and in its own shares. As a specific
modification of Section 23B.06.310 of the Act, pursuant to the authority in
Section 23B.02.020(5)(c) of the Act, to include provisions related to the
management of the business and the regulation of the affairs of the Corporation,
shares of the Corporation's stock acquired by it pursuant to this Article shall
be considered "Treasury Stock" and so held by the Corporation. The shares so
acquired by the Corporation shall not be considered as authorized and unissued
but rather as authorized, issued, and held by the Corporation. The shares, so
acquired shall not be regarded as cancelled or as a reduction to the authorized
capital of the Corporation unless specifically so designated by the Board of
Directors in an amendment to these Articles of Incorporation. The provisions of
this Article do not alter or effect the status of the Corporation's acquisition
of its shares as a "distribution" by the Corporation as defined in Section
23B.01.400(6) of the Act, nor alter or effect the limitations on distributions
by the Corporation as set forth in Section 23B.06.400 of the Act. Any shares so
acquired by the Corporation, unless otherwise specifically designated by the
Board of Directors, at the time of acquisition, shall be considered on
subsequent disposition, as transferred rather than reissued. Nothing in this
Article limits or restricts the right of the Corporation to resell or otherwise
dispose of any of its shares previously acquired for such consideration and
according to such procedures as established by the Board of Directors.
The undersigned has signed these Restated Articles of Incorporation as
of December __, 1996.
-----------------------
Robert A. Eshelman
Assistant Secretary
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<PAGE> 1
EXHIBIT 4.2
MICROSOFT CORPORATION
TO
[To be named]
Trustee
-----------------------
Indenture
Dated as of ...........
-----------------------
$............
__% Convertible Subordinated Notes Due 1999
<PAGE> 2
MICROSOFT CORPORATION
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- --------------- ---------
310(a)(1) ........................................ 609
(a)(2) ........................................ 609
(a)(3) ........................................ Not
Applicable
(a)(4) ........................................ Not
Applicable
(b) ........................................ 608
610
311(a) ........................................ 613
(b) ........................................ 613
312(a) ........................................ 701
702(a)
(b) ........................................ 702(b)
(c) ........................................ 702(c)
313(a) ........................................ 703(a)
(a)(4) ........................................ 101
1004
(b) ........................................ 703(a)
(c) ........................................ 703(a)
(d) ........................................ 703(b)
314(a) ........................................ 704
(b) ........................................ Not
Applicable
(c)(1) ........................................ 102
(c)(2) ........................................ 102
(c)(3) ........................................ Not
Applicable
(d) ........................................ Not
Applicable
(e) ........................................ 102
315(a) ........................................ 601
(b) ........................................ 602
(c) ........................................ 601
(d) ........................................ 601
(e) ........................................ 514
<PAGE> 3
Trust Indenture Indenture
Act Section Section
- --------------- ---------
316(a) ........................................ 101
(a)(1)(A)........................................ 502
512
(a)(1)(B)........................................ 513
(a)(2) ........................................ Not
Applicable
(b) ........................................ 508
(c) ........................................ 104(c)
317(a)(1) ........................................ 503
(a)(2) ........................................ 504
(b) ........................................ 1003
318(a) ........................................ 107
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
Page
----
Parties ................................................................... 1
Recitals of the Company ................................................... 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions ................................................. 1
Act ......................................................... 2
Affiliate ................................................... 2
Agent Member ................................................ 2
Authenticating Agent ........................................ 2
Board of Directors .......................................... 2
Board Resolution ............................................ 2
Business Day ................................................ 3
Closing Price ............................................... 3
Commission .................................................. 3
Common Shares ............................................... 3
Company ..................................................... 4
Company Request or Company Order ............................ 4
Conversion Amount ........................................... 4
Conversion Date ............................................. 4
Conversion Election ......................................... 4
Corporate Trust Office ...................................... 4
corporation ................................................. 4
Current Market Price ........................................ 4
Defaulted Interest .......................................... 4
Depositary .................................................. 4
Event of Default ............................................ 5
Global Security ............................................. 5
Holder ...................................................... 5
Indenture ................................................... 5
Initial Price ............................................... 5
Interest Payment Date ....................................... 5
Maturity .................................................... 5
Officers' Certificate ....................................... 5
Opinion of Counsel .......................................... 5
Outstanding ................................................. 6
Paying Agent ................................................ 6
Person ...................................................... 7
Predecessor Security ........................................ 7
Regular Record Date ......................................... 7
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<PAGE> 5
Page
----
Security Register and Security
Registrar ................................................... 7
Senior Indebtedness ......................................... 7
Series A Preferred Shares ................................... 7
Special Record Date ......................................... 7
Stated Maturity ............................................. 7
Subsidiary .................................................. 8
Trading Day ................................................. 8
Trustee ..................................................... 8
Trust Indenture Act ......................................... 8
Vice President .............................................. 8
SECTION 102. Compliance Certificates and Opinions ........................ 8
SECTION 103. Form of Documents Delivered to Trustee ...................... 9
SECTION 104. Acts of Holders; Record Dates ............................... 10
SECTION 105. Notices, Etc., to Trustee and Company ....................... 11
SECTION 106. Notice to Holders; Waiver ................................... 12
SECTION 107. Conflict with Trust Indenture Act ........................... 12
SECTION 108. Effect of Headings and Table of Contents .................... 13
SECTION 109. Successors and Assigns ...................................... 13
SECTION 110. Separability Clause ......................................... 13
SECTION 111. Benefits of Indenture ....................................... 13
SECTION 112. Governing Law ............................................... 13
SECTION 113. Legal Holidays .............................................. 13
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally ............................................. 14
SECTION 202. Form of Face of Security .................................... 14
SECTION 203. Form of Reverse of Security ................................. 19
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<PAGE> 6
Page
----
SECTION 204. Form of Trustee's Certificate of
Authentication .............................................. 21
ARTICLE THREE
The Securities
SECTION 301. Title and Terms ............................................. 21
SECTION 302. Denominations ............................................... 22
SECTION 303. Execution, Authentication, Delivery
and Dating .................................................. 22
SECTION 304. Temporary Securities ........................................ 23
SECTION 305. Registration, Registration of Transfer
and Exchange ................................................ 24
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities .................................................. 27
SECTION 307. Payment of Interest; Interest Rights
Preserved ................................................... 28
SECTION 308. Persons Deemed Owners ....................................... 29
SECTION 309. Cancellation ................................................ 29
SECTION 310. Computation of Interest ..................................... 30
