<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. ____)/1/
Sylvan Learning Systems, Inc.
________________________________________________________________________________
(Name of Issuer)
Common Stock
________________________________________________________________________________
(Title of Class of Securities)
871399101
_______________________________________________________________
(CUSIP Number)
John F. Hartigan, Esq.
Morgan, Lewis & Bockius LLP
300 South Grand Avenue
Los Angeles, California 90071-3132
(213) 612-2500
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
February 23, 2000
_______________________________________________________________
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 10 Pages
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CUSIP NO. 871399101 13D Page 2 of 10 Pages
- ------------------- ------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Apollo Investment Fund IV, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
5,117,634 shares of Common Stock (see Item 5 below)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
5,401,968 shares of Common Stock (See Item 5 below)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 5,117,634 shares of Common Stock (see Item 5 below)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
5,401,968 shares of Common Stock (See Item 5 below)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
5,117,634 shares of Common Stock (see Item 5 below)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
9.1% (see Item 5 below)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 10 Pages
<PAGE>
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CUSIP NO. 871399101 13D Page 3 of 10 Pages
- ------------------- ------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Apollo Overseas Partners IV, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(c) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
284,334 shares of Common Stock (see Item 5 below)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
5,401,968 shares of Common Stock (See Item 5 below)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 284,334 shares of Common Stock (see Item 5 below)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
5,401,968 shares of Common Stock (See Item 5 below)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
284,334 shares of Common Stock (see Item 5 below)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
0.6% (see Item 5 below)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 10 Pages
<PAGE>
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CUSIP NO. 871399101 13D Page 4 of 10 Pages
- ------------------- ------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Apollo Advisors IV, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(c) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0 shares of Common Stock (see Item 5 below)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
5,401,968 shares of Common Stock (See Item 5 below)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0 shares of Common Stock (see Item 5 below)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
5,401,968 shares of Common Stock (See Item 5 below)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
5,401,968 shares of Common Stock (see Item 5 below)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
9.6% (see Item 5 below)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 10 Pages
<PAGE>
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CUSIP NO. 871399101 13D Page 5 of 10 Pages
- ------------------- ------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Apollo Management IV, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0 shares of Common Stock (see Item 5 below)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
5,401,968 shares of Common Stock (See Item 5 below)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 0 shares of Common Stock (see Item 5 below)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
5,401,968 shares of Common Stock (See Item 5 below)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
5,401,968 shares of Common Stock (see Item 5 below)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
9.6% (see Item 5 below)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
PN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 10 Pages
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STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OR 1934, AS AMENDED
================================================================================
Responses to each item below are incorporated by reference into each other
item, as applicable.
Item 1. Security and Issuer.
- ------- -------------------
This Statement on Schedule 13D relates to the Common Stock, par value
$0.01 per share ("Common Stock"), of Sylvan Learning Systems, Inc., a Maryland
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 100 Lancaster Street, Baltimore, Maryland 21202.
Item 2. Identity and Background.
- ------- ------------------------
This Statement is filed by Apollo Investment Fund IV, L.P., a Delaware
limited partnership ("Fund IV"), Apollo Overseas Partners IV, L.P., an exempted
limited partnership registered in the Cayman Islands ("Overseas IV"), Apollo
Advisors IV, L.P. a Delaware limited partnership ("Advisors IV"), and Apollo
Management IV, L.P., a Delaware limited partnership ("Apollo Management IV").
Fund IV, Overseas IV, Advisors IV and Apollo Management IV are referred to
collectively as the "Reporting Persons."
Fund IV and Overseas IV are principally engaged in the business of
investment in securities. Advisors IV is principally engaged in the business of
serving as general partner of Fund IV and managing general partner of Overseas
IV and other investment funds. Apollo Management IV serves as manager of Fund
IV and Overseas IV and manages their day-to-day operations. The principal
office of each of the Reporting Persons is c/o Apollo Advisors IV, L.P., Two
Manhattanville Road, Purchase, New York 10577.
Apollo Capital Management IV, Inc., a Delaware corporation ("Capital
Management IV"), is the general partner of Advisors IV. Capital Management IV
is principally engaged in the business of serving as general partner to Advisors
IV.
AIF IV Management, Inc., a Delaware corporation ("AIMIV"), is the
general partner of Apollo Management IV. AIMIV is principally engaged in the
business of serving as general partner to Apollo Management IV.
The respective addresses of the principal office of Capital Management
IV and AIMIV are c/o Apollo Advisors IV, L.P., Two Manhattanville Road,
Purchase, New York 10577.
Apollo Fund Administration IV LLC, a Delaware limited liability
company ("Administration"), is the administrative general partner of Overseas
IV. Administration is
Page 6 of 10 Pages
<PAGE>
principally engaged in the business of serving as administrative general partner
of Overseas IV. The principal place of business of Administration is c/o Apollo
Advisors IV, L.P., Two Manhattanville Road, Purchase, New York 10577.
Attached as Appendix A to Item 2 is information concerning the
principals, executive officers, directors and principal shareholders of the
Reporting Persons and other entities as to which such information is required to
be disclosed in response to Item 2 and General Instruction C to Schedule 13D.
Neither the Reporting Persons nor any of the persons or entities
referred to in Appendix A to Item 2 has, during the last five years, have been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree, or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ------- --------------------------------------------------
Fund IV and Overseas IV intend to finance the purchase of the
debentures described in Item 4 below with cash on hand. See Item 4 below for
information regarding the amount of funds to be used in the purchase of the
debentures.
Item 4. Purpose of Transaction.
- ------- -----------------------
On February 23, 2000, Fund IV and Overseas IV entered into a Purchase
Agreement (the "Purchase Agreement") with the Issuer pursuant to which Fund IV
and Overseas IV have agreed to purchase from the Issuer, and the Issuer has
agreed to issue to Fund IV and Overseas IV, $80,526,000 and $4,474,000 principal
amount, respectively, of the Issuer's 5% Convertible Subordinated Debentures due
2010 (the "debentures"). The obligations of the parties under the Purchase
Agreement are subject to the conditions set forth in the Purchase Agreement.
The debentures will be issued at the closing of the transactions contemplated by
the Purchase Agreement (the "Closing"), pursuant to an Indenture, the form of
which is attached as Exhibit 1 to the Purchase Agreement. A copy of the
Purchase Agreement is attached as Exhibit 1 to this filing.
At the Closing, the Issuer will enter into an Investors Agreement (the
"Investors Agreement") with Apollo Management IV, on behalf of Fund IV and
Overseas IV, the form of which is attached as an exhibit to the Purchase
Agreement. The Investors Agreement generally provides for transfer restrictions
on the debentures, nomination rights for two board designees, restrictions on
purchases of voting securities of the Issuer and certain corporate governance
rights. In addition, pursuant to a Registration Rights Agreement to be entered
into at closing (the "Registration Rights Agreement"), the Issuer will grant
certain registration rights to the Reporting Persons. Reference is made to
Exhibit 1 to this filing for more complete information respecting the Investors
Agreement and the Registration Rights Agreement.
The foregoing descriptions do not purport to be complete and are
qualified in their entirety by reference to the Purchase Agreement and the forms
of exhibits thereto, copies of
Page 7 of 10 Pages
<PAGE>
which have been filed as an exhibit to this Schedule 13D and are incorporated
herein by reference.
The Reporting Persons retain the right to change their investment
intent, to propose one or more possible transactions to the Board, to acquire
additional debentures or shares of Common Stock from time to time or to sell or
otherwise dispose of all or part of the debentures or shares of Common Stock
beneficially owned by them in any manner permitted by law. In the event of a
material change in the present plans or intentions of the Reporting Persons, the
Reporting Persons will amend this Schedule 13D to reflect such change.
