<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number 0-27084
CITRIX SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2275152
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6400 N. W. 6th Way 33309
Fort Lauderdale, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (954) 267-3000
Not Applicable
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year if Changed Since Last Report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No ___
---
As of April 30, 1999 there were 87,269,955 shares of the registrant's Common
Stock, $.001 par value per share, outstanding.
<PAGE>
CITRIX SYSTEMS, INC.
Form 10-Q
For the Quarter Ended March 31, 1999
CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets:
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income:
Three Months Ended March 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows:
Three Months Ended March 31, 1999 and 1998 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Qualitative & Quantitative Disclosures About Market Risk 24
PART II: OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
Exhibit Index 27
Exhibit 1.1
Exhibit 4.1, 10.1
Exhibit 4.2
Exhibit 4.3, 10.2
Exhibit 27.1
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Citrix Systems, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------------------------------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $413,104 $127,546
Short-term investments 43,375 56,934
Accounts receivable, net of allowances of
$6,171 and $6,234 at March 31, 1999 and
December 31, 1998, respectively 43,774 32,798
Inventories 4,761 4,071
Prepaid expenses 2,751 6,745
Other current assets 3,746 3,037
Current portion of deferred tax assets 25,148 12,885
-------- --------
Total current assets 536,659 244,016
Long-term investments 162,771 97,108
Property and equipment, net 15,252 14,183
Long-term portion of deferred tax assets 31,501 29,183
Other assets 16,041 91
Intangible assets, net 43,021 46,799
-------- --------
$805,245 $431,380
======== ========
</TABLE>
Continued on following page.
3
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Citrix Systems, Inc.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------------------------------
(in thousands, except par value)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other accrued expenses $ 44,333 $ 29,735
Accrued royalties and other accounts payable
to stockholder 3,198 2,891
Deferred revenue 14,868 10,107
Current portion of deferred revenues on
contract with stockholder 39,898 39,830
Income taxes payable 19,347 2,553
-------- --------
Total current liabilities 121,644 85,116
Long-term liabilities:
Deferred revenues on contract with stockholder 38,870 48,810
Convertible subordinated debentures 301,894 --
-------- --------
Total long-term liabilities 340,764 48,810
Stockholders' equity:
Common stock at $.001 par value--150,000 shares
authorized; and 87,254 and 85,923 issued and
outstanding at March 31, 1999 and
December 31, 1998, respectively 87 86
Additional paid-in capital 207,821 188,207
Retained earnings 134,929 109,161
-------- --------
Total stockholders' equity 342,837 297,454
-------- --------
$805,245 $431,380
======== ========
</TABLE>
See accompanying notes.
4
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Citrix Systems, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------
1999 1998
------------------------------------------
(in thousands, except per share information)
<S> <C> <C>
Revenues:
Net revenues--unrelated parties $75,166 $45,552
Net revenues--stockholder 9,873 3,750
------- -------
Net revenues 85,039 49,302
Cost of revenues:
Cost of revenues--unrelated parties 4,280 3,673
Cost of revenues--stockholder 242 1,176
------- -------
Total cost of revenues 4,522 4,849
------- -------
Gross margin 80,517 44,453
Operating expenses:
Research and development 8,406 3,278
Sales, marketing and support 24,769 14,888
General and administrative 6,410 3,705
Amortization of intangible assets 3,778 774
In-process research and development -- 5,284
------- -------
Total operating expenses 43,363 27,929
------- -------
Income from operations 37,154 16,524
Interest income, net 3,513 2,659
Interest expense (404) --
------- -------
Income before income taxes 40,263 19,183
Income taxes 14,495 6,906
------- -------
Net income $25,768 $12,277
======= =======
Earnings per common share:
Basic earnings per share $0.30 $0.15
======= =======
Weighted average shares outstanding 86,492 83,248
======= =======
Earnings per common share--assuming dilution:
Diluted earnings per share $0.28 $0.14
======= =======
Weighted average shares outstanding 93,682 89,616
======= =======
</TABLE>
See accompanying notes.
5
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Citrix Systems, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1999 1998
----------------------------------------
(in thousands)
<S> <C> <C>
Operating activities
Net income $ 25,768 $ 12,277
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,400 1,586
(Recovery of) provision for doubtful accounts (63) 555
Recovery of product returns -- (824)
Tax benefit related to the exercise of non-statutory stock options and
disqualified dispositions of incentive stock options 7,860 4,078
Accretion of original issue discount 391 --
In-process research and development -- 5,284
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (10,913) (7,755)
Inventories (690) (2)
Prepaid expenses 3,994 (518)
Other current assets (709) --
Other assets (6,904) --
Deferred tax assets (14,581) 1,508
Deferred revenue 4,761 865
Deferred revenue on contract with stockholder (9,872) (3,750)
Accounts payable and other accrued expenses 14,861 776
Accrued royalties and other accounts payable to stockholder 307 185
Income taxes payable 16,794 252
-------- --------
Net cash provided by operating activities 36,404 14,517
Investing activities
Purchases of investments (102,411) (33,442)
Proceeds from sale of investments 50,308 19,785
Cash paid for acquisitions -- (17,500)
Cash paid for licensing agreement (250) (2,125)
Purchases of property and equipment (2,691) (4,184)
-------- --------
Net cash used in investing activities (55,044) (37,466)
Financing activities
Net proceeds from issuance of common stock 11,755 1,849
Net proceeds from issuance of convertible subordinated debentures 292,458 --
Payments on capital lease obligations (15) 35
-------- --------
Net cash provided by financing activities 304,198 1,884
-------- --------
Increase (decrease) in cash and cash equivalents 285,558 (21,065)
Cash and cash equivalents at beginning of period 127,546 140,081
-------- --------
Cash and cash equivalents at end of period $413,104 $119,016
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
Citrix Systems, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. All
adjustments which, in the opinion of management, are considered necessary for a
fair presentation of the results of operations for the periods shown are of a
normal recurring nature and have been reflected in the unaudited condensed
consolidated financial statements. The results of operations for the periods
presented are not necessarily indicative of the results expected for the full
fiscal year or for any future period. The information included in these
unaudited condensed consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this report and the consolidated financial
statements and accompanying notes included in the Citrix Systems, Inc. (the
"Company") Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
2. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the condensed consolidated financial statements
and accompanying notes. While the Company believes that such estimates are fair
when considered in conjunction with the condensed consolidated financial
position and results of operations taken as a whole, the actual amount of such
estimates, when known, will vary from these estimates.
3. Revenue Recognition
Revenue is recognized when earned. The Company's revenue recognition policies
are in compliance with the American Institute of Certified Public Accountants
Statement of Position ("SOP") 97-2 (as amended by SOP 98-4 and SOP 98-9),
"Software Revenue Recognition". Product revenues are recognized upon shipment of
the software product only if no significant Company obligations remain, the fee
is fixed or determinable, and collection of the resulting receivable is deemed
probable. In the case of non-cancelable product licensing arrangements under
which certain Original Equipment Manufacturers ("OEMs") have software
reproduction rights, initial recognition of revenue also requires delivery and
customer acceptance of the product master or first copy. Subsequent recognition
of revenues is based upon reported royalties from the OEMs as well as estimates
of royalties due through the Company's reporting date. Revenue from packaged
product sales to distributors and resellers is recorded when related products
are shipped. In software arrangements that include rights to multiple software
products, post-contract customer support, and/or other services, the Company
allocates the total arrangement fee among each deliverable based on the relative
fair value of each of the deliverables determined based on vendor-specific
objective evidence. Product returns and sales allowances, including stock
rotations, are estimated and provided for at the time of sale. Revenues from
training and consulting are recognized when the services are performed. Service
and subscription revenues from customer maintenance fees for ongoing customer
support and product updates and upgrades are based on the price charged or
derived value of the undelivered elements and are recognized ratably over the
term of the contract, which is typically twelve months. Service revenues, which
are immaterial when compared to net revenues, are included in net revenues on
the face of the statement of income.
7
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4. Convertible Subordinated Debentures
In March 1999, the Company sold $850.0 million principal amount at maturity of
its zero coupon convertible subordinated debentures (the "debentures") due March
22, 2019 in a private placement. The debentures were priced with a yield to
maturity of 5.25% and resulted in net proceeds to the Company of approximately
$292.5 million (net of original issue discount and debt issuance costs). Except
under limited circumstances, no interest will be paid on the debentures prior to
maturity. The debentures are convertible at the option of the security holder at
any time on or before the maturity date at a conversion rate of 7.0306 shares of
the Company's common stock for each $1,000 principal amount at maturity of
debentures, subject to adjustment in certain events. The Company may redeem the
debentures on or after March 22, 2004. Holders may require the Company to
repurchase the debentures, at set redemption prices (equal to the issue price
plus accrued original issue discount) beginning on March 22, 2004.
5. Earnings per Share
Basic earnings per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed
using the weighted average number of common and dilutive common share
equivalents outstanding during the period. Dilutive common share equivalents
consist of shares issuable upon the exercise of stock options. Convertible
shares related to the convertible subordinated debentures were excluded from the
computation of diluted earnings per share because of their antidilutive effect.
All share and per share data has been retroactively adjusted to reflect the two-
for-one stock split in the form of a stock dividend paid on March 25, 1999 to
stockholders of record as of March 17, 1999.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1999 1998
--------------------------------------
<S> <C> <C>
Numerator:
Net income $25,768 $12,277
======= =======
Denominator:
Denominator for basic earnings per share --
weighted-average shares outstanding 86,492 83,248
Effect of dilutive securities:
Employee stock options 7,190 6,368
------- -------
Denominator for diluted earnings per share --
adjusted weighted-average shares outstanding 93,682 89,616
======= =======
Basic earnings per share $ 0.30 $ 0.15
======= =======
Diluted earnings per share $ 0.28 $ 0.14
======= =======
</TABLE>
6. Reclassifications
Certain reclassifications have been made for consistent presentation.
7. Recent Accounting Pronouncements
In March 1998, the Accounting Standards Board issued Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". The Company has adopted the SOP during the current
quarter. The SOP requires the capitalization of certain costs incurred after the
date of adoption in connection with
8
<PAGE>
developing or obtaining software for internal use. The Company does not expect
the adoption of the SOP to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.
In December 1998, the Accounting Standards Board issued Statement of Position
("SOP") 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions". The SOP addresses software revenue recognition
as it applies to certain multiple-element arrangements. SOP 98-9 also amends SOP
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2", to extend the
deferral of application of certain passages of SOP 97-2 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. The Company will comply with the requirements of this SOP as they
become effective, which the Company does not expect to have a material effect on
the Company's consolidated financial position, results of operations or cash
flows.
8. Subsequent Events
On April 15, 1999, the Board of Directors approved a stock repurchase program
authorizing the repurchase of up to $200 million of the Company's common stock.
Purchases will be made from time to time in the open market and paid out of
general corporate funds.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company develops, markets, sells and supports innovative client and
serverbased computing software that enables effective and efficient deployment
of enterprise applications that are designed for Microsoft Windows operating
systems. The Company began shipping its WinFrame product in final form in the
third quarter of 1995 and its MetaFrame product in the second quarter of 1998.
These products, together with their related options, have comprised the largest
source of the Company's revenue.
On May 9, 1997, the Company and Microsoft entered into a License, Development
and Marketing Agreement, as amended (the "Development Agreement"), which
provides for the licensing to Microsoft of certain of the Company's multi-user
software enhancements to Microsoft's Windows NT Server and for the cooperation
between the parties for the development of certain future multi-user versions of
Microsoft Windows NT Server, Terminal Server Edition ("NT Terminal Server").
Under the terms of the Development Agreement, as amended, the Company is
entitled to receive payments of $100 million, in quarterly payments, $55 million
of which has already been received.
As a result of the Development Agreement, the Company will continue to support
the Microsoft Windows NT platform, but the MetaFrame products and later releases
will no longer directly incorporate Windows NT technology. The Company plans to
continue developing enhancements to its MetaFrame product line and expects that
this product, WinFrame products and associated options and royalties derived
under the terms of the Development Agreement will constitute a majority of its
revenues for the foreseeable future.
The Company's revenue recognition policies are in compliance with the American
Institute of Certified Public Accountants Statement of Position ("SOP") 97-2 (as
amended by SOP 98-4 and SOP 98-9), "Software Revenue Recognition" as described
in Note 3 of the Notes to Condensed Consolidated Financial Statements included
in this report.
On March 22, 1999, the Company completed a private placement of zero coupon
convertible subordinated debentures due March 22, 2019 (the "debentures") which
resulted in net proceeds to the Company of approximately $292.5 million (net of
original issue discount and debt issuance costs). The debentures were offered
at an issue price to investors equal to the principal amount at maturity of each
debenture less original issue discount. The debentures are general unsecured
obligations of the Company and are subordinated to all existing and future
senior indebtedness of the Company. The debentures were priced with a yield to
maturity of 5.25%. Except under limited circumstances, no interest will be paid
on the debentures prior to maturity. The Company intends to use the net proceeds
of the offering for working capital and other general corporate purposes. The
debentures are convertible, unless previously redeemed or purchased, at any time
on or before the maturity date at a conversion rate of 7.0306 shares of the
Company's common stock for each $1,000 principal amount at maturity of
debentures, subject to adjustment in certain events. The Company may redeem the
debentures on or after March 22, 2004. In the event of a redemption, the
debentures will be purchased for cash at a price equal to the issue price of the
debentures plus accrued original issue discount through the date of redemption.
Holders may also require the Company to repurchase the debentures upon a change
in control. In the event of a change in control, debentures will be purchased
for cash at a price equal to the issue price of the debentures plus accrued
original issue discount through the date of purchase. The Company has agreed
to file with the Securities and Exchange Commission a registration statement in
respect of the resale of the debentures and the Common Stock issuable upon
conversion of the debentures. The Company will be required to pay additional
interest on the debentures if it fails to comply with certain obligations under
the registration rights agreement.
The discussion below relating to the individual financial statement captions,
the Company's overall financial performance, operations and financial position
should be read in conjunction with the factors and events described in
"Overview" and "Certain factors which may affect future results" which, it is
anticipated, may impact the Company's future performance and financial position.
10
<PAGE>
Results of operations
The following table sets forth statement of operations data of the Company
expressed as a percentage of net revenues and as a percentage of change from
period-to-period for the periods indicated.
<TABLE>
<CAPTION>
Change from Three
Three Months Ended Months Ended
March 31, March 31, 1999
--------------------- vs.
1999 1998 March 31, 1998
--------------------------------------------
<S> <C> <C> <C>
Net revenues...................................................... 100.0% 100.0% 72.4%
Cost of revenues.................................................. 5.3 9.8 (6.7)
----- -----
Gross margin...................................................... 94.7 90.2 81.1
Operating expenses:
Research and development......................................... 9.9 6.6 156.4
Sales, marketing and support..................................... 29.1 30.2 66.4
General and administrative....................................... 7.5 7.5 73.0
Amortization of intangible assets................................ 4.4 1.6 *
In-process research and development.............................. -- 10.7 *
----- -----
Total operating expenses........................................ 50.9 56.6 55.3
----- -----
Income from operations............................................ 43.8 33.6 124.8
Interest income, net.............................................. 4.1 5.4 32.1
Interest expense.................................................. (0.5) -- *
----- -----
Income before income taxes........................................ 47.4 39.0 109.9
Income taxes...................................................... 17.0 14.0 109.9
----- -----
Net income........................................................ 30.4% 25.0% 109.9%
===== =====
</TABLE>
* Not meaningful.
Net Revenues. The increases in net revenues in the first quarter of 1999
compared to the first quarter of 1998 were primarily attributable to an increase
in volume of shipments of the Company's MetaFrame and system options products
and, to a lesser extent, an increase in revenue related to the Development
Agreement with Microsoft. System option products include additional user
licenses as well as other options, which are applicable to both the MetaFrame
and WinFrame product lines. The overall increase in net revenues was offset by
a decrease in the volume of shipments of the WinFrame product and decreased
volume in licensing of OEM products.
An analysis of Company net revenue is detailed in the table below. Net
revenue is segregated into six categories: WinFrame-based products, MetaFrame-
based products, system options products, OEM revenue, Microsoft royalties and
other revenue. The Company's WinFrame, MetaFrame, system options products and
OEM revenues represent product license fees based upon the Company's multi-user
NT-based technology. The OEM revenue consists of license fees and royalties from
third party manufacturers who are granted a license to incorporate and/or market
the Company's multi-user technologies in their own product offerings. Microsoft
royalties represent fees recognized in connection with the Development
Agreement.
<TABLE>
<CAPTION>
Revenue Growth for
Three Months Ended the Three Months Ended
March 31, March 31, 1999
---------------------------------------- vs.
1999 1998 March 31, 1998
------------------ -------------------- ----------------------
<S> <C> <C> <C>
WinFrame-based products...................... 8% 53% (75%)
MetaFrame-based products..................... 46 - *
System options products...................... 30 18 177
OEM revenue.................................. 2 16 (73)
Microsoft royalties.......................... 12 8 163
Other revenue................................ 3 5 (4)
---- ---- ---
Net revenues................................. 100% 100% 114%
</TABLE>
* Not meaningful.
11
<PAGE>
International. International revenues (sales outside of the United States)
accounted for approximately 39% and 28% of net revenues for the three months
ended March 31, 1999 and 1998, respectively. The Company expects international
revenue to account for a larger percentage of total revenue in 1999 than in
1998.
The Company will continue investing in international markets and expanding its
international operations by establishing additional foreign operations, hiring
personnel, expanding its international direct sales force and adding third party
channel partners. International revenues may fluctuate in future periods as a
result of difficulties in staffing, dependence on an independent distribution
channel, competition, variability of foreign economic and political conditions
and changing restrictions imposed by regulatory requirements, localized product
release timing and marketing such products in foreign countries.
Cost of Revenues. Cost of revenues consists primarily of the cost of
royalties, product media and duplication, manuals, packaging materials and
shipping expense. Cost of OEM revenues included in cost of revenues primarily
consists of cost of royalties, except where the OEM elects to purchase shrink
wrapped products in which case such costs are as described in the previous
sentence. All development costs incurred in connection with the Development
Agreement are expensed as incurred as a separate component of cost of revenues.
Gross Margin. Gross margin increased from 90.2% in the first quarter of 1998
to 94.7% in the first quarter of 1999 primarily due to the introduction of the
MetaFrame product line and an increase in system options products. The MetaFrame
product line began shipping in June 1998 and has a relatively high gross margin
contribution compared to the WinFrame product line as the MetaFrame product
line bears no royalties. The increase in gross margin as a percentage of revenue
related to the Development Agreement also increased due to an increase in
revenue related to the Development Agreement and a decrease in related
development costs. The increase in gross margin was partially offset by an
increase in inventory reserves.
Research and Development Expenses. Research and development expenses
consisted primarily of personnel-related costs. To date, all internal software
development costs have been expensed as incurred. The increase in research and
development expenses resulted primarily from additional staffing, associated
salaries and related expenses required to expand and enhance the Company's
product lines. All development costs included in the research and development of
software products and enhancements to existing products have been expensed as
incurred except for certain intangible assets related to the acquisitions and
licensing arrangement described herein.
Sales, Marketing and Support Expenses. The increase in sales, marketing and
support expenses resulted primarily from increased efforts in promotional and
advertising activities related to specific product lines and corporate branding.
Promotional activities include co-op advertising programs and other promotional
activities such as those directed at resellers, training programs, trade shows
and other direct mail programs. Sales, marketing and support staff and
associated salaries, commissions and related expenses also increased due to
efforts to increase the Company's international sales force and marketing
programs.
General and Administrative Expenses. The increase in general and
administrative expenses is primarily due to increased expenses associated with
additional staff, associated salaries and related expenses necessary to support
overall increases in the scope of the Company's operations. The increase in
general and administrative expenses was partially offset by lower bad debt
expenses as compared to the same quarter of 1998.
Amortization of Intangible Assets. The increase in amortization of goodwill
and identifiable intangible assets is primarily due to the APM Ltd. and VDOnet
Corporation Ltd. acquisitions. The Company acquired APM Ltd. for approximately
$40.4 million in June 1998 and acquired VDOnet Corporation Ltd. for
approximately $8.0 million in July 1998.
In-Process Research and Development Expenses. During 1998, the Company
completed certain acquisitions and licensing arrangement. Since the respective
dates of acquisition and licensing, the Company has used the acquired in-process
technology to develop new product offerings and enhancements, which have or will
become part of the Company's suite of products when completed. Functionality
included in products using the acquired in-process technology have been
introduced at various times following the respective transaction dates of the
acquired assets and licensing, and the Company currently expects to complete
12
<PAGE>
the development of the remaining projects at various dates between 1999 and
2000. Upon completion, the Company has offered and intends to offer the related
products to its customers.
The nature of the efforts required to develop and integrate the acquired
in-process technology into commercially viable products or features and
functionalities within the Citrix suite of existing products principally relate
to the completion of all planning, designing and testing activities that are
necessary to establish that the products can be produced to meet design
requirements, including functions, features and technical performance
requirements. The Company currently expects that products utilizing the acquired
in-process technology will be successfully developed, but there can be no
assurance that commercial viability of any of these products will be achieved.
Furthermore, future developments in the software industry, particularly the
server-based computing environment, changes in technology, changes in other
products and offerings or other developments may cause the Company to alter or
abandon product plans. Failure to complete the development of these projects in
their entirety, or in a timely manner, could have a material, adverse impact on
the Company's financial condition and results of operations.
A description of the in-process research and development and the estimates
made by the Company for EPiCON, Insignia, APM and VDOnet is summarized below.
All of the acquired projects are targeted for the server-based computing market.
After the acquisition or license of each technology, the Company has continued
the development of these in-process projects.
EPiCON
In January 1998, the Company licensed certain in-process software technology
from EPiCON, Inc. The in-process research and development acquired in the
license of EPiCON technology consisted of one significant research and
development project, termed Application Installation Services. This project
involved the development of software to enable an application to be installed
once on a server and then replicated to all other servers in a server farm
configuration. As of March 31, 1999, the Company has completed this project and
has incurred expenses totaling approximately $1.1 million since the date of
licensing.
Insignia
On February 5, 1998, the Company completed its acquisition of certain in-
process software technologies and assets of Insignia Solutions, plc. The in-
process research and development acquired in the Insignia acquisition consisted
primarily of one significant research and development project, Keoke, a video
display protocol designed to add performance and bandwidth management
enhancements to ICA in WinFrame and MetaFrame software. As of March 31, 1999,
expenses totaling approximately $1.0 million had been incurred since the date of
acquisition. The Company estimates approximately $800,000 will be required
to complete the remaining research and development project and it is expected to
be completed by the end of 1999. The remaining efforts to complete the project
are primarily the utilization of performance enhancements and algorithmic
methodologies of the Keoke protocol to create similar improvements in the
Company's ICA protocol. The research and development risks associated with this
project primarily relate to the integration of key performance features of Keoke
into the Company's ICA protocol.
APM
On June 30, 1998, the Company completed its acquisition of APM Ltd. The in-
process research and development acquired in the APM acquisition consisted
primarily of one significant research and development project. The project is a
Windows NT-based application server for Java, which is similar to WinFrame
software, but runs Java applications. As of March 31, 1999, expenses totaling
approximately $2.5 million had been incurred since the date of acquisition. The
Company estimates approximately $2.3 million will be required to complete the
remaining research and development project and it is expected to be completed in
2000. The remaining effort to complete the project is primarily the utilization
of acquired technology to develop an application server for Java that would
operate in a MetaFrame and WinFrame server environment. The research and
development risks associated with this project relate primarily to updating the
acquired technology to be compatible with Sun Microsystems' Java 2.0
application, integrating and porting such technology into a variety of server-
based computing architectures.
VDOnet
In July 1998, the Company completed its acquisition of VDOnet Corporation,
Ltd. The in-process research and development acquired in the VDOnet acquisition
consisted primarily of one significant research and development project, ICA
Video Services. This project allows video applications and applications
containing video to be viewed on an ICA client. As of
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March 31, 1999, expenses totaling approximately $1.8 million had been incurred
since the date of acquisition. The Company estimates approximately $2.4 million
will be required to complete the remaining research and development project and
it is expected to be completed in 2000. The remaining effort to complete the
project is primarily the utilization of acquired technology to develop a video
server that will provide video applications to an ICA client. The research and
development risks associated with this project relate primarily to integrating
this product into a server-based computing environment.
There can be no assurance that the Company will not incur additional charges
in subsequent periods to reflect costs associated with these transactions or
that the Company will be successful in its efforts to integrate and further
develop these technologies.
Interest Income, Net. The increase in interest income, net, for the three
months ended March 31, 1999 was primarily due to interest income earned on cash
generated from operations and additional cash obtained from the issuance of the
zero coupon convertible subordinated debentures in March 1999.
Interest Expense. The increase in interest expense for the three months ended
March 31, 1999 was due to the issuance of the zero coupon convertible
subordinated debentures in March 1999.
Income Taxes. The Company's effective tax rate amounted to 36% for the three
months ended March 31, 1999 and 1998.
Liquidity and capital resources
During the three months ended March 31, 1999, the Company generated positive
operating cash flows of approximately $36.4 million. Cash provided by operating
activities relate primarily to net income as adjusted for tax benefits related
to the exercise of non-statutory stock options and disqualified dispositions of
incentive stock options of $7.9 million and a $14.6 million increase in deferred
tax assets. Accounts receivable increased $10.9 million due to higher revenue
levels. Accounts payable and other accrued expenses increased $14.9 million due
to accrued royalty fees and increased expenses resulting from higher levels of
operating activity. Income tax payable increased $16.8 million due to greater
profitability generated from higher revenue levels. Cash used in investing
activities of $55.0 million related primarily to the use of a portion of the
proceeds from the issuance of convertible subordinated debentures to purchase
longer maturity investments. This cash outflow was partially offset by cash
inflows from the sale of investments of approximately $50.3 million. Cash
provided by financing activities of $304.2 million related primarily to $292.5
million of net proceeds from the issuance of convertible subordinated debentures
and $11.8 million from the issuance of common stock under the Company's stock
option plan.
As of March 31, 1999, the Company had approximately $619.3 million in cash and
investments and $415.0 million of working capital. The net proceeds from the
issuance of convertible subordinated debentures have been invested in cash
equivalents and investments. The Company intends to use the net proceeds for
working capital and other general corporate purposes. The Company's cash and
cash equivalents are invested in investment grade, highly liquid securities to
minimize interest rate risk and allow for flexibility in the event of immediate
cash needs. At March 31, 1999, the Company had approximately $43.8 million in
accounts receivable, net of allowances, and $93.6 million of deferred revenues,
of which the Company anticipates $54.8 million will be earned over the next
twelve months.
On April 15, 1999, the Board of Directors approved a stock repurchase program
authorizing the repurchase of up to $200 million of the Company's common stock.
Purchases will be made from time to time in the open market and paid out of
general corporate funds.
The Company believes existing cash and investments together with cash flow
from operations, if any, will be sufficient to meet operating and capital
expenditures requirements for at least the next twelve months. The Company may
also from time to time seek to raise additional funds through public or private
financings.
Year 2000 readiness disclosure
Until recently, many computer programs were written using two digits rather
than four digits to define the applicable year in the twentieth century. Such
software may recognize a date using "00" as the year 1900 rather than the year
2000. The
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consequences of this issue may include systems failures and business
process interruption to the extent companies fail to upgrade, replace or
otherwise address year 2000 problems. The year 2000 problem may also result in
additional business and competitive differentiation. Aside from the well-known
calculation problems with the use of 2-digit date formats as the year changes
from 1999 to 2000, the year 2000 is a special case leap year. As a result,
significant uncertainty exists in the software industry concerning the potential
impact of the year 2000 problem.
The Company believes that it has four general areas of potential exposure with
respect to the year 2000 problem: (i) its own software products; (ii) its
internal information systems; (iii) computer hardware and other equipment
related systems; and (iv) the effects of third party compliance efforts.
The Company's existing principal software product lines consist of WinFrame
and MetaFrame software. The Company's WinFrame product line is an authorized
extension to Microsoft Windows NT, 3.51. The Company's MetaFrame product line
adds additional functionality to NT Terminal Server. Customers can obtain
current information about the year 2000 compliance of the Company's products
from the Company's web site. Information on the Company's web site is provided
to customers for the sole purpose of assisting in planning for the transition to
the year 2000. Such information is the most currently available concerning the
behavior of the Company's products in the next century and is provided "as is"
without warranty of any kind.
While the Company believes that the current versions of its WinFrame and
MetaFrame products are capable of storing four-digit year data, allowing
applications to differentiate between dates from the 1900s and the year 2000 and
beyond, the potential incompatibility with two-digit application programs may
limit the Company's sales of product in those situations. Further,
notwithstanding the operating system's ability to store four-digit year data, it
is typically the application's function to collect and properly store date data.
There can be no assurance that the Company's products will not be integrated by
the Company or its customers with, or otherwise interact with, non-year 2000
compliant software or other products which may malfunction and expose the
Company to claims from its customers or other third parties. The foregoing
could result in the loss of or delay in market acceptance of the Company's
products and services, increased service costs to the Company or payment by the
Company of compensatory or other damages. Although the Company believes that
many Windows applications do store four-digit year dates today, it is possible
that some applications are now or have historically only collected two-digit
year data, and in such cases WinFrame cannot create four-digit year data for
applications which have collected only two digits in year fields. Further,
there can be no assurance that the Company's software products that are designed
to be year 2000 compliant contain all necessary technology to make them year
2000 compliant. If any of the Company's licensees experience year 2000
problems, such licensees could assert claims for damages against the Company.
With respect to internal information systems, the Company has commenced, but
has not yet completed, a testing and compliance program to identify any year
2000 problems. An audit has been conducted to identify all business critical
applications and responses sought from vendors as to whether the application is
compliant or not and what plans they have in place to ensure compliance before
December 31, 1999. The Company expects to complete this portion of its
compliance plan by the end of the third quarter of 1999.
The third type of potential year 2000 exposure relates to the Company's
computer hardware and other equipment related systems including such equipment
as the Company's workstations, phone systems, security systems and elevator
systems. The Company is in the final stages of identifying and evaluating such
systems' year 2000 exposure. At this point, the Company has not discovered any
significant potential year 2000 exposure regarding its computer hardware and
other equipment related systems. The Company expects to complete this portion
of its compliance plan by the end of the second quarter of 1999. The Company
does not expect costs incurred to have a material adverse effect on its
financial condition.
The fourth aspect of the Company's year 2000 analysis involves evaluating the
year 2000 efforts of third parties, including critical suppliers and other
partners with whom the Company has strategic relationships. The Company has
contacted critical suppliers and other parties through written and/or telephone
inquiries. Substantially all suppliers and other parties that have responded to
the Company's inquires have indicated they are compliant or will be compliant
before December 31, 1999. The Company will continue to follow up with suppliers
and other parties that have not yet responded or have indicated a current status
of noncompliance. If the Company determines that the year 2000 exposure of any
critical suppliers or other strategic relationships could result in material
disruptions to their respective businesses, the Company may develop appropriate
contingency plans. Further, if certain critical third party providers, such as
those supplying outsourced manufacturing,
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electricity, water, or telecommunications services, experience difficulties
resulting in a material interruption of services to the Company, such
interruption would likely result in a material adverse effect on the Company's
business, results of operations and financial condition.
To date, the Company has not incurred any material expenditure in connection
with identifying or evaluating year 2000 compliance issues. The Company
estimates it will not incur any material levels of expenditure on this issue
during 1999 to support its compliance initiatives. The Company believes that it
is unlikely to experience a material adverse impact on its financial condition
or results of operations due to the Company's internal year 2000 compliance
issues. However, since the assessment process is ongoing, year 2000
complications are not fully known, and potential liability issues are not clear,
the full potential impact of the year 2000 on the Company is not known at this
time.
As the Company has recently replaced its fundamental financial and accounting
software, no significant problems are anticipated which would result in either
the delay or the inability to process accounting and financial data. If the
audit of the other software applications used by Company lead to the discovery
of further year 2000 compliance issues, the Company intends to evaluate the need
for one or more contingency plans relating to such issues.
The Company's expectations as to the extent and timeliness of modifications
required in order to achieve year 2000 compliance is a forward-looking statement
subject to risks and uncertainties. Actual results may vary materially as a
result of a number of factors, including, among others, those described in this
paragraph. There can be no assurance however, that the Company will be able to
successfully modify on a timely basis such products, services and systems to
comply with year 2000 requirements, which failure could have a material adverse
effect on the Company's operating results. Further, while the Company believes
that its year 2000 compliance efforts will be completed on a timely basis, and
in advance of the year 2000 date transition, there can be no assurance that
unexpected delays or problems, including the failure to ensure year 2000
compliance by systems or products supplied to the Company by a third party, will
not have an adverse effect on the Company, its financial performance, or the
competitiveness or customer acceptance of its products. Further, the Company's
current understanding of expected costs is subject to change as the project
progresses and does not include potential costs related to actual customer
claims, or the cost of internal software and hardware replaced in the normal
course of business unless such installation has been accelerated to provide
solutions to year 2000 compliance issues.
Certain factors which may affect future results
We do not provide financial performance forecasts. Our operating results and
financial condition have varied in the past and may in the future vary
significantly depending on a number of factors. Except for the historical
information in this report, the matters contained in this report include
forward-looking statements that involve risks and uncertainties. The following
factors, among others, could cause actual results to differ materially from
those contained in forward-looking statements made in this report. Such
factors, among others, may have a material adverse effect upon our business,
results of operations and financial condition.
Our success is substantially dependent upon our strategic relationship with
Microsoft
Microsoft is the leading provider of desktop operating systems. We depend
upon the license of key technology from Microsoft, including certain source and
object code licenses, and technical support. We also depend upon our strategic
alliance agreement with Microsoft pursuant to which Citrix and Microsoft have
agreed to cooperate to develop advanced operating systems and promote Windows
application program interfaces. Our relationship with Microsoft is subject to
the following risks and uncertainties:
. Competition with Microsoft. NT Terminal Server is, and future product
offerings by Microsoft may be,
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competitive with our current WinFrame and MetaFrame products, and any future
product offerings by Citrix.