SECTION 311. Listing of Securities ....................................... 30
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401 Satisfaction and Discharge of Indenture ...................... 30
SECTION 402 Application of Trust Money ................................... 31
ARTICLE FIVE
Remedies
SECTION 501. Events of Default ........................................... 32
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<PAGE> 7
Page
----
SECTION 502. Acceleration of Maturity;
Rescission and Annulment .................................... 34
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee .................................. 35
SECTION 504. Trustee May File Proofs of Claim ............................ 36
SECTION 505. Trustee May Enforce Claims
Without Possession of Securities ............................ 36
SECTION 506. Application of Money Collected .............................. 37
SECTION 507. Limitation on Suits ......................................... 37
SECTION 508. Unconditional Right of Holders to
Receive Principal and Interest and
to Convert .................................................. 38
SECTION 509. Restoration of Rights and Remedies .......................... 38
SECTION 510. Rights and Remedies Cumulative .............................. 39
SECTION 511. Delay or Omission Not Waiver ................................ 39
SECTION 512. Control by Holders .......................................... 39
SECTION 513. Waiver of Past Defaults ..................................... 39
SECTION 514. Undertaking for Costs ....................................... 40
SECTION 515. Waiver of Stay or Extension Laws ............................ 40
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities ......................... 41
SECTION 602. Notice of Defaults .......................................... 41
SECTION 603. Certain Rights of Trustee ................................... 41
SECTION 604. Not Responsible for Recitals
or Issuance of Securities ................................... 43
SECTION 605. May Hold Securities ......................................... 43
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<PAGE> 8
Page
----
SECTION 606. Money Held in Trust ......................................... 43
SECTION 607. Compensation and Reimbursement .............................. 43
SECTION 608. Disqualification; Conflicting Interests ..................... 44
SECTION 609. Corporate Trustee Required; Eligibility ..................... 45
SECTION 610. Resignation and Removal;
Appointment of Successor .................................... 45
SECTION 611. Acceptance of Appointment by Successor ...................... 47
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business ...................................... 47
SECTION 613. Preferential Collection of
Claims Against Company ...................................... 48
SECTION 614. Appointment of Authenticating Agent ......................... 48
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders .................................... 50
SECTION 702. Preservation of Information;
Communications to Holders ................................... 50
SECTION 703. Reports by Trustee .......................................... 51
SECTION 704. Reports by Company .......................................... 51
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc.,
Only on Certain Terms ....................................... 52
SECTION 802. Successor Substituted ....................................... 53
ARTICLE NINE
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<PAGE> 9
Supplemental Indentures
Page
----
SECTION 901. Supplemental Indentures
Without Consent of Holders .................................. 53
SECTION 902. Supplemental Indentures with
Consent of Holders .......................................... 54
SECTION 903. Execution of Supplemental Indentures ........................ 55
SECTION 904. Effect of Supplemental Indentures ........................... 55
SECTION 905. Conformity with Trust Indenture Act ......................... 55
SECTION 906. Reference in Securities to
Supplemental Indentures ..................................... 56
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest .......................... 56
SECTION 1002. Maintenance of Office or Agency ............................ 56
SECTION 1003. Money for Security Payments to
Be Held in Trust ........................................... 57
SECTION 1004. Statement by Officers as to Default ........................ 58
SECTION 1005. Existence .................................................. 59
ARTICLE ELEVEN
Subordination of Securities
SECTION 1101. Securities Subordinate to Senior
Indebtedness ............................................... 59
SECTION 1102. Payment Over of Proceeds Upon
Dissolution, Etc ........................................... 59
SECTION 1103. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities ................................. 61
-viii-
<PAGE> 10
Page
----
SECTION 1104. No Payment When Senior Indebtedness in
Default .................................................... 61
SECTION 1105. Payment Permitted If No Default ............................ 62
SECTION 1106. Subrogation to Rights of Holders of Senior
Indebtedness ............................................... 63
SECTION 1107. Provisions Solely to Define Relative
Rights ..................................................... 63
SECTION 1108. Trustee to Effectuate Subordination ........................ 64
SECTION 1109. No Waiver of Subordination Provisions ...................... 64
SECTION 1110. Notice to Trustee .......................................... 65
SECTION 1111. Reliance on Judicial Order or Certificate
of Liquidating Agent ....................................... 66
SECTION 1112. Trustee Not Fiduciary for Holders of
Senior Indebtedness ........................................ 66
SECTION 1113. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights ..................................................... 66
SECTION 1114. Article Applicable to Paying Agents ........................ 67
ARTICLE TWELVE
Conversion of Securities
SECTION 1201. Terms of Conversion and Settlement ......................... 67
SECTION 1202. Merger Adjustments ......................................... 69
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<PAGE> 11
INDENTURE, dated as of __________________, between MICROSOFT
CORPORATION, a corporation duly organized and existing under the laws of the
State of Washington (herein called the "Company"), having its principal office
at One Microsoft Way, Redmond, Washington 98052-6399, and CITIBANK, N.A.,
a ___________________________ duly organized and existing under the laws of
__________________________, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
____% Convertible Subordinated Notes due 1999 (herein called the "Securities")
of substantially the tenor and amount hereinafter set forth, and to provide
therefor, the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE> 12
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted--at the date of this instrument--at the date of
such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the
Depositary.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors
-2-
<PAGE> 13
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, the City of New York, New York are authorized or obligated by law or
executive order to close.
"Closing Price" of a share of Common Shares on any date of
determination means the closing sale price (or, if no closing price is reported,
the last reported sale price) of such share as reported by the Nasdaq National
Market on such date, or, if it is not so reported, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Share is so listed, or, if it is not so listed on a United States
national or regional securities exchange, the last quoted bid price of the
Common Shares in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of a Common Share on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, 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 Trust Indenture
Act, then the body performing such duties at such time.
"Common Shares" includes any shares 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. However,
subject to the provisions of Section 1201, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Shares of
the Company at [the date of this instrument] 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
-3-
<PAGE> 14
issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Conversion Amount" has the meaning specified in Section 1201.
"Conversion Date" has the meaning specified in Section 1201.
"Conversion Election" has the meaning specified in Section 1201.
"Corporate Trust Office" means the principal office of the Trustee
in ______________ at which at any particular time its corporate trust business
shall be administered.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Current Market Price" means the average Closing Price per share of
the Common Shares of the Company on the 20 Trading Days beginning on the
twenty-second Trading Day immediately prior to, but not including, the
Conversion Date and ending on the second Trading Day immediately prior to, but
not including, the Conversion Date.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities issuable or
issued in whole or in part in the form of one or more Global Securities, The
Depository Trust Company for so long as it shall be a clearing agency registered
under the Securities Exchange Act of 1934, or such successor as the
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<PAGE> 15
Company shall designate from time to time in an Officers' Certificate delivered
to the Trustee.