Item 5. Interest in Securities of the Issuer.
- ------- ------------------------------------
(a) Upon acquisition of the debentures, the Reporting Persons may be
deemed to have beneficial ownership of an aggregate of 5,401,968 shares of
Common Stock that Fund IV and Overseas IV, in the aggregate, can acquire upon
conversion of the debentures. These shares represent approximately 9.6% of the
number of shares of Common Stock outstanding.
The acquisition by Fund IV and Overseas IV of the debentures is
subject to certain material conditions that are not within the control of any of
the Reporting Persons. Accordingly, the Reporting Persons may not have
beneficial ownership of any shares of Common Stock until those conditions have
been satisfied.
(b) Fund IV has sole voting and sole dispositive power with respect
to an aggregate of 5,117,634 shares of Common Stock. Overseas IV has sole voting
and sole dispositive power with respect to an aggregate of 284,334 shares of
Common Stock. Advisors IV, as the general partner of Fund IV and the managing
general partner of Overseas IV, and Apollo Management IV, as the manager of Fund
IV and Overseas IV, may be deemed to have voting and dispositive power over the
shares of Common Stock over which Fund IV and Overseas IV, respectively, have
voting and dispositive power.
(c) There have been no reportable transactions by the Reporting
Persons with respect to the Common Stock of the Issuer within the last 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
- ------- ---------------------------------------------------------------------
to the Securities of the Issuer.
--------------------------------
See Item 4 above.
Item 7. Material to be Filed as Exhibits.
- ------- ---------------------------------
Exhibit 1. Purchase Agreement
Page 8 of 10 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct and agree that this statement is filed on behalf of each of
them.
Dated: March 2, 2000
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P., its General Partner
By: Apollo Capital Management IV, Inc., its General Partner
By: /s/ Michael D. Weiner
---------------------
Name: Michael D. Weiner
Title: Vice President, Apollo Capital Management IV, Inc.
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P., its Managing General Partner
By: Apollo Capital Management IV, Inc., its General Partner
By: /s/ Michael D. Weiner
----------------------
Name: Michael D. Weiner
Title: Vice President, Apollo Capital Management IV, Inc.
APOLLO ADVISORS IV, L.P.
By: Apollo Capital Management IV, Inc., its General Partner
By: /s/ Michael D. Weiner
---------------------
Name: Michael D. Weiner
Title: Vice President, Apollo Capital Management IV, Inc.
APOLLO MANAGEMENT IV, L.P.
By: AIM Management IV, Inc.
By: /s/ Michael D. Weiner
---------------------
Name: Michael D. Weiner
Title: Vice President, AIM Management IV, Inc.
Page 9 of 10 Pages
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APPENDIX A TO ITEM 2
The following sets forth information with respect to the general
partners, executive officers, directors and principal shareholders of Advisors
IV, Capital Management IV, and Administration. Capitalized terms used herein
without definition have the meanings assigned thereto in the Schedule 13D to
which this Appendix A relates. Except as otherwise indicated in this Appendix A
or in the Schedule 13D to which this Appendix A relates, the principal business
address of each person or entity set forth below is c/o Apollo Advisors IV,
L.P., Two Manhattanville Road, Purchase, New York 10577, and each such person or
entity is a citizen of the United States of America.
The principal business of Advisors IV is to provide advice regarding
investments by, and serving as general partner to, the Reporting Persons, and
the principal business of Capital Management IV is that of serving as general
partner of Advisors IV.
The directors and principal executive officers of Capital Management
IV are Messrs. Leon D. Black and John J. Hannan. The principal occupation of
each of Messrs. Black and Hannan is to act as an executive officer and director
of Capital Management IV. Messrs. Black and Hannan are also limited partners of
Advisors IV. Mr. Black is the President and director of AIMIV, the general
partner of Apollo Management IV. Mr. Hannan is a Vice President and director of
AIMIV. AIMIV is principally engaged in the business of serving as general
partner of Apollo Management IV.
Messrs. Black and Hannan are also founding principals of Apollo
Advisors, L.P. ("Advisors"), Apollo Advisors II, L.P. ("Advisors II"), Lion
Advisors, L.P. ("Lion"), Apollo Real Estate Advisors, L.P. ("AREA") and Apollo
Real Estate Advisors II, L.P. ("AREAII"). The principal business of Advisors,
Advisors II and Lion is to provide advice regarding investments in securities
and the principal business of AREA and AREA II is to provide advice regarding
investments in real estate and real estate-related investments. The business
address of each of Messrs. Black and Hannan is c/o Apollo Management, L.P., 1301
Avenue of the Americas, New York, New York 10019.
Page 10 of 10 Pages
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Sylvan Learning Systems, Inc.
$100,000,000
5% Convertible Subordinated Debentures due 2010
______________________
PURCHASE AGREEMENT
______________________
Dated as of February 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
1. PRELIMINARY MATTERS................................................................................... 1
1.1 Authorization of Debentures.................................................................. 1
1.2 Issue Taxes.................................................................................. 1
1.3 Direct Payment............................................................................... 1
1.4 Replacement Debentures....................................................................... 2
1.5 Indemnification.............................................................................. 2
2. SALE AND PURCHASE OF DEBENTURES....................................................................... 4
3. CLOSING............................................................................................... 4
4. CONDITIONS TO CLOSING................................................................................. 4
4.1 Representations and Warranties............................................................... 4
4.2 Performance; No Default...................................................................... 5
4.3 Compliance Certificates...................................................................... 5
4.4 Opinions of Counsel.......................................................................... 5
4.5 Purchase Permitted By Applicable Law, etc.................................................... 5
4.6 Other Agreement.............................................................................. 5
4.7 Market Conditions............................................................................ 6
4.8 Proceedings and Documents.................................................................... 6
4.9 Consents and Permits......................................................................... 6
4.10 New Members of the Board of Directors........................................................ 6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 6
5.1 Organization; Power and Authority............................................................ 6
5.2 Authorization, etc........................................................................... 7
5.3 Capitalization............................................................................... 7
5.4 Organization and Ownership of Shares of Subsidiaries......................................... 7
5.5 Filed Documents and Financial Statements..................................................... 8
5.6 No Current Violation, Default................................................................ 8
5.7 Compliance with Laws, Other Instruments, etc................................................. 9
5.8 Consents, Approvals, etc..................................................................... 9
5.9 Litigation; Observance of Statutes and Orders................................................ 9
5.10 Environmental................................................................................ 10
5.11 Taxes........................................................................................ 10
5.12 Title to Property and Assets; Leases......................................................... 10
5.13 Licenses, Permits, etc....................................................................... 10
5.14 Compliance with ERISA........................................................................ 11
5.15 Private Offering by the Company.............................................................. 12
5.16 Use of Proceeds; Margin Regulations.......................................................... 12
5.17 Status under Certain Statutes................................................................ 13
5.18 Certain Payments............................................................................. 13
5.19 No Brokers or Finders........................................................................ 13
5.20 Insurance.................................................................................... 13
5.21 Accounting................................................................................... 14
5.22 Registration Rights.......................................................................... 14
5.23 [Intentionally Omitted.]..................................................................... 14
5.24 Securities Ratings........................................................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.25 Similar Securities Not Listed................................................................ 14
5.26 Intellectual Property........................................................................ 14
5.27 Authorization of Shares Issuable Upon Conversion............................................. 15
5.28 Affiliate Transactions....................................................................... 15
5.29 Representations and Warranties in the Prometric Agreements................................... 15
5.30 Investment Company Act....................................................................... 15