. Termination of Microsoft's Endorsement of the ICA Protocol. Microsoft has
agreed to endorse only our ICA protocol as the preferred method to provide
multi-user Windows access for devices other than Windows clients until at
least November 1999. Subsequent to November 1999, or before November 1999 if
certain events occur as provided in our development agreement with Microsoft,
it is possible that Microsoft will market or endorse other methods to provide
non-Windows client devices multi-user Windows access.
. Dependence on Microsoft for Commercialization. Our ability to successfully
commercialize our MetaFrame product depends on Microsoft's ability to market
NT Terminal Server products. We do not have control over Microsoft's
distributors and resellers and, to our knowledge, Microsoft's distributors and
resellers are not obligated to purchase products from Microsoft.
. Product Release Delays. There may be delays in the release and shipment of
future versions of NT Terminal Server.
If our relationship with Microsoft were terminated or adversely affected for
any reason, our business, operating results and financial condition would be
materially adversely affected.
Our continued growth depends upon broad-based acceptance of our ICA protocol
We believe that our success in the markets in which we compete will depend
upon our ability to make the ICA protocol a widely accepted standard for
supporting Windows applications. Microsoft includes as a component of NT
Terminal Server its Remote Desktop Protocol (RDP) which has certain of the
capabilities of our ICA protocol, and may offer customers a competitive
solution. We believe that our success is dependent on our ability to enhance
and differentiate our ICA protocol, and foster broad acceptance of the ICA
protocol based on its performance, scalability, reliability and enhanced
features. In addition, our ability to win broad market acceptance of our ICA
protocol will depend upon the degree of success achieved by our strategic
partners in marketing their respective product offerings, product pricing and
customers' assessment of our technical, managerial, service and support
expertise. If another standard emerges or if we otherwise fail to achieve wide
acceptance of the ICA protocol as a standard for supporting Windows
applications, our business, operating results and financial condition could be
materially adversely affected.
The success of our business also depends upon our strategic relationships with
parties other than Microsoft
In addition to our relationship with Microsoft, we have strategic
relationships with IBM, Compaq, Wyse and others. We depend upon our strategic
partners to successfully market and promote the use of the Company's products
and incorporate our technology into their products and to market and sell such
products. If we are unable to maintain our current strategic relationships or
develop additional strategic relationships, or if any of our key strategic
partners are unsuccessful in incorporating our technology into their products or
marketing or selling such products, our business, operating results and
financial condition could be materially adversely affected.
We face significant competition from other technology companies
The markets in which we compete are intensely competitive. Most of our
competitors and potential competitors, including Microsoft, have significantly
greater financial, technical, sales, marketing and other resources. The
announcement of the release and the actual release of products competitive with
our existing and future product lines, such as NT Terminal Server and related
enhancements by Microsoft or third parties, could cause our existing and
potential customers to postpone or cancel plans to license our product lines.
This would adversely impact our business, operating results and financial
condition. Further, our
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ability to market MetaFrame and other future product offerings may be affected
by Microsoft's licensing and pricing scheme for client devices implementing our
product offerings which attach to NT Terminal Server.
In addition, alternative products exist for Internet commerce that directly or
indirectly compete with our products. Existing or new products that extend
web site software to provide database access or interactive computing could
materially impact our ability to sell our products in this market. As markets
for our products continue to develop, additional companies, including companies
with significant market presence in the computer hardware, software and
networking industries, may enter the markets in which we compete and further
intensify competition. Finally, although we believe that price has historically
been a less significant competitive factor than product performance, reliability
and functionality, we believe that price competition may become more significant
in the future. We may not be able to maintain our historic prices, and any
inability to do so could adversely affect our business, results of operations
and financial condition.
As a result of these and other factors, we may not be able to compete
effectively with current or future competitors, which would have a material
adverse effect on our business, operating results and financial condition.
Our reliance on a few products for a majority of our revenue could adversely
affect our business
We anticipate that our MetaFrame and WinFrame product lines and related
enhancements will constitute the majority of our revenue for the foreseeable
future. The MetaFrame product, when combined with NT Terminal Server, provides
capabilities similar to those offered in the WinFrame technology line.
Therefore, our ability to generate revenue from our MetaFrame product will
depend upon market acceptance of NT Terminal Server products. We expect that
revenue from MetaFrame-based products will constitute an increasing percentage
of total revenue in the near future and that revenue from WinFrame-based
products will decrease over time as a percentage of total revenue. We may
experience declines in demand for our products as a result of new competitive
product releases, price competition, lack of success of our strategic partners,
technological change or other factors. In addition, the introduction of
products based on MetaFrame technology may create competition with our WinFrame
product line and may delay or replace orders of either product line. If we are
unable to successfully sell our MetaFrame and WinFrame product lines and related
enhancements, our business, operating results and financial condition would be
materially adversely affected.
Failure to properly manage our growth could adversely affect our business
We have recently experienced rapid growth in the scope of our operations, the
number of our employees and the geographic area of our operations. In addition,
we have completed certain international acquisitions since October 1997. Such
growth and assimilation of operations and personnel of such acquired companies
has placed and may continue to place a significant strain on our managerial,
operational and financial resources. To manage our growth effectively, we must
continue to implement and improve additional management and financial systems
and controls. Our systems, procedures or controls may not be adequate to
support our current or future operations. In addition, we may not be able to
effectively manage this expansion and still achieve the rapid execution
necessary to fully exploit the market opportunity for our products and services
in a timely and cost-effective manner. Our future operating results will also
depend on our ability to manage our expanding product line, expand our sales and
marketing organizations and expand our support organization commensurate with
the increasing base of our installed product. Our failure to properly manage
our growth could adversely affect our business, operating results and financial
condition.
We plan to increase our professional staff during 1999 as we implement sales,
marketing and support and product developments efforts, as well as associated
administrative systems, to support planned growth. As a result of this planned
growth in the size of our staff, we believe that we will require additional
facilities during 1999. Although we believe that the cost
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of such additional facilities will not significantly impact our financial
position or results of operations, we anticipate that operating expenses will
increase during 1999 as a result of our planned growth in staff. Such an
increase in operating expenses may reduce our income from operations and cash
flows from operating activities in 1999.
Loss of key personnel could materially affect our business
Our future success depends, in large part, upon the services of a number of
key employees. Any officer or employee can terminate his relationship at any
time. The effective management of our anticipated growth will depend, in large
part, upon our ability to retain our highly skilled technical, managerial and
marketing personnel, and attract and maintain replacements for and additions to
such personnel in the future. Competition for such personnel is intense and may
affect our ability to successfully attract, assimilate or retain sufficiently
qualified personnel. The loss of one or more of our key personnel could have a
material adverse affect on our business, operating results and financial
condition.
Our success depends upon our ability to protect our proprietary technology
We rely primarily on a combination of copyright, trademark and trade secret
laws, as well as confidentiality procedures and contractual provisions, to
protect our proprietary rights. Our efforts to protect our proprietary
technology rights may not be successful. The loss of any material trade secret,
trademark, trade name or copyright could have a material adverse effect on us.
Despite our precautions, it may be possible for unauthorized third parties to
copy certain portions of our products or to obtain and use information regarded
as proprietary. Substantially all of our sales are derived from the licensing
of our products under "shrink wrap" license agreements that are not signed by
licensees and, therefore, may be unenforceable under the laws of certain
jurisdictions. In addition, our ability to protect our proprietary rights may
be affected by the following:
. Differences in International Law. The laws of some foreign countries do not
protect our intellectual property to the same extent as do the laws of the
United States and Canada.
. Third Party Infringement Claims. Third parties may assert infringement
claims against us in the future. This may result in costly litigation or
require us to obtain a license to intellectual property rights of such third
parties. Such licenses may not be available on reasonable terms or at all.
As a result of these and other factors, we may not be able to compete
effectively with current or future competitors, which would have a material
adverse effect on our business, operating results and financial condition.
If we fail to introduce new products and enhance our existing products to keep
up with rapid technological change, demand for our products may decline
The markets for our products are relatively new and are characterized by:
. rapid technological change;
. evolving industry standards;
. changes in customer requirements; and
. frequent new product introductions and enhancements, including enhancements to
certain key technology licensed from Microsoft.
These market characteristics will require us to continuously enhance our
current products and develop and introduce new products to keep pace with
technological developments and respond to evolving customer requirements.
Additionally, we and
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others may announce new products, new product enhancements or technologies that
could replace or shorten the life cycle of our existing product offerings.
We believe we will incur additional costs and royalties associated with the
development, licensing or acquisition of new technologies or enhancements to
existing products. This will increase our cost of revenues and operating
expenses. We cannot currently quantify such increase with respect to
transactions that have not occurred. We may use a substantial portion of our
cash and investments to fund these additional costs, resulting in a decrease in
interest income, unless such decrease is offset by cash flows from future
operations.
We may need to hire additional personnel to develop new products, product
enhancements and technologies. If we are unable to add staff and resources,
future enhancement and additional features to our existing or future products
may be delayed, which may have a material adverse effect on our business,
results of operations and financial condition.
If our products contain errors, they may be costly to correct, revenue may be
delayed, we could get sued and our reputation could be harmed
Despite significant testing by us and by current and potential customers, our
products may contain errors after commencement of commercial shipments. If
errors are discovered, we may not be able to successfully correct them in a
timely manner or at all. In addition, we may need to make significant
expenditures of capital resources in order to eliminate errors and failures.
Errors and failures in our products could result in loss of or delay in market
acceptance of our products and could damage our reputation. If one or more of
our products fails, a customer may assert warranty and other claims for
substantial damages against us. The occurrence or discovery of these types of
errors or failures could have a material adverse effect on our business,
operating results and financial condition.
Our success depends on our ability to expand and manage distribution channels
and major distributors
To increase our sales, we must further expand and manage our indirect
distribution channels, including OEMs, distributors, resellers, system
integrators and service providers. We rely significantly on independent
distributors and resellers for the marketing and distribution of our products.
We do not control our distributors and resellers. Additionally, our
distributors and resellers as well as our other indirect distribution channels
are not obligated to purchase products from us and may also represent other
lines of products. Our inability to expand and manage our relationship with our
partners, the inability or unwillingness of our partners to effectively market
and sell our products or the loss of existing partnerships could have a material
adverse effect on our business, operating results and financial condition. We
intend to leverage our relationships with hardware and software vendors and
systems integrators to encourage them to recommend or distribute our products.
In addition, an integral part of our strategy is to expand our direct sales
force and add third-party distributors both domestically and internationally.
We are currently investing, and intend to continue to invest, significant
resources to develop these channels, which could reduce our profits.
Our business may be affected by unexpected year 2000 problems
Until recently, many computer programs were written using two digits rather
than four digits to define the applicable year in the twentieth century. Such
software may recognize a date using "00" as the year 1900 rather than the year
2000. The consequences of this issue may include systems failures and business
process interruption to the extent companies fail to upgrade, replace or
otherwise address year 2000 problems. The year 2000 problem may also result in
additional business and competitive differentiation. Aside from the well-known
calculation problems with the use of 2-digit date formats as the year changes
from 1999 to 2000, the year 2000 is a special case leap year and in many
organizations using older technology, dates
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were used for special programmatic functions. As a result, significant
uncertainty exists in the software industry concerning the potential impact of
the year 2000 problem. We believe we have four general areas of potential
exposure with respect to the year 2000 problem:
. our own software products;
. our internal information systems;
. our computer hardware and other equipment related systems; and
. the effects of compliance efforts by third parties, including our partners,
suppliers and vendors.
While we believe that the current versions of our WinFrame and MetaFrame
products are capable of storing four-digit year data allowing applications to
differentiate between dates from the 1900s and the year 2000 and beyond, the
potential incompatibility with two-digit application programs may limit our
sales of product in those situations. There can be no assurance that our
products will not be integrated by us or our customers with, or otherwise
interact with, non-year 2000 compliant software or other products which may
malfunction and expose us to warranty and other claims from our customers or
other third parties.
We have not yet completed our assessment of year 2000 compliance issues with
respect to all of these areas. Since the year 2000 complications are not fully
known, potential year 2000 problems, including changing purchasing patterns of
customers impacted by year 2000 issues, could materially adversely affect our
business, results of operations and financial condition.
If our growth rate does not continue our financial condition could be affected
Our revenue growth rate in 1999 may not approach the levels attained in 1998,
1997 and 1996. Our growth during those three years was largely attributable to
the introduction of MetaFrame in mid-1998 and WinFrame in late 1995. To the
extent our revenue growth continues, we believe that our cost of revenues and
certain operating expenses will also increase. A significant portion of our
expenses, such as employee compensation and rent, are relatively fixed in the
short term. Moreover, our expense levels are based, in part, on our
expectations regarding future revenue levels. Our income from operations and
cash flows from operating and investing activities may decrease as a percentage
of revenues in 1999. If we are unable to continue to manage our growth
efficiently, our business, financial condition and results of operations could
be materially adversely affected.
Our quarterly operating results may fluctuate
Our quarterly operating results have in the past varied and may in the future
vary significantly depending on a number of factors, including:
. the success of our MetaFrame products;
. the effects of acquisitions or licenses of additional technology;
. the size, timing and recognition of revenue from significant orders;
. increased competition;
. changes in our pricing policies or those of our competitors, including
Microsoft;
. new product introductions or enhancements by competitors;
. delays in the introduction of products or product enhancements by us or our
competitors;
. customer order deferrals in anticipation of upgrades and new products;
. market acceptance of new products and technologies offered by us;
. changes in operating expenses, including for the addition of personnel;
. foreign currency exchange rates; and
. general economic conditions.
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We continually re-evaluate our programs, including specific license terms and
conditions, to market our current and future products and services. We may
implement new programs, including offering specified and unspecified
enhancements to our current and future product lines. We may recognize revenues
associated with such enhancements after the initial shipment or licensing of the
software product or over the product's life cycle. The timing of the
implementation of such programs, the timing of the release of such enhancements
and other factors will impact the timing of our recognition of revenues and
related expenses associated with our products, related enhancements and
services. As a result of these factors, we currently cannot quantify the impact
of the re-evaluation of our programs on our business, results of operations and
financial condition.
We operate with little order backlog because our software products typically
are shipped shortly after orders are received. In addition, like many systems
level software companies, we recognize a substantial portion of our revenues in
the last month of a quarter, with these revenues frequently concentrated in the
last weeks or days of the quarter. As a result, product revenues in any quarter
are substantially dependent on orders booked and shipped in that quarter, and
revenues for any future quarter are not predictable with any degree of
certainty. We may also choose to reduce prices or increase spending in response
to competition or to pursue new market opportunities. New competitors,
technological advances or other factors could result in lower revenues and may
require us to incur additional expenses, which, in turn, would materially
adversely affect our operating margins in the future.
Insufficient reserves for product returns and price reductions could adversely
affect us
We provide certain of our distributors with product return rights for stock
balancing or limited product evaluation. We also provide certain of our
distributors with price protection rights. To cover these product returns and
price protection rights, we have established reserves based on our evaluation of
historical trends and current circumstances. These reserves may not prove to be
sufficient in the future, in which case our business, operating results and
financial condition could be adversely affected.
Our success depends on our ability to expand and manage our international
operations
Our continued growth and profitability will require further expansion of our
international operations. To successfully expand international sales, we must
establish additional foreign operations, hire additional personnel and recruit
additional international resellers. Such international operations are subject
to certain risks, such as:
. difficulties in staffing and managing foreign operations;
. fluctuations in foreign currency exchange rates;
. compliance with foreign regulatory and market requirements;
. variability of foreign economic and political conditions;
. changing restrictions imposed by regulatory requirements, tariffs or other
trade barriers or by United States export laws;
. costs of localizing products and marketing such products in foreign countries;
. longer accounts receivable payment cycles;
. potentially adverse tax consequences, including restrictions on repatriation
of earnings;
. difficulties in protecting intellectual property; and
. burdens of complying with a wide variety of foreign laws.
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Economic and market conditions may affect demand for our products
The demand for our products depends in part upon the general demand for
computer hardware and software, which fluctuates based on numerous factors,
including capital spending levels and general economic conditions. If capital
spending levels or general economic conditions are affected, our business,
financial condition and results of operations could be materially adversely
affected.
Possible volatility of our common stock price
The market price for our common stock has been volatile and has fluctuated
significantly to date. The trading price of our common stock is likely to
continue to be highly volatile and subject to wide fluctuations in response to
factors such as actual or anticipated variations in operating and financial
results, anticipated revenue or earnings growth, analyst reports or
recommendations and other events or factors, many of which are beyond our
control. In addition, the stock market in general, and The Nasdaq National
Market and the market for software companies and technology companies in
particular, have experienced extreme price and volume fluctuations. These broad
market and industry factors may materially and adversely affect the market price
of the common stock, regardless of our actual operating performance. In the
past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted against
such companies. Such litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources, which would have
a material adverse effect on our business, financial condition and results of
operations.
A re-evaluation of our revenue recognition process could affect our future
results of operations
We continually re-evaluate our programs, including specific license terms and
conditions, to market our current and future products and services. We may
implement new programs, including offering specified and unspecified
enhancements to our current and future product lines. We may recognize revenues
associated with such enhancements after the initial shipment or licensing of the
software product or over the product's life cycle. The timing of the
implementation of such programs, the timing of the release of such enhancements
and other factors will impact the timing of our recognition of revenues and
related expenses associated with our products, related enhancements and
services. As a result of these factors, we currently cannot quantify the impact
of the re-evaluation of our programs on our business, results of operations and
financial condition.
23
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk includes "forward-
looking statements" that involve risks and uncertainties. Actual results could
differ materially from those projected in the forward-looking statements. The
Company does not use derivative financial instruments for speculative or trading
purposes.
The Company maintains a non-trading investment portfolio of investment grade,
highly liquid, debt securities which limits the amount of credit exposure to any
one issue, issuer, or type of instrument. The securities in the Company's
investment portfolio are not leveraged and are generally classified as available
for sale and therefore are subject to interest rate risk. The Company does not
currently hedge interest rate exposure. The modeling technique used measures the
change in fair values arising from an immediate hypothetical shift in market
interest rates and assumes ending fair values include principal plus accrued
interest, dividends and reinvestment income. If market interest rates were to
increase by 100 basis points from December 31, 1998 levels, the fair value of
the portfolio would decline by approximately $1.1 million.
24
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 22, 1999, the Company sold $850 million aggregate principal amount at
maturity of its zero coupon convertible subordinated debentures due March 22,
2019 (the "debentures") in a private placement pursuant to Section 4(2) of the
Securities Act of 1933 at a purchase price of $354.71 per $1,000 principal
amount at maturity of the debentures resulting in net proceeds to the Company of
$292.5 million. The initial purchaser, Credit Suisse First Boston Corporation,
purchased the debentures at 97% of the issue price and resold the debentures in
private resale transactions to qualified institutional buyers pursuant to Rule
144A of the Exchange Act of 1934. The debentures are convertible at the option
of the security holder at any time on or before the maturity date at a
conversion rate of 7.0306 shares of the Company's common stock for each
debenture, subject to adjustment in certain events. The Company may redeem the
debentures on or after March 22, 2004. Holders may require the Company to
repurchase the debentures at set redemption prices (issue price plus accrued
original discount) beginning on March 22, 2004 or earlier upon a change in
control of the Company. The Company will use the net proceeds for working
capital and other general corporate purposes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits, which are filed with this report as set forth on the Exhibit
Index appearing on page 27 of this report, are incorporated herein by this
reference.
(b) 1. A report on Form 8-K was filed with the Securities and Exchange
Commission on March 24, 1999 with respect to:
Item 5 -- Other Events. To disclose the private placement of $850 million
aggregate amount at maturity of zero coupon convertible subordinated
debentures due March 22, 2019 pursuant to Section 4(2) of the Securities
Act of 1933.
2. A report on Form 8-K was filed with the Securities and Exchange
Commission on March 26, 1999 with respect to:
Item 5 -- Other Events. To disclose the two-for one stock split in the
form of a one-for-one stock dividend on March 25, 1999 paid to stockholders
of record on March 17, 1999.
3. A report on Form 8-K was filed with the Securities and Exchange
Commission on April 23, 1999 with respect to:
Item 5 -- Other Events. To disclose the authorization of a stock
repurchase program to repurchase up to $200 million of the Company's common
stock.
25
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on this 14th day of May 1999.
CITRIX SYSTEMS, INC.
By: /s/ Mark B. Templeton
--------------------------------------
Mark B. Templeton
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ James J. Felcyn, Jr.
--------------------------------------
James J. Felcyn, Jr.
Vice-President, Finance and
Administration and Chief Financial
Officer (Principal Financial Officer)
By: Marc-Andre Boisseau
--------------------------------------
Marc-Andre Boisseau
Vice-President, Controller
(Principal Accounting Officer)
26
<PAGE>
Exhibit Index
1.1 Purchase Agreement by and between the Company and Credit Suisse
First Boston Corporation dated as of March 16, 1999.
4.1, 10.1 Indenture by and between the Company and State Street Bank and
Trust Company as Trustee dated as of March 22, 1999, including
the form of Debenture.
4.2 Form of Debenture (included in Exhibit 4.1)
4.3, 10.2 Registration Rights Agreement by and between the Company and
Credit Suisse First Boston Corporation dated as of March 22,
1999.
27.1 Financial Data Schedule
27
<PAGE>
$850,000,000
CITRIX SYSTEMS, INC.
Zero Coupon Convertible Subordinated Debentures Due March 16, 2019
PURCHASE AGREEMENT
------------------
March 16, 1999
Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Citrix Systems, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Credit Suisse First Boston Corporation (referred to herein as
the initial "Purchaser" or "CSFBC") U.S.$ 850,000,000 principal amount at
maturity of its Zero Coupon Convertible Subordinated Debentures Due March 22,
2019 (the "Firm Securities") and also proposes to grant to the Purchaser an
option, exercisable from time to time by the Purchaser to purchase an aggregate
of up to an additional $280,000,000 principal amount at maturity ("Optional
Securities") of its Zero Coupon Convertible Subordinated Debentures Due March
22, 2019, each to be issued under an indenture, dated as of March 22, 1999 (the
"Indenture"), between the Company and State Street Bank and Trust Company, N.A.,
as Trustee. The Firm Securities and the Optional Securities which the Purchaser
may elect to purchase pursuant to Section 3 hereof are herein collectively
called the "Offered Securities". The United States Securities Act of 1933, as
amended, is herein referred to as the "Securities Act."
The Holders of the Offered Securities will be entitled to the benefits of a
Registration Rights Agreement of even date herewith among the Company and the
Purchaser (the "Registration Rights Agreement"), pursuant to which the Company
agrees to file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") registering the resale of
the Offered Securities and the Underlying Shares (as defined below) issuable
upon conversion thereof under the Securities Act.
The Company hereby agrees with the Purchaser as follows:
2. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, the Purchaser that:
(a) A preliminary offering circular and an offering circular relating to
the Offered Securities to be offered by the Purchaser have been prepared by the
Company. Such preliminary offering circular (the "Preliminary Offering
Circular") and offering circular (the "Offering Circular"), as supplemented as
of the date of this Agreement, together with the documents incorporated by
reference therein, the documents listed in Schedule A hereto and any other
document approved by the Company for use in connection with the contemplated
resale of the Offered
<PAGE>
Securities are hereinafter collectively referred to as the "Offering Document".
On the date of this Agreement, the Offering Document does not include any 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, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Company by CSFBC specifically for use therein, it
being understood and agreed that the only such information is that described as
such in Section 7(b) hereof. Except as disclosed in the Offering Document, on
the date of this Agreement, the Company's Annual Report on Form 10-K most
recently filed with the Commission and all subsequent reports (collectively, the
"Exchange Act Reports") which have been filed by the Company with the Commission
or sent to stockholders pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), do not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Such documents, when they were filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
(b) The Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Delaware, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Offering Document; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification.
(c) Each subsidiary of the Company has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document; and
each subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification;
all of the issued and outstanding capital stock of each subsidiary of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable; the Company is the sole record owner (except for directors
qualifying shares), directly or indirectly, of all of the capital stock of each
of its subsidiaries; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects. None of the Company's subsidiaries constitutes a
"significant subsidiary," as such term is defined in Rule 1-02(w) of Regulation
S-X promulgated by the Commission.
(d) The Indenture has been duly authorized by the Company; the Offered
Securities have been duly authorized by the Company; and when the Offered
Securities are delivered and paid for pursuant to this Agreement on each Closing
Date (as defined below), the Indenture will have been duly executed and
delivered by the Company, such Offered Securities will have been duly executed,
authenticated, issued and delivered and will conform to the description thereof
contained in the Offering Document and the Indenture and such Offered Securities
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(e) All outstanding shares of capital stock of the Company have been duly
authorized, validly issued, fully paid and are nonassessable and conform to the
description thereof contained in the Offering Document.
(f) When the Offered Securities are delivered and paid for pursuant to this
Agreement on each Closing Date (as defined below), such Offered Securities will
be convertible into the shares of Common Stock ("Underlying Shares") of the
Company in accordance with the terms of the Indenture; the Underlying Shares
initially issuable upon conversion of such Offered Securities have been duly
authorized and reserved for issuance upon such conversion and, when issued upon
such conversion, will be validly issued, fully paid and nonassessable; the
outstanding shares of Common
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<PAGE>
Stock have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the Offering
Document; and the stockholders of the Company have no preemptive rights with
respect to the Offered Securities or the Underlying Shares. Except as set forth
in the Offering Document, the Company does not have outstanding, and at the
Closing Date the Company will not have outstanding, any options to purchase, or
any rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, (i) any
Offered Securities, or (ii) any shares of capital stock held by it in any
subsidiary, or any such warrants, convertible securities or obligations (except
shares issued or issuable pursuant to employee or director benefit plans after
the date as of which information with respect thereto is given in the Offering
Document).
(g) Except for registration rights that have been waived in writing on or
prior to the date of this Agreement, no holder of securities of the Company has
rights to the registration of any securities of the Company because of the
filing of the Registration Statement.
(h) Except as disclosed in the Offering Document, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or Purchaser for a brokerage
commission, finder's fee or other like payment.
(i) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the performance by the
Company of its obligations under this Agreement, the Indenture and the
Registration Rights Agreement, except as may be required under state securities
or Blue Sky laws and except as many be required by Federal securities laws with
respect to the Company's obligations under the Indenture and the Registration
Rights Agreement.
(j) The execution, delivery and performance of this Agreement, the
Indenture, and the Registration Rights Agreement, and the issuance and sale of
the Offered Securities and compliance with the terms and provisions hereof and
thereof will not result in a breach or violation of any of the terms and
provisions of, or constitute a material default under, any statute, any rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any material agreement, indenture, mortgage, loan
agreement, note or lease or other instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any such subsidiary is subject,
or the charter or by-laws of the Company or any such subsidiary, and the Company
has full power and authority to authorize, issue and sell the Offered
Securities.
(k) This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights and to general equity
principles.
(l) The Registration Rights Agreement has been duly authorized by the
Company and on the Closing Date will have been duly executed and delivered by
the Company, conforms to the description contained in the Offering Document and
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights and to general equity principles.
(m) Except as disclosed in the Offering Document, the Company and its
subsidiaries have good and marketable title to all real properties and all other
properties and assets owned by them, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them; and except as
disclosed in the Offering Document, the Company and its subsidiaries hold any
leased real or personal property
-3-
<PAGE>
under valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them.
(n) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a whole or on
the Company's ability to perform its obligations under this Agreement, the
Indenture, the Registration Rights Agreement or the Offered Securities
("Material Adverse Effect").
(o) No labor dispute with the employees of the Company or any subsidiary
exists or, to the knowledge of the Company, is imminent that might have a
Material Adverse Effect. Except as disclosed in the Offering Document, the
Company is not a party to any collective bargaining agreement the breach of
which by the Company might have a Material Adverse Effect.
(p) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights") necessary
to conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect. All such intellectual property
rights are valid and enforceable and, to the knowledge of the Company and its
subsidiaries, are not being infringed by any third parties which infringement
would individually or in the aggregate have a Material Adverse Effect. To the
knowledge of the Company, the Company's and its subsidiaries' present use of any
of the intellectual property rights does not infringe on any rights of third
parties or conflict with any asserted rights of others that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect.
(q) Neither the Company nor any of its subsidiaries is in violation of its
charter or by-laws, or in material default (nor has an event occurred which with
notice or lapse of time or both would constitute a default or acceleration) in
the performance of any obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them or their respective properties
is bound or affected and neither the Company nor any of its subsidiaries is in
violation of any judgment, ruling, decree, order, franchise, license or permit
or any statute, rule or regulation applicable to the business or properties of
the Company or any of its subsidiaries, where such violation would have a
Material Adverse Effect.
(r) Neither the Company nor any of its subsidiaries is in violation of any
statute, any rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal or release
of hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws, is
liable for any off-site disposal or contamination pursuant to any environmental
laws, or is subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware of any
pending investigation which might lead to such a claim.
(s) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective
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<PAGE>
properties that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or which are otherwise material in the context of the sale of the
Offered Securities; and no such actions, suits or proceedings are threatened or,
to the Company's knowledge, contemplated.
(t) The financial statements included in the Offering Document present
fairly the financial position of the Company and its consolidated subsidiaries
as of the dates shown and their results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with generally accepted accounting principles in the United States applied on a
consistent basis. No other financial statement or schedules of the Company are
required by the Act, the Exchange Act, the rules and regulations of the
Commission under the Securities Act ("Rules and Regulations") or the rules and
regulations of the Commission under the Exchange Act ("Exchange Act Rules and
Regulations") to be included or incorporated in the Offering Document. Ernst &
Young LLP, who has reported on certain of such financial statements, are
independent accountants as required by the Securities Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations, as
applicable.
(u) Except as disclosed in the Offering Document, since the date of the
latest audited financial statements included or incorporated by reference in the
Offering Document there has been no material adverse change, nor any development
or event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock, other than the two-for-one stock split authorized by the
Company on March 1, 1999 and payable on or about March 25, 1999 to holders of
record of Common Stock as of March 17, 1999.
(v) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be registered
under Section 8 of the United States Investment Company Act of 1940, as amended
(the "Investment Company Act"); and the Company is not and, after giving effect
to the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act.
(w) The Company and its affiliates have not taken and will not take,
directly or indirectly any action resulting in a violation of Regulation M
promulgated under the Exchange Act with respect to the transactions contemplated
by this Agreement.
(x) No securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Offered Securities are listed on any national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.
(y) The offer and sale of the Offered Securities in the manner contemplated
by this Agreement will be exempt from the registration requirements of the
Securities Act by reason of Section 4(2) thereof, and, assuming compliance by
the Purchaser with Section 4(d) hereof, the resale by the Purchaser pursuant to
Section 4(b) hereof will be exempt from the registration requirements of the
Securities Act by reason of Rule 144A; and it is not necessary to qualify an
indenture in respect of the Offered Securities under the United States Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") in connection with
the offer, sale, and delivery of the Offered Securities to the Purchaser in the
manner contemplated by this Agreement.
(z) Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf (i) has, within the six-month period prior to the date
hereof, offered or sold the Offered Securities or any security of the same class
or series as the Offered Securities or (ii) has offered or will offer or sell
the Offered Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act. The
Company has not
-5-
<PAGE>
entered and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement.
(aa) The Company is subject to Section 13 or 15(d) of the Exchange Act.
(bb) There are no issues related to the Company's or any of its
subsidiaries' preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Exchange Act Reports and the
Offering Document or (ii) might reasonably be expected to result in any Material
Adverse Effect. All internal computer systems and each Constituent Component (as
defined below) of those systems and all computer-related products and each
Constituent Component of those products owned by the Company and each of its
Subsidiaries will, by December 31, 1999, comply in all material respects with
the Year 2000 Qualification Requirements. "Year 2000 Qualification Requirements"
means that the internal computer systems and each Constituent Component of those
systems and all computer-related products of each Constituent Component of those
products of the Company and each of its subsidiaries (i) have been reviewed to
confirm that they store, process (including sorting and performing mathematical
operations, calculations and computations), input and output data containing
date and information correctly regardless of whether the date contains dates and
times before, on or after January 1, 2000, (ii) have been designed or modified
to ensure date and time entry recognition, calculations that accommodate same
century formulas and multi-century formulas, and will not cause abnormal ending
scenario within the application or generate incorrect values or invalid results
involving such dates, (iii) accurately process any date rollover, and (iv)
accept and respond to year date input in a manner that resolves any ambiguities
as to the century. "Constituent Component" means all software (including
operating systems, programs, packages and utilities), firmware, hardware,
networking components, and peripherals provided as part of the configuration.
(cc) The Company and its subsidiaries have filed all Federal, State, local
and foreign income tax returns which have been required to be filed and have
paid all taxes indicated by said returns and all assessments received by them or
any of them to the extent that such taxes have become due and are not being
contested in good faith. All tax liabilities have been adequately provided for
in the financial statements of the Company.
(dd) The Company and its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ee) The Company and its subsidiaries carry, or are covered by, insurance
in such amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and as is
customary for companies engaged in similar industries.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Company,
U.S.$850,000,000, principal amount at maturity of Firm Securities at a purchase
price of $344.0687 per $1,000 principal amount at maturity thereof.
The Company will deliver against payment of the purchase price the Firm
Securities in the form of one or more permanent global Debentures in definitive
form (the "Firm Global Securities") deposited with the Trustee as custodian for
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee for DTC. Interests in any Firm Global Securities will be held only in
book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment for the Firm Global
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Securities shall be made by the Purchaser in Federal (same day) funds by wire
transfer to an account at a bank acceptable to the Purchaser drawn to the order
of the Company at the office of Testa, Hurwitz & Thibeault, LLP, High Street
Tower, 125 High Street, Boston, Massachusetts 02110, at 10:00 A.M., New York
time, on March 22, 1999, or at such other time not later than seven full
business days thereafter as the Purchaser and the Company determine, such time
being herein referred to as the "First Closing Date", against delivery to the
Trustee as custodian for DTC of the Firm Global Securities representing all of
the Firm Securities. The certificates representing the Firm Global Securities
will be made available for checking at the office of CSFBC at least 24 hours
prior to the First Closing Date.
In addition, upon written notice from the Purchaser given to the Company from
time to time not more than 30 days subsequent to the date of this Agreement, the
Purchaser may purchase all or less than all of up to U.S.$280,000,000 principal
amount at maturity of the Optional Securities at a purchase price of $344.0687
per $1,000 principal amount at maturity thereof. The Company agrees to sell to
the Purchaser the number of Optional Securities specified in such notice and the
Purchaser agrees to purchase such Optional Securities. No Optional Securities
shall be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time (during the
30 day period set forth above) and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by the Purchaser to the
Company.