"Event of Default" has the meaning specified in Section 501.
"Global Security" means a global certificate that evidences
all or part of the Securities and bears the legend set forth in Section 202.
"Holder" means a Person in whose name a Security is registered
in the Security Register or a Person who is the beneficial owner of a beneficial
interest in a Global Security.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Price" means $_______ per Common Share of the
Company.
"Interest Payment Date" means the Stated Maturity of an
instalment of interest on the Securities.
"Maturity," when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, or otherwise.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 1004 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be acceptable to the Trustee.
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<PAGE> 16
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities;
(iii) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
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<PAGE> 17
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the __________ or _____________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means (a) the principal of and interest
on all indebtedness of the Company (including indebtedness of others guaranteed
by the Company) other than the Securities, whether outstanding on the date of
this Indenture or thereafter created, incurred or assumed, which is (i) for
money borrowed or (ii) evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of any
kind and (b) amendments, renewals, extensions, modifications and refundings of
any such indebtedness, unless in any case in the instrument creating or
evidencing any such indebtedness or pursuant to which the same is outstanding it
is provided that such indebtedness is not superior in right of payment to the
Securities.
"Series A Preferred Shares" means __% Convertible Exchangeable
Principal-Protected Preferred Shares, Series A, par value $0.01 per share, of
the Company, which are subject to conversion into Common Shares or exchange into
Securities.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or
any instalment of interest thereon, means the
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date specified in such Security as the fixed date on which the principal of such
Security or such instalment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting shares of which are owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting shares" means
shares which ordinarily have voting power for the election of directors, whether
at all times or only so long as no senior class of shares has such voting power
by reason of any contingency.
"Trading Day" means a day on which the Common Shares (a) are
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (b) have
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president,"
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be
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<PAGE> 19
given by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel
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<PAGE> 20
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company stating
that the information with respect to such factual matters is in the possession
of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be
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<PAGE> 21
proved in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: _______________, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless
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<PAGE> 22
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company addressed to it at the
address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
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<PAGE> 23
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date or Stated Maturity
of any Security shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date or at the Stated Maturity, provided that no interest shall accrue for the
period from
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<PAGE> 24
and after such Interest Payment Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
Upon their original issuance, the Securities shall be issued
in the form of one or more Global Securities registered in the name of the
Depositary or its nominee and deposited with a custodian for the Depositary, for
credit by the Depositary to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct).
The definitive Securities, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 202. Form of Face of Security.
[If a Global Security, then insert -- THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
MAY NOT BE EXCHANGEABLE IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY PERSON OTHER THAN
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<PAGE> 25
SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]
[If a Global Security to be held by The Depository Trust
Company, then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
MICROSOFT CORPORATION
____% Convertible Subordinated Notes due 1999
No. __________ $________
Microsoft Corporation, a corporation duly organized and
existing under the laws of Washington (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to __________________, or registered
assigns, the principal sum of _____________________ Dollars [if this Security is
a Global Security, then insert: (which principal amount may from time to time be
increased or decreased to such other principal amounts (which, taken together
with the principal amounts of all other Outstanding Securities, shall not exceed
$__________ in the aggregate at any time) by adjustments made on the records of
the Trustee hereinafter referred to in accordance with the Indenture)] on
____________ (the "Conversion Date"); provided, however, that at any time not
more than 20 Trading Days nor fewer than two Trading Days immediately prior to,
but not including, the Conversion Date, the holder of a beneficial interest in
this [Global] Security representing such holder's interest in a __% Convertible
Subordinated Note due 1999 (a "Security" or "Convertible Note") may elect (a
"Conversion Election"), by written notice to the Trustee, to convert such
interest, on the Conversion Date, into the right to receive in respect of each
Convertible Note the sum of (i) the Conversion Amount (as defined below) payable
at the Company's option in either Common Shares or in cash, plus (ii) the
Additional Amount (as defined below) payable
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<PAGE> 26
in cash. In the event that such holder does not make a timely Conversion
Election, such holder shall receive on the Conversion Date, in lieu of the
Conversion Amount and the Additional Amount and in full satisfaction of such
Convertible Note, the principal sum of $[ ] in cash for each Convertible Note.
The Company will mail written notice of its election to pay the Conversion
Amount in either Common Shares or cash to each holder of record of Convertible
Notes not less than 30 Trading Days nor more than 45 Trading Days prior to the
Conversion Date and will include with such notice a description of the procedure
for making a Conversion Election. The "Conversion Amount" means an amount
(payable in either Common Shares or cash) for each Convertible Note equal to the
Current Market Price of Common Shares multiplied by the product of (x) .995 and
(y) the Convertible Note Exchange Rate. The Convertible Note Exchange Rate is
equal to (a) if the Current Market Price of the Common Shares is greater than or
equal to $_______ per share (the "Threshold Price"), a ratio equal to the
Threshold Price divided by the Current Market Price, (b) if the Current Market
Price is less than the Threshold Price but greater than the Initial Price, a
ratio of 1.0, and (c) if the Current Market Price is less than or equal to the
Initial Price, a ratio equal to the Initial Price divided by the Current Market
Price, subject in each case to adjustments in certain events as provided in the
Indenture. The "Additional Amount" means an amount (payable in cash) in respect
of each Convertible Note equal to [$ Equal to .005 of Initial Price of the
Common Shares; to be filled in at pricing]. In addition, the Company hereby
promises to pay interest hereon from _____________* or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
quarterly ____________, ________, ________ and ___________ in each year,
commencing ___________, at the rate of ___% per annum, until the principal
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the _________ or
__________ (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment
* Insert date on which the Convertible Notes are issued in exchange for the
Series A Preferred Shares.
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<PAGE> 27
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in ________, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
The Company will mail written notice of its election to pay
the Conversion Amount in either Common Shares or cash to each holder of record
of Convertible Notes not less than 30 Trading Days nor more than 45 Trading Days
prior to the Conversion Date. In the case of election by the Company to pay the
Conversion Amount in Common Shares the Company will issue the number of full
Common Shares issuable in payment thereof. No fractional Common Shares will be
issued on payment of the Conversion Amount, but in lieu thereof, such fractional
interest shall be rounded down to the next whole share or an amount will be paid
in cash by the Company for such fractional interest based upon the Current
Market Price.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
-------------------------
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<PAGE> 28
By_______________________
Attest:
- ------------------------------
SECTION 203. Form of Reverse of Security.