5.31 Antitakeover Matters......................................................................... 15
5.32 Formation and Capitalization of Incubator.................................................... 16
6. REPRESENTATIONS OF THE PURCHASER...................................................................... 16
6.1 Organization; Power and Authority............................................................ 16
6.2 Authorization, etc........................................................................... 17
6.3 Purchase for Investment...................................................................... 17
7. COVENANTS............................................................................................. 17
7.1 Transaction Expenses......................................................................... 17
7.2 Operation of Business........................................................................ 18
7.3 Access to Books and Records.................................................................. 18
7.4 Agreement to Take Necessary and Desirable Actions............................................ 18
7.5 Compliance with Conditions; Best Efforts..................................................... 19
7.6 HSR Act Filings.............................................................................. 19
7.7 Prometric Transaction........................................................................ 19
7.8 Antitakeover Matters......................................................................... 19
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.......................................... 19
9. AMENDMENT AND WAIVER.................................................................................. 20
10. NOTICES............................................................................................... 20
11. REPRODUCTION OF DOCUMENTS............................................................................. 20
12. SUBSTITUTION OF PURCHASER............................................................................. 20
13. MISCELLANEOUS......................................................................................... 21
13.1 Successors and Assigns....................................................................... 21
13.2 Severability................................................................................. 21
13.3 Construction................................................................................. 21
13.4 Counterparts................................................................................. 21
13.5 Governing Law; Submission to Jurisdiction.................................................... 21
13.6 Confidentiality.............................................................................. 21
</TABLE>
SCHEDULE A -- DEFINED TERMS
SCHEDULE 1.3 -- Purchaser's Bank Accounts
SCHEDULE 2 -- Debenture Purchase Commitments
SCHEDULE 5.3 -- Capitalization
ii
<PAGE>
<TABLE>
<S> <C>
SCHEDULE 5.4 -- Subsidiaries
SCHEDULE 5.5(b) -- Unaudited Interim Financial Statements of the Company
SCHEDULE 5.5(c) -- 2000 Budget
SCHEDULE 5.8 -- Consents
SCHEDULE 5.13 -- Restricted Licenses and Permits
SCHEDULE 5.14 -- Employee Benefit Plans
SCHEDULE 5.22 -- Registration Rights
SCHEDULE 5.28 -- Affiliate Transactions
EXHIBIT 1 -- Form of Indenture
EXHIBIT 4.4(a) -- Form of Opinion of Venable, Baetjer & Howard, LLP
EXHIBIT 4.4(b) -- Form of Opinion of Robert Zentz, General Counsel of the Company
EXHIBIT 5.8 -- Form of Registration Rights Agreement
EXHIBIT 5.28 -- Form of Investors Agreement
EXHIBIT 7.4 -- Terms of Incubator Agreement
</TABLE>
iii
<PAGE>
Sylvan Learning Systems, Inc.
100 Lancaster Street
Baltimore, Maryland 21202
Fax: 410-843-8065
$100,000,000
5% Convertible Subordinated Debentures due 2010
As of February 23, 2000
The Purchasers named on the signature pages hereto
Ladies and Gentlemen:
Sylvan Learning Systems, Inc., a Maryland corporation (the "Company"),
agrees with each of the purchasers named on the signature pages hereto (each, a
"Purchaser") as follows:
1. PRELIMINARY MATTERS.
1.1 Authorization of Debentures.
The Company has authorized the issue and sale of $100,000,000
aggregate principal amount of its 5% Convertible Subordinated Debentures due
2010 (the "Debentures"), such term to include any such Debentures issued in
----------
substitution therefor pursuant to the terms of the Indenture. The Debentures
shall be issued pursuant to an Indenture substantially in the form set out in
Exhibit 1. Certain capitalized terms used in this Agreement are defined in
Schedule A; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
1.2 Issue Taxes.
The Company agrees to pay all taxes (other than taxes in the nature of
income, franchise or gift taxes) and governmental fees in connection with the
issuance, sale, delivery or transfer by the Company to the Purchasers of the
Debentures and the execution and delivery of this Agreement and the Other
Agreements and any modification of any of this Agreement or the Other Agreements
and will save each and all of the Purchasers harmless without limitation as to
time against any and all liabilities with respect to all such taxes and fees.
The obligations of the Company under this Section 1.2 are in addition to any
other obligations of the Company contained elsewhere in this Agreement and shall
survive the payment or prepayment of the Debentures, at maturity, upon
redemption or otherwise and the termination of this Agreement and the Other
Agreements.
1.3 Direct Payment.
Notwithstanding any provision to the contrary in the Indenture or the
Debentures, the Company will pay or cause to be paid all amounts payable with
respect to any Debenture held by the Purchasers (without any presentment of such
Debenture and without any notation of such payment being made thereon) by
crediting (before 12:00 Noon, New York time), by Federal funds bank wire
transfer in same day funds to such holder's account in any bank in the United
States of America as may be designated
1
<PAGE>
and specified in writing by such holder at least two Business Days prior
thereto. Each Purchaser's initial bank account for this purpose is on Schedule
-----------
1.3 hereto.
- ---
1.4 Replacement Debentures.
If a mutilated Debenture that is a Transfer Restricted Security (as
defined in the Indenture) is surrendered to the Company or if a Purchaser or any
other institutional holder (or nominee thereof) of a Debenture that is a
Transfer Restricted Security claims and submits an affidavit or other evidence,
satisfactory to the Company, to the effect that the Debenture has been lost,
destroyed or wrongfully taken, the Company shall issue a replacement Debenture
without the need to post any bond, and no further indemnity shall be required as
a condition to the execution and delivery of a new Debenture other than the
unsecured written agreement of such owner reasonably satisfactory to the
Company, to indemnify the Company. With respect to any Debenture that is not a
Transfer Restricted Security which is surrendered to the Company or which is
claimed by the Purchaser or its holder to be lost, destroyed or wrongfully
taken, the Company may require the Purchaser or such holder to post a bond
against any loss arising in connection therewith as a condition to the execution
and delivery of a new Debenture and to indemnify the Company, in each case, to
the extent provided in the Indenture.
1.5 Indemnification.
(a) In addition to all other sums due hereunder or provided for in
this Agreement or any Other Agreement and any and all obligations of the
Company to indemnify any Purchaser hereunder or under any Other Agreement,
the Company hereby agrees, without limitation as to time, to indemnify each
Purchaser, each Affiliate of each Purchaser and each director, officer,
employee, counsel, agent or representative of each Purchaser and its
Affiliates (collectively, the "Indemnified Parties") against, and hold it
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and them harmless from, to the fullest extent lawful, all losses, claims,
damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees and disbursements) and expenses, including
expenses of investigation (collectively, "Losses"), incurred by it or them
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and arising out of or in connection with this Agreement or any Other
Agreement, or the Transactions, regardless of whether the Transactions are
consummated and regardless of whether any Indemnified Party is a formal
party to any proceeding; provided, that the Company shall not be liable to
any Indemnified Party for any Losses to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or review) that such Losses arose from the gross
negligence or willful misconduct of such Indemnified Party, which (i) is
independent of any wrongful act by the Company, its Affiliates or any of
its representatives and (ii) was not taken by such Indemnified Party in
reliance upon any of the representations, warranties, covenants or promises
of the Company herein or in the Other Agreements, including (without
limitation) the certificates delivered by the Company pursuant hereto or
thereto. The Company agrees to reimburse each Indemnified Party promptly
for all such Losses as they are incurred by such Indemnified Party
(regardless of whether it is or may be ultimately determined that such
Indemnified Party is not entitled to indemnification hereunder), subject to
repayment in the event that the Indemnified Party is ultimately determined
not entitled to indemnification hereunder (as finally determined by a court
of competent jurisdiction (which determination is not subject to review or
appeal)). The obligations of the Company to each Indemnified Party
hereunder shall be separate obligations, and the Company's liability to any
such Indemnified Party hereunder shall not be extinguished solely because
any other Indemnified Party is not entitled to indemnity hereunder. The
obligations of each Indemnifying Party under this Section 1.5 shall survive
the payment or prepayment of the Debentures, at maturity, upon
acceleration, redemption or otherwise, the
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redemption or repurchase of any Common Stock, any transfer of the
Debentures or Common Stock by any Purchaser and the termination of this
Agreement or any of the Other Agreements.