Each time for the delivery of and payment for the Optional Securities, being
herein referred to as the "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by the
Purchaser but shall not be later than seven full business days after written
notice of election to purchase Optional Securities is given. The Company will
deliver against payment of the purchase price the Optional Securities being
purchased on each Optional Closing Date in the form of one or more permanent
global Securities in definitive form (each, an "Optional Global Security")
deposited with the Trustee as custodian for DTC and registered in the name of
Cede & Co., as nominee for DTC. Payment for such Optional Securities shall be
made by the Purchaser in Federal (same day) funds by wire transfer to an account
at a bank acceptable to the Purchaser drawn to the order of the Company against
delivery to the Trustee as custodian for DTC of the Optional Global Securities
representing all of the Optional Securities being purchased on such Optional
Closing Date.
4. Representations by Purchaser; Resale by Purchaser. (a) The Purchaser
represents and warrants to the Company that it is an "accredited investor"
within the meaning of Regulation D under the Securities Act.
(b) The Purchaser acknowledges that the Offered Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. The Purchaser
represents and agrees that it has not offered or sold, and will not offer or
sell, any Offered Securities, except to qualified institutional buyers within
the meaning of Rule 144A under the Securities Act.
(c) The Purchaser agrees that it and each of its affiliates has not entered
and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except with the prior written consent of
the Company.
(d) The Purchaser agrees that it and each of its affiliates will not offer
or sell the Offered Securities in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act, including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. The Purchaser agrees, with respect to resales made in reliance on
Rule 144A of any of the Offered Securities, to deliver either with the
confirmation of such resale or otherwise prior to settlement of such resale a
notice to the
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effect that the resale of such Offered Securities has been made in reliance upon
the exemption from the registration requirements of the Securities Act provided
by Rule 144A.
5. Certain Agreements of the Company. The Company agrees with the Purchaser
that:
(a) The Company will advise CSFBC promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent. If, at any time prior to the completion
of the resale of the Offered Securities by the Purchaser, any event occurs as a
result of which the Offering Document 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, not misleading, the Company promptly
will notify CSFBC of such event and promptly will prepare, at its own expense,
an amendment or supplement which will correct such statement or omission.
Neither CSFBC's consent to, nor its delivery to offerees or investors of, any
such amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6.
(b) The Company will furnish to CSFBC copies of any preliminary offering
circular, the Offering Document and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as CSFBC
requests, and the Company will furnish to CSFBC on the date hereof three copies
of the Offering Document. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to
be furnished to CSFBC and, upon request of holders and prospective purchasers of
the Offered Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective purchasers of
the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The Company
will pay the expenses of printing and distributing to the Purchaser all such
documents.
(c) The Company will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for investment
under the laws of such jurisdictions in the United States and Canada as CSFBC
designates and will continue such qualifications in effect so long as required
for the resale of the Offered Securities by the Purchaser, provided that the
Company will not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such state.
(d) During the period of two years hereafter, the Company will furnish to
CSFBC, as soon as practicable after the end of each fiscal year, a copy of its
annual report to stockholders for such year; and the Company will furnish to
CSFBC (i) as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange Act or
mailed to stockholders, and (ii) from time to time, such other information
concerning the Company as CSFBC may reasonably request.
(e) During the period of two years after the last Closing Date, the Company
will, upon request, furnish to CSFBC and any holder of Offered Securities a copy
of the restrictions on transfer applicable to the Offered Securities.
(f) During the period of two years after the last Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them.
(g) During the period of two years after the last Closing Date, the Company
will not be or become, an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act.
(h) The Company will pay all expenses incidental to the performance of its
obligations under this Agreement, the Indenture, and the Registration Rights
Agreement, including (i) the fees and
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expenses of the Trustee and its professional advisers; (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities, the preparation and printing of this
Agreement, the Registration Rights Agreement, the Offered Securities, the
Indenture, the Offering Document and amendments and supplements thereto, and any
other document relating to the issuance, offer, sale and delivery of the Offered
Securities; (iii) the cost of qualifying the Offered Securities for trading in
The PortalSM Market ("PORTAL") and any expenses incidental thereto; (iv) the
cost of any advertising approved by the Company in connection with the issue of
the Offered Securities, (v) for any expenses (including fees and disbursements
of counsel) incurred in connection with qualification of the Offered Securities
for sale under the laws of such jurisdictions in the United States and Canada as
CSFBC designates and the printing of memoranda relating thereto, (vi) any fees
charged by investment rating agencies for the rating of the Securities, and
(vii) expenses incurred in distributing preliminary offering circulars and the
Offering Document (including any amendments and supplements thereto) to the
Purchaser. Each of the Purchaser and the Company agree to pay for all travel
expenses of its respective officers and employees in connection with the
offering, and to the extent that either of such parties shall have paid for any
such travel expenses incurred by the other's officer's and employees, such party
shall be reimbursed by the other for such expenses. The Company will also pay or
reimburse the Purchaser (to the extent incurred by the Purchaser) for all
expenses in connection with hosting meetings with prospective purchasers of the
Offered Securities from the Purchaser.
(i) In connection with the offering, until CSFBC shall have notified the
Company of the completion of the resale of the Offered Securities, neither the
Company nor any of its affiliates has or will, either alone or with one or more
other persons, bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt to induce
any person to purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating actual, or
apparent, active trading in, or of raising the price of, the Offered Securities.
(j) For a period of 90 days after the date of the initial offering of the
Offered Securities by the Purchaser, the Company will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any United
States dollar-denominated debt securities issued or guaranteed by the Company
and having a maturity of more than one year from the date of issue. The Company
will not at any time offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly, any securities under circumstances where such offer,
sale, pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act to cease to be applicable to the offer and
sale of the Offered Securities.
(k) The Company agrees that, without the prior written consent of CSFBC, it
will not, during the period ending 90 days after the date of this Agreement, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of the Company's common stock, par value $.001 per share (the "Common
Stock") or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the sale of the
Offered Securities under this Agreement or (B) the issuance by the Company of
any shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which CSFBC has been
advised in writing.
(l) The Company will cause to be delivered to the Purchaser an agreement
(in substantially the form attached hereto on Schedule B) dated on or before the
date of this Agreement from the Company's directors, and executive officers and
Microsoft Corporation to the effect that such person or entity will not (A) (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or
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warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock or (ii) enter into any
swap or any other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (A)(i) or (A)(ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, (B)
publicly disclose the intention to effect any such transaction, or (C) make any
demand for or exercise any right with respect to, the registration of any shares
of Common Stock or any security convertible into or exercisable or exchangeable
for Common Stock, in each case, for a period of 90 days after the date of the
Purchase Agreement without the prior written consent of CSFBC (the "Lockup
Agreement").
(m) The Company shall not invest, or otherwise use the proceeds received by
the Company from its sale of the Offered Securities in such a manner as would
require the Company or any of its subsidiaries to register as an investment
company under the 1940 Act.
6. Conditions of the Obligation of the Purchaser. The obligation of the
Purchaser to purchase and pay for the Firm Securities on the First Closing Date
and for the Optional Securities on each Optional Closing Date will be subject to
the accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) The Purchaser shall have received a letter, dated the date of this
Agreement, of Ernst & Young LLP confirming that they are independent public
accountants within the meaning of the Securities Act and the applicable
published Rules and Regulations and to the effect that:
(i) in their opinion the financial statements examined by them
and included or incorporated by reference in the Offering Document and
in the Exchange Act Reports comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and
the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials of the
Company who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that
caused them to believe that:
(A) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more
than three business days prior to the date of this Agreement,
there was any change in the capital stock or any increase in
short-term indebtedness or long-term debt of the Company and its
consolidated subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included or
incorporated by reference in the Offering Document and the
Exchange Act Reports; or
(B) for the period from the closing date of the latest
income statement included or incorporated by reference in the
Offering Document and the Exchange Act Reports to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year and previous quarter,
in consolidated net sales, net operating income or in the total
or per share amounts of consolidated net income or in the ratio
of earnings to fixed charges;
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except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Offering Document discloses
have occurred or may occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Offering Document and the Exchange Act Reports (in
each case to the extent that such dollar amounts, percentages and
other financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived directly
from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records
and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such
letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange
controls as would, in the judgment of CSFBC, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings
in the secondary market, or (ii) (A) any change, or any development or
event involving a prospective change, in the condition (financial or
other), business, properties or results of operations of the Company or its
subsidiaries which, in the judgment of a majority in interest of the
Purchasers including CSFBC, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the offering or
the sale of and payment for the Offered Securities; (B) any downgrading in
the rating of any debt securities of the Company by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) under the Securities Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (C) any suspension or limitation of trading
in securities generally on the New York Stock Exchange, or any setting of
minimum prices for trading on such exchange, or any suspension of trading
of any securities of the Company on any exchange or in the over-the-counter
market; (D) any banking moratorium declared by U.S. Federal or New York
authorities; or (E) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or
any other substantial national or international calamity or emergency if,
in the judgment of CSFBC, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the offering or sale of and payment for the
Offered Securities.
(c) The Purchaser shall have received an opinion, dated such Closing
Date, of Testa, Hurwitz & Thibeault, LLP, counsel for the Company ("TH&T"),
that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct
its business as described in the Offering Document; and the Company is
duly qualified to do business as a foreign corporation in good
standing in Florida, Massachusetts, Utah, Washington, California,
Texas, North Carolina, and Illinois;
(ii) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Offering Document; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable, and the capital
stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects;
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<PAGE>
(iii) The authorized capital stock of the Company conforms as to
the legal matters to the description thereof contained in the Offering
Document.
(iv) The Indenture has been duly authorized, executed and
delivered; the Offered Securities delivered on such Closing Date have
been duly authorized, executed, authenticated, issued and delivered
and conform to the description thereof contained in the Offering
Document; and the Indenture and the Offered Securities delivered on
such Closing Date constitute valid and legally binding obligations of
the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(v) The Offered Securities delivered on such Closing Date are
convertible into the Underlying Shares in accordance with the terms of
the Indenture; the shares of such Underlying Shares initially issuable
upon conversion of the Offered Securities delivered on such Closing
Date have been duly authorized and reserved for issuance upon such
conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable; the outstanding shares of such
Underlying Shares have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the description thereof
contained in the Offering Document; and the stockholders of the
Company have no preemptive rights under the Company's Certificate of
Incorporation or, to such counsel's knowledge, under any contractual
obligations with respect to the Offered Securities or the Underlying
Shares issuable upon conversion of the Offered Securities;
(vi) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act.
(vii) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement and
the Registration Rights Agreement in connection with the issuance or
sale of the Offered Securities by the Company, except such as may be
required under state securities or Blue Sky laws and except for the
order of the Commission declaring the Shelf Registration Statement
effective;
(viii) To such counsel's knowledge, there are no pending
actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture, this Agreement, or the
Registration Rights Agreement, or which are otherwise material in the
context of the sale of the Offered Securities; and, to such counsel's
knowledge, no such actions, suits or proceedings are threatened or
contemplated.
(ix) The execution, delivery and performance of each of the
Indenture, this Agreement, and the Registration Rights Agreement, and
the issuance and sale of the Offered Securities and compliance with
the terms and provisions thereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any
governmental agency or body or any court having jurisdiction over the
Company or any subsidiary of the Company or any of their properties,
or any agreement, indenture, mortgage, loan agreement, note or lease
or other instrument filed as an exhibit to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, or the charter or
by-laws of the Company or any such subsidiary, and the Company has
full power and authority to authorize, issue and sell the Offered
Securities as contemplated by this Agreement;
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<PAGE>
(x) The statements in the Offering Document under the captions
"Description of Debentures," "Description of Capital Stock," Transfer
Restrictions" and "Plan of Distribution" insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein;
(xi) The Offered Securities are properly treated as indebtedness
for United States federal income tax purposes (subject to customary
qualifications, limitations, exceptions and assumptions as set forth
therein);
(xii) The information in the Offering Document under the caption
"Certain United States Federal Income Tax Considerations," while not
purporting to discuss all tax matters relating to the Offered
Securities, based upon the Offered Securities being treated as
indebtedness, sets forth the material federal income tax consequences
of the Offered Securities, subject to the qualifications set forth
therein.
(xiii) The descriptions in the Offering Circular and the
Exchange Act Reports (incorporated by reference into the Offering
Circular) of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present in all
material respects the information;
(xiv) This Agreement has been duly authorized, executed and
delivered by the Company;
(xv) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company, conforms to the description
contained in the Offering Document and constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights and to general equity
principles;
(xvi) It is not necessary in connection with (i) the offer, sale
and delivery of the Offered Securities by the Company to the Purchaser
pursuant to this Agreement or (ii) the resales of the Offered
Securities by the Purchaser in the manner contemplated by this
Agreement, to register the Offered Securities under the Securities Act
or to qualify an indenture in respect thereof under the Trust
Indenture Act;
To the extent that such opinion relates to the laws of the State of New
York, TH&T may rely on the opinion of New York legal counsel reasonably
acceptable to CSFBC.
In addition, such counsel shall state that they have no reason to
believe that the Offering Circular, or any amendment or supplement thereto,
or any Exchange Act Report (incorporated by reference into the Offering
Circular) as of the date hereof and as of such Closing Date, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; it being understood that such counsel need express no
opinion as to the financial statements or other financial data contained in
the Offering Circular and the Exchange Act Reports.
(d) The Purchaser shall have received from Wilson, Sonsini, Goodrich
& Rosati, Professional Corporation, counsel for the Purchaser, such opinion
or opinions, dated such Closing Date, with respect to the incorporation of
the Company, the validity of the Offered Securities, the Offering Circular,
the exemption from registration for the offer and sale of the Offered
Securities by the Company to the Purchaser and the resales by the Purchaser
as contemplated hereby and other related matters as CSFBC may require, and
the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
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<PAGE>
(e) The Purchaser shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date, and that, subsequent to the date of the
most recent financial statements in the Offering Document there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in or contemplated by the
Offering Document or as described in such certificate.
(f) The Purchaser shall have received a letter, dated such Closing
Date, of Ernst & Young LLP which meets the requirements of subsection (a)
of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing
Date for the purposes of this subsection.
The Company will furnish the Purchaser with such conformed copies of such
opinions, certificates, letters and documents as the Purchaser reasonably
requests. CSFBC may in its sole discretion waive on behalf of the Purchaser
compliance with any conditions to the obligations of the Purchaser hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless Purchaser, its partners, directors and officers and each person,
if any, who controls such Purchaser within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Purchaser may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular or the Exchange Act Reports, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, including any losses,
claims, damages or liabilities arising out of or based upon the Company's
failure to perform its obligations under Section 5(a) of this Agreement, and
will reimburse the Purchaser for any legal or other expenses reasonably incurred
by the Purchaser in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will 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 in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company by the Purchaser specifically for use
therein, it being understood and agreed that the only such information consists
of the information described as such in subsection (b) below.
(b) The Purchaser will indemnify and hold harmless the Company, its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, claims, damages
or liabilities to which the Company may become subject, under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by the Purchaser specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by the Purchaser consists of the
following information in the Offering Document: the last paragraph at the bottom
of the cover page
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concerning the terms of the offering by the Purchaser, the legend concerning
over-allotments and stabilizing on the inside front cover page, and under the
caption "Plan of Distribution," the second, third, fifth, sixth, and ninth
paragraphs; provided, however, that the Purchaser shall not be liable for any
losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this
Agreement.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party except to the
extent that such omission materially prejudices the indemnifying party's ability
to defend such claim; provided, however, that such omission will not relieve the
indemnifying party from any liability which it may have to the indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
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 will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel and the indemnified party would be entitled thereto pursuant to this
section, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Purchaser on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Purchaser on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Purchaser 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 discounts and commissions received by the
Purchaser from the Company under this Agreement. 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 or the Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection
-15-
<PAGE>
(d), the Purchaser shall not be required to contribute any amount in excess of
the amount by which the total price at which the Offered Securities purchased by
it were resold exceeds the amount of any damages which the Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(e) The obligations of the Company under this Section 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 the Purchaser
within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Purchaser under this Section shall be in addition to any
liability which the Purchaser may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Purchaser set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Purchaser, the Company or any of their respective representatives, officers
or directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If for any reason the purchase of the Offered
Securities by the Purchaser is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Purchaser pursuant to
Section 7 shall remain in effect, and if any Offered Securities have been
purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Purchaser is not consummated for any reason other than
solely because of the occurrence of any event specified in clause (C), (D) or
(E) of Section 6(b)(ii), the Company will reimburse the Purchaser for all out-
of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by it in connection with the offering of the Offered Securities.
9. Notices. All communications hereunder will be in writing and, if sent to
the Purchaser will be mailed, delivered or telegraphed and confirmed to the
Purchaser at Eleven Madison Avenue, New York, New York 10010-3629, Attention:
Investment Banking Department Transactions Advisory Group, or, if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to it at 6400 NW
6th Way, Fort Lauderdale, Florida 33309, Attention: President.
10. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
11. Counterparts. This Agreement may be executed 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 Agreement.
12. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
-16-
<PAGE>
If the foregoing is in accordance with the Purchaser's understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Purchaser in accordance with its terms.
Very truly yours,
Citrix Systems, Inc.
By: /s/ James J. Felcyn, Jr.
----------------------------
Title: Chief Financial Officer
-------------------------
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
By: /s/ Cameron Lester
----------------------------
Title: Director
-------------------------
-17-
<PAGE>
SCHEDULE A
None
-18-
<PAGE>
---------------------------------------------------------
CITRIX SYSTEMS, INC.
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE MARCH 22, 2019
---------------------------------------------------------
INDENTURE
Dated as of March 22, 1999
---------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
---------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE................... 5
SECTION 1.1. Definitions............................................. 5
SECTION 1.2. Other Definitions....................................... 9
SECTION 1.3. Trust Indenture Act Provisions.......................... 10
SECTION 1.4. Rules of Construction................................... 11
ARTICLE 2 THE SECURITIES............................................... 11
SECTION 2.1. Form and Dating......................................... 11
SECTION 2.2. Execution and Authentication............................ 12
SECTION 2.3. Registrar, Paying Agent and Conversion Agent............ 13
SECTION 2.4. Paying Agent to Hold Money In Trust..................... 13
SECTION 2.5. Securityholder Lists.................................... 13
SECTION 2.6. Transfer and Exchange................................... 14
SECTION 2.7. Replacement Securities.................................. 14
SECTION 2.8. Outstanding Securities.................................. 15
SECTION 2.9. Treasury Securities..................................... 15
SECTION 2.10. Temporary Securities.................................... 15
SECTION 2.11. Cancellation............................................ 16
SECTION 2.12. Additional Transfer and Exchange Requirements........... 16
ARTICLE 3 REDEMPTION AND PURCHASES..................................... 20
SECTION 3.1. Right to Redeem; Notice to Trustee...................... 20
SECTION 3.2. Selection of Securities to Be Redeemed.................. 20
SECTION 3.3. Notice of Redemption.................................... 21
SECTION 3.4. Effect of Notice of Redemption.......................... 21
SECTION 3.5. Deposit of Redemption Price............................. 22
SECTION 3.6. Securities Redeemed in Part............................. 22
SECTION 3.7. Conversion Arrangement on Call for Redemption........... 22
SECTION 3.8. Purchase of Securities at Option of the Holder Upon
Change in Control...................................... 23
SECTION 3.9. Effect of Change in Control Purchase Notice............ 25
SECTION 3.10. Deposit of Change in Control Purchase Price............ 25
SECTION 3.11. Securities Purchased In Part........................... 25
SECTION 3.12. Compliance With Securities Laws Upon
Purchase of Securities................................. 26
SECTION 3.13. Repayment to the Company............................... 26
ARTICLE 4 CONVERSION.................................................. 26
SECTION 4.1. Conversion Privilege................................... 26
SECTION 4.2. Conversion Procedure................................... 27
SECTION 4.3. Fractional Shares...................................... 27
SECTION 4.4. Taxes on Conversion.................................... 27
<PAGE>
SECTION 4.5. Company to Provide Stock............................... 28
SECTION 4.6. Adjustment of Conversion Rate.......................... 28
SECTION 4.7. No Adjustment.......................................... 32
SECTION 4.8. Adjustment for Tax Purposes............................ 32
SECTION 4.9. Notice of Adjustment................................... 32
SECTION 4.10. Notice of Certain Transactions......................... 32
SECTION 4.11. Effect of Reclassification, Consolidation,
Merger or Sale on Conversion Privilege................. 33
SECTION 4.12. Trustee's Disclaimer................................... 33
SECTION 4.13. Voluntary Increase..................................... 34
ARTICLE 5 SUBORDINATION............................................... 34
SECTION 5.1. Securities Subordinated to Senior Indebtedness......... 34
SECTION 5.2. Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution, Liquidation,
Reorganization, Etc., of the Company................... 34
SECTION 5.3. Holders to Be Subrogated to Right of Holders of
Senior Indebtedness.................................... 35
SECTION 5.4. Obligations of the Company Unconditional............... 36
SECTION 5.5. Company Not to Make Payment With Respect to
Securities in Certain Circumstances.................... 36
SECTION 5.6. Notice to Trustee...................................... 37
SECTION 5.7. Application by Trustee of Money Deposited With It...... 37
SECTION 5.8. Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness........... 38
SECTION 5.9. Trustee to Effectuate Subordination.................... 38
SECTION 5.10. Right of Trustee to Hold Senior Indebtedness........... 38
SECTION 5.11. Article 5 Not to Prevent Events of Default............. 38
SECTION 5.12. No Fiduciary Duty Created to Holders of Senior
Indebtedness........................................... 38
SECTION 5.13. Article Applicable to Paying Agents.................... 38
SECTION 5.14. Certain Conversions and Repurchases Deemed Payment..... 39
ARTICLE 6 COVENANTS................................................... 39
SECTION 6.1. Payment of Securities.................................. 39
SECTION 6.2. SEC Reports; Rule 144A Information..................... 39
SECTION 6.3. Compliance Certificates................................ 40
SECTION 6.4. Further Instruments and Acts........................... 40
SECTION 6.5. Maintenance of Corporate Existence..................... 40
ARTICLE 7 SUCCESSOR CORPORATION....................................... 40
SECTION 7.1. When Company May Merge, Etc............................ 40
SECTION 7.2. Successor Corporation Substituted...................... 41
ARTICLE 8 DEFAULT AND REMEDIES........................................ 41
SECTION 8.1. Events of Default...................................... 41
SECTION 8.2. Acceleration........................................... 43
ii
<PAGE>
SECTION 8.3. Other Remedies......................................... 43
SECTION 8.4. Waiver of Defaults and Events of Default............... 43
SECTION 8.5. Control by Majority.................................... 43
SECTION 8.6. Limitations on Suits................................... 44
SECTION 8.7. Rights of Holders to Receive Payment and to Convert.... 44
SECTION 8.8. Collection Suit by Trustee............................. 44
SECTION 8.9. Trustee May File Proofs of Claim....................... 44
SECTION 8.10. Priorities............................................. 45
SECTION 8.11. Undertaking for Costs.................................. 45
SECTION 8.12. Waiver of Usury, Stay or Extension Laws................ 46
ARTICLE 9 TRUSTEE..................................................... 46
SECTION 9.1. Duties of Trustee...................................... 46
SECTION 9.2. Rights of Trustee...................................... 47
SECTION 9.3. Individual Rights of Trustee........................... 47
SECTION 9.4. Trustee's Disclaimer................................... 47
SECTION 9.5. Notice of Default or Events of Default................. 48
SECTION 9.6. Reports by Trustee to Holders.......................... 48
SECTION 9.7. Compensation and Indemnity............................. 48
SECTION 9.8. Replacement of Trustee................................. 49
SECTION 9.9. Successor Trustee by Merger, Etc....................... 49
SECTION 9.10. Eligibility; Disqualification.......................... 49
SECTION 9.11. Preferential Collection of Claims Against Company...... 50
ARTICLE 10 DISCHARGE OF INDENTURE...................................... 50
SECTION 10.1. Discharge of Liability on Securities................... 50
SECTION 10.2. Repayment to the Company............................... 50
ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS......................... 50
SECTION 11.1. Without Consent of Holders............................. 50
SECTION 11.2. With Consent of Holders................................ 51
SECTION 11.3. Compliance With Trust Indenture Act.................... 52
SECTION 11.4. Revocation and Effect of Consents...................... 52
SECTION 11.5. Notation on or Exchange of Securities.................. 52
SECTION 11.6. Trustee to Sign Supplemental Indentures................ 52
SECTION 11.7. Effect of Supplemental Indentures...................... 52
ARTICLE 12 MISCELLANEOUS............................................... 53
SECTION 12.1. Trust Indenture Act Controls........................... 53
SECTION 12.2. Notices................................................ 53
SECTION 12.3. Communications by Holders With Other Holders........... 53
SECTION 12.4. Certificate and Opinion as to Conditions Precedent..... 53
SECTION 12.5. Record Date for Vote or Consent of Securityholders..... 54
SECTION 12.6. Rules by Trustee, Paying Agent, Registrar and
Conversion Agent....................................... 54
iii
<PAGE>
SECTION 12.7. Legal Holidays......................................... 54
SECTION 12.8. Governing Law.......................................... 55
SECTION 12.9. No Adverse Interpretation of Other Agreements.......... 55
SECTION 12.10. No Recourse Against Others............................. 55
SECTION 12.11. Successors............................................. 55
SECTION 12.12. Multiple Counterparts.................................. 55
SECTION 12.13. Separability........................................... 55
SECTION 12.14. Table of Contents, Headings, etc....................... 55
ARTICLE 13 REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER............ 55
SECTION 13.1. General................................................ 55
SECTION 13.2. Company's Right to Elect Manner of Payment of
Repurchase Price....................................... 57
SECTION 13.3. Repurchase with Cash................................... 57
SECTION 13.4. Payment by Issuance of Common Stock.................... 57
SECTION 13.5. Notice of Election..................................... 59
SECTION 13.6. Covenants of the Company............................... 60
SECTION 13.7. Procedure upon Repurchase.............................. 60
SECTION 13.8. Taxes.................................................. 60
SECTION 13.9. Effect of Repurchase Notice............................ 60
SECTION 13.10. Deposit of Repurchase Price............................ 61
SECTION 13.11. Securities Repurchased in Part......................... 61
SECTION 13.12. Covenant to Comply with Securities Laws Upon
Purchase of Securities................................. 62
SECTION 13.13. Repayment to the Company............................... 62
ARTICLE 14 SPECIAL TAX EVENT CONVERSION................................ 62
SECTION 14.1. Optional Conversion to Semiannual Coupon Debenture
Upon Tax Event......................................... 62
SECTION 14.2. Payment of Interest; Interest Rights Preserved......... 63
iv
<PAGE>
CROSS REFERENCE TABLE/1/
<TABLE>
<CAPTION>
Trust Indenture Act Indenture
Section Section
- ------------------- ---------
<S> <C>
310(a)(1)................................................... 9.10
(a)(2)................................................... 9.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(b)...................................................... 9.8; 9.10
(c)...................................................... N.A.
311(a)...................................................... 9.11
(b)...................................................... 9.11
(c)...................................................... N.A.
312(a)...................................................... 2.5
(b)...................................................... 12.3
(c)...................................................... 12.3
313(a)...................................................... 9.6
(b)(1)................................................... N.A.
(b)(2)................................................... 9.6
(c)...................................................... 12.2
(d)...................................................... 9.6
314(a)...................................................... 6.2; 6.3; 12.2
(b)...................................................... N.A.
(c)(1)................................................... 12.4
(c)(2)................................................... 12.4
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 12.5
(f)...................................................... N.A.
315(a)...................................................... 9.1
(b)...................................................... 9.5; 12.2
(c)...................................................... 9.1
(d)...................................................... 9.1
(e)...................................................... 8.11
316(a)(last sentence)....................................... 2.8
(a)(1)(A)................................................ 8.5
(a)(1)(B)................................................ 8.4
(a)(2)................................................... N.A.
(b)...................................................... 8.7
317(a)(1)................................................... 8.8
(a)(2)................................................... 8.9
(b)...................................................... 2.4
318(a)...................................................... 12.1
</TABLE>
N.A. means Not Applicable.
- ---------------
/1/ Note: This Cross Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
-v-
<PAGE>
THIS INDENTURE, dated March 22, 1999 is between Citrix Systems, Inc., a
Delaware corporation (the "Company"), and State Street Bank and Trust Company,
a trust company organized and existing under the laws of the Commonwealth of
Massachusetts, as Trustee (the "Trustee").
In consideration of the premises and the purchase of the Securities by the
Holders thereof, both parties agree as follows for the benefit of the other and
for the equal and ratable benefit of the registered Holders of the Company's
Zero Coupon Convertible Subordinated Debentures Due March 22, 2019.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
-----------
"Additional Interest" shall have the meaning set forth in the Registration
Rights Agreement.
"Affiliate" means, with respect to any specified person, 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 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" means any Registrar, Paying Agent or Conversion Agent.
"Applicable Procedures" means, with respect to any transfer or exchange of
beneficial ownership interests in a Global Security, the rules and procedures of
the Depositary that are applicable to such transfer or exchange.
"Board of Directors" means the board of directors of the Company or any
authorized committee of the board of directors.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" or "capital stock" of any person means any and all shares,
interests, partnership interests, participations, rights or other equivalents
(however designated) of such person's equity interest (however designated).
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash" or "cash" means such coin or currency of the United States as at any
time of payment is legal tender for the payment of public and private debts.
"Certificated Security" means a Security that is in substantially the form
attached hereto as Exhibit A and that does not include the information or the
---------
schedule called for by footnotes 1, 3 and 4 thereof.
"Common Stock" means the common stock of the Company, $.001 par value, as
it exists on the date of this Indenture and any shares of any class or classes
of capital stock of the Company 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
<PAGE>
redemption by the Company; provided, however, that if at any time there shall be
more than one such resulting class, the shares of each such class then so
issuable on conversion of Securities shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Company" means the party named as such in this Indenture until a successor
replaces it pursuant to this Indenture, and thereafter means the successor.
"Company Order" means a written request or order signed in the name of the
Company by its Chairman of the Board, its President, a Senior Vice President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered which
office at the date of the execution of this Indenture is located at Two
International Place, Boston, Massachusetts 02110 (Attention: Corporate Trust
Department--Citrix Systems, Inc., Zero Coupon Convertible Subordinated
Debentures Due March 22, 2019) or at any other time at such other address as the
Trustee may designate from time to time by notice to the Company.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company against fluctuations in currency values.
"Default" or "default" means, when used with respect to the Securities, any
event which is or, after notice or passage of time or both, would be an Event of
Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Maturity Date" means March 22, 2019.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are applicable from time to
time and are consistently applied.
"Global Security" means a permanent Global Security that is in
substantially the form attached hereto as Exhibit A and that includes the
---------
information and schedule called for by footnotes 1, 3 and 4 thereof and which
is deposited with the Depositary or the Securities Custodian and registered in
the name of the Depositary or its nominee.
"Holder" or "Securityholder" means the person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade accounts payable and other
current liabilities incurred in the ordinary course of business; (b) all
obligations of such person evidenced by bonds, notes, debentures, or other
similar instruments; (c) all Capitalized Lease Obligations of such person; (d)
all guarantees of Indebtedness referred to in this definition by such person;
(e) all obligations of such person under or in respect of Currency Agreements
and Interest Rate Protection Obligations of such person; and (f) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) through (e) above.
2
<PAGE>
"Indenture" means this Indenture as amended or supplemented from time to
time pursuant to the terms of this Indenture.
"Initial Issuance Date" means March 22, 1999.
"Interest Rate Protection Agreement" means any arrangement between the
Company and any other person whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or a floating rate of interest on the same notional amount and shall
include, without limitation, interest rate swaps, caps, floors, collars and
similar agreements.
"Interest Rate Protection Obligations" means the obligations of the Company
pursuant to an Interest Rate Protection Agreement.
"Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.
"Issue Price" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is sold
as set forth on the face of the Security.
"Officer" means the Chairman or any Co-Chairman of the Board, any Vice
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers;
provided, however, that for purposes of Sections 4.11 and 6.3, "Officers'
Certificate" means a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer of the Company and
by one other Officer.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of or counsel to the Company or the Trustee.
"Original Issue Discount" of any Security means the difference between the
Issue Price and the Principal Amount of the Security as set forth on the face of
the Security.
"Person" or "person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust, or
any other entity or organization, including a government or political
subdivision or instrumentality thereof.
"Principal Amount" of a Security means the Principal Amount as set forth on
the face of the Security.
"Redemption Date" or "redemption date," when used with respect to any
Security to be redeemed, means the date fixed for such redemption pursuant to
this Indenture.
"Redemption Price" or "redemption price," when used with respect to any
Security to be redeemed, means the price fixed for such redemption pursuant to
this Indenture, as set forth in the form of Security annexed as Exhibit A
---------
hereto.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of March 22, 1999, between the Company and Credit Suisse First Boston
Corporation.
"Restricted Certificated Security" means a Certificated Security which is a
Transfer Restricted Security.
3
<PAGE>
"Restricted Global Security" means a Global Security that is a Transfer
Restricted Security.
"Rule 144" means Rule 144 under the Securities Act or any successor to such
Rule.
"Rule 144A" means Rule 144A under the Securities Act or any successor to
such Rule.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means any of the Company's Zero Coupon Convertible
Subordinated Debentures Due March 22, 2019, as amended or supplemented from time
to time, that are issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the Trustee, as custodian with respect to the
Securities in global form, or any successor thereto.
"Senior Indebtedness" means the principal of and premium, if any, interest
and other amounts payable on or in respect of any Indebtedness of the Company,
whether outstanding on the date of this Indenture or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to, or shall be junior in right of payment to, or shall be pari
passu in right of payment with, the Securities. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (a) Indebtedness evidenced by the
Securities, and (b) Indebtedness of the Company to a Subsidiary of the Company.
"Significant Subsidiary" means any Subsidiary of the Company which is a
"significant subsidiary" within the meaning of Rule 1-02 under Regulation S-X
promulgated by the Commission, as such Rule is in effect on the date of this
Indenture.