This [Global] Security is one of a duly authorized issue of
Securities of the Company designated as its __% Convertible Subordinated Notes
Due 1999 (herein called the "Securities"), limited in aggregate principal amount
to $______, issued and to be issued under an Indenture, dated as of _______
(herein called the "Indenture"), between the Company and
________________________, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness and the holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights
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<PAGE> 29
of the holders of the Securities under the Indenture at any time by the Company
and the Trustee with the consent of the holders of 66 2/3% in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the holders of the Securities
shall be conclusive and binding upon such holders and upon all future holders of
the Securities and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
[If a Global Security insert -- In the event of a deposit or
withdrawal of an interest in this Security (including upon an exchange,
transfer, redemption or repurchase of this Security in part only) effected in
accordance with the Applicable Procedures, the Security Registrar, upon receipt
of notice of such event from the Depositary's custodian for this Security, shall
make an adjustment on its records to reflect an increase or decrease of the
Outstanding principal amount of this Security resulting from such deposit or
withdrawal, as the case may be.]
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the Borough of Manhattan, the
City of New York, New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
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<PAGE> 30
The Securities will be evidenced by a global security, in
fully registered form without coupons, deposited with a custodian for and
registered in the name of a nominee of the Depositary. The Securities will be in
denominations of $[initial price].
No service charge shall be made for any such registration of
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this 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 this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the
within-mentioned Indenture.
-------------------------,
as Trustee
By _______________________
Authorized Officer
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is
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limited to $___________, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Sections 304, 305, 306, 906 or 1201.
The Securities shall be known and designated as the "__%
Convertible Subordinated Notes due 1999" of the Company. Their Stated Maturity
shall be ____________, 1999, and they shall bear interest at the rate of ____%
per annum, from the date or dates on which Securities are issued for Series A
Preferred Shares or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable quarterly on
__________, _________, __________ and ________, commencing ___________, until
the principal thereof is paid or made available for payment.
The principal of and interest on the Securities shall be
payable at the office or agency of the Company in the Borough of Manhattan, the
City of New York, New York, maintained for such purpose and at any other office
or agency maintained by the Company for such purpose; provided, however, that at
the option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Eleven.
The Securities shall be convertible as provided in Article
Twelve.
Upon receipt by the Trustee of an Officer's Certificate, dated
as of a dividend payment date on the Series A Preferred Shares, stating (i) that
the Company has elected to exchange Series A Preferred Shares for Securities,
(ii) the amount of Securities to be issued in such exchange and (iii) that,
after giving effect to such exchange, (A) the aggregate outstanding principal
balance of Securities will not be less than $250,000,000, (B) that, if there
will be additional Series A Preferred Shares outstanding, they will have an
aggregate liquidating distribution amount of not less than $250,000,000, (C) all
accrued and unpaid interest on any outstanding Securities has been paid in full,
(D) all accrued and unpaid dividends on the Series A Preferred Shares have been
paid in full, and (E) no Event of Default, or event which with the passage of
time or the giving of notice would become an Event of Default, has occurred, the
Trustee shall authenticate and
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deliver, on such dividend payment date, in accordance with this Indenture such
amount of Securities as are specified by the Company to be issued in such
exchange. The Company will mail written notice to the Trustee of its intention
to exchange Series A Preferred Shares for Securities not less than 30 Trading
Days prior to the date fixed for exchange.
SECTION 302. Denominations.
The Securities will be evidenced by one or more Global
Securities, in fully registered form without coupons, deposited with a custodian
for and registered in the name of the Depository or a nominee of the Depositary.
The Securities will be in denominations of $[initial price].
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, its President or one
of its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant Secretaries. 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 such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of
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authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, if any, 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
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 any office or agency of the Company designated pursuant to Section
1002, 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 305. Registration, Registration of Transfer and Exchange.
(a) The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
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Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 1002 for such
purpose, 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.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906 or 1201 not involving any transfer.
(b) The provisions of Clauses (1), (2), (3), (4) and (5) below
shall apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary or a nominee thereof
and delivered to the Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
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(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
or a nominee thereof unless (A) the Depositary (i) has notified the
Company that it is unwilling or unable to continue as Depositary for
such Global Security and the Company thereupon fails to appoint a
successor Depository or (ii) has ceased to be a clearing agency
registered under the Exchange Act, (B) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
the Securities in definitive registered certificated form or (C) there
shall have occurred and be continuing an Event of Default or any event
which after notice or lapse of time or both would be an Event of
Default with respect to the Securities evidenced by such Global
Security.
(3) If any Global Security is to be exchanged for other
Securities or cancelled in whole, it shall be surrendered by or on
behalf of the Depositary or its nominee to the Trustee, as Security
Registrar, for exchange or cancellation as provided in this Article
Three. If any Global Security is to be exchanged for other Securities
or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Three or (ii) the principal
amount thereof shall be reduced or increased by an amount equal to the
portion thereof to be so exchanged or cancelled, or equal to the
principal amount of such other Security to be so exchanged for a
beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon
any such surrender or adjustment of a Global Security, the Trustee
shall, subject to Section 305(b)(2) and as otherwise provided in this
Article Three, authenticate and deliver any Securities issuable in
exchange for such Global Security (or any portion thereof) to or upon
the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon
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the request of the Trustee in connection with the occurrence of any of
the events specified in the preceding paragraph, the Company shall
promptly make available to the Trustee a reasonable supply of
Securities that are not in the form of Global Securities. The Trustee
shall be entitled to rely upon any order, direction or request of the
Depositary or its authorized representative which is given or made
pursuant to this Article Three if such order, direction or request is
given or made in accordance with the Applicable Procedures.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section ,
Section 304, 306, or 906 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary or a nominee thereof.
(5) None of the Company, the Trustee, any agent of the
Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the Depository's records
(or the records of the participant of such Depository) relating to or
payments made on account of beneficial ownership interests of a Global
Security or for maintaining, supervising or reviewing any records of
the Depository relating to such beneficial ownership interests.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen
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Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section , the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as
it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment
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pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section , each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and (subject
to Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled 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 cancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section , except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Listing of Securities.
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An Application will be made to have the Securities quoted on
the Nasdaq National Market under the symbol " ."