(b) In case any action, claim or proceeding shall be brought against
any Indemnified Party with respect to which indemnity may be sought
hereunder, such Indemnified Party shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party and
payment of all fees and expenses incurred in connection with the defense
thereof; provided, that the failure to so notify the Company shall not
affect any obligation it may have to any Indemnified Party under this
Agreement or otherwise except to the extent that (as finally determined by
a court of competent jurisdiction (which determination is not subject to
review or appeal)) such failure materially and adversely prejudiced the
Company. The Company shall not, without the Indemnified Party's prior
written consent, consent to entry of any judgment or settle or compromise
any pending or threatened claim, action or proceeding in respect of which
indemnification or contribution may be sought hereunder unless the
foregoing contains an unconditional release, in form and substance
reasonably satisfactory to the Indemnified Parties, of the Indemnified
Parties from all liability and obligation arising therefrom. Each
Indemnified Party shall have the right to employ separate counsel in such
action, claim or proceeding and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of each
Indemnified Party unless: (i) the Company has agreed to pay such expenses;
or (ii) the Company has failed to promptly assume the defense and employ
counsel reasonably satisfactory to such Indemnified Party; or (iii) the
named parties to any such action, claim or proceeding (including any
impleaded parties) include any Indemnified Party and the Company or an
Affiliate of the Company, and such Indemnified Party shall have been
advised by counsel that either (x) there may be one or more legal defenses
available to it that are different from or in addition to those available
to the Company or such Affiliate or (y) a conflict of interest may exist if
such counsel represents such Indemnified Party and the Company or its
Affiliate; provided that, if such Indemnified Party notifies the Company in
writing that it elects to employ separate counsel in the circumstances
described in clause (ii) or (iii) above, the Company shall not have the
right to assume the defense thereof and such counsel shall be at the
expense of the Indemnifying Parties.
Notwithstanding any other provision hereof the Company shall not (i)
in connection with any one such action or proceeding, be responsible
hereunder for the fees and expenses of more than one such firm of separate
counsel (in addition to any local counsel), which counsel shall be
designated by such Indemnified Party, (ii) be liable for any settlement of
any such action effected without its written consent (which shall not be
unreasonably withheld or delayed), or (iii) be responsible hereunder for
attorneys' fees or expenses incurred by the Indemnified Parties in excess
of $500,000 in the aggregate other than 50% of such attorneys' fees and
expenses in excess of $1,000,000.
(c) If the indemnification provided for in this Section 1.5 is
unavailable to, or insufficient to hold harmless, any Indemnified Party in
respect of any Losses referred to herein, then the Company shall contribute
to the amount paid or payable by such Persons as a result of such Losses in
such proportion as is appropriate to reflect the relative fault of the
Company, its subsidiaries and Affiliates, on the one hand, and such
Indemnified Party, on the other hand, in connection with the actions which
resulted in such Losses, as well as any other relevant equitable
considerations. The amount paid or payable by any such Person as a result
of the Losses referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such Person in connection
with any investigation, lawsuit or legal or administrative action or
proceeding.
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(d) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 1.5 were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. 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 is not guilty of such
fraudulent misrepresentation.
2. SALE AND PURCHASE OF DEBENTURES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to each Purchaser, and each Purchaser will severally
purchase from the Company, at the Closing, Debentures in the respective amounts
as set forth in Schedule 2 at a purchase price of 100% of the principal amount
thereof. In connection with the Transactions, the Company shall pay to the
Persons designated by Apollo Management IV, L.P. ("Apollo Management") a closing
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fee equal to 1% of the aggregate principal amount of Debentures purchased by the
Purchasers (the "Closing Fee").
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3. CLOSING.
The sale and purchase of the Debentures shall occur at the offices of
Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank and Trust Building, 2
Hopkins Plaza, Baltimore, Maryland 21201, at 9:00 a.m., local time, at a
closing (the "Closing"), which shall occur as soon as practicable after
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satisfaction or waiver of each of the conditions to closing set forth herein
(but in no event prior to March 20, 2000) or on such other Business Day
thereafter as may be agreed upon by the Company and Apollo Management. The date
on which the Closing occurs is referred to herein as the "Closing Date." At the
------------
Closing (a) the Company will deliver to each Purchaser the Debentures to be
purchased by such Purchaser in the form of a single Debenture (or such greater
number of Debentures as Apollo Management may request), dated the Closing Date,
and registered in such Purchaser's name (or in the name of such Purchaser's
nominee), against delivery by such Purchaser to the Company of immediately
available funds in the amount of the purchase price therefor by wire transfer to
such bank account as the Company shall have notified Apollo Management in
writing and (b) the Company shall pay the Closing Fee in immediately available
funds by wire transfer to such bank accounts as Apollo Management shall have
notified the Company in writing. If at the Closing the Company shall fail to
tender such Debentures to such Purchaser or pay the Closing Fee as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to such Purchaser's reasonable satisfaction, such
Purchaser shall, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights it may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Each Purchaser's obligation to purchase and pay for the Debentures to
be sold to such Purchaser at the Closing is subject to the fulfillment or
waiver, prior to or at the Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company in this Agreement
and each of the Other Agreements shall be correct when made and at the time of
the Closing except where such representations and warranties expressly relate to
an earlier date.
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4.2 Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement and each of the Other Agreements required
to be performed or complied with by it prior to or at the Closing. After giving
effect to the Transactions (including, without limitation, the issue and sale of
the Debentures (and the application of the proceeds thereof as contemplated by
Section 5.16)), no Default or Event of Default (as both terms are defined in the
Indenture) shall have occurred and be continuing.
4.3 Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to the
---------------------
Purchasers an Officer's Certificate, dated the Closing Date, in form and
substance reasonably satisfactory to Apollo Management, certifying that the
conditions specified in Sections 4.1, 4.2, 4.9 and 4.10 have been
fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to the
-----------------------
Purchasers a certificate of the secretary of the Company, dated the Closing
Date, in form and substance reasonably satisfactory to Apollo Management,
certifying, among other things, as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of this Agreement and the Other Agreements and the approval of the
Transactions.
4.4 Opinions of Counsel.
(a) The Purchasers shall have received an opinion, dated the Closing
Date, from, Venable, Baetjer & Howard, LLP, special counsel for the
Company, in the form set forth in Exhibit 4.4(a) (and the Company hereby
instructs such counsel to deliver such opinion to the Purchasers).
(b) The Purchasers shall have received an opinion, dated the Closing
Date, from, Robert Zentz, General Counsel of the Company, in the form set
forth in Exhibit 4.4(b) (and the Company hereby instructs such counsel to
deliver such opinion to the Purchasers).
(c) The Purchasers shall have received the opinions, dated the Closing
Date, as to certain tax matters, described in Exhibit 7.4 (and the Company
hereby instructs such counsel to deliver such opinion to the Purchasers).
4.5 Purchase Permitted By Applicable Law, etc.
The Purchaser's purchase of Debentures shall (i) not violate any
applicable Law and (ii) not subject any Purchaser to any tax, penalty or
liability under or pursuant to any applicable Law.