"Stated Maturity", when used with respect to any Security, means the date
specified in such Security as the fixed date on which an amount equal to the
Principal Amount of such Security is due and payable.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose outstanding Voting Stock is at the time of determination
thereof, directly or indirectly, owned by such person, by one or more
Subsidiaries of such person or by such person and one or more of its
Subsidiaries and (ii) any other person (other than a corporation), including,
without limitation, a joint venture, in which such person, one or more
Subsidiaries of such person or such person and one or more of its Subsidiaries,
directly or indirectly, at the date of determination thereof, owns at least a
majority of the ownership interests entitled to vote in the election of
directors, managers or trustees thereof (or other persons performing similar
functions). For purposes of this definition, any directors' qualifying shares
or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after March 16, 1999, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
of such laws or regulations by any legislative body, court, governmental agency
or regulatory authority, in each case, which amendment or change is enacted,
promulgated, issued or announced or which interpretation is issued or announced
or which action is taken, on or after March 16, 1999, there is more than an
insubstantial risk that interest (including Original Issue Discount) payable on
the Securities either (i) would not be deductible on a current accrual basis or
(ii) would not be deductible under any other method, in either case, in whole or
in part, by the Company (by reason of deferral, disallowance or otherwise) for
United States Federal income tax purposes.
4
<PAGE>
"TIA" means the Trust Indenture Act of 1939, as amended, as in effect on
the date of this Indenture, except as provided in Section 11.3, and except to
the extent any amendment to the Trust Indenture Act expressly provides for
application of the Trust Indenture Act as in effect on another date.
"Trading Day" means a day during which trading in securities generally
occurs on the National Association of Securities Dealers Automated Quotation
System or, if the Common Stock is not quoted on the National Association of
Securities Dealers Automated Quotation System, on the New York Stock Exchange
or, if the Common Stock is not listed on the New York Stock Exchange, on the
principal other national or regional securities exchange on which the Common
Stock is then listed or, if the Common Stock is not listed on a national or
regional securities exchange, on the principal other market on which the Common
Stock is then traded.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture, and thereafter
means the successor.
"Trust Officer" means, with respect to the Trustee, any officer assigned to
the Corporate Trust Office, including any vice president, assistant vice
president, assistant treasurer, assistant secretary or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above-designated officers and having direct responsibility for the
administration of this Indenture, and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Unrestricted Certificated Security" means a Certificated Security which is
not a Transfer Restricted Security.
"Unrestricted Global Security" means a Global Security which is not a
Transfer Restricted Security.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof under ordinary circumstances have the power to vote in
the election of the board of directors, managers or trustees of any person (or
other persons performing similar functions), irrespective of whether or not, at
the time, Capital Stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency.
<TABLE>
<CAPTION>
SECTION 1.2. Other Definitions.
-----------------
Term Defined in Section
<S> <C>
"Agent Members" 2.1(b)
"Bankruptcy Law" 8.1
"Change in Control" 3.8(a)
"Change in Control Purchase Date" 3.8(a)
"Change in Control Purchase Notice" 3.8(c)
"Change in Control Purchase Price" 3.8(a)
"closing price" 4.6(e)
"Company Notice" 13.5
"Company Notice Date" 13.3
"Conversion Agent" 2.3
"Conversion Date" 4.2
"Conversion Rate" 4.6
"current market price" 4.6
"Custodian" 8.1
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
"DTC" 2.1(a)
"Default Notice" 5.5
"Depositary" 2.1
"Determination Date" 4.6
"Distribution Date" 4.6
"Event of Default" 8.1
"Expiration Date" 4.6
"Expiration Time" 4.6
"Legal Holiday" 12.7
"Market Price" 13.4
"NYSE" 4.6
"Paying Agent" 2.3
"Purchase Agreement" 2.1(a)
"Purchased Shares" 4.6
"QIB" 2.1(a)
"Registrar" 2.3
"Repurchase Date" 13.1
"Repurchase Notice" 13.1
"Repurchase Price" 13.1
"Restated Principal Amount" 14.1
"Sale Price" 13.4
"Tax Event Date" 14.1
"Transfer Certificate" 2.12
"Transfer Restricted Security" 2.12
"Triggering Distribution" 4.6
"Unissued Shares" 3.8
</TABLE>
SECTION 1.3. Trust Indenture Act Provisions.
------------------------------
Whenever this Indenture refers to a provision of the TIA, that provision is
incorporated by reference in and made a part of this Indenture. The Indenture
shall also include those provisions of the TIA required to be included herein by
the provisions of the Trust Indenture Reform Act of 1990. The following TIA
terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other terms used in this Indenture that are defined in the TIA, defined
by TIA reference to another statute or defined by SEC rule and not otherwise
defined herein have the meanings assigned to them therein.
6
<PAGE>
SECTION 1.4. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions;
(5) the term "merger" includes a statutory share exchange and the
term "merged" has a correlating meaning;
(6) the masculine gender includes the feminine and the neuter;
(7) references to agreements and other instruments include
subsequent amendments thereto; and
(8) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication shall be
substantially in the respective forms set forth in Exhibit A, which Exhibit A is
--------- ---------
incorporated in and made part of this Indenture. The Securities may have
notations, legends or endorsements required, if any, by law, stock exchange rule
or usage. Each Security shall be dated the date of its authentication. The
Securities are being offered and sold by the Company pursuant to a Purchase
Agreement, dated March 16, 1999 (the "Purchase Agreement"), between the Company
and Credit Suisse First Boston Corporation, in transactions exempt from, or not
subject to, the registration requirements of the Securities Act.
(a) Restricted Global Securities. All of the Securities are initially
----------------------------
being offered and sold to qualified institutional buyers as defined in Rule 144A
(collectively, "QIBs" or individually a "QIB") in reliance on Rule 144A under
the Securities Act and shall be issued initially in the form of one or more
Restricted Global Securities, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Trustee, at its
Corporate Trust Office, as Securities Custodian for the depositary, The
Depository Trust Company ("DTC") (such depositary, or any successor thereto,
being hereinafter referred to as the "Depositary"), and registered in the name
of its nominee, Cede & Co., duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate Principal Amount of the
Restricted Global Security may from time to time be increased or decreased by
adjustments made on the records of the Securities Custodian as hereinafter
provided, subject in each case to compliance with the Applicable Procedures.
7
<PAGE>
(b) Global Securities in General. Each Global Security shall represent
----------------------------
such of the outstanding Securities as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Securities
from time to time endorsed thereon and that the aggregate amount of outstanding
Securities represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions, purchases or conversions of such
Securities. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the Principal Amount of outstanding Securities
represented thereby shall be made by the Securities Custodian in accordance with
the standing instructions and procedures existing between the Depositary and the
Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or under the Global Security, and the Depositary
(including, for this purpose, its nominee) may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner and
Holder of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall (A) prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or (B)
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(c) Certificated Securities. Certificated Securities shall be issued only
-----------------------
under the limited circumstances provided in Section 2.12(a)(1) hereof.
SECTION 2.2. Execution and Authentication.
----------------------------
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President, one of its Senior Vice Presidents or one of its
Vice Presidents, and attested by the manual or facsimile signature of the
Secretary or an Assistant Secretary of the Company. Typographic and other minor
errors or defects in any such reproduction of the seal or any such facsimile
signature shall not affect the validity or enforceability of any Security which
has been authenticated and delivered by the Trustee.
If an Officer whose signature is on a Security no longer holds that office
at the time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery Securities
for original issue in the aggregate Principal Amount of up to $850,000,000 (plus
up to an additional $280,000,000 aggregate Principal Amount issuable upon
exercise of the option described in the Purchase Agreement) upon receipt of a
Company Order or Orders. The Company Order shall specify the Principal Amount of
Securities to be authenticated, shall provide that all such Securities upon
initial issuance will be represented by a Restricted Global Security and the
date on which each original issue of Securities is to be authenticated. The
aggregate Principal Amount of Securities outstanding at any time may not exceed
$850,000,000, except as provided in the first sentence of this paragraph and in
Section 2.7.
The Trustee shall act as the initial authenticating agent. Thereafter, the
Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent shall have the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
8
<PAGE>
The Securities shall be issuable only in registered form without coupons
and only in denominations of Principal Amount of $1,000 and any integral
multiple thereof.
SECTION 2.3. Registrar, Paying Agent and Conversion Agent.
--------------------------------------------
The Company shall maintain one or more offices or agencies where Securities
may be presented for registration of transfer or for exchange (each, a
"Registrar"), one or more offices or agencies where Securities may be presented
for payment (each, a "Paying Agent"), one or more offices or agencies where
Securities may be presented for conversion (each, a "Conversion Agent") and one
or more offices or agencies where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served, which in each case
shall initially be the Corporate Trust Office. The Company will at all times
maintain a Paying Agent, Conversion Agent, Registrar and an office or agency
where notices and demands to or upon the Company in respect of the Securities
and this Indenture in the Borough of Manhattan, the City of New York, which
shall initially be an office or agency of State Street Bank and Trust Company,
N.A., an Affiliate of the Trustee, located at 61 Broadway, 15th Floor, New York,
New York 10006 (Attention: Corporate Trust Department--Citrix Systems, Inc.,
Zero Coupon Convertible Subordinated Debentures Due March 22, 2019). The
Registrar shall keep a register of the Securities and of their transfer and
exchange.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any Agent not a party to this Indenture. If the
Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent
for service of notices and demands in any place required by this Indenture, or
fails to give the foregoing notice, the Trustee shall act as such. The Company
or any Subsidiary or any Affiliate of the Company may act as Paying Agent
(except for the purposes of Section 6.1 and Article 10).
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands in connection with
the Securities.
SECTION 2.4. Paying Agent to Hold Money In Trust.
-----------------------------------
Prior to 11:00 a.m., New York City time, on each due date of payments in
respect of any Security, the Company shall deposit with a Paying Agent a sum of
money (in immediately available funds deposited on the due date) or Common Stock
sufficient to make such payments so becoming due. A Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money and Common
Stock held by the Paying Agent for the making of payments in respect of the
Securities, and shall notify the Trustee of any default by the Company (or any
other obligor on the Securities) in making any such payment. If the Company or
an Affiliate of the Company acts as Paying Agent, it shall, before 11:00 a.m.,
New York City time, on each due date of the making of payments in respect of
the Securities, segregate the money and Common Stock and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all money
and Common Stock held by it to the Trustee, and the Trustee may at any time
during the continuance of any default, upon written request to a Paying Agent,
require such Paying Agent to forthwith pay to the Trustee all sums so held in
trust by such Paying Agent. Upon doing so, the Paying Agent (other than the
Company) shall have no further liability for the money or Common Stock.
SECTION 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall cause
to be furnished to the Trustee on March 22 and September 22 of each year and at
such other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
9
<PAGE>
SECTION 2.6. Transfer and Exchange.
---------------------
(a) Subject to compliance with any applicable additional requirements
contained in Section 2.12, when a Security is presented to a Registrar with a
request to register a transfer thereof or to exchange such Security for an equal
Principal Amount of Securities of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested; provided,
however, that every Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar duly executed by
the Holder thereof or its attorney duly authorized in writing. To permit
registration of transfers and exchanges, upon surrender of any Security for
registration of transfer or exchange at an office or agency maintained pursuant
to Section 2.3, the Company shall execute and the Trustee shall authenticate
Securities of a like aggregate Principal Amount at the Registrar's request. Any
exchange or transfer shall be without charge, except that the Company or the
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto, and provided
further that this sentence shall not apply to any exchange pursuant to Section
2.10, 2.12(a)(1), 3.6, 3.11, 4.2 (last paragraph), 11.5 or 13.11.
Neither the Company, any Registrar nor the Trustee shall be required to
exchange or register a transfer of (a) any Securities for a period of 15 days
next preceding any selection of Securities to be redeemed, (b) any Securities or
portions thereof selected or called for redemption (except, in the case of
redemption of a Security in part, the portion not to be redeemed) or (c) any
Securities or portions thereof in respect of which a Change in Control Purchase
Notice or Repurchase Notice has been delivered and not withdrawn by the Holder
thereof (except, in the case of the purchase of a Security in part, the portion
not to be purchased).
All Securities issued upon any transfer or exchange of Securities shall be
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
(b) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to
the Trustee such information as the Trustee may reasonably require in connection
with the delivery by such Registrar of Securities upon transfer or exchange of
Securities.
SECTION 2.7. Replacement Securities.
----------------------
If any mutilated Security is surrendered to the Company, a Registrar or the
Trustee, or the Company, a Registrar and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company, the applicable Registrar and the Trustee such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, such Registrar or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute,
and upon its written request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a new Security of like tenor and Principal Amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, or is about to be redeemed or purchased
by the Company upon a Change in Control pursuant to Article 3 or purchased by
the Company on a Repurchase Date pursuant to Article 13, the Company in its
discretion may, instead of issuing a new Security, pay, redeem or purchase such
Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.7, 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
reasonable expenses (including the reasonable fees and expenses of the Trustee
or the Registrar) in connection therewith.
10
<PAGE>
Every new Security issued pursuant to this Section 2.7 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 2.7 are (to the extent lawful) 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 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities authenticated by the
Trustee, except for those canceled by it, those delivered to it for cancellation
and those described in this Section 2.8 as not outstanding.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If a Paying Agent (other than the Company or an Affiliate of the Company)
holds on a Redemption Date, a Change in Control Purchase Date or on the Business
Day following a Repurchase Date or Stated Maturity, money or securities, if
permitted hereunder, sufficient to pay the Securities (or portions thereof)
payable on that date, then on and after that date such Securities (or portions
thereof, as the case may be) cease to be outstanding and Original Issue Discount
and interest, if any, on such Securities shall cease to accrue; provided, that
if such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made.
Subject to the restrictions contained in Section 2.9, a Security does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Security.
If a Security is converted in accordance with Article 4, then from and
after the time of conversion on the Conversion Date, such Security shall cease
to be outstanding and Original Issue Discount and interest, if any, shall cease
to accrue on such security.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required Principal Amount of
Securities have concurred in any notice, direction, waiver or consent,
Securities owned by the Company or any other obligor on the Securities or by any
Affiliate of the Company or of such other obligor shall be disregarded, except
that, for purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only Securities which
the Trustee has actual knowledge that such Securities are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith shall
not be disregarded if the pledgee establishes to the satisfaction of the Trustee
the pledgee's right so to act with respect to the Securities and that the
pledgee is not the Company or any other obligor on the Securities or any
Affiliate of the Company or of such other obligor.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may prepare
and execute, and, upon receipt of a Company Order, the Trustee shall
authenticate and deliver, temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company with the consent of the Trustee considers appropriate for temporary
Securities.
11
<PAGE>
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.3,
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 or 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 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee or its agent any Securities surrendered to them for
transfer, exchange, payment or conversion. The Trustee and no one else shall
cancel, in accordance with its standard procedures, all Securities surrendered
for transfer, exchange, redemption, payment, purchase pursuant to Section 3.8 or
Article 13, conversion or cancellation and shall deliver the canceled Securities
to the Company. All Securities which are redeemed, purchased, converted or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates prior
to the Final Maturity Date shall be delivered to the Trustee for cancellation
and the Company may not hold or resell such Securities or issue any new
Securities to replace any such Securities or any Securities that any Holder has
converted pursuant to Article 4. Without limitation to the foregoing, any
Securities acquired by any investment bankers or other purchasers pursuant to
Section 3.7 shall be surrendered to the Trustee for conversion and thereafter
canceled, and may not be reoffered, sold or otherwise transferred.
SECTION 2.12. Additional Transfer and Exchange Requirements.
---------------------------------------------
(a) Transfer and Exchange of Global Securities.
------------------------------------------
(1) Certificated Securities shall be issued in exchange for
interests in the Global Securities only if (x) the Depositary notifies
the Company that it is unwilling or unable to continue as depositary
for the Global Securities or if it at any time ceases to be a
"clearing agency" registered under the Exchange Act if so required by
applicable law or regulation and a successor depositary is not
appointed by the Company within 90 days, or (y) an Event of Default
has occurred and is continuing. In either case, the Company shall
execute, and the Trustee shall, upon receipt of a Company Order (which
the Company agrees to deliver promptly), authenticate and deliver
Certificated Securities in an aggregate Principal Amount equal to the
Principal Amount of such Global Securities in exchange therefor. Only
Restricted Certificated Securities shall be issued in exchange for
beneficial interests in Restricted Global Securities, and only
Unrestricted Certificated Securities shall be issued in exchange for
beneficial interests in Unrestricted Global Securities. Certificated
Securities issued in exchange for beneficial interests in Global
Securities shall be registered in such names and shall be in such
authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct
the Trustee. The Trustee shall deliver or cause to be delivered such
Certificated Securities to the persons in whose names such Securities
are so registered. Such exchange shall be effected in accordance with
the Applicable Procedures.
(2) Notwithstanding any other provisions of this Indenture other
than the provisions set forth in Section 2.12(a)(1), a global Security
may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary
or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
12
<PAGE>
(b) Transfer and Exchange of Certificated Securities. When Certificated
------------------------------------------------
Securities are presented by a Holder to a Registrar with a request:
(1) to register the transfer of the Certificated Securities to a
person who will take delivery thereof in the form of Certificated
Securities only; or
(2) to exchange such Certificated Securities for an equal
Principal Amount of Certificated Securities of other authorized
denominations,
such Registrar shall register the transfer or make the exchange as requested;
provided, however, that the Certificated Securities presented or surrendered for
register of transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument
of transfer in accordance with the proviso to the first paragraph of
Section 2.6; and
(2) in the case of a Restricted Certificated Security, such
request shall be accompanied by the following additional information
and documents, as applicable:
(A) if such Restricted Certificated Security is being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, or such Restricted
Certificated Security is being transferred to the Company or a
Subsidiary of the Company, a certification to that effect from
such Holder (in substantially the form set forth in the Transfer
Certificate required pursuant to Section 2.12(e)(1));
(B) if such Restricted Certificated Security is being
transferred to a person the Holder reasonably believes is a QIB
in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification
to that effect from such Holder (in substantially the form set
forth in the Transfer Certificate); or
(C) if such Restricted Certificated Security is being
transferred (i) pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 or
(ii) pursuant to an exemption from the registration requirements
of the Securities Act (other than pursuant to Rule 144A or Rule
144) and as a result of which, in the case of a Security
transferred pursuant to this clause (ii), such Security shall
cease to be a "restricted security" within the meaning of Rule
144, a certification to that effect from the Holder (in
substantially the form set forth in the Transfer Certificate)
and, if the Company or such Registrar so requests, a customary
opinion of counsel, certificates and other information reasonably
acceptable to the Company and such Registrar to the effect that
such transfer is in compliance with the Securities Act.
(c) Transfer of a Beneficial Interest in a Restricted Global Security for a
-----------------------------------------------------------------------
Beneficial Interest in an Unrestricted Global Security. Any person having a
- ------------------------------------------------------
beneficial interest in a Restricted Global Security may upon request, subject to
the Applicable Procedures, transfer such beneficial interest to a person who is
required or permitted to take delivery thereof in the form of an Unrestricted
Global Security. Upon receipt by the Trustee of written instructions or such
other form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any person having a beneficial interest
in a Restricted Global Security and the following additional information and
documents in such form as is customary for the Depositary from the Depositary or
its nominee on behalf of the person having such beneficial interest in the
Restricted Global Security (all of which may be submitted by facsimile or
electronically):
13
<PAGE>
(1) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certification to that effect from the transferor (in substantially the
form set forth in the Transfer Certificate); or
(2) if such beneficial interest is being transferred (i) pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 or (ii) pursuant to an exemption from
the registration requirements of the Securities Act (other than
pursuant to Rule 144A or Rule 144) and as a result of which, in the
case of a Security transferred pursuant to this clause (ii), such
Security shall cease to be a "restricted security" within the meaning
of Rule 144, a certification to that effect from the transferor (in
substantially the form set forth in the Transfer Certificate) and, if
the Company or the Trustee so requests, a customary opinion of
counsel, certificates and other information reasonably acceptable to
the Company and the Trustee to the effect that such transfer is in
compliance with the Securities Act,
the Trustee, as a Registrar and Securities Custodian, shall reduce or cause to
be reduced the aggregate Principal Amount of Restricted Global Security by the
appropriate Principal Amount and shall increase or cause to be increased the
aggregate Principal Amount of the Unrestricted Global Security by a like
Principal Amount. Such transfer shall otherwise be effected in accordance with
the Applicable Procedures. If no Unrestricted Global Security is then
outstanding, the Company shall execute and the Trustee shall, upon receipt of a
Company Order (which the Company agrees to deliver promptly), authenticate and
deliver an Unrestricted Global Security.
(d) Transfers of Certificated Securities for Beneficial Interest in Global
----------------------------------------------------------------------
Securities. In the event that Certificated Securities are issued in exchange
- ----------
for beneficial interests in Global Securities and, thereafter, the events or
conditions specified in Section 2.12(a)(1) which required such exchange shall
have ceased to exist, the Company shall mail notice to the Trustee and to the
Holders stating that Holders may exchange Certificated Securities for interests
in Global Securities by complying with the procedures set forth in this
Indenture and briefly describing such procedures and the events or circumstances
requiring that such notice be given. Thereafter, if Certificated Securities are
presented by a Holder to a Registrar with a request:
(1) to register the transfer of such Certificated Securities to a
person who will take delivery thereof in the form of a beneficial
interest in a Global Security, which request shall specify whether
such Global Security will be a Restricted Global Security or an
Unrestricted Global Security; or
(2) to exchange such Certificated Securities for an equal
Principal Amount of beneficial interests in a Global Security, which
beneficial interests will be owned by the Holder transferring such
Certificated Securities (provided that in the case of such an
exchange, Restricted Certificated Securities may be exchanged only for
Restricted Global Securities and Unrestricted Certificated Securities
may be exchanged only for Unrestricted Global Securities),
the Registrar shall register the transfer or make the exchange as requested by
canceling such Certificated Security and causing, or directing the Securities
Custodian to cause, the aggregate Principal Amount of the applicable Global
Security to be increased accordingly and, if no such Global Security is then
outstanding, the Company shall issue and the Trustee shall authenticate and
deliver a new Global Security; provided, however, that the Certificated
Securities presented or surrendered for registration of transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument
of transfer in accordance with the proviso to Section 2.6(a);
(2) in the case of a Restricted Certificated Security to be
transferred for a beneficial interest in an Unrestricted Global
Security, such request shall be accompanied by the following
additional information and documents, as applicable:
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(A) if such Restricted Certificated Security is being
transferred pursuant to an effective registration statement under
the Securities Act, a certification to that effect from such
Holder (in substantially the form set forth in the Transfer
Certificate); or
(B) if such Restricted Certificated Security is being
transferred pursuant to (i) an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 or
(ii) pursuant to an exemption from the registration requirements
of the Securities Act (other than pursuant to Rule 144A or Rule
144) and as a result of which, in the case of a Security
transferred pursuant to this clause (ii), such Security shall
cease to be a "restricted security" within the meaning of Rule
144, a certification to that effect from such Holder (in
substantially the form set forth in the Transfer Certificate),
and, if the Company or the Registrar so requests, a customary
opinion of counsel, certificates and other information reasonably
acceptable to the Company and the Trustee to the effect that such
transfer is in compliance with the Securities Act;
(3) in the case of a Restricted Certificated Security to be
transferred or exchanged for a beneficial interest in a Restricted
Global Security, such request shall be accompanied by a certification
from such Holder (in substantially the form set forth in the Transfer
Certificate) to the effect that such Restricted Certificated Security
is being transferred to a person the Holder reasonably believes is a
QIB (which, in the case of an exchange, shall be such Holder) in
accordance with Rule 144A; and
(4) in the case of an Unrestricted Certificated Security to be
transferred or exchanged for a beneficial interest in an Unrestricted
Global Security, such request need not be accompanied by any
additional information or documents.
(e) Legends.
-------
(1) Except as permitted by the following paragraphs (2) and (3),
each Global Security and Certificated Security (and all Securities
issued in exchange therefor or upon registration of transfer or
replacement thereof and any Common Stock issuable upon conversion
thereof) shall bear a legend in substantially the form called for by
footnote 2 to Exhibit A hereto (each a "Transfer Restricted Security"
---------
for so long as such Security or Common issuable upon conversion
thereof is required by this Indenture to bear such legend). Each
Transfer Restricted Security shall have attached thereto a certificate
(a "Transfer Certificate") in substantially the form called for
footnote 5 to Exhibit A hereto.
---------
(2) Upon any sale or transfer of a Transfer Restricted Security
(x) pursuant to Rule 144, (y) pursuant to an effective registration
statement under the Securities Act or (z) pursuant to any other
available exemption (other than Rule 144A) from the registration
requirements of the Securities Act and as a result of which, in the
case of a Security transferred pursuant to this clause (z), such
Security shall cease to be a "restricted security" within the meaning
of Rule 144:
(A) in the case of any Restricted Certificated Security, any
Registrar shall permit the Holder thereof to exchange such
Restricted Certificated Security for an Unrestricted Certificated
Security, or (under the circumstances described in Section
2.12(d)) to transfer such Restricted Certificated Security to a
transferee who shall take such Security in the form of a
beneficial interest in an Unrestricted Global Security, and in
each case shall rescind any restriction on the transfer of such
Security; provided, however, that the Holder of such Restricted
Certificated Security shall, in connection
15
<PAGE>
with such exchange or transfer, comply with the other applicable
provisions of this Section 2.12; and
(B) in the case of any beneficial interest in a Restricted
Global Security, the Trustee shall permit the beneficial owner
thereof to transfer such beneficial interest to a transferee who
shall take such interest in the form of a beneficial interest in
an Unrestricted Global Security and shall rescind any restriction
on transfer of such beneficial interest; provided, that such
Unrestricted Global Security shall continue to be subject to the
provisions of Section 2.12(a)(2); and provided, further, that the
owner of such beneficial interest shall, in connection with such
transfer, comply with the other applicable provisions of this
Section 2.12.
(3) Upon the exchange, registration of transfer or replacement of
Securities not bearing the legend described in paragraph (1) above,
the Company shall execute, the Trustee shall authenticate and deliver
Securities that do not bear such legend and which do not have a
Transfer Certificate attached thereto.
(f) Transfers to the Company. Nothing in this Indenture or in the
------------------------
Securities shall prohibit the sale or other transfer of any Securities
(including beneficial interests in Global Securities) to the Company or any of
its Subsidiaries, which Securities shall thereupon be canceled in accordance
with the second to last sentence of Section 2.11.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.1. Right to Redeem; Notice to Trustee.
----------------------------------
The Company, at its option, may redeem the Securities in accordance with
the provisions of paragraphs 5 and 6 of the Securities. If the Company elects
to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify
the Trustee in writing of the Redemption Date, the Principal Amount of
Securities to be redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.1 by a Company Order, in the case of any redemption of less than all
of the Securities, at least 30 days before the Redemption Date and, in the case
of any redemption of all of the Securities, on or prior to the date of notice of
redemption (in each case, unless a shorter notice shall be satisfactory to the
Trustee).
SECTION 3.2. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed, the Trustee shall,
at least 25 days but not more than 60 days prior to the Redemption Date, select
the Securities to be redeemed. The Trustee shall make the selection from the
Securities outstanding and not previously called for redemption, by lot, pro
rata or by another method the Trustee considers fair and appropriate.
Securities in denominations of Principal Amounts of $1,000 may only be redeemed
in whole. The Trustee may select for redemption portions (equal to Principal
Amounts of $1,000 or any multiple thereof) of the Principal Amount of Securities
that have denominations larger than $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of Securities
called for redemption.
If any Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed
16
<PAGE>
to be the portion selected for redemption. Securities which have been converted
during a selection of Securities to be redeemed shall be treated by the Trustee
as outstanding for the purpose of such selection.
SECTION 3.3. Notice of Redemption.
--------------------
At least 20 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed a notice of redemption to each Holder
of Securities to be redeemed at such Holder's address as it appears on the
Registrar's books.
The notice shall identify the Securities to be redeemed (if less than all)
and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Rate and any adjustments thereto;
(4) the name and address of each Paying Agent and Conversion Agent;
(5) that Securities called for redemption must be presented and
surrendered to a Paying Agent to collect the Redemption Price;
(6) that the Securities called for redemption may be converted at any
time before the close of business on the Business Day immediately preceding
the Redemption Date;
(7) that Holders who wish to convert Securities must satisfy the
other requirements in paragraph 8 of the Securities;
(8) that, unless the Company defaults in making the redemption
payment, Original Issue Discount on Securities called for redemption and
interest, if any, shall cease accruing on and after the Redemption Date;
(9) if any Security is being redeemed in part, the portion of the
Principal Amount of such Security to be redeemed and that, after the
Redemption Date, upon presentation and surrender of such Security, a new
Security or Securities in aggregate Principal Amount equal to the
unredeemed portion thereof will be issued; and
(10) the CUSIP number or numbers of the Securities.
If any of the Securities to be redeemed is in the form of a Global
Security, then the Company shall modify such notice to the extent necessary to
accord with the procedures of the Depositary applicable to redemptions.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price stated
in the notice except for Securities that are converted in accordance with the
provisions of Article 4 and on and after the Redemption Date (unless the Company
shall default in the payment of such Securities at the Redemption Price)
Original Issue Discount on the Securities or portion of Securities so called for
redemption shall cease to accrue and such Securities shall cease after the close
of business on
17
<PAGE>
the Business Day next preceding the date fixed for redemption to be convertible
into Common Stock and, except as provided in Section 10.2, to be entitled to any
benefit or security under this Indenture, and the Holders thereof shall have no
right in respect of such Securities except the right to receive the Redemption
Price thereof. Upon presentation and surrender to a Paying Agent, such
Securities shall be paid at the Redemption Price stated in such notice.
SECTION 3.5. Deposit of Redemption Price.
---------------------------
Prior to 11:00 a.m. New York City time, on the Redemption Date, the Company
shall deposit with a Paying Agent (or, if the Company acts as Paying Agent,
shall segregate and hold in trust) money sufficient to pay the Redemption Price
of all Securities to be redeemed on that date, other than Securities or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation or have been converted. The Paying
Agent shall return to the Company any money not required for that purpose
because of the conversion of Securities pursuant to Article 4 or, if such money
is then held by the Company in trust and is not required for such purpose, it
shall be discharged from the trust.
SECTION 3.6. Securities Redeemed in Part.
---------------------------
Upon presentation and surrender of a Security that is redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder a new Security equal in Principal Amount to the unredeemed portion of the
Security surrendered.
SECTION 3.7. Conversion Arrangement on Call for Redemption.
---------------------------------------------
In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities called for redemption by an
agreement with one or more investment bankers or other purchasers to purchase
such Securities by paying to a Paying Agent (other than the Company or any of
its Affiliates) in trust for the Securityholders, on or before 11:00 A.M. New
York City time on the Redemption Date, an amount that, together with any amounts
deposited with such Paying Agent by the Company for the redemption of such
Securities, is not less than the Redemption Price of such Securities.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Price of such Securities,
including interest, if any, shall be deemed to be satisfied and discharged to
the extent such amount is so paid by such purchasers; provided, however, that
nothing in this Section 3.7 shall relieve the Company of its obligation to pay
the Redemption Price on Securities called for redemption. If such an agreement
is entered into, any Securities called for redemption and not surrendered for
conversion by the Holders thereof prior to the relevant Redemption Date may, at
the option of the Company upon written notice to the Trustee, be deemed, to the
fullest extent permitted by law, acquired by such purchasers from such Holders
and (notwithstanding anything to the contrary contained in Article 4)
surrendered by such purchasers for conversion, all as of 11:00 A.M. New York
City time on the Redemption Date, subject to payment of the above amount as
aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities
are selected for redemption any such amount paid to it for purchase in the same
manner as it would money deposited with it by the Company for the redemption of
Securities. Without the Paying Agent's prior written consent, no arrangement
between the Company and such purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Paying Agent as set forth in this
Indenture, and the Company agrees to indemnify the Paying Agent from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such purchasers, including the costs and
expenses incurred by the Paying Agent in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture, in
accordance with the indemnity provisions applicable to the Trustee set forth in
Section 9.7.
SECTION 3.8. Purchase of Securities at Option of the Holder Upon Change in
-------------------------------------------------------------
Control .
- -------
18
<PAGE>
(a) If at any time that Securities remain outstanding there shall occur a
Change in Control, Securities shall be purchased by the Company at the option of
the Holders thereof as of the date that is 30 Business Days after the occurrence
of the Change in Control (the "Change in Control Purchase Date") at a purchase
price equal to the Issue Price plus accrued Original Issue Discount through the
Change in Control Purchase Date (the "Change in Control Purchase Price"),
subject to satisfaction by or on behalf of any Holder of the requirements set
forth in subsection (c) of this Section 3.8.
A "Change in Control" shall be deemed to have occurred if any of the
following occurs after the Initial Issuance Date:
(1) any "person" or "group" (as such terms are defined below) is
or becomes the "beneficial owner" (as defined below), directly or
indirectly, of shares of Voting Stock of the Company representing 50%
or more of the total voting power of all outstanding classes of Voting
Stock of the Company or has the power, directly or indirectly, to
elect a majority of the members of the Board of Directors of the
Company; or
(2) the Company consolidates with, or merges with or into,
another Person or the Company sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of the assets
of the Company, or any Person consolidates with, or merges with or
into, the Company, in any such event other than pursuant to a
transaction in which the Persons that "beneficially owned" (as defined
below), directly or indirectly, shares of Voting Stock of the Company
immediately prior to such transaction "beneficially own" (as defined
below), directly or indirectly, shares of Voting Stock of the Company
representing at least a majority of the total voting power of all
outstanding classes of Voting Stock of the surviving or transferee
Person; or
(3) there shall occur the liquidation or dissolution of the
Company.
For the purpose of the definition of "Change in Control", (i) "person" and
"group" have the meanings given such terms under Section 13(d) and 14(d) of the
Exchange Act or any successor provision to either of the foregoing, and the term
"group" includes any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act (or any successor provision thereto), (ii) a "beneficial owner"
shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in
effect on the date of this Indenture, except that the number of shares of Voting
Stock of the Company shall be deemed to include, in addition to all outstanding
shares of Voting Stock of the Company and Unissued Shares deemed to be held by
the "person" or "group" (as such terms are defined above) or other Person with
respect to which the Change in Control determination is being made, all Unissued
Shares deemed to be held by all other Persons, and (iii) the terms "beneficially
owned" and "beneficially own" shall have meanings correlative to that of
"beneficial owner". The term "Unissued Shares" means shares of Voting Stock not
outstanding that are subject to options, warrants, rights to purchase or
conversion privileges exercisable within 60 days of the date of determination of
a Change in Control.