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation have become due and payable at
their stated maturity and the Company has deposited or caused
to be deposited with the Trustee as trust funds in trust for
the purpose an amount sufficient to pay and discharge all
amounts due and payable in respect of such Securities not
theretofore delivered to the Trustee for cancellation.
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
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(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section , the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
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(2) default in the payment of the principal (which for
purposes of this Indenture shall be deemed to include the Conversion
Amount with respect to any Security for which a Conversion Amount is
applicable pursuant to Section 1201) of any Security at its Maturity;
or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 10% in principal
amount of the Outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(4) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(5) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect
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of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities may declare the principal of all the
Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal (which for purposes of this
Indenture shall be deemed to include
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the Conversion Amount with respect to any Security for which a
Conversion Amount is applicable pursuant to Section 1201) of
any Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal (which for
purposes of this Indenture shall be deemed to include the Conversion
Amount with respect to any Security for which a Conversion Amount is
applicable pursuant to Section 1201) of any Security at the Maturity
thereof,
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the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or
any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due 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 607.
No provision of this Indenture 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
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authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Eleven any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a
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receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest
and to Convert.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject to Section
307) interest on such Security on the respective Stated Maturities expressed in
such Security and to convert such Security in accordance with Article Twelve and
to institute suit for the enforcement of any such payment and right to convert,
and
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such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. Control by Holders.
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The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on any
Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. 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,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or in any suit for the
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enforcement of the right to convert any Security in accordance with Article
Twelve.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section .
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(3), no
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such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section , the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
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incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
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SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse 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 and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, 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.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
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SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in _________________________________________. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section , the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section , it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after
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written request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
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SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
which shall be authorized to act on behalf of the Trustee to authenticate
Securities issued upon original issue and upon exchange, registration of
transfer or pursuant to Section 306, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section , the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section , such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section .
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
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corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section , without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section , the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section .
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section , and
the Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section , the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the
within-mentioned Indenture.
-----------------------------,
As Trustee
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By___________________________,
As Authenticating Agent
By___________________________
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
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(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission.
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ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
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 any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership or trust, shall be organized and validly
existing under the laws of the United States of America, 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 of and interest on all the Securities and the performance
or observance of every covenant of this Indenture on the part of the
Company to be performed or observed and shall have provided for
conversion rights in accordance with Section 1201;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Company has 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
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comply with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or 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 Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to secure the Securities pursuant to the requirements of
Section 1003 or otherwise; or
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(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided that such action
pursuant to this Clause (4) shall not adversely affect the interests of
the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than 66 2/3% in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment
where, or the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity
thereof, or adversely affect the right to convert any Security as
provided in Article Twelve, or modify the provisions of this Indenture
with respect to the subordination of the Securities in a manner adverse
to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or
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certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section or Section
513, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
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SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, the
City of New York, New York an office or agency where Securities may be presented
or surrendered for payment, where Securities may be surrendered for registration
of transfer or exchange, where Securities may be surrendered for conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the
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Borough of Manhattan, the City of New York, New York) 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, New York
for such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal or interest so becoming
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and will promptly notify the Trustee of its action or failure so
to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section ,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be
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held by the Trustee upon the same trusts as those upon which such sums were held
by the Company or such Paying Agent; and, upon such payment by any Paying Agent
to the Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or
interest on any Security and remaining unclaimed for two years after such
principal or interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, the City of
New York, New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, 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 they may have knowledge.
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SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
ARTICLE ELEVEN
Subordination of Securities
SECTION 1101. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of and interest
on each and all of the Securities are hereby expressly made subordinate and
subject in right of payment to the prior payment in full of all Senior
Indebtedness.
SECTION 1102. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company,
then and in any such event the holders of Senior Indebtedness shall be entitled
to receive payment in full of all amounts due or to become due on or in respect
of all Senior Indebtedness, or provision shall be made for such payment in cash,
before the Holders of the Securities are entitled to receive any
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payment on account of principal of or interest on the Securities, and to that
end the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable in respect of the Securities in any such case, proceeding,
dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section , the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, before all Senior Indebtedness is paid
in full or payment thereof provided for, and if such fact shall, at or prior to
the time of such payment or distribution, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property
or securities" shall not be deemed to include shares of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Indebtedness which may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or which acquires by conveyance or transfer
such properties and assets substantially as an entirety, as the case may be,
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shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions set forth in Article Eight.
SECTION 1103. Prior Payment to Senior Indebtedness Upon Acceleration of
Securities.
In the event that any Securities are declared due and payable
before their Stated Maturity, then and in such event the holders of the Senior
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made for such
payment in cash, before the Holders of the Securities are entitled to receive
any payment [(including any payment which may be payable by reason of the
payment of any other indebtedness of the Company being subordinated to the
payment of the Securities)](*) by the Company on account of the principal of or
interest on the Securities or on account of the purchase or other acquisition of
Securities.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section , and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment
with respect to which Section 1102 would be applicable.
SECTION 1104. No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any default in
the payment of principal of or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto, or in the event that any event of
default with respect to any Senior Indebtedness shall have
* This provision should be included if the Company may have a class or
classes of debt which are subordinated to the Securities.
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occurred and be continuing permitting the holders of such Senior Indebtedness
(or a trustee on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and such acceleration shall have
been rescinded or annulled, or (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then no
payment shall be made by the Company on account of principal of or interest on
the Securities or on account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section , and if such fact shall, at or
prior to the time of such payment, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment
with respect to which Section 1102 would be applicable.
SECTION 1105. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent [(a)] the Company, at any
time except during the pendency of any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshalling of assets and liabilities of the Company referred to in
Section 1102 or under the conditions described in Section 1103 or 1104, from
making payments at any time of principal of or interest on the Securities [, or
(b) the application by the Trustee of any money deposited with it hereunder to
the payment of or on account of the principal of or interest on the Securities
or the retention of such payment by the Holders, if, at the time of such
application by the Trustee, it did not have knowledge that such payment would
have been prohibited by the provisions of this Article].
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SECTION 1106. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
SECTION 1107. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the obligation
of the Company, which is absolute and unconditional (and which, subject to the
rights under this Article of the holders of Senior Indebtedness, is intended to
rank equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness to receive cash, property and securities
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otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1108. Trustee to Effectuate Subordination.
Each holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1109. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
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SECTION 1110. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities. Notwithstanding the provisions
of this Article or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist [; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least [to be discussed with
the Trustee] Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within [to be discussed with the Trustee] Business
Days prior to such date].
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
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SECTION 1111. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Section
601, and the Holders of the Securities shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1112. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such holders
if it shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other Person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article or otherwise.