4.6 Other Agreements.
Each Other Agreement (other than the Incubator Agreement) shall have
been executed and delivered by all parties thereto and shall be in full force
and effect, each party to each Other Agreement shall have performed all of its
obligations to be performed thereunder on or prior to the Closing Date, and each
of Chris Hoehn-Saric and Douglas Becker shall have entered into employment
agreements (collectively, the "Employment Agreements") with the Incubator, each
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in a form approved by Apollo Management.
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4.7 Market Conditions.
During the seven-calendar-day period ending on the Closing Date, (a)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ Stock Market shall not have been suspended and
minimum prices shall not have been established on either of such exchanges or
such market by such exchange or by the SEC, (b) a general banking moratorium
shall not have been declared by Federal or New York or California authorities,
and (c) no change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened that, in the reasonable
judgment of the Purchasers, has had or could, individually or in the aggregate,
reasonably be expected to have a material adverse effect upon the prices or
trading of securities generally traded on financial markets in the United
States.
4.8 Proceedings and Documents.
All corporate and other proceedings in connection with the
Transactions and all documents and instruments executed or delivered in
connection with such Transactions shall be reasonably satisfactory in form and
substance to Apollo Management and Apollo Management shall have received all
such counterpart originals or certified or other copies of such documents as
Apollo Management may reasonably request.
4.9 Consents and Permits.
The Company shall have received all consents, permits, approvals and
authorizations and sent or made all notices, filings, registrations and
qualifications as may be required pursuant to any Law or pursuant to any
Applicable Agreement, in connection with the Transactions to be consummated on
or prior to the Closing Date.
4.10 New Members of the Board of Directors.
Michael Gross and Laurence Berg shall have been appointed as members
of the board of directors of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
5.1 Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and to perform the provisions hereof and
thereof.
5.2 Authorization, etc.
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(a) This Agreement has been duly authorized, executed and delivered by
the Company and is enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or similar laws affecting creditors' rights generally and (ii) general
principals of equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such enforcement
is considered in a proceeding at law or in equity).
(b) Each of the Other Agreements has been duly authorized by the
Company and, on the Closing Date, will have been validly executed and
delivered by the Company. When each Other Agreement has been duly executed
and delivered by the Company such Other Agreement will be a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
limited by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights
generally and (ii) general principals of equity and the discretion of the
court before which any proceeding therefor may be brought (regardless of
whether such enforcement is considered in a proceeding at law or in
equity). On the Closing Date the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended
(the "TIA" or "Trust Indenture Act"), and the rules and regulations of the
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SEC applicable to an indenture which is qualified thereunder.
5.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists of: (i) 90,000,000 shares of common stock, par value $0.01 per
share ("Common Stock"), of which 50,915,574 shares are issued and
outstanding and (ii) 10,000,000 shares of preferred stock, par value $0.01
per share ("Preferred Shares"), of which no shares are issued and
outstanding.
(b) The outstanding shares of Common Stock have been duly authorized
and are validly issued and outstanding, fully paid and nonassessable, and
subject to no preemptive or similar rights (and were not issued in
violation of any preemptive or similar rights). Except as disclosed in the
previous paragraph and in Schedule 5.3, there are no other shares of
capital stock of the Company authorized and reserved for issuance and the
Company does not have any commitment to authorize, issue or sell any of its
capital stock or securities convertible into its capital stock. Schedule
5.3 sets forth the number of shares of Common Stock, or other ownership
interests, issuable or reserved for issuance upon exercise of
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or Liens related to or entitling any person to purchase
or otherwise to acquire any shares of the capital stock of the Company (and
the exercise price thereof).
5.4 Organization and Ownership of Shares of Subsidiaries.
(a) Except as set forth on Schedule 5.4, all of the outstanding shares
of capital stock or similar equity interests of each Subsidiary of the
Company have been duly authorized, validly issued, are fully paid and
nonassessable, and are owned by the Company or another Subsidiary free and
clear of any Lien. Schedule 5.4 sets forth the number of shares of capital
stock, or other ownership interests, issuable or reserved for issuance upon
exercise of subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or Liens related to or entitling any person
to purchase or otherwise to acquire any shares of the capital stock of each
Subsidiary (and the exercise price thereof).
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(b) Each Subsidiary of the Company is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
power and authority to own or hold under lease the properties it purports
to own or hold under lease and to transact the business it transacts and
proposes to transact.
5.5 Filed Documents and Financial Statements.
(a) The Company has filed all required forms, reports and documents
with the SEC since January 1, 1995 (the "SEC Documents"), each of which
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complied in all material respects with all of the requirements of the
Securities Act or the Exchange Act, as applicable, and did not contain any
untrue statement of a material fact or omit to state any material fact
required to be contained therein or necessary in order to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading. All financial statements contained in such
filings (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates and the
consolidated results of their operations and cash flows for the respective
periods and have been prepared in accordance with GAAP, consistently
applied throughout the periods involved, except as set forth in the notes
thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
(b) The Company's unaudited financial statements attached as Schedule
5.5(b), were prepared on the same basis as the financial statements
contained in the SEC Documents and fairly present the consolidated
financial position of the Company and its Subsidiaries as of the dates
referenced therein and the consolidated results of their operations and
cash flow for the respective periods, and have been prepared in accordance
with GAAP consistently applied throughout the periods involved, except such
statements do not contain footnotes or related schedules. Since December
31, 1999, there has been no material adverse change in the business,
operations, properties, prospects or condition (financial or otherwise) of
the Company or any of its Subsidiaries. Since December 31, 1999, the
Company has conducted its business in the usual, regular and ordinary
course..
(c) The Company's budget for 2000 attached as Schedule 5.5(c) was
prepared in good faith based on assumptions and projections believed to
have been reasonable at the time made and were prepared in all material
respects consistent with past accounting practices.
5.6 No Current Violation, Default.
Neither the Company nor any of its Subsidiaries is (a) in violation of
its respective charter, by-laws, partnership agreement or similar governing
documents ("Charter"), as the case may be, or (b) in default (and no condition
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exists that with notice or lapse of time or both would constitute a default) in
the performance of any obligation, agreement or condition contained in any
Applicable Agreement, except in case of this clause (b) to the extent such
violation or default, if any, could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries is in default (and no
condition exists that with notice or lapse of time or both would constitute a
default) in the performance of any obligation, agreement or condition contained
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in the Prometric Agreements except to the extent such violation or default, if
any, could not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.7 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement and the Other Agreements, and the consummation of the Transactions,
will not violate, contravene, trigger any rights of any shareholder of the
Company under, result in any breach of, conflict with, constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, (a) any Charter, (b) any Applicable Agreement
or (c) any Law, except in the case of clause (b), to the extent such violation
or default could not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
5.8 Consents, Approvals, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority or any other Person is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Other Agreements or the consummation of the Transactions,
except (i) a filing pursuant to the HSR Act as may be required in connection
with the conversion of the Debentures, (ii) filings with the SEC required by the
Registration Rights Agreement, dated as of the Closing Date, to be entered into
among the Company and the Purchasers , in the form attached as Exhibit 5.8
hereto (the "Registration Rights Agreement"), (iii) any filings required to
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perfect an exemption from registration under the Securities Act and similar
state securities laws for the sale of the Debentures and Common Stock issuable
on conversion thereof, (iv) any applicable filing to list the Common Stock
issuable on conversion of the Debentures on the applicable national securities
exchange or Nasdaq market,and (v) the consents listed on Schedule 5.8. The
Company is not aware of any consents listed on Schedule 5.8 that will not be
obtained in a timely manner. Schedule 5.8 indicates whether each of the
consents listed thereon has been obtain on or prior to the date hereof.