(b) Within 10 Business Days after the occurrence of a Change in Control,
the Company shall mail a written notice of the Change in Control to the Trustee
and to each Holder (and to beneficial owners as required by applicable law) and
shall cause a copy of such notice to be published in a daily newspaper of
national circulation. The notice shall include the form of a Change in Control
Purchase Notice to be completed by the Holder and shall state:
(1) the date of such Change in Control and, briefly, the events
causing such Change in Control;
(2) the date by which the Change in Control Purchase Notice
pursuant to this Section 3.8 must be given;
(3) the Change in Control Purchase Date;
19
<PAGE>
(4) the Change in Control Purchase Price;
(5) briefly, the conversion rights of the Securities;
(6) the name and address of each Paying Agent and Conversion
Agent;
(7) the Conversion Rate and any adjustments thereto;
(8) that Securities as to which a Change in Control Purchase
Notice has been given may be converted into Common Stock pursuant to
Article 4 only to the extent that the Change in Control Purchase
Notice has been withdrawn in accordance with the terms of this
Indenture;
(9) the procedures that the Holder must follow to exercise rights
under this Section 3.8;
(10) the procedures for withdrawing a Change in Control Purchase
Notice, including a form of notice of withdrawal; and
(11) that the Holder must satisfy the requirements set forth in
the Securities in order to convert the Securities.
If any of the Securities is in the form of a Global Security, then the
Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to the repurchase of Global Securities.
(c) A Holder may exercise its rights specified in subsection (a) of this
Section 3.8 upon delivery of a written notice (which shall be in substantially
the form included in Exhibit A hereto and which may be delivered by letter,
---------
overnight courier, hand delivery, facsimile transmission or in any other written
form and, in the case of Global Securities, may be delivered electronically or
by other means in accordance with the Depositary's customary procedures) of the
exercise of such rights (a "Change in Control Purchase Notice") to any Paying
Agent at any time prior to the close of business on the Business Day next
preceding the Change in Control Purchase Date.
The delivery of such Security to any Paying Agent (together with all
necessary endorsements) at the office of such Paying Agent shall be a condition
to the receipt by the Holder of the Change in Control Purchase Price therefor.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.8, a portion of a Security if the Principal Amount of such portion is
$1,000 or an integral multiple of $1,000. Provisions of this Indenture that
apply to the purchase of all of a Security pursuant to Sections 3.8 through 3.13
also apply to the purchase of such portion of such Security.
Notwithstanding anything herein to the contrary, any Holder delivering to a
Paying Agent the Change in Control Purchase Notice contemplated by this
subsection (c) shall have the right to withdraw such Change in Control Purchase
Notice in whole or in a portion thereof that is a Principal Amount of $1,000 or
in an integral multiple thereof at any time prior to the close of business on
the Business Day next preceding the Change in Control Purchase Date by delivery
of a written notice of withdrawal to the Paying Agent in accordance with Section
3.9.
A Paying Agent shall promptly notify the Company of the receipt by it of
any Change in Control Purchase Notice or written withdrawal thereof.
20
<PAGE>
Anything herein to the contrary notwithstanding, in the case of Global
Securities, any Change in Control Purchase Notice may be delivered or withdrawn
and such Securities may be surrendered or delivered for purchase in accordance
with the applicable procedures of the Depositary as in effect from time to time.
SECTION 3.9. Effect of Change in Control Purchase Notice.
-------------------------------------------
Upon receipt by any Paying Agent of the Change in Control Purchase Notice
specified in Section 3.8(c), the Holder of the Security in respect of which such
Change in Control Purchase Notice was given shall (unless such Change in Control
Purchase Notice is withdrawn as specified below) thereafter be entitled to
receive the Change in Control Purchase Price with respect to such Security.
Such Change in Control Purchase Price shall be paid to such Holder promptly
following the later of (a) the Change in Control Purchase Date with respect to
such Security (provided the conditions in Section 3.8(c) have been satisfied)
and (b) the time of delivery of such Security to a Paying Agent by the Holder
thereof in the manner required by Section 3.8(c). Securities in respect of
which a Change in Control Purchase Notice has been given by the Holder thereof
may not be converted into shares of Common Stock on or after the date of the
delivery of such Change in Control Purchase Notice unless such Change in Control
Purchase Notice has first been validly withdrawn.
A Change in Control Purchase Notice may be withdrawn by means of a written
notice (which may be delivered by letter, overnight courier, hand delivery,
facsimile transmission or in any other written form and, in the case of Global
Securities, may be delivered electronically or by other means in accordance
with the Depositary's customary procedures) of withdrawal delivered by the
Holder to a Paying Agent at any time prior to the close of business on the
Business Day immediately preceding the Change in Control Purchase Date,
specifying the Principal Amount of the Security or portion thereof (which must
be a Principal Amount of $1,000 or an integral multiple of $1,000 in excess
thereof) with respect to which such notice of withdrawal is being submitted.
SECTION 3.10. Deposit of Change in Control Purchase Price.
-------------------------------------------
On or before 11:00 a.m. New York City time on the Change in Control
Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent
(other than the Company or an Affiliate of the Company) an amount of money (in
immediately available funds if deposited on such Business Day) sufficient to pay
the aggregate Change in Control Purchase Price of all the Securities or portions
thereof that are to be purchased as of such Change in Control Purchase Date.
The manner in which the deposit required by this Section 3.10 is made by the
Company shall be at the option of the Company, provided that such deposit shall
be made in a manner such that the Trustee or a Paying Agent shall have
immediately available funds on the Change in Control Purchase Date.
If a Paying Agent holds, in accordance with the terms hereof, money
sufficient to pay the Change in Control Purchase Price of any Security for which
a Change in Control Purchase Notice has been tendered and not withdrawn in
accordance with this Indenture then, on the Change in Control Purchase Date,
such Security will cease to be outstanding and the rights of the Holder in
respect thereof shall terminate (other than the right to receive the Change in
Control Purchase Price as aforesaid). The Company shall publicly announce the
Principal Amount of Securities purchased as a result of such Change in Control
on or as soon as practicable after the Change in Control Purchase Date.
SECTION 3.11. Securities Purchased In Part.
----------------------------
Any Security that is to be purchased only in part shall be surrendered at
the office of a Paying Agent and promptly after the Change in Control Purchase
Date the Company shall execute and the Trustee shall authenticate and deliver to
the Holder of such Security, without service charge, a new Security or
Securities, of such authorized denomination or denominations as may be requested
by such Holder, in aggregate Principal Amount equal to, and in exchange for, the
portion of the Principal Amount of the Security so surrendered that is not
purchased.
SECTION 3.12. Compliance With Securities Laws Upon Purchase of Securities
-----------------------------------------------------------
.
21
<PAGE>
In connection with any offer to purchase or purchase of Securities under
Section 3.8, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any
successor to either such Rule), if applicable, under the Exchange Act, (b) file
the related Schedule 13E-4 (or any successor or similar schedule, form or
report) if required under the Exchange Act, and (c) otherwise comply with all
federal and state securities laws in connection with such offer, all so as to
permit the rights of the Holders and obligations of the Company under Sections
3.8 through 3.11 to be exercised in the time and in the manner specified
therein.
SECTION 3.13. Repayment to the Company.
------------------------
Subject to the provisions of Section 5.7, to the extent that the aggregate
amount of cash deposited by the Company pursuant to Section 3.10 exceeds the
aggregate Change in Control Purchase Price together with interest, if any,
thereon of the Securities or portions thereof that the Company is obligated to
purchase, then promptly after the Change in Control Purchase Date the Trustee or
a Paying Agent, as the case may be, shall return any such excess to the Company.
ARTICLE 4
CONVERSION
SECTION 4.1. Conversion Privilege.
--------------------
A Holder of a Security may convert the Principal Amount of such Security
(or any portion thereof equal to a Principal Amount of $1,000 or any integral
multiple of a Principal Amount of $1,000 in excess thereof) into Common Stock at
any time prior to the close of business on the Final Maturity Date, at the
Conversion Rate then in effect; provided, however, that, if such Security is
called for redemption pursuant to Article 3, such conversion right shall
terminate at the close of business on the Business Day immediately preceding the
Redemption Date for such Security (unless the Company shall default in making
the redemption payment when due, in which case the conversion right shall
terminate at the close of business on the date such default is cured and such
Security is redeemed). The number of shares of Common Stock issuable upon
conversion of a Security per $1,000 of Principal Amount thereof (the "Conversion
Rate") shall be that set forth in paragraph 8 in the Securities, subject to
adjustment as herein set forth. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of a
Security.
A Security in respect of which a Holder has delivered a Repurchase Notice
or Change in Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of this Indenture.
A Holder of Securities is not entitled to any rights of a holder of Common
Stock until such Holder has converted its Securities to Common Stock, and only
to the extent such Securities are deemed to have been converted into Common
Stock pursuant to this Article 4.
SECTION 4.2. Conversion Procedure.
--------------------
To convert a Security, a Holder must (a) complete and manually sign the
conversion notice on the back of the Security and deliver such notice to a
Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish
appropriate endorsements and transfer documents if required by a Registrar or a
Conversion Agent, and (d) pay any transfer or similar tax, if required. The
date on which the Holder satisfies all of those requirements is the "Conversion
Date." As soon as practicable after the Conversion Date, the Company shall
deliver to the Holder through a Conversion Agent a certificate for the number of
whole shares of Common Stock issuable upon the conversion and cash in lieu of
any fractional shares pursuant to Section 4.3. Anything herein to the contrary
22
<PAGE>
notwithstanding, in the case of Global Securities, conversion notices may be
delivered and such Securities may be surrendered for conversion in accordance
with the Applicable Procedures of the Depositary as in effect from time to time.
The person in whose name the Common Stock certificate is registered shall
be deemed to be a shareholder of record on the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
or persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the person or persons entitled
to receive such shares of Common Stock as the record holder or holders thereof
for all purposes at the close of business on the next succeeding day on which
such stock transfer books are open; provided, further, that such conversion
shall be at the Conversion Rate in effect on the date that such Security shall
have been surrendered for conversion, as if the stock transfer books of the
Company had not been closed. Upon conversion of a Security, such person shall
no longer be a Holder of such Security.
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article 4. On conversion of a Security, that portion of accrued Original Issue
Discount (or interest, if the Company has exercised its option provided for in
Section 14.1) attributable to the period from the Issue Date (or, if the Company
has exercised the option provided for in Section 14.1, the later of (x) the date
of such exercise and (y) the date on which interest was last paid) of the
Security through the Conversion Date with respect to the converted Security
shall not be cancelled, extinguished or forfeited, but rather shall be deemed to
be paid in full to the Holder thereof through delivery of the Common Stock
(together with the cash payment, if any, in lieu of fractional shares) in
exchange for the Security being converted pursuant to the provisions hereof; and
the fair market value of such shares of Common Stock (together with any such
cash payment in lieu of fractional shares) shall be treated as issued, to the
extent thereof, first in exchange for Original Issue Discount (or interest, if
the Company has exercised its option provided for in Section 14.1) accrued
through the Conversion Date, and the balance, if any, of such fair market value
of such Common Stock (and any such cash payment) shall be treated as issued in
exchange for the Issue Price of the Security being converted pursuant to the
provisions hereof.
If a Holder converts more than one Security at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the
aggregate Principal Amount of Securities converted.
Upon surrender of a Security that is converted in part, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder, a new
Security equal in Principal Amount to the unconverted portion of the Security
surrendered.
SECTION 4.3. Fractional Shares.
-----------------
The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash based upon the closing price of the Common Stock on the Trading Day
immediately prior to the Conversion Date.
SECTION 4.4. Taxes on Conversion.
-------------------
If a Holder converts a Security, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon such conversion. However, the Holder shall pay any such tax which is
due because the Holder requests the shares to be issued in a name other than the
Holder's name. The Conversion Agent may refuse to deliver the certificate
representing the Common Stock being issued in a name other than the Holder's
name until the Conversion Agent receives a sum sufficient to pay any tax which
will be due because the shares are to be issued in a name other than the
Holder's name. Nothing herein shall preclude any tax withholding required by
law or regulation.
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SECTION 4.5. Company to Provide Stock.
------------------------
The Company shall, prior to issuance of any Securities under this Article
4, and from time to time as may be necessary, reserve, out of its authorized but
unissued Common Stock, a sufficient number of shares of Common Stock to permit
the conversion of all outstanding Securities into shares of Common Stock.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares, shall be duly authorized, validly issued, fully
paid and nonassessable and shall be free from preemptive rights and free of any
lien or adverse claim.
The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Securities, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or on the Nasdaq
National Market or other over-the-counter market or such other market on which
the Common Stock is then listed or quoted.
SECTION 4.6. Adjustment of Conversion Rate.
-----------------------------
The Conversion Rate shall be adjusted from time to time by the Company as
follows:
(a) In case the Company shall (i) pay a dividend on its Common Stock
in shares of Common Stock, (ii) make a distribution on its Common Stock in
shares of Common Stock, (iii) subdivide its outstanding Common Stock into a
greater number of shares, or (iv) combine its outstanding Common Stock into
a smaller number of shares, the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the Holder of any Security thereafter
surrendered for conversion shall be entitled to receive that number of
shares of Common Stock which it would have owned had such Security been
converted immediately prior to the happening of such event. An adjustment
made pursuant to this subsection (a) shall become effective immediately
after the record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of
subdivision or combination.
(b) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not
more than 60 days after such record date) to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a
price per share (or having a conversion price per share) less than the
current market price per share of Common Stock (as determined in accordance
with subsection (e) of this Section 4.6) on the record date for the
determination of shareholders entitled to receive such rights or warrants,
the Conversion Rate in effect immediately prior thereto shall be adjusted
so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to such record date by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding on such record date plus the number of additional shares
of Common Stock offered (or into which the convertible securities so
offered are convertible), and of which the denominator shall be the number
of shares of Common Stock outstanding on such record date plus the number
of shares which the aggregate offering price of the total number of shares
of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered, which shall be determined by multiplying
the number of shares of Common Stock issuable upon conversion of such
convertible securities by the conversion price per share of Common Stock
pursuant to the terms of such convertible securities) would purchase at the
current market price per share (as defined in subsection (e) of this
Section 4.6) of Common Stock on such record date. Such adjustment shall be
made successively whenever any such rights or warrants are issued, and
shall become effective immediately after such record date. If at the end
of the period during which such rights or warrants are exercisable not all
rights or warrants shall have been exercised, the adjusted Conversion Rate
shall be immediately readjusted to what it would have been based
24
<PAGE>
upon the number of additional shares of Common Stock actually issued (or
the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of capital stock (other than
dividends or distributions of Common Stock on Common Stock to which Section
4.6(a) applies) of the Company evidences of indebtedness or other assets
(including securities of any person other than the Company, but excluding
all-cash distributions to which 4.6(d) applies or any rights or warrants
referred to in 4.6(b)), then in each such case the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by multiplying
the current Conversion Rate by a fraction of which the numerator shall be
the current market price per share (as defined in subsection (e) of this
Section 4.6) of the Common Stock on such record date, and of which the
denominator shall be the current market price per share (as defined in
subsection (e) of this Section 4.6) of the Common Stock on the record date
mentioned below less the fair market value on such record date (as
determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and which shall be evidenced
by an Officers' Certificate delivered to the Trustee) of the portion of the
capital stock, evidences of indebtedness or other non-cash assets so
distributed or of such rights or warrants applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date). Such adjustment shall be made
successively whenever any such distribution is made and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such distribution.
In the event that the Company implements a stockholder rights plan,
such rights plan shall provide, subject to customary exceptions, that upon
conversion of the Securities the Holders will receive, in addition to the
Common Stock issuable upon such conversion, the rights issued under such
rights plan (notwithstanding the occurrence of an event causing such rights
to separate from the Common Stock at or prior to the time of conversion).
Any distribution of rights or warrants pursuant to a stockholder rights
plan complying with the requirements set forth in the immediately preceding
sentence of this paragraph shall not constitute a distribution of rights or
warrants for the purposes of this Section 4.6(c).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 4.6(c)
(and no adjustment to the Conversion Rate under this Section 4.6(c) will be
required) until the occurrence of the earliest Trigger Event. If such
right or warrant is subject to subsequent events, upon the occurrence of
which such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitle the holder
to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of
each such event shall be deemed to be the date of issuance and record date
with respect to a new right or warrant (and a termination or expiration of
the existing right or warrant without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of
rights or warrants, or any Trigger Event or other event (of the type
described in the preceding sentence) with respect thereto, that resulted in
an adjustment to the Conversion Rate under this Section 4.6(c), (1) in the
case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Rate
shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made
to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants all of which
shall have expired or been terminated without exercise, the Conversion Rate
shall be readjusted as if such rights and warrants had never been issued.
25
<PAGE>
(d) (12) In case the Company shall, by dividend or otherwise, at
any time distribute (a "Triggering Distribution") to all or substantially
all holders of its Common Stock all cash distributions in an aggregate
amount that, together with the aggregate amount of (A) any cash and the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive evidence thereof and which shall be
evidenced by an Officers' Certificate delivered to the Trustee) of any
other consideration payable in respect of any tender offer by the Company
or a Subsidiary of the Company for Common Stock consummated within the 12
months preceding the date of payment of the Triggering Distribution and in
respect of which no Conversion Rate adjustment pursuant to this Section 4.6
has been made and (B) all other cash distributions to all or substantially
all holders of its Common Stock made within the 12 months preceding the
date of payment of the Triggering Distribution and in respect of which no
Conversion Rate adjustment pursuant to this Section 4.6 has been made,
exceeds an amount equal to 10% of the product of the current market price
per share of Common Stock (as determined in accordance with subsection (e)
of this Section 4.6) on the Business Day (the "Determination Date")
immediately preceding the day on which such Triggering Distribution is
declared by the Company multiplied by the number of shares of Common Stock
outstanding on the Determination Date (excluding shares held in the
treasury of the Company), the Conversion Rate shall be increased so that
the same shall equal the rate determined by multiplying such Conversion
Rate in effect immediately prior to the Determination Date by a fraction of
which the numerator shall be such current market price per share of the
Common Stock (as determined in accordance with subsection (e) of this
Section 4.6) on the Determination Date, and the denominator shall be the
current market price per share of the Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) on the Determination
Date less the sum of the aggregate amount of cash and the aggregate fair
market value (determined as aforesaid) of any such other consideration so
distributed, paid or payable within such 12 months (including, without
limitation, the Triggering Distribution) applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date), such increase to become effective
immediately prior to the opening of business on the day following the date
on which the Triggering Distribution is paid.
(13) In case any tender offer made by the Company or any of its
Subsidiaries for Common Stock shall expire and such tender offer (as
amended upon the expiration thereof) shall involve the payment of aggregate
consideration in an amount (determined as the sum of the aggregate amount
of cash consideration and the aggregate fair market value (as determined by
the Board of Directors, whose determination shall be conclusive evidence
thereof and which shall be evidenced by an Officers' Certificate delivered
to the Trustee thereof ) of any other consideration) that, together with
the aggregate amount of (A) any cash and the fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive evidence thereof and which shall be evidenced by an Officers'
Certificate delivered to the Trustee) of any other consideration payable in
respect of any other tender offers by the Company or any Subsidiary of the
Company for Common Stock consummated within the 12 months preceding the
date of the Expiration Date (as defined below) and in respect of which no
Conversion Rate adjustment pursuant to this Section 4.6 has been made and
(B) all cash distributions to all or substantially all holders of its
Common Stock made within the 12 months preceding the Expiration Date and in
respect of which no Conversion Rate adjustment pursuant to this Section 4.6
has been made, exceeds an amount equal to 10% of the product of the current
market price per share of Common Stock (as determined in accordance with
subsection (e) of this Section 4.6) as of the last date (the "Expiration
Date") tenders could have been made pursuant to such tender offer (as it
may be amended) (the last time at which such tenders could have been made
on the Expiration Date is hereinafter sometimes called the "Expiration
Time") multiplied by the number of shares of Common Stock outstanding
(including tendered shares but excluding any shares held in the treasury of
the Company) at the Expiration Time, then, immediately prior to the opening
of business on the day after the Expiration Date, the Conversion Rate shall
be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to close of
business on the Expiration Date by a fraction of which the numerator shall
be the sum of (x) the aggregate consideration (determined as aforesaid)
payable to stockholders based on the acceptance (up to any maximum
specified
26
<PAGE>
in the terms of the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares and excluding any shares held in the treasury of the
Company) at the Expiration Time and the current market price per share of
Common Stock (as determined in accordance with subsection (e) of this
Section 4.6) on the Trading Day next succeeding the Expiration Date, and
the denominator shall be the product of the number of shares of Common
Stock outstanding (including tendered shares but excluding any shares held
in the treasury of the Company) at the Expiration Time multiplied by the
current market price per share of the Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) on the Trading Day next
succeeding the Expiration Date, such increase to become effective
immediately prior to the opening of business on the day following the
Expiration Date. In the event that the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any or all such purchases or any
or all such purchases are rescinded, the Conversion Rate shall again be
adjusted to be the Conversion Rate which would have been in effect based
upon the number of shares actually purchased. If the application of this
Section 4.6(d)(2) to any tender offer would result in a decrease in the
Conversion Rate, no adjustment shall be made for such tender offer under
this Section 4.6(d)(2).
(14) For purposes of this Section 4.6(d), the term "tender
offer" shall mean and include both tender offers and exchange offers, all
references to "purchases" of shares in tender offers (and all similar
references) shall mean and include both the purchase of shares in tender
offers and the acquisition of shares pursuant to exchange offers, and all
references to "tendered shares" (and all similar references) shall mean and
include shares tendered in both tender offers and exchange offers.
(e) For the purpose of any computation under subsections (b), (c) and
(d) of this Section 4.6, the current market price per share of Common Stock
on any date shall be deemed to be the average of the daily closing prices
for the 30 consecutive Trading Days commencing 45 Trading Days before (i)
the Determination Date or the Expiration Date, as the case may be, with
respect to distributions or tender offers under subsection (d) of this
Section 4.6 or (ii) the record date with respect to distributions,
issuances or other events requiring such computation under subsection (b)
or (c) of this Section 4.6. The closing price for each day shall be the
last reported sales price or, in case no such reported sale takes place on
such date, the average of the reported closing bid and asked prices in
either case on the New York Stock Exchange (the "NYSE") or, if the Common
Stock is not listed or admitted to trading on the NYSE, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the last reported sales price of the Common
Stock as quoted on NASDAQ (the term "NASDAQ" shall include, without
limitation, the Nasdaq National Market) or, in case no reported sales takes
place, the average of the closing bid and asked prices as quoted on NASDAQ
or any comparable system or, if the Common Stock is not quoted on NASDAQ or
any comparable system, the closing sales price or, in case no reported sale
takes place, the average of the closing bid and asked prices, as furnished
by any two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose. If no such
prices are available, the current market price per share shall be the fair
value of a share of Common Stock as determined by the Board of Directors
(which shall be evidenced by an Officers' Certificate delivered to the
Trustee).
(f) In any case in which this Section 4.6 shall require that an
adjustment be made following a record date or a Determination Date or
Expiration Date, as the case may be, established for purposes of this
Section 4.6, the Company may elect to defer (but only until five Business
Days following the filing by the Company with the Trustee of the
certificate described in Section 4.9) issuing to the Holder of any Security
converted after such record date or Determination Date or Expiration Date
the shares of Common Stock and other capital stock of the Company issuable
upon such conversion over and above the shares of Common Stock and other
capital stock of the Company issuable upon such conversion only on the
basis of the Conversion Rate prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, the
27
<PAGE>
Company shall issue or cause its transfer agents to issue due bills or
other appropriate evidence prepared by the Company of the right to receive
such shares. If any distribution in respect of which an adjustment to the
Conversion Rate is required to be made as of the record date or
Determination Date or Expiration Date therefor is not thereafter made or
paid by the Company for any reason, the Conversion Rate shall be readjusted
to the Conversion Rate which would then be in effect if such record date
had not been fixed or such effective date or Determination Date or
Expiration Date had not occurred.
SECTION 4.7. No Adjustment.
-------------
No adjustment in the Conversion Rate shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Rate as last adjusted; provided, however, that any adjustments which
by reason of this Section 4.7 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article 4 shall be made to the nearest cent or to the nearest
1/1000th of a share, as the case may be.
No adjustment need be made for issuances of Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for a change in the
par value or a change to no par value of the Common Stock.
To the extent that the Securities become convertible into the right to
receive cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
SECTION 4.8. Adjustment for Tax Purposes.
---------------------------
The Company shall be entitled to make such reductions in the Conversion
Rate, in addition to those required by Section 4.6, as it in its discretion
shall determine to be advisable in order that any stock dividends, subdivisions
of shares, distributions of rights to purchase stock or securities or
distributions of securities convertible into or exchangeable for stock hereafter
made by the Company to its shareholders shall not be taxable.
SECTION 4.9. Notice of Adjustment.
--------------------
Whenever the Conversion Rate is adjusted, the Company shall promptly mail
to Securityholders a notice of the adjustment and file with the Trustee an
Officers' Certificate specifying the adjusted Conversion Rate, and briefly
stating the facts requiring the adjustment and the manner of computing it.
SECTION 4.10. Notice of Certain Transactions.
------------------------------
In the event that:
(15) the Company takes any action which would require an adjustment
in the Conversion Rate,
(16) the Company takes any action that requires a supplemental
indenture pursuant to Section 4.11, or
(17) there is a dissolution or liquidation of the Company,
the Company shall mail to Holders and file with the Trustee a notice stating the
proposed record or effective date, as the case may be. The Company shall mail
the notice at least fifteen days before such date; provided that no such notice
--------
shall be needed to be provided by the Company with respect to the Company's two-
for-one stock split payable on or about March 25, 1999 to holders of record of
the Company's Common Stock as of March 17, 1999. Failure to mail such notice or
any defect therein shall not affect the validity of any transaction referred to
in clause (1), (2) or (3) of this Section 4.10.
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SECTION 4.11. Effect of Reclassification, Consolidation, Merger or Sale on
------------------------------------------------------------
Conversion Privilege.
- --------------------
If any of the following shall occur, namely: (a) any reclassification or
change of shares of Common Stock issuable upon conversion of the Securities
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination); (b) any
consolidation or merger to which the Company is a party other than a merger in
which the Company is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination) in, outstanding shares of Common Stock; or (c) any
sale or conveyance of all or substantially all of the property and assets of the
Company to any person, then the Company, or such successor, purchasing or
transferee corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
execute and deliver to the Trustee a supplemental indenture providing that the
Holder of each Security then outstanding shall have the right to convert such
Security into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock deliverable upon conversion of such Security immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. Such
supplemental indenture shall provide for adjustments of the Conversion Rate
which shall be as nearly equivalent as may be practicable to the adjustments of
the Conversion Rate provided for in this Article 4. If, in the case of any such
consolidation, merger, sale or conveyance, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
include shares of stock or other securities and property of a person other than
the successor, purchasing or transferee corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then such supplemental indenture
shall also be executed by such other person and shall contain such additional
provisions to protect the interests of the Holders of the Securities as the
Board of Directors shall reasonably consider necessary by reason of the
foregoing. The provisions of this Section 4.11 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales or
conveyances.
In the event the Company shall execute a supplemental indenture pursuant to
this Section 4.11, the Company shall promptly file with the Trustee (x) an
Officers' Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or other securities or property (including cash) receivable
by Holders of the Securities upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance, any
adjustment to be made with respect thereto and that all conditions precedent
have been complied with and (y) an Opinion of Counsel that all conditions
precedent have been complied with, and shall promptly mail notice thereof to all
Holders.
SECTION 4.12. Trustee's Disclaimer.
--------------------
The Trustee shall have no duty to determine when an adjustment under this
Article 4 should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of that fact or the correctness of any
such adjustment, and shall be protected in relying upon, an Officers'
Certificate including the Officers' Certificate with respect thereto which the
Company is obligated to file with the Trustee pursuant to Section 4.9. The
Trustee makes no representation as to the validity or value of any securities or
assets issued upon conversion of Securities, and the Trustee shall not be
responsible for the Company's failure to comply with any provisions of this
Article 4.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 4.11, but may accept as conclusive evidence of the
correctness thereof, and shall be fully protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 4.11.
SECTION 4.13. Voluntary Increase.
------------------
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<PAGE>
The Company from time to time may increase the Conversion Rate by any
amount for any period of time if the period is at least 20 days or such longer
period as may be required by law and if the increase is irrevocable during the
period.
ARTICLE 5
SUBORDINATION
SECTION 5.1. Securities Subordinated to Senior Indebtedness.
----------------------------------------------
The Company covenants and agrees, and each Holder of Securities issued
hereunder by its acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article 5; and each
person holding any Security, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
The payment of all amounts on account of all Securities issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and junior in right of payment to the prior payment in full, in cash or other
payment satisfactory to holders of Senior Indebtedness, of all Senior
Indebtedness, whether outstanding at the date of this Indenture or thereafter
created, assumed or guaranteed.
SECTION 5.2. Securities Subordinated to Prior Payment of All Senior
------------------------------------------------------
Indebtedness on Dissolution, Liquidation, Reorganization, Etc., of
- ------------------------------------------------------------------
the Company.
- -----------
Upon the payment or distribution of the assets of the Company of any kind
or character, whether in cash, property or securities (including any collateral
at any time securing the Securities), to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company (whether voluntary or
involuntary, or in bankruptcy, insolvency, reorganization, liquidation,
receivership proceedings, or upon an assignment for the benefit of creditors, or
any other marshaling of the assets and liabilities of the Company, or in any
similar proceedings), then in such event:
(a) all Senior Indebtedness shall first be paid in full, in cash or
other payment satisfactory to holders of Senior Indebtedness, before any
payment is made with respect to Principal Amount, Issue Price, accrued
Original Issue Discount, accrued Additional Interest, if any, Redemption
Price, Repurchase Price, Change in Control Purchase Price and interest, if
any, on the Securities (collectively, the "Subordinated Security
Obligations");
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other person provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at
least to the extent provided in this Article 5, with respect to the
Securities, to the payment of all Senior Indebtedness) to which the Holders
or the Trustee on behalf of the Holders would be entitled except for the
provisions of this Article 5, including any such payment or distribution
which may be payable or deliverable by reason of the payment of another
debt of the Company being subordinated to the payment of the Securities,
shall be paid or delivered by any debtor, custodian or other person making
such payment or distribution, directly to the holders of the Senior
Indebtedness or their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, for application to payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay
all Senior Indebtedness in full, in cash or other payment satisfactory to
holders of Senior
30
<PAGE>
Indebtedness, after giving effect to any concurrent payment or distribution
to or for the benefit of the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing provisions of
this Section 5.2, any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other person provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at
least to the extent provided for in this Article 5, with respect to the
Securities, to the payment of all Senior Indebtedness), shall be received
by the Trustee or any Paying Agent or the Holders before all Senior
Indebtedness is paid in full, in cash or other payment satisfactory to
holders of Senior Indebtedness, such payment or distribution (subject to
the provisions of Sections 5.6 and 5.7) shall be held in trust for the
benefit of, and shall be immediately paid or delivered by the Trustee, such
Paying Agent or such Holders, as the case may be, to, the holders of Senior
Indebtedness remaining unpaid or unprovided for, or their representative or
representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any of such Senior Indebtedness have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, in cash or
other payment satisfactory to holders of Senior Indebtedness, after giving
effect to any concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company.
Upon any distribution of assets of the Company referred to in this Article
5, the Trustee and the Holders shall be entitled to rely conclusively upon any
order or decree by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceeding is pending, or
a certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 5.
SECTION 5.3. Holders to Be Subrogated to Right of Holders of Senior
------------------------------------------------------
Indebtedness.
- ------------
Subject to the prior payment in full, in cash or other payment satisfactory
to holders of Senior Indebtedness, of all Senior Indebtedness then due, the
Holders shall be subrogated to the rights of the holders of Senior Indebtedness
to receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness until the Principal Amount, Issue Price, accrued Original
Issue Discount, accrued Additional Interest, if any, Redemption Price,
Repurchase Price, Change in Control Purchase Price or interest, if any, on the
Securities shall be paid in full, and, for purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of assets,
whether in cash, property or securities, distributable to the holders of Senior
Indebtedness under the provisions hereof to which the Holders would be entitled
except for the provisions of this Article 5, and no payment pursuant to the
provisions of this Article 5 to the holders of Senior Indebtedness by the
Holders shall, as among the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders, be deemed to be a payment by the Company
to or on account of Senior Indebtedness, it being understood that the provisions
of this Article 5 are, and are intended, solely for the purpose of defining the
relative rights of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
SECTION 5.4. Obligations of the Company Unconditional.
----------------------------------------
Nothing contained in this Article 5 or elsewhere in this Indenture or in
any Security is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the
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obligation of the Company, which is absolute and unconditional, to pay to the
Holders, Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Additional Interest, if any, Redemption Price, Repurchase Price, Change in
Control Purchase Price or interest, if any, on the Securities, as and when the
same shall become due and payable in accordance with the terms of the Securities
and this Indenture, or affect the relative rights of the Holders and other
creditors of the Company other than the holders of Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon the happening
of an Event of Default under this Indenture, subject to the provisions of
Article 8, and the rights, if any, under this Article 5 of the holders of Senior
Indebtedness to receive assets, whether in cash, property or securities, of the
Company otherwise payable or deliverable to the Trustee or such Holder upon the
exercise of any such remedy.
SECTION 5.5. Company Not to Make Payment With Respect to Securities in
---------------------------------------------------------
Certain Circumstances.
- ---------------------
(a) Upon the happening of a default in payment (whether at maturity or at a
date fixed for prepayment or by acceleration or otherwise) of the principal of,
or premium, if any, or interest on any Senior Indebtedness, as such default is
defined under or in respect of such Senior Indebtedness or in any agreement
pursuant to which such Senior Indebtedness has been incurred, then, unless and
until the amount of such Senior Indebtedness then due shall have been paid in
full, in cash or other payment satisfactory to holders of Senior Indebtedness,
or such default shall have been cured or waived or shall have ceased to exist,
the Company shall not pay the Subordinated Security Obligations.