SECTION 1113. Rights of Trustee as Holder of Senior Indebtedness; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
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Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
SECTION 1114. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1113 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE TWELVE
Conversion of Securities
SECTION 1201. Terms of Conversion and Settlement.
At any time not more than 20 Trading Days nor fewer than two Trading Days
immediately prior to, but not including, the Conversion Date, any Holder may
elect (a "Conversion Election"), by written notice to the Trustee, to convert a
Security on the Conversion Date, into the right to receive in respect of each
Security the sum of (i) the Conversion Amount (as defined below) payable at the
Company's option in either Common Shares or in cash, plus (ii) the Additional
Amount (as defined below) payable in cash. Any Holder who does not make a timely
Conversion Election shall receive on the Conversion Date, in lieu of the
Conversion Amount and the Additional Amount and in full satisfaction of the
Holder's Securities, the principal sum of $_______ dollars in cash for each
Security. The Company will mail written notice of its election to pay the
Conversion Amount in either Common Shares or cash to each holder of record of
Convertible Notes not less than 30 Trading Days nor more than 45 Trading Days
prior to the Conversion Date and will include with such notice a description of
the procedure for making a Conversion Election. The "Conversion Amount" means an
amount (payable in either Common Shares or cash) for each Security equal to the
Current Market Price of Common Shares multiplied by the product of (x) .995 and
(y) the Convertible Note Exchange Rate. The Convertible Note Exchange Rate is
equal to (a) if the Current Market Price of the Common Shares is greater than or
equal to $_______ per share (the "Threshold Price"), a ratio equal to the
Threshold Price divided by the Current Market Price,
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(b) if the Current Market Price is less than the Threshold Price but greater
than the Initial Price, a ratio of 1.0, and (c) if the Current Market Price is
less than or equal to the Initial Price, a ratio equal to the Initial Price
divided by the Current Market Price, subject in each case to adjustments in
certain events. The "Additional Amount" means an amount (payable in cash) in
respect of each Security equal to [$ Equal to .005 of Initial Price of the
Common Share].
The Convertible Note Exchange Rate is subject to adjustment as
appropriate in certain circumstances, including if the Company (a) pays a share
dividend or makes a distribution with respect to its Common Shares in Common
Shares, (b) subdivides or splits its outstanding Common Shares, (c) combines its
outstanding Common Shares into a smaller number of shares, (d) issues by
reclassification of its Common Shares any capital shares , (e) issues certain
rights or warrants to all holders of its Common Shares or (f) pays a dividend
of, or distributes to all holders of its Common Shares, evidences of its
indebtedness or other assets (including capital shares of the Company but
excluding any cash dividends or distributions and dividends referred to in
clause (a) above). In addition, the Company will be entitled to make such upward
adjustments in the Convertible Note Exchange Rate as the Company, in its
discretion, determines to be advisable, in order that any share dividend,
subdivision of shares, distribution of rights to purchase shares or securities,
or distribution of securities convertible into or exchangeable for shares (or
any transaction which could be treated as any of the foregoing transactions
pursuant to Section 305 of the Internal Revenue Code of 1986, as amended)
hereafter made by the Company to its shareholders will not be taxable. All
adjustments to the Convertible Note Exchange Rate will be calculated to the
nearest 1/10,000th of a Common Share. No adjustment in the Convertible Note
Exchange Rate will be required unless such adjustment would require an increase
or decrease of at least one percent in the Convertible Note Exchange Rate,
provided that any adjustments which, by reason of the foregoing, are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively. All
adjustments to the Convertible Note Exchange Rate shall be made consistent with
the provisions of paragraphs (d) and (f) of Section 4.4.3 of the Restated
Articles of Incorporation of the Company dated ________, 199_, treating the
Securities in the same manner as the Series A Preferred Shares for which they
were exchanged.
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Whenever the Convertible Note Exchange Rate is adjusted as
provided in the preceding paragraph, the Company will file with the Trustee a
certificate with respect to such adjustment, make a prompt public announcement
thereof and mail a notice to Holders providing specified information with
respect to such adjustment.
The Company will reserve and at all times keep available, free
from preemptive rights, out of its authorized but unissued shares, for the
purpose of effecting the conversion of the Securities, such number of its duly
authorized Common Shares as will from time to time be sufficient to effect the
conversion of all outstanding Securities; provided, however, that the Company
shall not be obligated to keep such shares available with respect to any
Securities during any time that the conversion of such Securities is prohibited
under a contract or other agreement between the holder of such Securities and
the Company.
The Company will mail written notice of its election to pay
the Conversion Amount in either Common Shares or cash to each Holder of record
of Securities not less than 30 Trading Days nor more than 45 Trading Days prior
to the Conversion Date. In the case of election by the Company to pay the
Conversion Amount in Common Shares the Company will issue the number of full
shares of Common Shares issuable in payment thereof. No fractional Common Shares
will be issued on payment of the Conversion Amount, but in lieu thereof, such
fractional interest shall be rounded down to the next whole share and an amount
will be paid in cash by the Company for such fractional interest based upon the
Current Market Price.
SECTION 1202. Merger Adjustments
In case of any consolidation or merger to which the Company is
a party (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Shares outstanding immediately
prior to the merger or consolidation remain unchanged), or in case of any sale
or transfer to another entity of the property of the Company as an entirety or
substantially as an entirety, or in case of any statutory share exchange with
another entity (other than in connection with an acquisition in which the Common
Shares outstanding immediately prior to the share exchange remain unchanged),
each Security shall, after consummation of such transaction, be subject to (i)
conversion at the option of the holder into the kind and
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amount of securities, cash, or other property receivable upon consummation of
such transaction by a holder of the number of Common Shares into which such
Securities might have been converted immediately prior to consummation of such
transaction and (ii) conversion on the Conversion Date into the kind and amount
of securities, cash, or other property receivable upon consummation of such
transaction by a holder of the number of Common Shares into which such Security
would have been converted if the conversion on the Conversion Date had occurred
immediately prior to the date of consummation of such transaction assuming in
each case that such holder of Common Shares failed to exercise rights of
election if any, as to the kind or amount of securities, cash, or other property
receivable upon consummation of such transaction (provided that if the kind or
amount of securities, cash, or other property receivable upon consummation of
such transaction is not the same for each nonelecting share, then the kind and
amount of securities, cash, or other property receivable upon consummation of
such transaction for each nonelecting share shall be deemed to be the kind and
amount so receivable per share by a plurality of the nonelecting shares). The
kind and amount of securities into which the Securities shall be convertible
after consummation of such transaction shall be subject to adjustment as
described above under Section 1201 following the date of consummation of such
transaction. The Company may not become a party to any such transaction unless
the terms thereof are consistent with the foregoing.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
MICROSOFT CORPORATION
-----------------------------
By___________________________
Attest:
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- --------------------------
CITICORP, N.A.