5.9 Litigation; Observance of Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary or any property of the Company or any Subsidiary before or
by any Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any Governmental Authority or is in
violation of any applicable Law, which default or violation, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
5.10 Environmental.
(a) The Company and its Subsidiaries are in compliance with all
Environmental Laws, except where such non-compliance could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has received any notice
that alleges that the Company or its Subsidiaries is not in compliance with
any Environmental Laws, and to the best of the Company's knowledge, there
are no circumstances that may prevent or interfere with such compliance in
the future.
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(b) There is no Environmental Claim pending or threatened, to the
knowledge of the Company, against the Company or any of its Subsidiaries
with respect to the operations or business of the Company or its
Subsidiaries, or against any Person whose liability for any Environmental
Claim the Company or its Subsidiaries has retained or assumed either
contractually or by operation of law, and to the best of the Company's
knowledge, there are no circumstances that could form the basis of any such
Environmental Claim in the future.
5.11 Taxes.
(a) All Tax returns required to be filed by the Company and each of
its Subsidiaries have been filed and all such returns are true, complete,
and correct in all material respects. All Taxes that are due or claimed to
be due from the Company and each of its subsidiaries have been paid, other
than those (i) currently payable without penalty or interest or (ii) being
contested in good faith and by appropriate proceedings and for which, in
the case of both clauses (i) and (ii), adequate reserves have been
established on the books and records of the Company and its subsidiaries in
accordance with GAAP. There are no proposed Tax assessments against the
Company or any of its subsidiaries. To the best knowledge and belief of
the Company, the accruals and reserves on the books and records of the
Company and its Subsidiaries in respect of any Tax liability for any
taxable period not finally determined are adequate to meet any assessments
of Tax for any such period.
(b) The Company is not currently a United States real property holding
corporation as defined in Section 897(c)(2) of the Code. The Company will
use its best efforts to not become a United States real property holding
corporation in the future.
5.12 Title to Property and Assets; Leases.
Except as set forth in the SEC Documents filed on or after January 1,
1999, each of the Company and each of its Subsidiaries has good and marketable
title, free and clear of all Liens to all of its assets except (i) Liens for
taxes not yet due and payable and (ii) immaterial Liens that do not interfere
with the use of such assets. All leases to which the Company or any of its
Subsidiaries is a party are valid and binding and no default has occurred or is
continuing thereunder, other than any such defaults that, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
The Company and its Subsidiaries enjoy a peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with such
exceptions as do not materially interfere with the use made by the Company or
such Subsidiary.
5.13 Licenses, Permits, etc.
The Company and each of its Subsidiaries has such material permits,
licenses, franchises, authorizations of governmental or regulatory authorities,
patents, copyrights, service marks, trademarks and trade names, or rights
thereto ("licenses and permits") including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate its
respective properties and to conduct its business. The Company and each of its
Subsidiaries has fulfilled and performed in all material respects all of its
obligations with respect to such licenses and permits. No event has occurred
that allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other impairment of the rights of the
holder of any such license or permit if the revocation, termination or
impairment thereof could, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and, except as
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described in Schedule 5.13, such licenses and permits contain no restrictions
that are materially burdensome to the Company or any of its Subsidiaries.
5.14 Compliance with ERISA.
(a) Schedule 5.14 sets forth a true and complete list of each
employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other stock-based
incentive, severance, change-in-control, or termination pay,
hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or any of
its Subsidiaries, or by any trade or business, whether or not incorporated
(an "1 ERISA Affiliate"), that together with the Company or any of its
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Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of ERISA, for the benefit of any current or former
employee or director of the Company, or any of its Subsidiaries or any
ERISA Affiliate (the "Plans").
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(b) The Company has made available to the Purchasers with respect to
all Plans, true, complete and correct copies of the following: all plan
documents and the most recent summary plan descriptions and any subsequent
summaries of material modifications; forms 5500 as filed with the IRS for
the most recent plan year; all trust agreements with respect to the Plans;
the most recent IRS determination letter for all plans qualified under Code
section 401(a); all handbooks, manuals, and similar documents governing
material employment policies, practices and procedures and each form S-8
and each prospectus related thereto filed or used in the past three years.
(c) There are no proceedings (other than routine claims for benefits)
pending or to the knowledge of the Company threatened with respect to any
Plan, the assets of any trust thereunder, or the Plan sponsor or the Plan
administrator with respect to the design or operation of any Plan. Each
Plan which is intended to be "qualified" within the meaning of section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service with respect to its tax-qualified status and to
the knowledge of the Company, nothing has occurred since the date of the
most recent applicable determination letter that would adversely affect the
tax-qualified status of any such Plan;
(d) The consummation of the Transactions will not, either alone or in
combination with another event, (i) entitle any employee of the Company or
any Subsidiary of the Company to severance pay, unemployment compensation
or any other payment, (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee, or (iii)
result in any liability under Title IV of ERISA.
(e) Except with respect to any act that would not have a Material
Adverse Effect on the Company, any Subsidiary or ERISA Affiliate, the
Company has operated and administered each Plan in substantial compliance
with all applicable Laws.
(f) None of the Company, any of its Subsidiaries, any ERISA Affiliate,
any of the ERISA Plans, any trust created thereunder, nor to the Company's
knowledge, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with
which the Company, any of its Subsidiaries or any ERISA Affiliate could be
subject
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to any material liability for either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975(a) or (b), 4976 or 4980B of the Code.
(g) At no time has the Company, any of its Subsidiaries or any ERISA
Affiliate ever, maintained, established, sponsored, participated in or
contributed to any ERISA Plan that is subject to Title IV of ERISA.
(h) At no time has the Company, any of its Subsidiaries or any ERISA
Affiliate ever contributed to or been obliged to contribute to any
"multiemployer pension plan, " as such term is defined in Section 3(37) of
ERISA.
(i) No amounts payable under any of the Plans or any other contract,
agreement or arrangement with respect to which the Company or any of its
Subsidiaries may have any liability could fail to be deductible for federal
income tax purposes by virtue of Section 162(m) or Section 280G of the
Code.
(j) The Company, its Subsidiaries and its ERISA Affiliates do not have
any obligations in connection with any medical, death or other welfare
benefit for its employees after they retire, except to the extent required
under the group health plan continuation requirements of Section 601 of
ERISA or under any applicable state law.
5.15 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Debentures or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than the Purchasers, which have been offered the
Debentures at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Debentures to the registration requirements of Section 5
of the Securities Act. No securities of the same class as the Debentures have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof. Prior to the effectiveness of any registration
statement filed under the Securities Act, the Indenture is not required to be
qualified under the TIA.
5.16 Use of Proceeds; Margin Regulations.
At all times after the Closing and prior to contribution thereof to
the Incubator in accordance with the Incubator Agreement, the Company will set
aside and keep available for such contribution an amount equal to the proceeds
from the sale of the Debentures (the "Contribution Amount"). Pending such
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contribution, the Contribution Amount and any portion thereof held by the
Company will be held solely in the form of: (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), (iii) time deposits and certificates of deposit and commercial paper
issued by the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000 and (iv)
commercial paper issued by others rated at least A-2 or the equivalent thereof
by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc. and in the case of each of (ii), (iii), and (iv)
maturing within one year of the Closing Date.
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5.17 Status under Certain Statutes.
Neither the Company nor any Subsidiary is, nor after giving effect to
the Transactions will any of them be, subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935,
as amended, the Interstate Commerce Act, as amended, or the Federal Power Act,
as amended.
5.18 Certain Payments.
Neither the Company nor any Subsidiary, nor any director, officer,
agent, employee, or other person associated with or acting on behalf of any of
them, has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any
Subsidiary or any Affiliate of the Company or any Subsidiary, or (iv) in
violation of any Law, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company.