(b) Upon the happening of an event of default with respect to any Senior
Indebtedness (other than under circumstances when the terms of subsection (a) of
this Section 5.5 are applicable), as such event of default is defined under or
in respect of such Senior Indebtedness or in any agreement pursuant to which
such Senior Indebtedness has been incurred, permitting the holders thereof to
accelerate the maturity thereof, and upon written notice thereof given to the
Company and the Trustee by any one or more holders of such Senior Indebtedness
or their representative or representatives or the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have been issued (a "Default Notice"), then, unless and until such
event of default shall have been cured or waived or shall have ceased to exist,
the Company shall not pay the Subordinated Security Obligations; provided,
however, that the foregoing provisions of this sentence shall not prevent the
making of any such payment (which is not otherwise prohibited by subsection (a)
of this Section 5.5) for more than 180 days after the Default Notice shall have
been given unless the Senior Indebtedness in respect of which such event of
default exists has been declared due and payable in its entirety, in which case
no such payment may be made until such acceleration has been waived, rescinded
or annulled, or such Senior Indebtedness shall have been paid in full in cash or
other payment satisfactory to holders of Senior Indebtedness. Notwithstanding
the foregoing, not more than one Default Notice shall be given with respect to
the same issue of Senior Indebtedness within a period of 360 consecutive days,
and no event of default which existed or was continuing on the date of any
Default Notice and was known to the holders of such issue of Senior Indebtedness
shall be made the basis for the giving of a subsequent Default Notice by the
holders of such issue of Senior Indebtedness.
(c) In the event that, notwithstanding the foregoing provisions of this
Section 5.5, the Company shall pay the Subordinated Security Obligations and
such payment shall be received by the Trustee, any Holder or any Paying Agent
(or, if the Company is acting as its own Paying Agent, money for any such
payment shall be segregated and held in trust), after the happening of a default
or event of default, as the case may be, under any Senior Indebtedness of the
type specified in subsections (a) and (b) of this Section 5.5, then, unless and
until the amount of such Senior Indebtedness then due shall have been paid in
full, in cash or other payment satisfactory to holders of Senior Indebtedness,
or such default or event of default, as the case may be, shall have been cured
or waived or shall have ceased to exist or any such acceleration referred to in
the proviso to subsection (b) of this Section 5.5 shall have been waived,
rescinded or annulled, such payment (subject, in each case, to the provisions of
Sections 5.6 and 5.7 and the proviso contained in subsection (b) of this Section
5.5) shall be held in trust for the benefit of, and shall be immediately paid
over to, the holders of Senior Indebtedness or their representative or
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representatives or the trustee or trustees under any indenture under which any
instruments evidencing any of the Senior Indebtedness may have been issued
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness held or represented by each, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full, in cash or other payment satisfactory to holders of
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of Senior Indebtedness.
SECTION 5.6. 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 5 or any other provision of this Indenture, the Trustee shall not at any
time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, unless and until the
Trustee shall have received written notice thereof from the Company or from the
holder or holders of Senior Indebtedness or from their representative or
representatives or from the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness have been
issued; and, prior to the receipt of any such written notice, the Trustee shall
be entitled to assume conclusively that such facts do not exist.
The Trustee shall be entitled to rely conclusively on the delivery to it of
a written notice by a person representing himself or herself to be a holder of
Senior Indebtedness (or a representative of such holder or the trustee under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness have been issued) to establish that such notice has been given by a
holder of Senior Indebtedness or a representative of any such holder. 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 5, 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
each person under this Article 5, 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.
SECTION 5.7. Application by Trustee of Money Deposited With It.
-------------------------------------------------
Money deposited in trust with the Trustee or any Paying Agent pursuant to
Section 10.1 and not in violation of this Article 5 shall be for the sole
benefit of Holders and shall thereafter not be subject to the subordination
provisions of this Article 5. Otherwise, any deposit of money by the Company
with the Trustee or any Paying Agent (whether or not in trust) for the payment
of the Subordinated Security Obligations shall be subject to the provisions of
Sections 5.1, 5.2, 5.3 and 5.5; except that, if two Business Days prior to the
date on which by the terms of this Indenture any such money may become payable
for any purpose (including, without limitation, the payment of the Subordinated
Security Obligations) the Trustee shall not have received with respect to such
money the notice provided for in Section 5.6, then the Trustee or any Paying
Agent shall have full power and authority to receive such money and to apply
such money to the purpose for which it was received, and shall not be affected
by any notice to the contrary which may be received by it on or after such date.
This Section 5.7 shall be construed solely for the benefit of the Trustee and
the Paying Agent and shall not otherwise affect the rights that holders of
Senior Indebtedness may have to recover any such payments from the Holders in
accordance with the provisions of this Article 5.
SECTION 5.8. Subordination Rights Not Impaired by Acts or Omissions of
---------------------------------------------------------
Company or Holders of Senior Indebtedness.
- -----------------------------------------
No right of any present or future holders 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
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Company or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof which any such holder may
have or be otherwise charged with. The holders of any Senior Indebtedness may
extend, renew, modify or amend the terms of such Senior Indebtedness or any
security therefor and release, sell or exchange such security and otherwise deal
freely with the Company, all without affecting the liabilities and obligations
of the parties to this Indenture or the Holders.
SECTION 5.9. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by its acceptance thereof authorizes and directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article 5 and appoints the
Trustee its attorney-in-fact for any and all such purposes.
SECTION 5.10. Right of Trustee to Hold Senior Indebtedness.
--------------------------------------------
The Trustee, in its individual capacity, shall be entitled to all of the
rights set forth in this Article 5 in respect of any Senior Indebtedness at any
time held by it to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee of any
of its rights as such holder. Nothing in this Article shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 9.7.
SECTION 5.11. Article 5 Not to Prevent Events of Default.
------------------------------------------
The failure to make a payment on account of the Subordinated Security
Obligations by reason of any provision in this Article 5 shall not be construed
as preventing the occurrence of a default or an Event of Default.
SECTION 5.12. No Fiduciary Duty Created to Holders of Senior
----------------------------------------------
Indebtedness.
- ------------
Notwithstanding any other provision in this Article 5, the Trustee shall
not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness by
virtue of the provisions of this Article 5.
SECTION 5.13. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 5 shall in such case (unless the context shall otherwise
require) 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 5 in addition to or in place of the Trustee; provided, however,
that Sections 5.6, 5.10 and 5.12 shall not apply to the Company if it acts as
Paying Agent.
SECTION 5.14. Certain Conversions and Repurchases Deemed Payment. For
--------------------------------------------------
the purposes of this Article 5 only, (1) the issuance and delivery of junior
securities upon conversion of Securities in accordance with Article 4 or upon
repurchase of Securities by the Company on a Repurchase Date in accordance with
Article 13 shall not be deemed to constitute a payment or distribution on
account of the Principal Amount, Issue Price, accrued Original Issue Discount,
accrued Additional Interest, if any, Redemption Price, Repurchase Price, Change
in Control Purchase Price or interest, if any, on the Securities or on account
of the purchase or other acquisition of Securities, and (2) the payment,
issuance or delivery of cash (including cash paid for fractional shares upon
conversion of a Security or repurchase of a Security on a Repurchase Date),
property or securities (other than junior securities) upon conversion of a
Security or repurchase of a Security by the Company on a Repurchase Date shall
be deemed to constitute payment on account of the principal of such Security.
For the purposes of this Section, the term "junior securities" means (a) shares
of any stock of any class of the Company and (b) securities of the Company which
are subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this
34
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Indenture or in the Securities is intended to or shall impair, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of the Securities, the right, which is absolute and unconditional, of the Holder
of any Security to convert such Security in accordance with Article 4.
ARTICLE 6
COVENANTS
SECTION 6.1. Payment of Securities.
---------------------
The Company shall promptly make all payments in respect of the Securities
on the dates and in the manner provided in the Securities or pursuant to this
Indenture. The Principal Amount, Restated Principal Amount, Issue Price plus
accrued Original Issue Discount, Redemption Price, Repurchase Price, Change in
Control Purchase Price and interest, if any, shall be considered paid on the
applicable date due if on such date (or, in the case of a Repurchase Price, on
the Business Day following the applicable Repurchase Date) the Trustee or the
Paying Agent holds, in accordance with this Indenture, money or securities, if
permitted hereunder, sufficient to pay all such amounts then due.
The Company shall, to the extent permitted by law, pay interest on overdue
amounts at the rate per annum set forth in paragraph 1 of the Securities,
compounded semiannually, which interest shall accrue from the date such overdue
amount was originally due to the date payment of such amount, including interest
thereon, has been made or duly provided for. All such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount.
SECTION 6.2. SEC Reports; Rule 144A Information.
----------------------------------
The Company shall file with the Trustee, within 15 days after it files such
annual and quarterly reports, information, documents and other reports with the
SEC, copies of its annual report and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the
Company is at any time no longer subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, it shall continue to provide the
Trustee with reports containing substantially the same information as would have
been required to be filed with the SEC had the Company continued to have been
subject to such reporting requirements. In such event, such reports shall be
provided at the times the Company would have been required to provide reports
had it continued to have been subject to such reporting requirements. The
Company also shall comply with the other provisions of TIA Section 314(a).
If at any time while any of the Securities are "restricted securities"
within the meaning of Rule 144, the Company is no longer subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will prepare and will furnish to any Holder, any beneficial owner of Securities
and any prospective purchaser of Securities designated by a Holder or a
beneficial owner of Securities, promptly upon request, the information required
pursuant to Rule 144A(d)(4) (or any successor thereto) under the Securities Act
in connection with the offer, sale or transfer of Securities.
SECTION 6.3. Compliance Certificates.
-----------------------
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending December
31, 1999), an Officers' Certificate as to the signers' knowledge of the
Company's compliance with all conditions and covenants on its part contained in
this Indenture and stating whether or not each signer knows of any default or
Event of Default. If such signer knows of such a default or Event of Default,
the Officers' Certificate shall describe the default or Event of Default and the
efforts to remedy the
35
<PAGE>
same. For the purposes of this Section 6.3, compliance shall be determined
without regard to any grace period or requirement of notice provided pursuant to
the terms of this Indenture.
SECTION 6.4. Further Instruments and Acts.
----------------------------
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
SECTION 6.5. Maintenance of Corporate Existence.
----------------------------------
Subject to Article 7, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights (charter and statutory) and franchises, and the existence, rights
(charter and statutory) and franchises of its Subsidiaries; provided, however,
that the Company will not be required to preserve any such right or franchise or
the existence of any Subsidiary if the Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the outstanding Securities.
ARTICLE 7
SUCCESSOR CORPORATION
SECTION 7.1. When Company May Merge, Etc.
---------------------------
The Company shall not consolidate with or merge with or into any other
corporation, or sell, lease, convey, assign or otherwise transfer all or
substantially all of its property and assets to any other corporation unless:
(a) the resulting or surviving corporation or successor corporation
(if other than the Company) is a corporation organized and existing under
the laws of the United States of America, any State thereof or the District
of Columbia, and expressly assumes, by supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all
obligations of the Company under the Securities and the Indenture,
including the due and punctual payment of the Principal Amount, Issue
Price, accrued Original Issue Discount, accrued Additional Interest, if
any, Redemption Price, Repurchase Price, Change in Control Purchase Price
or interest, if any, on the Securities, and the due and punctual
performance and observance of all other covenants, agreements and
conditions contained in this Indenture and the Securities to be performed
or observed by the Company (including, without limitation, the obligations
of the Company under Article 4 hereof);
(b) immediately after giving effect to such transaction, no default or
Event of Default shall have occurred and be continuing; and
(c) the Company shall deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each of which shall comply with Section 12.4 and
shall state that such transaction and any such supplemental indenture comply
with this Article 7 and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 7.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any sale, lease, conveyance,
assignment or other transfer of all or substantially all of the property and
assets of the Company in accordance with Section 7.1, the successor corporation
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which such sale, lease, conveyance, assignment or other
transfer is made shall succeed to, and be substituted for, and may
36
<PAGE>
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation had been named as the Company
herein, and the predecessor corporation (except in the case of a lease) shall be
released from all of its obligations under this Indenture and the Securities.
ARTICLE 8
DEFAULT AND REMEDIES
SECTION 8.1. Events of Default.
-----------------
An "Event of Default" shall occur if:
(18) after exercise of the Company's option pursuant to Section 14.1
hereof following a Tax Event, the Company defaults in the payment of
interest upon any Security when such interest becomes due and payable, and
such default continues for a period of 30 days;
(19) the Company defaults in the payment of the Principal Amount (or,
if the Securities have been converted to semiannual coupon debentures
following a Tax Event pursuant to Article 14, the Restated Principal
Amount), Issue Price plus accrued Original Issue Discount, Redemption
Price, Repurchase Price, Change in Control Purchase Price or Additional
Interest on any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration, when due for purchase
by the Company or otherwise;
(20) failure by the Company to deliver shares of Common Stock
(including cash in lieu of fractional shares) required to be delivered
following conversion of a Security in accordance with Article 4 of this
Indenture and continuance of such default for five (5) days; or
(21) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clauses (1),
(2) and (3) above) and such failure continues for 60 days after receipt by
the Company of a Notice of Default;
(22) default under any bond, debenture note or other evidence of
indebtedness for money borrowed of the Company or any Significant
Subsidiary having an outstanding principal amount in excess of $10,000,000,
which default shall have resulted in such indebtedness being accelerated,
without such indebtedness being discharged or such acceleration being
rescinded or annulled within 20 days after receipt of notice thereof by the
Company from the Trustee or the Company and the Trustee from the Holders of
not less than 25% in aggregate Principal Amount of Securities then
outstanding (unless such default has been cured or waived);
(23) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(C) consents to the appointment of a Bankruptcy Custodian of
it or for all or substantially all of its property; or
(D) makes a general assignment for the benefit of its
creditors; or
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(24) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case or proceeding;
(B) appoints a Bankruptcy Custodian of the Company or any
Significant Subsidiary or for all or substantially all of
the property of the Company or any Significant
Subsidiary; or
(C) orders the liquidation of the Company or any Significant
Subsidiary;
and in each case the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11 of the United States Code (or any
successor thereto) or any similar federal or state law for the relief of
debtors. The term "Bankruptcy Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
A default under clause (4) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
Principal Amount of the Securities then outstanding notify the Company and the
Trustee in writing, of the default, and the Company does not cure the default
within 60 days after receipt of such notice. The notice given pursuant to this
Section 8.1 must specify the default, demand that it be remedied and state that
the notice is a "Notice of Default." When any default under this Section 8.1 is
cured, it ceases.
The Trustee shall not be charged with knowledge of any Event of Default
unless written notice thereof shall have been given to a Trust Officer at the
Corporate Trust Office of the Trustee by the Company, a Paying Agent, any Holder
or any agent of any Holder.
SECTION 8.2. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in clause
(6) or (7) of Section 8.1) occurs and is continuing, the Trustee may, by notice
to the Company, or the Holders of at least 25% in aggregate Principal Amount of
the Securities then outstanding may, by written notice to the Company and the
Trustee, declare all unpaid Issue Price plus accrued Original Issue Discount to
the date of acceleration on the Securities then outstanding (if not then due and
payable) to be due and payable upon any such declaration, and the same shall
become and be immediately due and payable. If an Event of Default specified in
clause (6) or (7) of Section 8.1 occurs, all unpaid Issue Price plus accrued
Original Issue Discount on the Securities then outstanding shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. The Holders of a majority in
aggregate Principal Amount of the Securities at the time outstanding, by written
notice to the Trustee (and without notice to any other Securityholder) may
rescind an acceleration and its consequences if the recission would not conflict
with any judgement or decree and if all existing Events of Default have been
cured or waived except nonpayment of the Issue Price plus accrued Original Issue
Discount that have become due solely as a result of acceleration and if all
amounts due to the Trustee under Section 9.7 have been paid. No such rescission
shall affect any subsequent default of impair any right consequent thereto.
SECTION 8.3. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may, but shall
not be obligated to, pursue any available remedy by proceeding at law or in
equity to collect the payment of the Issue Price plus accrued Original Issue
Discount on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 8.4. Waiver of Defaults and Events of Default.
----------------------------------------
The Holders of a majority in Principal Amount of the Securities then
outstanding by notice to the Trustee may waive an existing default or Event of
Default and its consequence, except (i) a default or Event of Default described
in Section 8.1(1) or (2); (ii) any default or Event of Default in respect of any
provision of this Indenture or the Securities which under Section 11.2 cannot be
modified or amended without the consent of the Holder of each Security affected;
or (iii) any default or Event of Default which constitutes a failure to convert
any Security in accordance with the terms of Article 4. When a default or Event
of Default is waived, it is cured and ceases. This Section 8.4 shall be in lieu
of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly
excluded from this Indenture, as permitted by the TIA.
SECTION 8.5. Control by Majority.
-------------------
The Holders of a majority in aggregate Principal Amount of the Securities
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture or that the Trustee determines in good
faith is unduly prejudicial to the rights of other Securityholders or would
involve the Trustee in personal liability unless the Trustee is offered
indemnity satisfactory to it. This Section 8.5 shall be in lieu of Section
316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 8.6. Limitations on Suits.
--------------------
A Holder may not pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in Principal Amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer satisfactory indemnity satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) the Trustee shall have not received during such 60-day period a
contrary direction from the Holders of a majority in Principal Amount of
the Securities then outstanding.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 8.7. Rights of Holders to Receive Payment and to Convert.
---------------------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of the Principal Amount (or if the
Securities have been converted to semiannual coupon debentures
39
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following a Tax Event pursuant to Article 14, the Restated Principal Amount),
Issue Price plus accrued Original Issue Discount, Redemption Price, Repurchase
Price, Change in Control Purchase Price or interest, if any, on the Security, on
or after the respective due dates expressed in the Security and this Indenture,
to convert such Security in accordance with Article 4, and to bring suit for the
enforcement of any such payment on or after such respective dates or the right
to convert, is absolute and unconditional and shall not be impaired or affected
without the consent of the Holder.
SECTION 8.8. Collection Suit by Trustee.
--------------------------
If an Event of Default described in Section 8.1(1) or 8.1(2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount owing with respect to
the Securities and the amounts provided for in Section 9.1.
SECTION 8.9. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the Principal Amount, Issue
Price plus accrued Original Issue Discount, Redemption Price, Repurchase Price,
Change in Control Purchase Price, Additional Interest, if any, or interest, if
any, in respect of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of any such amount)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of the Principal
Amount, Issue Price plus accrued Original Issue Discount, Redemption Price,
Repurchase Price, Change in Control Purchase Price, Additional Interest, if
any, or interest, if any, and to file such other papers or documents as may
be deemed necessary to advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, indemnification,
expenses, disbursements and advances of the Trustee, its agents and counsel
or any other amounts due the Trustee under Section 9.7) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, indemnification,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 9.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 8.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 8, it shall pay
out the money in the following order:
FIRST: to the Trustee for amounts due under Section 9.7;
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SECOND: to the holders of Senior Indebtedness to the extent required
by Article 5;
THIRD: to Holders for amounts due and unpaid on the Securities for
Principal Amount, Issue Price plus accrued Original Issue
Discount, Redemption Price, Repurchase Price, Change in
Control Purchase Price, Additional Interest, if any, or
interest, if any, ratably, without preference or priority of
any kind, according to the amounts due and payable on the
Securities; and
FOURTH: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 8.10.
SECTION 8.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 8.11
does not apply to a suit made by the Trustee, a suit by a Holder pursuant to
Section 8.7, or a suit by Holders of more than 10% in Principal Amount of the
Securities then outstanding. This Section 8.11 shall be in lieu of Section
315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this
Indenture, as permitted by the TIA.
SECTION 8.12. Waiver of Usury, 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 or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying Principal Amount, Issue Price plus
accrued Original Issue Discount, Redemption Price, Repurchase Price, Change in
Control Purchase Price or Additional Interest, if any, in respect of Securities,
or any interest on such amounts, as contemplated herein, or which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such 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 9
TRUSTEE
SECTION 9.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties as are specifically set
forth in this Indenture and no others; and
41
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine any certificates and opinions which by any
provision hereof are specifically required to be delivered to the Trustee
to determine whether or not they conform to the requirements of this
Indenture. This Section 9.1 shall be in lieu of Section 315(a) of the TIA
and such Section 315(a) is hereby expressly excluded from this Indenture,
as permitted by the TIA.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) this paragraph (c) does not limit the effect of subsection (b) of
this Section 9.1;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.5.
Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and
315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the
TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1.
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 9.2. Rights of Trustee.
-----------------
Subject to its duties and responsibilities under the TIA:
(1) The Trustee may rely conclusively on any document believed by it
to be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance
on such Certificate or Opinion.
(3) The Trustee may act through its agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
(4) Subject to Section 7.1(c), the Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel selected by it and any advice
or Opinion of Counsel shall be full and complete authorization and
protection in respect of any such action taken or suffered or omitted by it
hereunder in good faith and in accordance with the advice or Opinion of
Counsel.
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(6) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.
SECTION 9.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or an Affiliate of
the Company with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee must comply with
Sections 9.10 and 9.11.
SECTION 9.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Indenture or the Securities other than its certificate of
authentication.
SECTION 9.5. Notice of Default or Events of Default.
--------------------------------------
If a default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Securityholder notice of
the default or Event of Default within 90 days after it occurs unless such
default or Event of Default has been cured or waived before the giving of such
notice. Except in the case of a default or an Event of Default described in
Section 8.1(1) or (2), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding notice
is in the interests of Securityholders. The second sentence of this Section 9.5
shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is
hereby expressly excluded from this Indenture, as permitted by the TIA.
SECTION 9.6. Reports by Trustee to Holders.
-----------------------------
If such report is required by TIA Section 313, within 60 days after each
May 1, beginning with the May 1 following the date of this Indenture, the
Trustee shall mail to each Securityholder a brief report dated as of such May 1
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b)(2) and (c).
A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Securities are listed. The Company shall notify the Trustee
whenever the Securities become listed on any stock exchange or listed or
admitted to trading on any quotation system and any changes in the stock
exchanges or quotation systems on which the Securities are listed or admitted to
trading.
SECTION 9.7. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation (as agreed to from time to time by the Company and the Trustee) for
its services (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust). The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it, except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith. Such expenses
may include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee (which for purposes of this Section
9.7 shall include its officers, directors, employees and agents) for, and hold
it harmless against, any loss, liability or expense (including
43
<PAGE>
reasonable legal fees and expenses) incurred by it in connection with its duties
under this Indenture or any action or failure to act as authorized or within the
discretion or rights or powers conferred upon the Trustee hereunder including
the reasonable costs and expenses of the Trustee and its counsel in defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Trustee shall notify
the Company promptly of any claim asserted against the Trustee for which it may
seek indemnity, although the failure of the Trustee to give such notice shall
not prejudice any of its indemnification rights hereunder unless the Company is
materially adversely affected by such delay. The Company need not pay for any
settlement without its written consent, which shall not be unreasonably
withheld.
The Company need not reimburse the Trustee for any expense or indemnify it
against any loss or liability incurred by it resulting from its gross negligence
or bad faith.
To secure the Company's payment obligations in this Section 9.7, the
Trustee shall have a senior claim to which the Securities are hereby made
subordinate on all money or property held or collected by the Trustee, except
such money or property held in trust to pay the Principal Amount, Issue Price
plus accrued Original Issue Discount, Redemption Price, Repurchase Price, Change
in Control Purchase Price, Additional Interest, if any, or interest, if any, on
the Securities. The obligations of the Company under this Section 9.7 shall
survive the discharge of this Indenture or the resignation or removal of the
Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (6) or (7) of Section 8.1 occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 9.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company; provided, however, no
such resignation shall be effective until a successor Trustee has accepted its
appointment pursuant to this Section 9.8. The Holders of a majority in
Principal Amount of the Securities then outstanding may remove the Trustee by so
notifying the Trustee and may, with the Company's written consent, appoint a
successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 9.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly, by resolution of its
Board of Directors, appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company satisfactory in form and substance to
the retiring Trustee and the Company. Thereupon the resignation or removal of
the retiring Trustee shall become effect, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to the Securityholders.
The retiring Trustee shall promptly transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided for in Section 9.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount of the Securities at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee fails to comply with Section 9.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
SECTION 9.9. Successor Trustee by Merger, Etc..
--------------------------------
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust assets to, another corporation, the
resulting, surviving or transferee corporation, without any further act, shall
be the successor Trustee, provided such transferee corporation shall qualify and
be eligible under Section 9.10. Such successor Trustee shall promptly mail
notice of its succession to the Company and each Holder.
SECTION 9.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall always satisfy the requirements of TIA Sections 310(a)(1)
and 310(b). The Trustee (or its parent holding company) shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. Nothing herein shall prevent the Trustee
from filing with the SEC the application referred to in the penultimate
paragraph of TIA Section 310(b).
SECTION 9.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 10
DISCHARGE OF INDENTURE
SECTION 10.1. Discharge of Liability on Securities. When (i) the
------------------------------------
Company delivers to the Trustee or any Paying Agent all outstanding Securities
(other than Securities replaced pursuant to Section 2.7) for cancellation or
(ii) all outstanding Securities have become due and payable and the Company
deposits with the Trustee or any Paying Agent cash or, if expressly permitted by
the terms of the Securities, Common Stock sufficient to pay all amounts due and
owing on all outstanding Securities (other than Securities replaced pursuant to
Section 2.7), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Section 9.7,
cease to be of further effect. The Trustee shall join in the execution of a
document prepared by the Company acknowledging satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers' Certificate
and Opinion of Counsel and at the cost and expense of the Company.
SECTION 10.2. Repayment to the Company. The Trustee and the Paying
------------------------
Agent shall return to the Company upon written request any money or securities
held by them for the payment of any amount with respect to the Securities that
remains unclaimed for two years, subject to applicable unclaimed property law.
After return to the Company, Holders entitled to the money or securities must
look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person and the Trustee and the Paying
Agent shall have no further liability to the Securityholders with respect to
such money or securities for that period commencing after the return thereof.
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ARTICLE 11
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.1. Without Consent of Holders.
--------------------------
The Company and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to comply with Sections 4.11 and 7.1;
(2) to cure any ambiguity, defect or inconsistency;
(3) to make any other change that does not adversely affect the
rights of any Securityholder;
(4) to comply with the provisions of the TIA; or
(5) to appoint a successor Trustee.
SECTION 11.2. With Consent of Holders.
-----------------------
The Company and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Holders of at least a majority in
aggregate Principal Amount of the Securities then outstanding. The Holders of
at least a majority in aggregate Principal Amount of the Securities then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities without notice to any
Securityholder. However, notwithstanding the foregoing but subject to Section
11.4, without the written consent of each Securityholder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 8.4, may not:
(1) reduce the percentage of the aggregate Principal Amount of the
outstanding Securities whose Holders must consent to an amendment,
supplement or waiver;
(2) make any change in the manner or rate of accrual or payment (if
applicable) of Original Issue Discount, reduce the rate of interest
referred to in paragraph 1 of the Securities, reduce the rate of interest
referred to in Section 14.1 upon the occurrence of a Tax Event, or extend
the time for payment of Original Issue Discount or interest, if any, on any
Security;
(3) reduce the Principal Amount, Restated Principal Amount, Issue
Price, Repurchase Price or Change in Control Purchase Price or extend the
Stated Maturity of any Security.
(4) change the definition of "Change in Control" or "Change in Control
Purchase Date" applicable to any Security or alter any of the other Change
in Control provisions or any of the redemption provisions in a manner
adverse to the Holder of any Security;
(5) alter the conversion or purchase provisions with respect to any
Security in a manner adverse to the Holder thereof;
(6) make any changes in Section 8.4 or in this Section 11.2, except to
increase any percentage in aggregate Principal Amount of outstanding
Securities required for any amendment, supplement or waiver;
(7) modify any of the subordination provisions in Article 5 of this
Indenture in a manner adverse to the Holders of the Securities;
(8) make any Security payable in money other than that stated in the
Security; or
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(9) impair the right to institute suit for the enforcement of payment
with respect to, or conversion of, the Securities.
It shall not be necessary for the consent of the Holders under this Section
11.2 to approve the particular form of any proposed amendment but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 11.2 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amendment.
An amendment under this Section 11.2 or under Section 11.1 may not make any
change that adversely affects the rights under Article 5 of any holder of an
issue of Senior Indebtedness unless the holders of that issue, pursuant to its
terms, consent to the change.
SECTION 11.3. Compliance With Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as in effect at the date of such amendment or supplement.
SECTION 11.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment or other action by Holders becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent, waiver or
action is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent, waiver or action as to its Security or portion of
a Security if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver or action becomes effective.
After an amendment, waiver or action becomes effective, it shall bind every
Securityholder, unless it makes a change described in any of clauses (1) through
(9) of Section 11.2. In that case the amendment, supplement or waiver shall
bind each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security.
SECTION 11.5. Notation on or Exchange of Securities.
-------------------------------------
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 notification in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for outstanding Securities.
SECTION 11.6. Trustee to Sign Supplemental Indentures.
---------------------------------------
The Trustee shall sign any supplemental indenture authorized pursuant to
this Article 11 if the amendment contained therein does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign such supplemental indenture. In signing such
supplemental indenture the Trustee shall be entitled to receive, and (subject to
Section 9.1) shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that such amendment is authorized or permitted
by this Indenture.
SECTION 11.7. Effect of Supplemental Indentures.
---------------------------------
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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.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 to 317, inclusive, of the TIA through
operation of Section 318(c) thereof, such imposed duties shall control.
SECTION 12.2. Notices.
-------
Any notice, request or communication shall be given in writing and
delivered in person or mailed by first-class mail, postage prepaid, addressed as
follows:
If to the Company:
Citrix Systems, Inc.
6400 NW 6th Way
Fort Lauderdale, Florida 33309
Attention: Investor Relations
If to the Trustee:
State Street Bank and Trust Company
2 International Place
4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Department (Citrix Systems, Inc.--Zero
Coupon Convertible Subordinated Debentures Due March 22,
2019)
Such notices or communications shall be effective when received.
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed by
first-class mail to it at its address shown on the register kept by the
Registrar.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication to a Securityholder is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 12.3. Communications by Holders With Other Holders.
--------------------------------------------
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Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
SECTION 12.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
(a) Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent (including any covenants, compliance with
which constitutes a condition precedent), if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent (including any covenants, compliance
with which constitutes a condition precedent) have been complied with.
(b) Each Officers' Certificate and Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 12.5. Record Date for Vote or Consent of Securityholders.
--------------------------------------------------
The Company (or, in the event deposits have been made pursuant to Section
10.1, the Trustee) may set a record date for purposes of determining the
identity of Holders entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture, which record date shall be the
later of thirty (30) days prior to the first solicitation of such vote or
consent or the date of the most recent list of Securityholders furnished to the
Trustee pursuant to Section 2.5 prior to such solicitation. Notwithstanding the
provisions of Section 11.4, if a record date is fixed, those persons who were
Holders of Securities at the close of business on such record date (or their
duly designated proxies), and only those persons, shall be entitled to take such
action by vote or consent or to revoke any vote or consent previously given,
whether or not such persons continue to be Holders after such record date.
SECTION 12.6. Rules by Trustee, Paying Agent, Registrar and Conversion
--------------------------------------------------------
Agent.
- -----
The Trustee may make reasonable rules (not inconsistent with the terms of
this Indenture) for action by or at a meeting of Holders. Any Registrar, Paying
Agent or Conversion Agent may make reasonable rules for its functions.
49
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SECTION 12.7. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, Sunday or a day on which state or
federally chartered banking institutions in New York, New York or in the city
where the Corporate Trust Office is located are not required to be open. If a
payment date is a Legal Holiday, payment may be made on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 12.8. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
SECTION 12.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
--------------------------
All liability described in paragraph 20 of the Securities of any director,
officer, employee or shareholder, as such, of the Company is waived and
released.
SECTION 12.11. Successors.
----------
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
SECTION 12.12. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each signed
counterpart shall be deemed an original, but all of them together represent the
same agreement.
SECTION 12.13. Separability.
------------
In case any provisions 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 12.14. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
ARTICLE 13
REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER
SECTION 13.1. General.
-------
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Securities shall be purchased by the Company pursuant to paragraph 9 of the
Securities as of March 22, 2004, March 22, 2009 and March 22, 2014 (each, a
"Repurchase Date"), at the repurchase price specified therein (each, a
"Repurchase Price"), at the option of the Holder thereof, upon:
(1) delivery to the Paying Agent, by the Holder of a written notice of
purchase (a "Repurchase Notice") at any time from the opening of business on the
date that is 20 Business Days prior to a Repurchase Date until the close of
business on such Repurchase Date stating:
(A) the certificate number of the Security which the Holder will
deliver to be purchased,
(B) the portion of the Principal Amount of the Security which the
Holder will deliver to be purchased, which portion must be $1,000 or an integral
multiple thereof,
(C) that such Security shall be purchased as of the Repurchase Date
pursuant to the terms and conditions specified in paragraph 9 of the Securities
and in this Indenture, and
(D) in the event the Company elects, pursuant to Section 13.2, to pay
the Repurchase Price to be paid as of such Repurchase Date, in whole or in part,
in shares of Common Stock but such portion of the Repurchase Price shall
ultimately be payable to such Holder entirely in cash because any of the
conditions to payment of the Repurchase Price in Common Stock is not satisfied
prior to the close of business on such Repurchase Date, as set forth in Section
13.4, whether such Holder elects (i) to withdraw such Repurchase Notice as to
some or all of the Securities to which such Repurchase Notice relates (stating
the Principal Amount and certificate numbers of the Securities as to which such
withdrawal shall relate), or (ii) to receive cash in respect of the entire
Repurchase Price for all Securities (or portions thereof) to which such
Repurchase Notice relates; and
(2) delivery of such Security to the Paying Agent prior to, on or after the
Repurchase Date (together with all necessary endorsements) at the offices of the
Paying Agent, such delivery being a condition to receipt by the Holder of the
Repurchase Price therefor; provided, however, that such Repurchase Price shall
-------- -------
be so paid pursuant to this Article 13 only if the Security so delivered to the
Paying Agent shall conform in all respects to the description thereof in the
related Repurchase Notice.