-----------------------------
By___________________________
Attest:
- ---------------------------
-70-
<PAGE> 81
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the _____ day of __________, 19__, before me personally
came ___________________________, to me known, who, being by me duly sworn, did
depose and say that [he --she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] 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 -- she] signed [his -her] name thereto by like
authority.
------------------------------
STATE OF NEW YORK ) ss.:
COUNTY OF NEW YORK )
On the _____ day of __________, 19__, before me personally
came ___________________________, to me known, who, being by me duly sworn, did
depose and say that [he --she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] 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 -- she] signed [his -- her] name thereto by like
authority.
------------------------------
-71-
<PAGE> 1
EXHIBIT 5.1
December 16, 1996
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
Re: Registration Statement on Form S-3 of Microsoft Corporation
Ladies and Gentlemen:
We have acted as counsel to Microsoft Corporation (the "Company") in
connection with the filing of the above-referenced Registration Statement (the
"Registration Statement") relating to the offer of % Convertible Exchangeable
Principal-Protected Preferred Shares, Series A, par value $0.01 per share (the
"Series A Preferred Shares"), and the % Convertible Subordinated Notes Due 1999
(the "Convertible Notes") and the Common Shares, par value $0.000025 per share
(the "Common Shares" and, together with the Series A Preferred Shares and the
Convertible Notes, the "Securities") issuable upon conversion of the Series A
Preferred Shares or the Convertible Notes. In connection therewith, we have
reviewed the Company's Restated Articles of Incorporation, Bylaws, resolutions
of the Company's Board of Directors, the Indenture under which the Convertible
Notes will be issued (the "Indenture"), and such other documents and matters we
deemed appropriate.
In connection with this opinion, we have assumed that (i) the
Registration Statement, and any amendments thereto (including post-effective
amendments), will have become effective, and (ii) all Securities will be issued
and sold in compliance with applicable federal and state securities laws and in
the manner stated in the Registration Statement.
Based on this review, it is our opinion that:
1. The Series A Preferred Shares have been duly authorized and, when
securities representing the Series A Preferred Shares shall have been duly
executed, authenticated, issued and delivered to the recipients thereof upon
payment of consideration therefor, will be legally issued, fully paid and
non-assessable.
2. The Convertible Notes have been duly authorized and, when securities
representing the Convertible Notes shall have been duly executed, authenticated,
issued and delivered to the recipients thereof in accordance with the terms of
the Indenture and upon exercise of the Company's right of exchange pursuant to
the Series A Preferred Shares, will be legally issued, fully paid,
non-assessable and binding obligations of the Company and will be
<PAGE> 2
December 16, 1996
Page 2
enforceable against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance and other similar laws affecting the enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
3. The Common Shares have been duly authorized and, when securities
representing the Common Shares shall have been duly executed, authenticated,
issued and delivered to the recipients thereof upon conversion of the Series A
Preferred Shares or the Convertible Notes, will be legally issued, fully paid
and non-assessable.
We do not find it necessary for the purposes of this opinion to cover,
and accordingly we express no opinion as to, the application of the securities
or blue sky laws of the various states to the sale of the Convertible Notes.
This opinion letter is limited to the matters stated herein and no
opinion is implied or may be inferred beyond the matters expressly stated.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
We consent to being named in the Registration Statement and related
Prospectus as counsel who are passing upon the validity of the Securities for
the Company and to the reference to our name under the caption "Validity of
Securities" in such Prospectus. We further consent to your filing copies of this
opinion as an exhibit to the Registration Statement or any amendment thereto. In
giving such consents, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
PRESTON GATES & ELLIS
By /s/ Richard B. Dodd
---------------------
Richard B. Dodd
<PAGE> 1
Exhibit 8.1
December 16, 1996
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052
Ladies and Gentlemen :
Reference is made to the Registration Statement on form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission in connection with the proposed sale by Microsoft Corporation of
____% Convertible Exchangeable Principal-Protected Preferred Shares, Series A,
par value $0.01 per share (the "Series A Preferred Shares").
We have reviewed the discussion contained under the caption "Certain
U.S. Federal Income Tax Considerations" in the Prospectus that is part of the
Registration Statement. In our opinion such discussion accurately summarizes the
material federal income tax considerations applicable to the Series A Preferred
Shares.
We consent to the use of this opinion as an exhibit to the Registration
Statement and any amendments thereto, and to the reference to Preston Gates &
Ellis under the caption "Certain U.S. Federal Income Tax Considerations" in the
Prospectus that is part of the Registration Statement.
Very truly yours,
PRESTON GATES & ELLIS
By /s/ Charles H. Purcell
Charles H. Purcell
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHANGES
(dollars in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30 SEPTEMBER 30
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net income before income
taxes....................... $1,041 $1,401 $1,722 $2,167 $3,379 $ 945
Add:
Fixed charges............ -- -- -- -- -- --
Adjust to include:
Capitalized interest..... -- -- -- -- -- --
Preferred stock dividend
requirements........... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net income before taxes,
as adjusted.......... $1,041 $1,401 $1,782 $2,167 $3,379 $ 945
====== ====== ====== ====== ====== ======
Fixed changes:
Interest................... -- -- -- -- -- --
Amortization of debt
expenses................. -- -- -- -- -- --
Portion of rents
representative of the
interest factor.......... -- -- -- -- -- --
Preferred stock dividend
requirements............. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total fixed charges...... $ -- $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ======
Ratio of earnings to fixed
charges(1)................. * * * * * *
====== ====== ====== ====== ====== ======
</TABLE>
- ----------
* Not meaningful
(1) The Company had no material debt and, consequently, had no material fixed
charges for each of the periods presented. The ratio of earnings to fixed
charges is determined by dividing earnings by fixed charges. Fixed charges
consist of the total of (i) interest, whether expensed or capitalized; (ii)
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized; (iii) such portion of rental
expense as can be demonstrated to be representative of the interest factor
in the particular case; and (iv) preferred stock dividend requirements of
majority-owned subsidiaries and fifty-percent-owned persons, excluding in
all cases items which would be or are eliminated in consolidation. Earnings
consist of pretax income from continuing operations plus the amount of
fixed charges, adjusted to exclude (i) the amount of any interest
capitalized during the period and (ii) the actual amount of any preferred
stock dividend requirements of majority-owned subsidiaries and
fifty-percent-owned persons which were included in such fixed charges
amount but not deducted in the determination of pretax income. The ratio of
earnings to fixed charges is not meaningful for periods in which there were
no material fixed charges.