5.19 No Brokers or Finders.
No agent, broker, finder, or investment or commercial banker or other
Person engaged by or acting on behalf of the Company or any Subsidiary, is or
will be entitled to any brokerage or finder's or similar fee or other commission
as a result of this Agreement, the Other Agreements or the Transactions, other
than Chase Securities, Inc., which will be entitled to receive an amount not to
exceed $750,000 in the aggregate in exchange for delivering a fairness opinion
to the Company and all other services in connection with such matters.
5.20 Insurance.
The Company and its Subsidiaries maintain, with reputable insurers,
insurance in such amounts, including deductible arrangements, and of such a
character as is usually maintained by reasonably prudent managers of companies
engaged in the same or similar business. All policies of title, fire,
liability, casualty, business interruption, workers' compensation and other
forms of insurance including, but not limited to, directors and officers
insurance, held by the Company and its Subsidiaries, are in full force and
effect in accordance with their terms. Neither the Company nor any of its
Subsidiaries is in default under any provisions of any such policy of insurance
and no such Person has received notice of cancellation of any such insurance.
5.21 Accounting.
The Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (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 the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
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5.22 Registration Rights.
Except for the Registration Rights Agreement and as set forth on
Schedule 5.22, there are no contracts, agreements or understandings between the
Company and any Person granting such Person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the
Debentures or the Common Stock issuable upon conversion thereof registered
pursuant to the Registration Rights Agreement.
5.23 [Intentionally Omitted.]
5.24 Securities Ratings.
No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Securities Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company or any securities of the Company or (ii) has indicated
to the Company that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company or any securities of the Company.
5.25 Similar Securities Not Listed.
When the Debentures are issued and delivered pursuant to this
Agreement, the Debentures will not be of the same class (within the meaning of
Rule 144A under the Securities Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
5.26 Intellectual Property.
The Company and its Subsidiaries own in all material respects the
entire and unencumbered right, title and interest in and to, or possess adequate
licenses or other rights to use, all intellectual property, including but not
limited to, patents, trademarks, service marks, trade names, copyrights,
computer software and know-how used in, or necessary to, the business conducted
by the Company or any of its Subsidiaries (the "Intellectual Property"). All
---------------------
such Intellectual Property is valid and enforceable and the Company and each of
its Subsidiaries has performed all acts and has paid all required fees and Taxes
to maintain all registrations and applications of such Intellectual Property in
full force and effect. None of the Company or any of its Subsidiaries has
received any notice of infringement of or conflict with (or knows or has known
of such infringement of or conflict with) asserted rights of others with respect
to the use of Intellectual Property. To the Company's knowledge, the Company
and its Subsidiaries do not in the conduct of their business infringe or
conflict with any right of any third party. None of the Company or any of its
Subsidiaries is, nor will any of them be as a result of the execution and
delivery of this Agreement or the performance of any obligations hereunder, in
breach of any Applicable Agreement relating to any Intellectual Property.
5.27 Authorization of Shares Issuable Upon Conversion.
The shares of Common Stock issuable upon conversion of the Debentures
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; and the stockholders of the Company or other holders of the
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<PAGE>
Company's securities have no preemptive or similar rights with respect to the
Debentures or the Common Stock issuable upon conversion of the Debentures.
5.28 Affiliate Transactions.
Except for transactions described on Schedule 5.28 and transactions
contemplated by the Other Agreements, neither the Company nor any of its
Subsidiaries is or has been a party to any transaction or series of transactions
described in (a) Item 404 of Regulation S-K under the Securities Act; provided,
however, that for purposes hereof, references in such Item 404 to the
"registrant" shall be deemed to be references to the Company or such Subsidiary,
as the case may be, and references to the "beginning of the registrant's last
fiscal year" shall be deemed to be references to the beginning of the Company's
fiscal year ended December 31, 1996 or (b) Section 4(b)(i) of the Investors
Agreement, to be entered into and dated as of the Closing Date, among the
Company and the Purchasers, in the form attached as Exhibit 5.28 hereto (the
"Investors Agreement").
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5.29 Representations and Warranties in the Prometric Agreements.
The representations and warranties of the Company to the Prometric
Agreements were true in all material respects as of the date thereof and are
true in all material respects on the date hereof.
5.30 Investment Company Act.
Neither the Company nor each of its Subsidiaries is and, after giving
effect to consummation of the transactions contemplated hereby and by the Other
Agreements, none of them will be, an "investment company" (as such term is
defined in the Investment Company Act of 1940, as amended).
5.31 Antitakeover Matters.
Prior to the Closing Date, the Company, its shareholders and its Board
of Directors shall have each taken all action required in order to (i) exempt
the Purchasers, in respect to their purchase and conversion of the Debentures,
from "interested stockholder" status as defined by Title 3, Subtitle 6 of the
General Corporation Law of Maryland and (ii) exempt the execution, delivery, and
performance of this Agreement and the Other Agreements, and the issuance and
conversion of the Debentures, from the requirements of, and from triggering any
provisions under, the Rights Agreement or any Antitakeover Law.
5.32 Formation and Capitalization of Incubator.
Immediately following the Closing:
(a) The Incubator will be duly organized and validly existing as a
limited liability company in good standing under the laws of the State
Delaware. The Incubator will be duly qualified to transact business and in
good standing in each jurisdiction in which such qualification is
required. The Incubator will have full power and authority to (i) own,
lease and operate its properties and to conduct its business as proposed
to be conducted and (ii) consummate the Transactions and enter into and
perform its obligations under each Other Agreement to which it is a party.
(b) The issuance and sale of all the then issued and outstanding
membership interests in the Incubator will be duly authorized by all
necessary action of the Incubator. Each membership
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interest of the Incubator that is then issued and outstanding will be duly
authorized and validly issued, and not issued in violation of, or subject
to, any preemptive or similar rights. Except as set forth in the Incubator
Agreement, there will be no outstanding (i) securities convertible into or
exchangeable for any membership interests or other equity securities of
the Incubator, (ii) options, warrants or other rights to purchase or
subscribe to any membership interests or other equity securities of the
Incubator or (iii) contracts, commitments, agreements, understandings,
arrangements, calls or claims of any kind relating to the issuance of any
membership interests or other equity securities of the Incubator, any such
convertible or exchangeable securities, or any such options, warrants or
rights.
(c) The Incubator will have duly authorized, executed and delivered
each of the Other Agreements to which it is a party, and each of such
Other Agreements will be a valid and binding agreement of the Incubator,
enforceable against the Incubator in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(d) The Company will have contributed the Initial Company Contribution
to the Incubator.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 Organization; Power and Authority.
Each Purchaser represents that (a) it is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified and in good standing in each jurisdiction in
which such qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on its ability to perform its obligations under the Agreement and
the Other Agreements to which it is or becomes a party, or the validity or
enforceability of this Agreement or the Other Agreements to which it is or
becomes a party and (b) it has the organizational power and authority to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements to which it is or becomes a
party, and to perform the provisions hereof and thereof.
6.2 Authorization, etc.
Each Purchaser represents that this Agreement and the Other Agreements
to which it is or becomes a party, has been duly authorized by all necessary
organizational action on the part of it, and this Agreement and the Other
Agreements to which it is or becomes a party, constitutes, and upon execution
and delivery by the Company of such Agreements, will constitute, legal, valid
and binding obligations of it enforceable against it in accordance with their
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
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6.3 Purchase for Investment; Accredited Investor Status
Each Purchaser represents that it is purchasing the Debentures for its
own account or for one or more separate accounts maintained by it and not with a
view to the distribution thereof, provided that the disposition of its or their
property shall at all times be within its or their control. Each Purchaser
understands that the Debentures have not been registered under the Securities
Act and may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law. Each Purchaser represents that it is an Accredited Investor as defined
under Regulation D promulgated pursuant to the Securities Act of 1933.