If a Holder, in such Holder's Repurchase Notice and in any written
notice of withdrawal delivered by such Holder pursuant to the terms of Section
13.9, fails to indicate such Holder's choice with respect to the election set
forth in clause (D) of Section 13.1(1), such Holder shall be deemed to have
elected to receive cash in respect of the Repurchase Price for all Securities
subject to such Repurchase Notice in the circumstances set forth in such clause
(D).
The Company shall purchase from the Holder thereof, pursuant to this
Article 13, a portion of a Security if the Principal Amount of such portion is
$1,000 or an integral multiple of $1,000. Provisions of this Indenture that
apply to the purchase of all of a Security also apply to the purchase of such
portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Article 13 shall be consummated by the delivery of the consideration to be
received by the Holder promptly following the later of the Repurchase Date and
the time of delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Repurchase Notice contemplated by this Section 13.1
shall have the right to withdraw such Repurchase Notice at any time prior to the
close of business on the Repurchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 13.9.
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The Paying Agent shall promptly notify the Company of the receipt by
it of any Repurchase Notice or written notice of withdrawal thereof.
SECTION 13.2. Company's Right to Elect Manner of Payment of Repurchase
--------------------------------------------------------
Price
- -----
The Securities to be purchased pursuant to Section 13.1 may be paid for, at
the election of the Company, in cash or Common Stock, or in any combination of
cash and Common Stock, subject to the conditions set forth in Sections 13.3 and
13.4. The Company shall designate, in the Company Notice delivered pursuant to
Section 13.5, whether the Company will purchase the Securities for cash or
Common Stock, or, if a combination thereof, the percentages of the Repurchase
Price of Securities in respect of which it will pay in cash or Common Stock;
provided, that the Company will pay cash for fractional interests in Common
- --------
Stock. For purposes of determining the existence of potential fractional
interests, all Securities subject to purchase by the Company held by a Holder
shall be considered together (no matter how many separate certificates are to be
presented). Each Holder whose Securities are purchased pursuant to this Article
13 shall receive the same percentage of cash or Common Stock in payment of the
Repurchase Price for such Securities, except (i) as provided in Section 13.4
with regard to the payment of cash in lieu of fractional shares of Common Stock
and (ii) in the event that the Company is unable to purchase the Securities of a
Holder or Holders for Common Stock because any necessary qualifications or
registrations of the Common Stock under applicable state securities laws cannot
be obtained, the Company may purchase the Securities of such Holder or Holders
for cash. The Company may not change its election with respect to the
consideration (or components or percentages of components thereof) to be paid
once the Company has given its Company Notice to Securityholders except pursuant
to this Section 13.2 or pursuant to Section 13.4 in the event of a failure to
satisfy, prior to the close of business on the Repurchase Date, any condition to
the payment of the Repurchase Price, in whole or in part, in Common Stock.
At least three Business Days before the Company Notice Date, the
Company shall deliver an Officers' Certificate to the Trustee specifying:
(1) the manner of payment selected by the Company,
(2) the information required by Section 13.5,
(3) if the Company elects to pay the Repurchase Price, or a specified
percentage thereof, in Common Stock, that the conditions to such manner of
payment set forth in Section 13.4 have been or will be complied with, and
(4) whether the Company desires the Trustee to give the Company Notice
required by Section 13.5.
SECTION 13.3. Repurchase with Cash
--------------------
On each Repurchase Date, at the option of the Company, the Repurchase Price
of Securities in respect of which a Repurchase Notice pursuant to Section 13.1
has been given, or a specified percentage thereof, may be paid by the Company
with cash equal to the aggregate Repurchase Price of such Securities. If the
Company elects to purchase Securities with cash, the Company Notice, as provided
in Section 13.5, shall be sent to Holders (and to beneficial owners as required
by applicable law) not less than 20 Business Days prior to such Repurchase Date
(the "Company Notice Date").
SECTION 13.4. Payment by Issuance of Common Stock
-----------------------------------
On each Repurchase Date, at the option of the Company, the Repurchase Price
of Securities in respect of which a Repurchase Notice pursuant to Section 13.1
has been given, or a specified percentage thereof, may be paid by the Company by
the issuance of a number of shares of Common Stock equal to the quotient
obtained by dividing
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(i) the amount of cash to which the Securityholders would have been entitled had
the Company elected to pay all or such specified percentage, as the case may be,
of the Repurchase Price of such Securities in cash by (ii) the Market Price of a
share of Common Stock, subject to the next succeeding paragraph.
The Company will not issue a fractional share of Common Stock in
payment of the Repurchase Price. Instead the Company will pay cash for the
current market value of the fractional share. The current market value of a
fraction of a share shall be determined by multiplying the Market Price by such
fraction and rounding the product to the nearest whole cent. It is understood
that if a Holder elects to have more than one Security purchased, the number of
shares of Common Stock shall be based on the aggregate amount of Securities to
be purchased.
If the Company elects to purchase the Securities by the issuance of
shares of Common Stock, the Company Notice, as provided in Section 13.5, shall
be sent to the Holders (and to beneficial owners as required by applicable law)
not later than the Company Notice Date.
The Company's right to exercise its election to purchase the
Securities pursuant to Article 13 through the issuance of shares of Common Stock
shall be conditioned upon:
(1) the Company's not having given its Company Notice of an election
to pay entirely in cash and its giving of timely Company Notice of election to
purchase all or a specified percentage of the Securities with Common Stock as
provided herein;
(2) the registration of the shares of Common Stock to be issued in
respect of the payment of the Repurchase Price under the Securities Act or the
Exchange Act, in each case, if required;
(3) any necessary qualification or registration under applicable state
securities laws or the availability of an exemption from such qualification and
registration; and
(4) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the Common
Stock are in conformity with this Indenture and (B) the shares of Common Stock
to be issued by the Company in payment of the Repurchase Price in respect of
Securities have been duly authorized and, when issued and delivered pursuant to
the terms of this Indenture in payment of the Repurchase Price in respect of the
Securities, will be validly issued, fully paid and non-assessable and, to the
best of such counsel's knowledge, free from preemptive rights, and, in the case
of such Officers' Certificate, stating that conditions (1), (2) and (3) above
and the notice provision set forth in the second succeeding sentence below have
been satisfied and, in the case of such Opinion of Counsel, stating that
conditions (2) and (3) above have been satisfied.
Such Officers' Certificate shall also set forth the number of shares
of Common Stock to be issued for each $1,000 Principal Amount of Securities and
the Sale Price of a share of Common Stock on each Trading Day during the period
commencing on the first Trading Day of the period during which the Market Price
is calculated and ending on the applicable Repurchase Date. The Company may pay
the Repurchase Price (or any portion thereof) in Common Stock only if the
information necessary to calculate the Market Price is published in a daily
newspaper of national circulation. If the foregoing conditions are not
satisfied with respect to a Holder or Holders prior to the close of business on
the Repurchase Date and the Company has elected to purchase the Securities
pursuant to this Article 13 through the issuance of shares of Common Stock, the
Company shall pay the entire Repurchase Price of the Securities of such Holder
or Holders in cash.
The "Market Price" means the average of the Sale Price of the Common
Stock for the five Trading Day period ending on (if the third Business Day prior
to the applicable Repurchase Date is a Trading Day, or if not, then on the last
Trading Day prior to) the third Business Day prior to the applicable Repurchase
Date, appropriately adjusted to take into account the occurrence, during the
period commencing on the first of such Trading Days
53
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during such five Trading Day period and ending on such Repurchase Date, of any
event described in Sections 4.6(a), 4.6(b) or 4.6(c); subject, however, to the
conditions set forth in Section 4.7.
The "Sale Price" of the Common Stock on any date means the closing per
share sale price (or, if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and average ask prices) on such date as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is traded or, if the Common Stock is not listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers Automated Quotation System.
SECTION 13.5. Notice of Election
------------------
The Company's notice of election to purchase with cash or Common Stock or
any combination thereof shall be sent to the Holders (and to beneficial owners
as required by applicable law) in the manner provided in Section 12.2 at the
time specified in Section 13.3 or 13.4, as applicable (the "Company Notice").
Such Company Notice shall state the manner of payment elected and shall contain
the following information:
In the event the Company has elected to pay the Repurchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(1) state that each Holder will receive Common Stock with a Market
Price determined as of a specified date prior to the Repurchase Date equal to
such specified percentage of the Repurchase Price of the Securities held by such
Holder (except any cash amount to be paid in lieu of fractional shares);
(2) set forth the method of calculating the Market Price of the Common
Stock; and
(3) state that because the Market Price of Common Stock will be
determined prior to the Repurchase Date, Holders will bear the market risk with
respect to the value of the Common Stock to be received from the date such
Market Price is determined to the Repurchase Date.
In any case, each Company Notice shall include a form of Repurchase
Notice to be completed by a Securityholder and shall state:
(A) the Repurchase Price and the Conversion Rate;
(B) the name and address of the Paying Agent and the
Conversion Agent;
(C) that Securities as to which a Repurchase Notice has
been given may be converted pursuant to Article 4 hereof only if the applicable
Repurchase Notice has been withdrawn in accordance with the terms of this
Indenture;
(D) that Securities must be surrendered to the Paying Agent
to collect payment;
(E) that the Repurchase Price for any security as to which
a Repurchase Notice has been given and not withdrawn will be paid promptly
following the later of the Repurchase Date and the time of surrender of such
Security as described in (D);
(F) the procedures the Holder must follow to exercise
rights under Article 13 and a brief description of those rights;
(G) briefly, the conversion rights of the Securities; and
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(H) the procedures for withdrawing a Repurchase Notice
(including, without limitation, for a conditional withdrawal pursuant to the
terms of Section 13.1(1)(D) or Section 13.9.
At the Company's request, the Trustee shall give such
Company Notice in the Company's name and at the Company's expense; provided,
--------
however, that, in all cases, the text of such Company Notice shall be prepared
- -------
by the Company.
Upon determination of the actual number of shares of Common
Stock to be issued for each $1,000 Principal Amount of Securities, the Company
will publish such determination in a newspaper of national circulation.
SECTION 13.6. Covenants of the Company
------------------------
All shares of Common Stock delivered upon purchase of the Securities shall
be newly issued shares or treasury shares, shall be duly authorized, validly
issued, fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.
The Company shall use its best efforts to list or cause to have quoted any
shares of Common Stock to be issued to purchase Securities on each national
securities exchange or over-the-counter or other domestic market on which the
Common Stock is then listed or quoted.
SECTION 13.7. Procedure upon Repurchase
-------------------------
The Company shall deposit cash (in respect of a cash purchase under Section
13.3 or for fractional interests, as applicable) or shares of Common Stock, or a
combination thereof, as applicable, at the time and in the manner as provided in
Section 13.10, sufficient to pay the aggregate Repurchase Price of all
Securities to be purchased on the applicable Repurchase Date pursuant to this
Article 13. As soon as practicable after the Repurchase Date, the Company shall
deliver to each Holder entitled to receive Common Stock through the Paying
Agent, a certificate for the number of full shares of Common Stock issuable in
payment of the Repurchase Price and cash in lieu of any fractional interests.
The person in whose name the certificate for Common Stock is registered shall be
treated as a holder of record of shares of Common Stock on the Business Day
following the Repurchase Date. Subject to Section 13.4, no payment or
adjustment will be made for dividends on the Common Stock the record date for
which occurred on or prior to the Repurchase Date.
SECTION 13.8. Taxes
-----
If a Holder of a Security is paid in Common Stock, the Company shall pay
any documentary, stamp or similar issue or transfer tax due on such issue of
shares of Common Stock. However, the Holder shall pay any such tax which is due
because the Holder requests the shares of Common Stock to be issued in a name
other than the Holder's name. The Paying Agent may refuse to deliver the
certificates representing the Common Stock being issued in a name other than the
Holder's name until the Paying Agent receives a sum sufficient to pay any tax
which will be due because the shares of Common Stock are to be issued in a name
other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
SECTION 13.9. Effect of Repurchase Notice
---------------------------
Upon receipt by the Paying Agent of the Repurchase Notice, the Holder of
the Security in respect of which such Repurchase Notice was given shall (unless
such Repurchase Notice is withdrawn as specified in the following two
paragraphs) thereafter be entitled to receive solely the Repurchase Price with
respect to such Security. Such Repurchase Price shall be paid to such Holder,
subject to receipts of funds and/or securities by the Paying Agent, promptly
following the later of (x) the Repurchase Date with respect to such Security
(provided the conditions in
55
<PAGE>
Section 13.1 have been satisfied) and (y) the time of delivery of such Security
to the Paying Agent by the Holder thereof in the manner required by Section
13.1. Securities in respect of which a Repurchase Notice has been given by the
Holder thereof may not be converted pursuant to Article 4 hereof on or after the
date of the delivery of such Repurchase Notice unless such Repurchase Notice has
first been validly withdrawn as specified in the following two paragraphs.
A Repurchase Notice may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent in accordance with the
Repurchase Notice at any time prior to the close of business on the Repurchase
Date specifying:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the Principal Amount of the Security with respect to which such
notice of withdrawal is being submitted; and
(3) the Principal Amount, if any, of such Security which remains
subject to the original Repurchase Notice and which has been or will be
delivered for purchase by the Company.
A written notice of withdrawal of a Repurchase Notice may be in the
form set forth in the preceding paragraph or may be in the form of (i) a
conditional withdrawal contained in a Repurchase Notice pursuant to the terms of
Section 13.1(1)(D) or (ii) a conditional withdrawal containing the information
set forth in Section 13.1(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.
There shall be no purchase of any Securities pursuant to Article 13
(other than through the issuance of Common Stock in payment of the Repurchase
Price, including cash in lieu of fractional shares) if there has occurred (prior
to, on or after, as the case may be, the giving, by the Holders of such
Securities, of the required Repurchase Notice) and is continuing an Event of
Default (other than a default in the payment of the Repurchase Price with
respect to such Securities). The Paying Agent will promptly return to the
respective Holders thereof any Securities (x) with respect to which a Repurchase
Notice has been withdrawn in compliance with this Indenture, or (y) held by it
during the continuance of an Event of Default (other than a default in the
payment of the Repurchase Price with respect to such Securities) in which case,
upon such return, the Repurchase Notice with respect thereto shall be deemed to
have been withdrawn.
SECTION 13.10. Deposit of Repurchase Price
---------------------------
Prior to 11:00 a.m. (New York City time) on the Business Day following the
Repurchase Date the Company shall deposit with the Trustee or with the Paying
Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is
acting as the Paying Agent, shall segregate and hold in trust as provided in
Section 2.4) an amount of money (in immediately available funds if deposited on
such Business Day) or Common Stock, if permitted hereunder, sufficient to pay
the aggregate Repurchase Price of all of the Securities or portions thereof
which are to be purchased as of the Repurchase Date.
SECTION 13.11. Securities Repurchased in Part
------------------------------
Any Security which is to be purchased only in part shall be surrendered at
the office of the Paying Agent (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge, a new Security or Securities, of any authorized denomination as
requested by
56
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such Holder in aggregate Principal Amount equal to, and in exchange for, the
portion of the Principal Amount of the Security so surrendered which is not
purchased.
SECTION 13.12. to Comply with Securities Laws Upon Purchase of Securities
----------------------------------------------------------
In connection with any offer to purchase or purchase of Securities under
Article 13 hereof (provided that such offer or purchase constitutes an "issuer
tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes
any successor provision thereto) under the Exchange Act at the time of such
offer or purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1
under the Exchange Act, (ii) file the related Schedule 13E-4 (or any successor
schedule, form or report) under the Exchange Act, and (iii) otherwise comply
with all Federal and state securities laws so as to permit the rights and
obligations under Article 13 to be exercised in the time and in the manner
specified in Article 13.
SECTION 13.13. Repayment to the Company
------------------------
The Trustee and the Paying Agent shall return to the Company any cash or
shares of Common Stock that remain unclaimed as provided in paragraph 15 of the
Securities, together with interest or dividends, if any, thereon held by them
for the payment of the Repurchase Price; provided, however, that to the extent
-------- -------
that the aggregate amount of cash or shares of Common Stock deposited by the
Company pursuant to Section 13.10 exceeds the aggregate Repurchase Price of the
Securities or portions thereof which the Company is obligated to purchase as of
the Repurchase Date, then promptly after the Business Day following the
Repurchase Date the Trustee shall return any such excess to the Company together
with interest or dividends, if any, thereon.
ARTICLE 14
SPECIAL TAX EVENT CONVERSION
SECTION 14.1. Optional Conversion to Semiannual Coupon Debenture Upon Tax
-----------------------------------------------------------
Event
- -----
From and after (i) the date (the "Tax Event Date") of the occurrence of a
Tax Event and (ii) the date the Company exercises such option, whichever is
later (the "Option Exercise Date"), at the option of the Company, interest in
lieu of future Original Issue Discount shall accrue at the rate of 5.25% per
annum on a restated principal amount per $1,000 original Principal Amount (the
"Restated Principal Amount") equal to the Issue Price plus Original Issue
Discount accrued to the Option Exercise Date and shall be payable semiannually
on March 22 and September 22 of each year (each an "Interest Payment Date") to
holders of record at the close of business on March 7 or September 7 (each a
"Regular Record Date") immediately preceding such Interest Payment Date.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months and will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from the Option Exercise Date. Within 15
days of the occurrence of a Tax Event, the Company shall mail a written notice
of such Tax Event by first-class mail to the Trustee and within 15 days of its
exercise of such option the Company shall mail a written notice of the Option
Exercise Date by first-class mail to the Trustee and Holders of the Securities.
From and after the Option Exercise Date, (i) the Company shall be obligated to
pay at Stated Maturity, in lieu of the Principal Amount of a Security, the
Restated Principal Amount thereof and (ii) "Issue Price and accrued Original
Issue Discount," "Issue Price plus Original Issue Discount" or similar words, as
used herein, shall mean Restated Principal Amount plus accrued and unpaid
interest with respect to any Security. Securities authenticated and delivered
after the Option Exercise Date may, and shall if required by the Trustee, bear a
notation in a form approved by the Trustee as to the conversion of the
Securities to semiannual coupon debentures.
SECTION 14.2. Payment of Interest; Interest Rights Preserved
----------------------------------------------
(a) Interest on any Security that is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security is registered at the close of business on the
57
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Regular Record Date for such interest at the office or agency of the Company
maintained for such purpose. Each installment of interest on any Security shall
be paid in same-day funds by transfer to an account maintained by the payee
located inside the United States. In the case of a permanent Global Security,
interest payable on any Interest Payment Date will be paid to the Depositary,
with respect to that portion of such permanent Global Security held for its
account by Cede & Co. for the purpose of permitting such party to credit the
interest received by it in respect of such permanent Global Security to the
accounts of the beneficial owners thereof.
(b) Except as otherwise specified with respect to the Securities, any
interest on any Security that is payable, but is not punctually paid or duly
provided for, within 30 days following on any Interest Payment Date (herein
called "Defaulted Interest", which term shall include any accrued and unpaid
interest that has accrued on such defaulted amount in accordance with paragraph
1 of the Securities), shall forthwith cease to be payable to the registered
Holder thereof on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, as its election
in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities are registered
at the close of business on a Special Record Date (as defined below)
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 (which shall not be less
than 25 days after such notice is received by the Trustee), 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 on or 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 ("Special Record Date") 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 of Securities at his address as it appears on the list of
Securityholders maintained pursuant to Section 2.5 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 mailed as aforesaid, such Defaulted Interest shall be paid to
the persons in whose names the 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 on the
Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such 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 pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 2.6,
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
Original Issue Discount and interest, if any, accrued and unpaid, and to accrue,
which were carried by such other Security.
[SIGNATURE PAGE FOLLOWS]
58
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date and year first above written.
CITRIX SYSTEMS, INC.
By: /s/ Edward E. Iacobucci
-----------------------------------
Name: Edward E. Iacobucci
Title: Chairman of the Board
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ Donald E. Smith
-----------------------------------
Name: Donald E. Smith
Title: Vice President
59
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EXHIBIT A
[FORM OF FACE OF SECURITY]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT WITH RESPECT TO EACH $1,000 OF PRINCIPAL AMOUNT OF
THIS SECURITY IS $645.29, THE ISSUE DATE IS MARCH 22, 1999, AND THE YIELD TO
MATURITY IS 5.25%.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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 IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]/(1)/
[THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING
PERIOD UNDER RULE 144(k) (OR ANY SUCCESSOR PROVISION) UNDER THE SECURITIES ACT
WHICH IS APPLICABLE TO THIS SECURITY (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE
- --------------------
(1) These paragraphs should be included only if the Security is a Global
Security.
60
<PAGE>
UNDER THE SECURITIES ACT, (D) PURSUANT TO AND IN COMPLIANCE WITH RULE 144 UNDER
THE SECURITIES ACT, IF AVAILABLE, OR (E) PURSUANT TO AND IN COMPLIANCE WITH
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (SUBJECT TO THE CONDITION THAT, IF THIS SECURITY IS SOLD OR TRANSFERRED
PURSUANT TO THIS CLAUSE (E), THIS SECURITY MUST UPON SUCH SALE OR TRANSFER CEASE
TO BE A "RESTRICTED SECURITY" WITHIN THE MEANING OF RULE 144 (OR ANY SUCCESSOR
PROVISION) UNDER THE SECURITIES ACT), SUBJECT TO THE RIGHT OF THE COMPANY, ANY
REGISTRAR FOR THIS SECURITY AND THE TRUSTEE, PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE OR A REGISTRAR. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION
RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO
COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]/(1)/
- --------------------
(2) These paragraphs to be included only if the Security is a Transfer
Restricted Security.
61
<PAGE>
CITRIX SYSTEMS, INC.
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE DUE MARCH 22, 2019
No. R- CUSIP:_______________
Issue Date: March 22, 1999 Original Issue Discount: $645.29
Issue Price: $354.71 (for each $1,000 Principal Amount)
(for each $1,000 Principal Amount)
Citrix Systems, Inc., a Delaware corporation (the "Company"), which terms
shall include any successor corporation under the Indenture referred to on the
reverse hereof), promises to pay to , or registered assigns, the
-----------
Principal Amount of Dollars ($ ) on March 22, 2019
-------------- --------------
[or such greater or lesser amount as is indicated on the Schedule of Exchanges
of Securities on the other side of this Security]./(1)/
This Security shall not bear interest except as specified on the other side
of this Security. Original Issue Discount will accrue as specified on the other
side of this Security. This Security is convertible as specified on the other
side of this Security. Additional provisions of this Security are set forth on
the other side of this Security.
[SIGNATURE PAGE FOLLOWS]
- --------------------
(3) This phrase should be included only if the Security is a Global Security.
62
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
CITRIX SYSTEMS, INC.
By:
------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
Dated:
Trustee's Certificate of Authentication: This is one
of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
------------------------------
Authorized Signatory
63
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
CITRIX SYSTEMS, INC.
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE DUE MARCH 22, 2019
1. Interest
--------
This Security shall not bear interest, except as specified in this
paragraph or in paragraph 10 hereof. If the Principal Amount hereof or any
portion of such Principal Amount is not paid when due (whether upon acceleration
pursuant to Section 8.2 of the Indenture, upon the date set for payment of the
Redemption Price pursuant to paragraph 5 hereof, upon the date set for payment
of Change in Control Purchase Price pursuant to paragraph 7 hereof, upon the
date set for payment of the Repurchase Price pursuant to paragraph 9 or upon the
Stated Maturity of this Security) or if interest due hereon or any portion of
such interest is not paid when due in accordance with paragraph 10 hereof, then
in each such case the overdue amount shall, to the extent permitted by law, bear
interest at the rate of 6.25% per annum, compounded semi-annually, which
interest shall accrue from the date such overdue amount was originally due to
the date payment of such amount, including interest thereon, has been made or
duly provided for. All such interest shall be payable as set forth in the
Indenture. The accrual of such interest on overdue amounts shall be in lieu of,
and not in addition to, the continued accrual of Original Issue Discount.
Original Issue Discount (the difference between the Issue Price and the
Principal Amount of the Security), in the period during which a Security remains
outstanding, shall accrue at 5.25% per annum, on a semiannual bond equivalent
basis using a 360-day year composed of twelve 30-day months, from the Issue Date
of this Security.
2. Method of Payment
-----------------
Subject to the terms and conditions of the Indenture, the Company will make
payments in respect of Redemption Prices, Repurchase Prices, Change in Control
Purchase Prices and at Stated Maturity to Holders who surrender Securities to a
Paying Agent to collect such payments in respect of the Securities. The Company
will pay cash amounts in money of the United States that at the time of payment
is legal tender for payment of public and private debts. However, the Company
may make such cash payments by check payable in such money directly to the
Holder.
3. Paying Agent, Registrar and Conversion Agent
--------------------------------------------
Initially, State Street Bank and Trust Company (the "Trustee", which term
shall include any successor trustee under the Indenture hereinafter referred to)
will act as Paying Agent, Registrar and Conversion Agent. The Company may
change and appoint any Paying Agent, Registrar or Conversion Agent without
notice to the Holder, except that the Company will maintain at least one Paying
Agent in the Borough of Manhattan, the City of New York, which shall initially
be an office or agency of the Trustee. The Company or any of its Subsidiaries
may, subject to certain limitations set forth in the Indenture, act as Paying
Agent, Registrar or Conversion Agent.
4. Indenture, Limitations
----------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its Zero Coupon Convertible Subordinated Debentures Due
March 22, 2019 (the "Securities"), issued under an Indenture dated as of March
22, 1999 (together with any supplemental indentures thereto, the "Indenture"),
between the Company and the Trustee. The terms of this Security include those
stated in the Indenture and those required by or made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture. This Security is subject to all such terms, and the
Holder of this Security is referred to the Indenture and said Act for a
statement of them.
64
<PAGE>
The Securities are general unsecured obligations of the Company limited to
$850,000,000 aggregate Principal Amount, subject to Section 2.2 of the
Indenture. The Indenture does not limit other debt of the Company, secured or
unsecured, including Senior Indebtedness.
5. Optional Redemption
-------------------
No sinking fund is provided for the Securities. The Securities are
redeemable as a whole, or from time to time in part, at any time at the option
of the Company at the Redemption Prices set forth below, provided that the
Securities are not redeemable prior to March 22, 2004.
The table below shows Redemption Prices of a Security per $1,000 Principal
Amount on the dates shown below and at Stated Maturity, which prices reflect
accrued Original Issue Discount calculated through each such date. The
Redemption Price of a Security redeemed between such dates shall include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table.
<TABLE>
<CAPTION>
(1) (2) (3)
Redemption Date Debenture Accrued Original Redemption Price
Issue Price Issue Discount (1) + (2)
----------- at 5.25% ---------
----------------
<S> <C> <C> <C>
March 22, 2004............................... $354.71 $104.92 $ 459.63
March 22, 2005............................... $354.71 $129.36 $ 484.07
March 22, 2006............................... $354.71 $155.11 $ 509.82
March 22, 2007............................... $354.71 $182.23 $ 536.94
March 22, 2008............................... $354.71 $210.79 $ 565.50
March 22, 2009............................... $354.71 $240.87 $ 595.58
March 22, 2010............................... $354.71 $272.54 $ 627.25
March 22, 2011............................... $354.71 $305.91 $ 660.62
March 22, 2012............................... $354.71 $341.04 $ 695.75
March 22, 2013............................... $354.71 $378.05 $ 732.76
March 22, 2014............................... $354.71 $417.03 $ 771.74
March 22, 2015............................... $354.71 $458.07 $ 812.78
March 22, 2016............................... $354.71 $501.30 $ 856.01
March 22, 2017............................... $354.71 $546.84 $ 901.54
March 22, 2018............................... $354.71 $594.79 $ 949.50
At Stated Maturity........................... $354.71 $645.29 $1,000.00
</TABLE>
If converted to a semiannual coupon debenture following the occurrence
of a Tax Event, this Security will be redeemable at the Restated Principal
Amount plus accrued and unpaid interest from the date of such conversion to the
Redemption Date; but in no event will this Security be redeemable before March
22, 2004.
6. Notice of Redemption
--------------------
Notice of redemption will be mailed by first-class mail at least 20 days
but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. Securities in
denominations larger than $1,000 Principal Amount may be redeemed in part, but
only in whole multiples of $1,000. On and after the Redemption Date, subject to
the deposit with the Paying Agent of funds sufficient to pay the Redemption
Price, Original Issue Discount ceases to accrue on Securities or portions
thereof called for redemption.
7. Purchase of Securities at Option of Holder Upon a Change in Control
-------------------------------------------------------------------
65
<PAGE>
At the option of the Holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated to purchase all or any part
specified by the Holder (so long as the Principal Amount of such part is $1,000
or an integral multiple of $1,000 in excess thereof) of the Securities held by
such Holder on the date that is 30 Business Days after the occurrence of a
Change in Control, at a Change in Control Purchase Price equal to the Issue
Price plus accrued Original Issue Discount through the Change in Control
Purchase Date. The Holder shall have the right to withdraw any Change in
Control Purchase Notice (in whole or in a portion thereof that is $1,000
Principal Amount or an integral multiple of $1,000 in excess thereof) at any
time prior to the close of business on the Business Day next preceding the
Change in Control Purchase Date by delivering a written notice of withdrawal to
the Paying Agent in accordance with the terms of the Indenture.
If prior to a Change in Control Purchase Date this Security has been
converted to a semiannual coupon debenture following the occurrence of a Tax
Event, the Change in Control Purchase Price shall be equal to the Restated
Principal Amount plus accrued and unpaid interest from the date of conversion to
the Change in Control Purchase Date.
8. Conversion
----------
A Holder of a Security may convert the Security into shares of Common Stock
at any time prior to the close of business on March 22, 2019; provided, however,
that if the Security is called for redemption, the conversion right will
terminate at the close of business on the Business Day immediately preceding the
Redemption Date for such Security or such earlier date as the Holder presents
such Security for redemption (unless the Company shall default in making the
redemption payment when due, in which case the conversion right shall terminate
at the close of business on the date such default is cured and such Security is
redeemed). A Security in respect of which a Holder has delivered a Repurchase
Notice or Change in Control Purchase Notice exercising the option of such Holder
to require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.
The initial Conversion Rate is 3.5153 shares of Common Stock per $1,000
Principal Amount, subject to adjustment in certain events described in the
Indenture. The Company will deliver cash or a check in lieu of any fractional
share of Common Stock.
In the event the Company exercises its option pursuant to Section 14.1 of
the Indenture to have interest in lieu of Original Issue Discount accrue on the
Security following a Tax Event, the Holder will be entitled on conversion to
receive the same number of shares of Common Stock such Holder would have
received if the Company had not exercised such option. If the Company exercises
such option, Securities surrendered for conversion during the period from the
close of business on any Regular Record Date next preceding any Interest Payment
Date to the opening of business of such Interest Payment Date (except Securities
to be redeemed on a date within such period) must be accompanied by payment from
the Holder of an amount equal to the interest thereon that the registered Holder
is to receive from the Company on such Interest Payment Date. Except where
Securities surrendered for conversion must be accompanied by payment as
described above, no interest on converted Securities will be payable by the
Company on any Interest Payment Date subsequent to the date of conversion.
A Holder may convert a portion of a Security if the Principal Amount of
such portion is $1,000 or an integral multiple of $1,000. No payment or
adjustment will be made for dividends on the Common Stock except as provided in
the Indenture. On conversion of a Security, that portion of accrued Original
Issue Discount (or interest if the Company has exercised its option provided for
in paragraph 10 hereof) attributable to the period from the Issue Date (or, if
the Company has exercised the option referred to in paragraph 10 hereof, the
later of (x) the date of such exercise and (y) the date on which interest was
last paid) through the Conversion Date with respect to the converted Security
shall not be canceled, extinguished or forfeited, but rather shall be deemed to
be paid in full to the Holder thereof through the delivery of the Common Stock
(together with the cash payment, if any, in lieu of fractional shares) in
exchange for the Security being converted pursuant to the terms hereof; and the
fair market value of such shares of Common Stock (together with any such cash
payment in lieu of fractional shares) shall be treated as issued, to the extent
thereof, first in exchange for Original Issue Discount (or interest, if the
Company has exercised its option provided for in paragraph 10 hereof) accrued
through the Conversion Date, and the balance, if
66
<PAGE>
any, of such fair market value of such Common Stock (and any such cash payment)
shall be treated as issued in exchange for the Issue Price of the Security being
converted pursuant to the provisions hereof.
No fractional shares will be issued upon conversion; in lieu thereof, an
amount will be paid in cash based upon the closing price (as defined in the
Indenture) of the Common Stock on the Trading Day immediately prior to the
Conversion Date.
To convert a Security, a Holder must (a) complete and manually sign the
conversion notice set forth below and deliver such notice to a Conversion Agent,
(b) surrender the Security to a Conversion Agent, (c) furnish appropriate
endorsements and transfer documents if required by a Registrar or a Conversion
Agent, and (d) pay any transfer or similar tax, if required.
9. Repurchase By the Company at the Option of the Holder.
-----------------------------------------------------
Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, the Securities held
by such Holder on the following Repurchase Dates and at the following Repurchase
Prices per $1,000 Principal Amount, upon delivery of a Repurchase Notice
containing the information set forth in the Indenture, at any time from the
opening of business on the date that is 20 Business Days prior to such
Repurchase Date until the close of business on such Repurchase Date and upon
delivery of the Securities to the Paying Agent by the Holder as set forth in the
Indenture.
Repurchase Date Repurchase Price
--------------- ----------------
March 22, 2004 $459.63
March 22, 2009 $595.58
March 22, 2014 $771.74
The Repurchase Price (equal to the Issue Price plus accrued Original Issue
Discount through the Repurchase Date) may be paid, at the option of the Company,
in cash or by the issuance and delivery of shares of Common Stock of the
Company, or in any combination thereof.
If prior to a Repurchase Date this Security has been converted to a
semiannual coupon debenture following the occurrence of a Tax Event, the
Repurchase Price will be equal to the Restated Principal Amount plus accrued and
unpaid interest from the date of conversion to the Repurchase Date.
Holders have the right to withdraw any Repurchase Notice by delivering to
the Paying Agent a written notice of withdrawal in accordance with the
provisions of the Indenture.