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a Trustee
pursuant to Section 305 (b)(2) ____
------------------------
CITIBANK, N.A.
(Exact name of trustee as specified in its charter)
13-5266470
(I.R.S. employer
identification no.)
399 Park Avenue, New York, New York 10043
(Address of principal executive office) (Zip Code)
-----------------------
MICROSOFT CORPORATION
(Exact name of obligor as specified in its charter)
Washington 91-1144442
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One Microsoft Way
Redmond, Washington 98052-6399
(Address of principal executive offices) (Zip Code)
-------------------------
% Convertible Subordinated Notes Due 1999
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of New York New York, NY
33 Liberty Street
New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this Statement of
Eligibility.
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as exhibits
hereto.
Exhibit 1 - Copy of Articles of Association of the Trustee, as
now in effect. (Exhibit 1 to T-1 to Registration Statement No.
2-79983)
Exhibit 2 - Copy of certificate of authority of the Trustee to
commence business. (Exhibit 2 to T-1 to Registration Statement
No. 2-29577).
Exhibit 3 - Copy of authorization of the Trustee to exercise
corporate trust powers. (Exhibit 3 to T-1 to Registration
Statement No. 2-55519)
Exhibit 4 - Copy of existing By-Laws of the Trustee. (Exhibit
4 to T-1 to Registration Statement No. 33-34988)
Exhibit 5 - Not applicable.
<PAGE> 3
Exhibit 6 - The consent of the Trustee required by Section
321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1
to Registration Statement No. 33-19227.)
Exhibit 7 - Copy of the latest Report of Condition of
Citibank, N.A. (as of September 30, 1996 - attached)
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
------------------
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Citibank, N.A., a national banking association organized and existing
under the laws of the United States of America, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York and State of New York, on the 13th day
of December, 1996.
CITIBANK, N.A.
By /s/ Carol Ng
-----------------------------
Carol Ng
Vice President
<PAGE> 4
Charter No. 1461
Comptroller of the Currency
Northeastern District
REPORT OF CONDITION
CONSOLIDATING
DOMESTIC AND FOREIGN
SUBSIDIARIES OF
CITIBANK, N.A.
of New York in the State of New York, at the close of business on September 30,
1996, published in response to call made by Comptroller of the Currency, under
Title 12, United States Code, Section 161. Charter Number 1461 Comptroller of
the Currency Northeastern District.
<TABLE>
<CAPTION>
ASSETS
Thousands
of dollars
<S> <C>
Cash and balances due from de-
pository institutions:
Noninterest-bearing balances
and currency and coin ................... $ 8,647,000
Interest-bearing balances ........................ 13,006,000
Held-to-maturity securities ...................... 0
Available-for-sale securities .................... 22,101,000
Federal funds sold and securities
purchased under agreements to
resell in domestic offices of the
bank and of its Edge and Agree-
ment subsidiaries, and in IBFs:
Federal funds sold ...................... 4,263,000
Securities purchased under
agreements to resell .................... 370,000
Loans and lease financing receiv-
ables:
Loans and Leases, net of un-
earned income ........................... $ 147,806,000
LESS: Allowance for loan
and lease losses ........................ 4,386,000
LESS: Allocated transfer
risk reserve ............................ 0
Loans and leases, net of un-
earned income, allowance,
and reserve ............................. 143,420,000
Trading assets ................................... 24,655,000
Premises and fixed assets (includ-
ing capitalized leases) ................. 3,547,000
Other real estate owned .......................... 708,000
Investments in unconsolidated
subsidiaries and associated com-
panies .................................. 1,220,000
Customers' liability to this bank
on acceptances outstanding .............. 2,270,000
Intangible assets ................................ 105,000
Other assets ..................................... 7,084,000
-------------
TOTAL ASSETS ..................................... $ 231,396,000
=============
LIABILITIES
Deposits:
In domestic offices ..................... $ 35,623,000
Noninterest-
bearing ................................. $ 13,178,000
Interest-
bearing ................................. 22,445,000
In foreign offices, Edge and
Agreement subsidiaries, and
IBFs .................................... 130,945,000
Noninterest-
bearing ................................. 8,792,000
Interest-
bearing ................................. 122,153,000
Federal funds purchased and se-
curities sold under agreements
to repurchase in domestic offices
of the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ................. 1,872,000
Securities sold under agree
ments to repurchase ..................... 398,000
Demand notes issued to
the U.S. Treasury ....................... 0
Trading liabilities .............................. 17,042,000
Other borrowed money:
With a remaining maturity of one
year or less ............................ 9,839,000
With a remaining maturity of more
than one year ........................... 4,014,000
Mortgage indebtedness and obli-
gations under capitalized leases ........ 137,000
Bank's liability on acceptances ex-
ecuted and outstanding .................. 2,316,000
Subordinated notes and
debentures ....................................... 4,700,000
Other liabilities ................................ 8,549,000
-------------
TOTAL LIABILITIES ................................ $ 215,435,000
=============
Limited-life preferred stock
and related surplus ..................... 0
EQUITY CAPITAL
Perpetual preferred stock
and related surplus ..................... 0
Common stock ..................................... $ 751,000
Surplus .......................................... 6,895,000
Undivided profits and capital re-
serves .................................. 8,308,000
Net unrealized holding gains (losses)
on available-for-sale securities ........ 590,000
Cumulative foreign currency
translation adjustments ................. (583,000)
-------------
TOTAL EQUITY CAPITAL ............................. $ 15,961,000
=============
TOTAL LIABILITIES, LIMITED-
LIFE PREFERRED STOCK, AND
EQUITY CAPITAL .......................... $ 231,396,000
=============
</TABLE>
I, Roger W. Trupin, Controller of the above- named bank do hereby declare that
this Report of Condition is true and correct to the best of my knowledge and
belief.
ROGER W. TRUPIN
CONTROLLER
We, the undersigned directors, attest to the
correctness of this Report of Condition. We declare that it has been examined by
us, and to the best of our knowledge and belief has been prepared in conformance
with the instructions and is true and correct.
PAUL J. COLLINS
JOHN S. REED
WILLIAM R. RHODES
DIRECTORS