If cash (and/or securities if permitted under the Indenture) sufficient to
pay the Repurchase Price of all Securities or portions thereof to be purchased
as of the Repurchase Date, is deposited with the Paying Agent on the Business
Day following the Repurchase Date, Original Issue Discount ceases to accrue on
such Securities (or portions thereof) immediately after such Repurchase Date,
and the Holder thereof shall have no other rights as such (other than the right
to receive the Repurchase Price upon surrender of such Security).
10. Tax Event
---------
From and after (i) the date (the "Tax Event Date") of the occurrence of a
Tax Event and (ii) the date the Company exercises such option, whichever is
later (the "Option Exercise Date"), at the option of the Company, interest in
lieu of future Original Issue Discount shall accrue at the rate of 5.25% per
annum on a Principal Amount per Security (the "Restated Principal Amount") equal
to the Issue Price plus Original Issue Discount accrued through the Option
Exercise Date and shall be payable semiannually on March 22, and September 22,
of each year (each an "Interest Payment Date") to holders of record at the close
of business on March 7 or September 7 (each a "Regular Record Date") immediately
preceding such Interest Payment Date. Interest will be computed on the basis
67
<PAGE>
of a 360-day year comprised of twelve 30-day months and will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the Option Exercise Date.
Interest on any Security that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Security is registered at the close of business on the Regular Record
Date for such interest at the office or agency of the Company maintained for
such purpose. Each installment of interest on any Security shall be paid in
same-day funds by transfer to an account maintained by the payee located inside
the United States.
Except as otherwise specified with respect to the Securities, any Defaulted
Interest on any Security shall forthwith cease to be payable to the registered
Holder thereof on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company as provided for
in Section 14.2(b) of the Indenture.
11. Conversion Arrangement on Call for Redemption
---------------------------------------------
Any Securities called for redemption, unless surrendered for conversion
before the close of business on the Redemption Date, may be deemed to be
purchased from the Holders of such Securities at an amount not less than the
Redemption Price, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Securities from the Holders, to convert
them into Common Stock of the Company and to make payment for such Securities to
the Paying Agent in trust for such Holders.
12. Subordination
-------------
The indebtedness evidenced by the Securities is, to the extent and in the
manner provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness, in cash or other payment
satisfactory to the holders of Senior Indebtedness, of the Company. Any Holder
by accepting this Security agrees to and shall be bound by such subordination
provisions and authorizes the Trustee to give them effect.
In addition to all other rights of Senior Indebtedness described in the
Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any terms of any instrument relating to the
Senior Indebtedness or any extension or renewal of the Senior Indebtedness.
13. Denominations, Transfer, Exchange
---------------------------------
The Securities are in registered form without coupons in denominations of
$1,000 of Principal Amount and integral multiples of $1,000. A Holder may
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes or other
governmental charges that may be imposed in relation thereto by law or permitted
by the Indenture.
14. Persons Deemed Owners
---------------------
The Holder of a Security may be treated as the owner of it for all purposes.
15. Unclaimed Money
---------------
The Trustee and the Paying Agent shall return to the Company upon written
request for the payment of any amount with respect to Securities that remains
unclaimed for two years, subject to applicable unclaimed property law. After
that, Holders entitled to money or securities must look to the Company for
payment as general creditors, unless an applicable abandoned property law
designates another person.
16. Amendment, Supplement and Waiver
--------------------------------
68
<PAGE>
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in Principal Amount of the Securities then outstanding, and an existing default
or Event of Default and its consequence or compliance with any provision of the
Indenture or the Securities may be waived in a particular instance with the
consent of the Holders of a majority in Principal Amount of the Securities then
outstanding. Without the consent of or notice to any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Securities to, among
other things, cure any ambiguity, defect or inconsistency or make any other
change that does not adversely affect the rights of any Holder.
17. Successor Corporation
---------------------
When a successor corporation assumes all the obligations of its predecessor
under the Securities and the Indenture in accordance with the terms and
conditions of the Indenture, the predecessor corporation will (except in certain
circumstances specified in the Indenture) be released from those obligations.
18. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) if the Securities have
been converted to semiannual coupon debentures following a Tax Event, default in
the payment of interest which default continues for a period of 30 days; (ii)
default in payment of the Principal Amount (or, if the Securities have been
converted to semiannual coupon debentures following a Tax Event, the Restated
Principal Amount), Issue Price plus accrued Original Issue Discount, Redemption
Price, Repurchase Price, Change in Control Purchase Price or Additional
Interest, as the case may be, in respect of the Securities when the same becomes
due and payable; (iii) failure to deliver shares of Common Stock following
conversion of a Security and continuance of such default for five days; (iv)
failure by the Company to comply with other agreements in the Indenture or the
Securities, subject to notice and lapse of time; (v) default under any bond,
debenture, note or other evidence of indebtedness for money borrowed of the
Company or any Significant Subsidiary having an aggregate outstanding principal
amount of in excess of $10,000,000, which default shall have resulted in such
indebtedness being accelerated, without such indebtedness being discharged or
such acceleration having been rescinded or annulled, subject to notice and
passage of time; and (vi) certain events of bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary. If an Event of
Default (other than as a result of certain events of bankruptcy, insolvency or
reorganization of the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in Principal Amount of the Securities then outstanding
may declare the Securities then outstanding to be due and payable immediately,
all as and to the extent provided in the Indenture. If an Event of Default
occurs as a result of certain events of bankruptcy, insolvency or reorganization
of the Company, the Securities outstanding shall become due and payable
immediately without any declaration or other act on the part of the Trustee or
any Holder, all as and to the extent provided in the Indenture.
19. Trustee Dealings With the Company
---------------------------------
State Street Bank and Trust Company, the Trustee under the Indenture, in
its individual or any other capacity, may make loans to, accept deposits from
and perform services for the Company or an Affiliate of the Company, and may
otherwise deal with the Company or an Affiliate of the Company, as if it were
not the Trustee.
20. No Recourse Against Others
--------------------------
A director, officer, employee or shareholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Securities
or the Indenture nor for any claim based on, in respect of or by reason of such
obligations or their creation. The Holder of this Security by accepting this
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of this Security.
21. Authentication
--------------
This Security shall not be valid until the Trustee or an authenticating
agent manually signs the certificate of authentication on the other side of this
Security.
69
<PAGE>
22. Abbreviations and Definitions
-----------------------------
Customary abbreviations may be used in the name of the Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
All terms defined in the Indenture and used in this Security but not
specifically defined herein are defined in the Indenture and are used herein as
so defined.
23. Indenture to Control; Governing Law
-----------------------------------
In the case of any conflict between the provisions of this Security and the
Indenture, the provisions of the Indenture shall control. This Security shall
be governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflicts of laws principles.
The Company will furnish to any Holder, upon written request and without
charge, a copy of the Indenture. Requests may be made to: 6400 NW 6th Way,
Fort Lauderdale, Florida 33309, Attention: Investor Relations.
70
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him or her.
Your Signature:
________________________________
Date:
----------------- (Sign exactly as your name appears on the other
side of this Security)
* Signature guaranteed by:
---------------------------------------------------
By:
--------------------------------------------------------------------------
- --------------------
* The signature must be guaranteed by an institution which is a member of one of
the following recognized signature guaranty programs: (i) the Securities
Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or
(iv) such other guaranty program acceptable to the Trustee.
71
<PAGE>
CONVERSION NOTICE
To convert this Security into Common Stock of the Company,
check the box: [ ]
To convert only part of this Security, state the Principal Amount to be
converted (must be $1,000 or a multiple of $1,000): $
-------------
If you want the stock certificate made out in another person's name, fill
in the form below:
- --------------------------------------------------------------------------------
(Insert other person's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
Your Signature:
________________________________
Date:
----------------- (Sign exactly as your name appears on the other
side of this Security)
* Signature guaranteed by:
---------------------------------------------------
By:
--------------------------------------------------------------------------
- --------------------
* The signature must be guaranteed by an institution which is a member of one of
the following recognized signature guaranty programs: (i) the Securities
Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or
(iv) such other guaranty program acceptable to the Trustee.
72
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased, in whole or in part,
by the Company pursuant to Section 3.8 of the Indenture, check the following
box: [ ]
If you want to have only part of this Security purchased by the Company
pursuant to Section 3.8 of the Indenture, state the Principal Amount you want to
be purchased (must be $1,000 or a multiple of $1,000): $
-------------
Your Signature:
________________________________
Date:
----------------- (Sign exactly as your name appears on the other
side of this Security)
* Signature guaranteed by:
---------------------------------------------------
By:
--------------------------------------------------------------------------
- --------------------
* The signature must be guaranteed by an institution which is a member of one of
the following recognized signature guaranty programs: (i) the Securities
Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange
Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or
(iv) such other guaranty program acceptable to the Trustee.
73
<PAGE>
SCHEDULE OF EXCHANGES OF Securities(4)(1)
The following exchanges, redemptions, repurchases or conversions of a part
of this Global Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Date of Transaction Amount of Decrease Amount of Increase Principal Amount
in Principal Amount in Principal Amount of this Global Security
of this Global Security of this Global Security Following
Decrease or Increase
</TABLE>
- --------------------
(4) This schedule should be included only if the Security is a Global Security.
74
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF TRANSFER RESTRICTED SECURITIES(1)
Re: Zero Coupon Convertible Subordinated Debentures Due March 22, 2019 (the
"Securities") of Citrix Systems, Inc.
This certificate relates to $ principal amount at maturity
----------------
of Securities owned in (check applicable box)
[ ] book-entry or [ ] definitive form by (the
---------------------
"Transferor").
The Transferor has requested a Registrar or the Trustee to exchange or
register the transfer of such Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that the Transferor is familiar with
transfer restrictions relating to the Securities as provided in Section
2.12 of the Indenture dated as of March 22, 1999 between Citrix Systems,
Inc. and State Street Bank and Trust Company, N.A. (the "Indenture"), and
the transfer of such Security is being made pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") (check applicable box) or the transfer or exchange, as
the case may be, of such Security does not require registration under the
Securities Act because (check applicable box):
[ ] Such Security is being transferred pursuant to an effective
registration statement under the Securities Act.
[ ] Such Security is being acquired for the Transferor's own account,
without transfer.
[ ] Such Security is being transferred to the Company or a Subsidiary (as
defined in the Indenture) of the Company.
[ ] Such Security is being transferred to a person the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in
Rule 144A or any successor provision thereto ("Rule 144A") under the
Securities Act) that is purchasing for its own account or for the account
of a "qualified institutional buyer", in each case to whom notice has been
given that the transfer is being made in reliance on such Rule 144A, and in
each case in reliance on Rule 144A.
- --------------------
(5) This certificate should only be included if this Security is a Transfer
Restricted Security.
75
<PAGE>
[ ] Such Security is being transferred pursuant to and in compliance with
an exemption from the registration requirements under the Securities Act in
accordance with Rule 144 (or any successor thereto) ("Rule 144") under the
Securities Act.
76
<PAGE>
[ ] Such Security is being transferred pursuant to and in compliance with
an exemption from the registration requirements of the Securities Act
(other than an exemption referred to above) and as a result of which such
Security will, upon such transfer, cease to be a "restricted security"
within the meaning of Rule 144 under the Securities Act.
The Transferor acknowledges and agrees that, if the transferee will
hold any such Securities in the form of beneficial interests in a Global
Security which is a "restricted security" within the meaning of Rule 144
under the Securities Act, then such transfer can only be made pursuant to
Rule 144A under the Securities Act and such transferee must be a "qualified
institutional buyer" (as defined in Rule 144A).
(Insert Name of Transferor)
By:
-----------------------------------
Date:
----------------------------
77
<PAGE>
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)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
Citrix Systems, Inc.
(Exact name of obligor as specified in its charter)
DELAWARE 75-2275152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 NW 6/th/ Way
Fort Lauderdale, FL 33309
(Address of principal executive offices) (Zip Code)
Convertible Subordinated Debentures
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-
17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the May 6, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gerald R. Wheeler
----------------------
NAME: GERALD R. WHEELER
TITLE: VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by CITRIX SYSTEMS,
INC.. of its CONVERTIBLE SUBORDINATED DEBENTURES, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gerald R. Wheeler
---------------------
NAME: GERALD R. WHEELER
TITLE : VIVE PRESIDENT
DATED: MAY 6, 1999
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1998,
-----------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................................................... 1,209,293
Interest-bearing balances................................................................................ 12,007,895
Securities.................................................................................................... 9,705,731
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary...................................................................... 9,734,476
Loans and lease financing receivables:
Loans and leases, net of unearned income........................ 6,973,125
Allowance for loan and lease losses............................. 84,308
Allocated transfer risk reserve................................. 0
Loans and leases, net of unearned income and allowances.................................................. 6,888,817
Assets held in trading accounts............................................................................... 1,574,999
Premises and fixed assets..................................................................................... 523,514
Other real estate owned....................................................................................... 0
Investments in unconsolidated subsidiaries.................................................................... 612
Customers' liability to this bank on acceptances outstanding.................................................. 47,334
Intangible assets............................................................................................. 212,743
Other assets.................................................................................................. 1,279,224
----------
Total assets.................................................................................................. 43,184,638
==========
LIABILITIES
Deposits:
In domestic offices...................................................................................... 10,852,862
Noninterest-bearing............................................ 8,331,830
Interest-bearing............................................... 2,521,032
In foreign offices and Edge subsidiary................................................................... 16,761,573
Noninterest-bearing............................................ 83,010
Interest-bearing............................................... 16,678,563
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary...................................................................... 10,041,324
Demand notes issued to the U.S. Treasury...................................................................... 108,420
Trading liabilities.......................................................................... 1,240,938
Other borrowed money.......................................................................................... 322,331
Subordinated notes and debentures............................................................................. 0
Bank's liability on acceptances executed and outstanding...................................................... 47,334
Other liabilities............................................................................................. 1,126,058
Total liabilities............................................................................................. 40,500,840
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................................. 0
Common stock.................................................................................................. 29,931
Surplus....................................................................................................... 468,511
Undivided profits and capital reserves/Net unrealized holding gains (losses).................................. 2,164,055
Net unrealized holding gains (losses) on available-for-sale securities....................... 21,638
Cumulative foreign currency translation adjustments........................................................... (337)
Total equity capital.......................................................................................... 2,683,798
----------
Total liabilities and equity capital.......................................................................... 43,184,638
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
$850,000,000 AT MATURITY
CITRIX SYSTEMS, INC.
Zero Coupon Convertible Subordinated Debentures Due March 22, 2019
REGISTRATION RIGHTS AGREEMENT
March 22, 1999
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Citrix Systems, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Credit Suisse First Boston Corporation, (the "Initial
Purchaser"), upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement"), $850,000,000 aggregate principal amount at
maturity of its Zero Coupon Convertible Subordinated Debentures due March 22,
2019 (the "Debentures"). The Debentures will be issued pursuant to an Indenture,
dated as of March 22, 1999 (the "Indenture") by and between the Company and
State Street Bank and Trust Company (the "Trustee"). Under the terms of the
Indenture, the Debentures are convertible, in whole or in part, into shares of
Common Stock, par value $.001 per share (the "Conversion Shares" and, together
with the Debentures, the "Securities"), at the option of the holders thereof at
any time following the date of original issuance thereof at the Conversion Rate
(as defined in the Indenture) set forth in the Debentures, as adjusted from time
to time pursuant to the Indenture. As an inducement to the Initial Purchaser,
the Company agrees with the Initial Purchaser, for the benefit of the holders of
the Debentures (including, without limitation, the Initial Purchaser) and
Conversion Shares (collectively, the "Holders"), as follows:
1. Resale Shelf Registration. (a) The Company shall, at its cost, use
its reasonable best efforts to file as promptly as practicable (but in no event
more than 60 days after the Closing Date (as defined in the Purchase Agreement))
with the Securities and Exchange Commission (the "Commission") and thereafter
shall use its reasonable best efforts to cause to be declared effective a
registration statement (the "Resale Shelf Registration Statement") on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act") relating to the offer and sale of the Transfer Restricted Securities (as
defined in Section 5 hereof) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Resale Shelf
Registration Statement and Rule 415 under the Securities Act (hereinafter, the
"Resale Shelf Registration"); provided, however, that no Holder (other than the
Initial Purchaser) shall be entitled to have the
<PAGE>
Securities held by it covered by such Resale Shelf Registration Statement unless
such Holder agrees in writing to be bound by all the provisions of this
Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Resale Shelf Registration Statement continuously effective in order to permit
the prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years from the date of its
effectiveness or such shorter period that will terminate when all the Securities
covered by the Resale Shelf Registration Statement (i) have been sold pursuant
thereto or (ii) are no longer Transfer Restricted Securities as defined in
Section 5(d) (in any such case, such period being called the "Shelf Registration
Period"). The Company shall be deemed not to have used its best efforts to keep
the Resale Shelf Registration Statement effective during the requisite period if
it voluntarily takes any action (other than as contemplated by Section 2(h))
that would result in Holders of Securities covered thereby not being able to
offer and sell such Securities during that period, unless such action is
required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Resale Shelf Registration Statement and
the related prospectus and any amendment or supplement thereto, as of the
effective date of the Resale Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(d) Each Holder agrees that if such Holder wishes to sell such
Holder's Securities pursuant to a Resale Shelf Registration Statement and
related prospectus, it will do so in accordance with this Section 1(d). Each
Holder wishing to sell Securities pursuant to a Resale Shelf Registration
Statement and related prospectus agrees to deliver a Notice and Questionnaire
(the form of which is attached as Annex A to the Offering Memorandum and in
connection with the offering of the Debentures) to the Company prior to any
intended distribution of Securities under the Resale Shelf Registration
Statement. From and after the date the Resale Shelf Registration Statement is
declared effective, the Company shall, as promptly as is practicable after the
date a Notice and Questionnaire is delivered, and in any event within five (5)
Business Days after such date, (i) if required by applicable law, file with the
Commission a post-effective amendment to the Shelf Registration Statement or
prepare and, if required by applicable law, file a supplement to the related
prospectus or a supplement or amendment to any document incorporated therein by
reference or file any other required document so that the Holder delivering such
Notice and Questionnaire is named as a selling securityholder in the Resale
Shelf Registration Statement and the related prospectus in such a manner as to
permit such Holder to deliver such prospectus to purchasers of the Securities in
accordance with applicable law and, if the Company shall file a post-effective
amendment to the Resale Shelf Registration Statement, use all reasonable efforts
to cause such post-effective amendment to be declared effective under the
Securities Act as promptly as is practicable, but in any event by the date that
is sixty (60) days after the date such post-effective amendment is required by
this clause to be filed; (ii) provide such Holder copies of any documents filed
pursuant to Section 1(d)(i); and (iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any post-
-2-
<PAGE>
effective amendment filed pursuant to Section 1(d)(i); provided, that if such
Notice and Questionnaire is delivered during a period in which the use of the
prospectus is suspended pursuant to Section 2(h), the Company shall so inform
the Holder delivering such Notice and Questionnaire and shall take the actions
set forth in clauses (i), (ii) and (iii) above upon expiration of the suspension
period. Notwithstanding anything contained herein to the contrary, the Company
shall be under no obligation to name any Holder that has not supplied the
requisite information required by Section 1(d) as a selling securityholder in
any Registration Statement or related Prospectus; provided, however, that any
Holder that has subsequently supplied the requisite information required by this
Section 1(d) pursuant to the provisions of this Section (whether or not such
Holder has supplied the requisite information required by this Section 1(d) at
the time the Resale Shelf Registration Statement was declared effective) shall
be named as a selling securityholder in the Resale Shelf Registration Statement
or related prospectus in accordance with the requirements of this Section 1(d).
2. Registration Procedures. In connection with the Resale Shelf
Registration contemplated by Section 1 hereof, the following provisions apply:
(a) The Company shall (i) furnish to the Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Resale Shelf Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that the Initial Purchaser (with
respect to any portion of an unsold allotment from the original offering) is
participating in the Resale Shelf Registration, the Company shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as the Initial Purchaser reasonably may propose; and (ii) include
the names of the Holders, who propose to sell Securities pursuant to the Resale
Shelf Registration Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial Purchaser and
Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Resale Shelf Registration Statement or any
amendment thereto has been filed with the Commission and when the Resale Shelf
Registration Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Resale Shelf Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Resale Shelf Registration Statement or the
initiation of any proceedings for that purpose;
-3-
<PAGE>
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the prospectus which forms a part of the Resale Shelf
Registration Statement in order that the prospectus does not contain an untrue
statement of a material fact nor omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Resale Shelf Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Resale Shelf Registration, without charge, at least
one copy of the Resale Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall, during the Resale Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of the Resale
Shelf Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Resale Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably request.
The Company consents, subject to the provisions of this Agreement, to the use of
the prospectus or any amendment or supplement thereto by each of the selling
Holders of the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement thereto,
included in the Resale Shelf Registration Statement in the manner described
therein.
(f) Prior to any public offering of the Securities, pursuant to any
Resale Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any Holder of the Securities reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities covered by
such Resale Shelf Registration Statement; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
-4-
<PAGE>
(g) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Resale Shelf Registration Statement (to
the extent such Securities are certificated) free of any restrictive legends and
in such denominations and registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities pursuant to such
Resale Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the Shelf Registration Period, the
Company shall promptly prepare and file a post-effective amendment to the Resale
Shelf Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders or
purchasers of Securities, the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided however, that the Company may
delay preparing, filing and distributing any such supplement or amendment (and
continue the suspension of the use of the prospectus) if the Company determines
in good faith that such supplement or amendment would, in the reasonable
judgment of the Company, (i) interfere with or affect the negotiation or
completion of a transaction that is being contemplated by the Company (whether
or not a final decision has been made to undertake such transaction) or (ii)
involve initial or continuing disclosure obligations that are not in the best
interests of the Company's stockholders at such time; provided further, that
neither such delay nor such suspension shall extend for a period of more than 30
days in any three month period or more than 90 days for all such periods in any
twelve month period. If the Company notifies the Initial Purchaser and the
Holders of the Securities in accordance with paragraphs (ii) through (v) of
Section 2(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchaser and the
Holders shall suspend use of such prospectus.
(i) Not later than the effective date of the Resale Shelf Registration
Statement, the Company will provide CUSIP numbers for the Debentures and the
Conversion Shares registered under the Resale Shelf Registration Statement and
provide the Trustee with a certificate for the Debentures, in a form eligible
for deposit with The Depository Trust Company.
(j) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Resale Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Resale Shelf
Registration Statement, which statement shall cover such 12-month period.
(k) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing such
changes, if any, as shall be necessary for such qualification. In the event that
such qualification would require the
-5-
<PAGE>
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(l) The Company shall enter into such customary agreements (including,
if requested an underwriting agreement in customary form) and take all such
other action, if any, as any Holder shall reasonably request in order to
facilitate the disposition of the Securities pursuant to any Resale Shelf
Registration.
(m) The Company shall (i) make reasonably available for inspection by
the Holders, any underwriter participating in any disposition pursuant to the
Resale Shelf Registration Statement and any attorney, accountant or other agent
retained by the Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company and (ii)
cause the Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with the Resale Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchaser and the other parties, by one firm of counsel, which firm
shall be Wilson Sonsini Goodrich & Rosati, Professional Corporation until
another firm shall be designated as described in Section 3 hereof.
(n) The Company shall cause (i) its counsel to deliver an opinion and
updates thereof relating to the Securities in customary form addressed to the
Holders and the managing underwriters, if any, thereof and dated, in the case of
the initial opinion, the effective date of such Resale Shelf Registration
Statement (it being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 2(l) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of governmental approvals required to be
obtained in connection with the Resale Shelf Registration Statement, the
offering and sale of the applicable Securities or any agreement of the type
referred to in Section 2(n) hereof; the compliance as to form of such Resale
Shelf Registration Statement and any documents incorporated by reference therein
and of the Indenture with the requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of the opinion and as of the
effective date of the Resale Shelf Registration Statement or most recent post-
effective amendment thereto, as the case may be, the absence from such Resale
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, and from any documents incorporated by reference
therein of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in the
light of the circumstances existing at the time that such documents were filed
with the Commission under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof requested
by any underwriters of the
-6-
<PAGE>
applicable Securities; and (iii) its independent public accountants and the
independent public accountants, if any with respect to any other entity for
which financial information is provided in the Resale Shelf Registration
Statement to provide to the selling Holders of the applicable Securities and any
underwriter therefor a comfort letter in customary form; and covering matters of
the type customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No. 72.
(o) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules (the "Rules") of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such
Securities or as an underwriter, a placement or sales agent or a broker or
dealer in respect thereof, or otherwise, the Company will assist such broker-
dealer in complying with the requirements of such Rules, including, without
limitation, by (i) if such Rules, including Rule 2720, shall so require,
engaging a "qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Resale Shelf Registration Statement
relating to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such Resale
Shelf Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (ii)
indemnifying any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 4 hereof and (iii) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.
(p) The Company shall use its reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered by
the Resale Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
and 2 hereof whether or not a Resale Shelf Registration is filed or becomes
effective, shall bear or reimburse the Holders of the Securities covered thereby
for the reasonable fees and disbursements of one firm of counsel, which firm
shall be Wilson Sonsini Goodrich & Rosati, Professional Corporation until
another firm shall be designated by the Holders of a majority in principal
amount of the Debentures covered thereby to act as counsel for the Holders in
connection therewith.
4. Indemnification. The Company agrees to indemnify and hold harmless
each Holder of the Securities and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (each Holder and
such controlling persons are referred to collectively as the "Indemnified
Parties") from and against any losses, claims, damages or liabilities, joint or
several, or any actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to purchases and sales
of the Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise,
-7-
<PAGE>
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Resale Shelf Registration Statement or prospectus or in
any amendment or supplement thereto or in any preliminary prospectus relating to
the Resale Shelf Registration, 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 in light of the
circumstances in which they were made, not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Resale Shelf Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to the Resale Shelf
Registration in reliance upon and in conformity with written information
pertaining to a Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein, and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to the Resale Shelf Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Holder from whom the person asserting any such losses, claims,
damages or liabilities purchased the Securities concerned, to the extent that a
prospectus relating to such Securities was required to be delivered by such
Holder under the Securities Act in connection with such purchase and any such
loss, claim, damage or liability of such Holder results from the fact that there
was not sent or given to such person, at or prior to the written confirmation of
the sale of such Securities to such person, a copy of the final prospectus if
the Company had previously furnished copies thereof to such Holder, provided,
further, however, that this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party. The
Company shall also indemnify underwriters, their officers and directors and each
person who controls such underwriters within the meaning of the Securities Act
or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders if requested by such Holders.
(l) Each Holder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities or any actions in respect thereof, to
which the Company or any such controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Resale
Shelf Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to the Resale Shelf
Registration, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein in
light of the circumstances in which they were made, not misleading, but in each
case only to the extent that the untrue statement or omission or alleged untrue
statement or omission was made in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically
-8-
<PAGE>
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company or
any of its controlling persons.
(m) Promptly after receipt by an indemnified party under this Section
4 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 4,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably 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 will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action. An indemnifying party will not be liable for any settlement of
any action or claim effected without its written consent; provided, however,
that such consent will not be reasonably withheld.
(n) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the sale of the Securities,
pursuant to the Resale Shelf Registration, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the
-9-
<PAGE>
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 such Holder or such other indemnified party, as the case may
be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 4(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Resale Shelf Registration Statement exceeds the amount of damages which such
Holders have 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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(o) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to the Resale Shelf Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
5. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Debentures and
Conversion Shares that are Transfer Restricted Securities shall be assessed as
follows if any of the following events occur (each such event in clauses (i)
through (iii) below a "Registration Default":
(i) If on or prior to the 60th day after the first date of
original issuance of the Debentures, the Resale Shelf Registration Statement has
not been filed with the Commission;
(ii) If on or prior to the 180th day after the first date of
original issuance of the Debentures, the Resale Shelf Registration Statement has
not been declared effective by the Commission; or
(iii) If after the Resale Shelf Registration Statement is
declared effective (A) such Resale Shelf Registration Statement thereafter
ceases to be effective; or (B) such Resale Shelf Registration Statement or the
related prospectus ceases to be usable (except as permitted in paragraph (b)) in
connection with resales of Transfer Restricted Securities during the periods
specified herein because either (1) any event occurs as a result of which the
related
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<PAGE>
prospectus forming part of such Resale Shelf Registration Statement would
include any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or (2) it shall be necessary to amend
such Resale Shelf Registration Statement or supplement the related prospectus,
to comply with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Debentures and Conversion Shares
that are Transfer Restricted Securities over and above the interest set forth in
the title of the Securities from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.25% per annum in the case
of (i) and 0.50% per annum in the case of (ii) or (iii) of the aggregate
Applicable Principal Amount of such Debentures and, in the case of the
Conversion Shares, the aggregate Applicable Conversion Price.
(b) A Registration Default referred to in Section 5(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to the Resale
Shelf Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Resale Shelf Registration Statement to incorporate annual
audited financial information with respect to the Company where such post-
effective amendment is not yet effective and needs to be declared effective to
permit Holders to use the related prospectus or (y) other material events, with
respect to the Company that would need to be described in such Resale Shelf
Registration Statement or the related prospectus and (ii) in the case of clause
(y), the Company is proceeding promptly and in good faith to amend or supplement
such Resale Shelf Registration Statement and related prospectus to describe such
events; provided, however, that in any case if such Registration Default occurs
for a continuous period in excess of 30 days, Additional Interest shall be
payable in accordance with the above paragraph from the day such Registration
Default occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) of Section 5(a) above will be payable in cash to the Record Holder
on the Damages Payment Dates with respect to the Debentures and Conversion
Shares. The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by, in the case of the Debentures, the
Applicable Principal Amount and, in the case of the Conversion Shares, the
Applicable Conversion Price, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
(d) Certain Definitions. For purposes of this Section 5:
Applicable Conversion Price: The Applicable Conversion Price means
the Applicable Principal Amount divided by the Conversion Rate in effect as of
the next succeeding March 22 or September 22 following such Registration Default
in the case of the first such payment of Additional Interest with respect to a
Registration Default (and thereafter at the next succeeding March 22 or
September 22 until the cure of such Registration Default) or, if no Debentures
are then
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<PAGE>
outstanding, the last Conversion Rate that was in effect when the Debentures
were last outstanding.
Applicable Principal Amount: Applicable Principal Amount with respect
to each $1,000 principal amount at maturity of Debentures means the sum of the
initial issue price of such Debenture ($354.71) plus accrued original issue
discount with respect to such Debenture through the next succeeding March 22 or
September 22 following such Registration Default in the case of the first such
payment of Additional Interest with respect to a Registration Default (and
thereafter at the next succeeding March 22 or September 22 until the cure of
such Registration Default) or, if no Debentures are then outstanding, such sum
calculated as if such Debentures were then outstanding.
Damages Payment Date: Each March 22 and September 22 in the case of
Debentures and the Conversion Shares.
Record Holder: With respect to any Damages Payment Date relating to
any Debenture or Conversion Shares as to which any Additional Interest has
accrued, the registered holder of such Debenture or Conversion Shares, as the
case may be, 15 days prior to the next succeeding Damages Payment Date.
Transfer Restricted Securities: Each Security until (i) the date on
which such Security has been effectively registered under the Securities Act and
disposed of in accordance with the Resale Shelf Registration Statement or (ii)
the date on which such Security is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
6. Rules 144 and 144A. The Company shall use its reasonable best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Debentures,
make publicly available such other information as is necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Company covenants that
it will take such further action as any Holder of Debentures may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Debentures without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Debentures identified to the Company by
the Initial Purchaser upon request. Upon the request of any Holder of
Debentures, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
7. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Resale Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of such
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<PAGE>
Transfer Restricted Securities to be included in such offering, provided however
-------- -------
that such Managing Underwriters must be reasonably satisfactory to the Company.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting agreements.
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Conversion Shares constituting Transfer
Restricted Securities (with Holders of Debentures deemed to be the Holders, for
purposes of this Section 8, of the number of outstanding shares of Conversion
Shares into which such Debentures are or would be convertible or exchangeable as
of the date on which such consent is requested). Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Resale Shelf
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Transfer Restricted Securities may be given by
Holders of at least a majority of the Transfer Restricted Securities being sold
by such Holders pursuant to such Resale Shelf Registration Statement; provided,
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Each Holder of Transfer Restricted Securities outstanding
at the time of any such amendment, modification, supplement, waiver or consent
or thereafter shall be bound by any such amendment, modification, supplement,
waiver or consent effected pursuant to this Section 8, whether or not any
notice, writing or marking indicating such amendment, modification, supplement,
waiver or consent appears on the Transfer Restricted Securities or is delivered
to such Holder. Each Holder may waive compliance with respect to any obligation
of the Company under this Agreement as it may apply or be enforced by such
particular Holder
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
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<PAGE>
(2) if to the Initial Purchaser:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Fax No.: (650) 493-6811
Attention: John A. Fore
(3) if to the Company, at its address as follows:
Citrix Systems, Inc.
6400 NW 6th Way
Fort Lauderdale, Florida 33309
Fax No.: (954) 267-2501
Attention: President
with a copy to:
Testa Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Fax No.: (617) 248-7100
Attention: Jonathan M. Moulton
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
-14-
<PAGE>
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
-15-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement on the
Initial Purchaser and the Company in accordance with its terms.
Very truly yours,
CITRIX SYSTEMS, INC.
By: /s/ Edward E. Iacobucci
----------------------------
Name: Edward E. Iacobucci
Title: Chairman of the Board
-16-
<PAGE>
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Cameron Lester
-----------------------
Name: Cameron Lester
Title: Director
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF CITRIX SYSTEMS, INC. FOR THE PERIOD ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 413,104
<SECURITIES> 43,375
<RECEIVABLES> 49,945
<ALLOWANCES> 6,171
<INVENTORY> 4,761
<CURRENT-ASSETS> 536,659
<PP&E> 23,925
<DEPRECIATION> 8,673
<TOTAL-ASSETS> 805,245
<CURRENT-LIABILITIES> 121,644
<BONDS> 301,894
0
0
<COMMON> 87
<OTHER-SE> 342,750
<TOTAL-LIABILITY-AND-EQUITY> 805,245
<SALES> 85,039
<TOTAL-REVENUES> 85,039
<CGS> 4,522
<TOTAL-COSTS> 4,522
<OTHER-EXPENSES> 43,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 404
<INCOME-PRETAX> 40,263
<INCOME-TAX> 14,495
<INCOME-CONTINUING> 25,768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,768
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.28
</TABLE>