7. COVENANTS.
7.1 Transaction Expenses.
Whether or not any of the Transactions are consummated, the Company
will pay all reasonable and documented out-of-pocket fees and expenses incurred
by the Purchasers or Apollo Management (including the reasonable and documented
fees and expenses of a special counsel and other representatives engaged by the
Purchasers or Apollo Management) up to an aggregate of $1,500,000 in connection
with (i) such Transactions, (ii) any amendments, waivers or consents under or in
respect of this Agreement or the Other Documents (whether or not such amendment,
waiver or consent becomes effective) or (iii) the Purchaser's investment in the
Debentures, including, without limitation: (a) the costs and expenses incurred
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or any of the Other Documents, or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or any of the Other Documents, or by reason of
being a holder of any Debenture, (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the Transactions, and (c) any filing fees payable by the Company or the
Purchasers in connection with any filings or submissions required under the HSR
Act in connection with the conversion of the Debentures. Prior to paying such
expenses, the Company will be given an opportunity to review reasonably detailed
invoices related thereto. The obligations of the Company under this Section 7.1
will survive the payment or transfer of any Debenture, the enforcement,
amendment or waiver of any provision of this Agreement or any Other Agreement,
and the termination of this Agreement or any Other Agreement. All such fees and
expenses incurred as of the Closing Date shall be paid at the Closing in
immediately available funds by wire transfer to such bank accounts as the
Purchasers or Apollo Management shall have notified the Company in writing.
7.2 Operation of Business.
From the date hereof until the Closing Date, except as contemplated by
this Agreement and the Other Agreements (including the schedules hereto or
thereto),
(a) the Company shall, and shall cause each of the Subsidiaries to,
(i) operate its business in the normal course and use its reasonable best
efforts to preserve its present business organization intact and its
present relationships with persons having material business dealings with
it; and (ii) continue to maintain, in all material respects, its assets
and properties and keep its books in accordance with present practices in
a condition suitable for its current use; and
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(b) the Company shall not, and shall not permit any of the
Subsidiaries to, (i) take any action regarding any matter described in
Section 4 of the Investors Agreement; or (ii) take any action that would
cause any of the representations and warranties made by the Company in
this Agreement not to remain true and correct as if made at and as of the
Closing Date.
7.3 Access to Books and Records.
The Company shall afford, and shall cause each of its Subsidiaries to
afford, to each of the Purchasers and the Purchasers' accountants, counsel and
representatives full access during normal business hours throughout the period
prior to the Closing Date to all the Company's and its Subsidiaries' properties,
books, contracts, commitments and records (including, but not limited to, tax
returns) and, during such period, shall furnish promptly to each of the
Purchasers (a) a copy of each report, schedule and other document filed or
received by the Company or any of its Subsidiaries pursuant to the requirements
of federal or state securities laws, and (b) all other information concerning
the Company's and its Subsidiaries' business, properties and personnel as the
Purchasers may reasonably request, provided that no investigation or receipt of
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information pursuant to this Section 7.3 shall affect any representation or
warranty of the Company or the conditions to the obligations of the Purchasers.
7.4 Agreement to Take Necessary and Desirable Actions.
(a) The Company shall, and shall cause each of its Subsidiaries to,
execute and deliver this Agreement and the Other Agreements to which each
is a party and such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary, desirable or
reasonably requested by the Purchasers in order to consummate or implement
expeditiously the Transactions.
(b) The Company and the Purchasers party thereto shall in good faith
negotiate, and shall execute and deliver on the Closing Date the Incubator
Agreement, which agreement shall contain the terms specified on Exhibit
7.4 (which Exhibit reflects the parties agreement as to the terms of the
Incubator). The Company shall, and shall cause each of its Subsidiaries
to, execute and deliver such documents, certificates, agreements and other
writings and to take such other actions as may be necessary, desirable or
reasonably requested by the Purchasers in order to contribute the Initial
Company Contribution to the Incubator.
7.5 Compliance with Conditions; Best Efforts.
The Company shall use its best efforts to cause all of the obligations
imposed upon it in this Agreement to be duly complied with and to cause all
conditions precedent to the obligations of the Company and the Purchasers to be
satisfied. Upon the terms and subject to the conditions of this Agreement, the
Company will use its best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to consummate and make effective in the most expeditious
manner practicable the Transactions.
7.6 HSR Act Filings.
The Company and each of its Subsidiaries shall file all reports and
documents as may be necessary to comply with the HSR Act. The Company shall
cooperate with and assist the other parties hereto and take such action as may
be reasonably required and as permitted under law in connection with such
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filings (including cooperating with additional requests for information,
documents and interviews of officers and personnel by either of the antitrust
enforcement agencies).
7.7 Prometric Transaction.
The Company agrees promptly to inform Apollo Management in writing of
(a) any material development in the proceedings and negotiations related to the
Prometric Transaction and (b) the receipt of any notices under the Prometric
Agreements.
7.8 Antitakeover Matters.
Prior to the Closing Date, the Company, its shareholders and its Board
of Directors shall take all action required to be taken by in order to (i)
exempt the Purchasers, in respect to their purchase and conversion of the
Debentures, from "interested stockholder" status as defined by Title 3, Subtitle
6 of the General Corporation Law of Maryland and (ii) exempt the execution,
delivery, and performance of this Agreement and the Other Agreements, and the
issuance and conversion of the Debentures, from the requirements of, and from
triggering any provisions under, the Rights Agreement or any Antitakeover Law.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Other Agreements, the purchase
or transfer by the Purchasers of any Debenture or portion thereof or interest
therein, and the payment or conversion of any Debenture, and may be relied upon
by any Person who purchases any of the first $25,000,000 in principal amount of
Debentures sold by any Affiliate of Apollo Management on or prior to the 90/th/
day following the Closing Date, regardless of any investigation made at any time
by or on behalf of the Purchasers or any other holder of a Debenture. All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant to this Agreement or any other Agreement shall be
deemed representations and warranties of the Company under this Agreement.
9. AMENDMENT AND WAIVER.
This Agreement may be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may be given, provided that
the same are in writing and signed by each of the parties hereto.
10. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or a Purchaser's nominee, to such address such
Purchaser shall have specified to the Company in writing,
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(ii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of Chief Financial Officer, or at such
other address as the Company shall have specified to the holder of each
Debenture in writing.
Notices under this Section 10 will be deemed given only when actually received.
11. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by Apollo Management at the Closing (except the
Debentures themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to Apollo Management, may be
reproduced by Apollo Management or any Purchaser by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and Apollo Management or such Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by Apollo Management or such Purchaser in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 11
shall not prohibit the Company or any other holder of Debentures from contesting
any such reproduction to the same extent that it could contest the original, or
from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
12. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any designee
reasonably acceptable to the Company as the purchaser of the Debentures that
such Purchaser has agreed to purchase hereunder, by written notice to the
Company. Any affiliate of a Purchaser shall be deemed acceptable to the
Company. Upon receipt of such notice, wherever the word "Purchaser" is used in
this Agreement (other than in this Section 12), such word shall be deemed to
refer to such designee in lieu of such Purchaser.
13. MISCELLANEOUS.
13.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any permitted
subsequent holder of a Debenture) whether so expressed or not.
13.2 Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
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13.3 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
13.4 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
13.5 Governing Law; Submission to Jurisdiction;.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland, without regard to the conflict of law rules
thereof. Each of the parties hereto hereby irrevocably submits to the
jurisdiction of any Maryland state court sitting in the City of Baltimore or any
federal court sitting in the City of Baltimore in respect of any suit, action or
proceeding arising out of or relating to this Agreement and irrevocably accepts
for itself and in respect of its property, generally and unconditionally,
jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
13.6 Confidentiality.
The terms of this Agreement shall remain confidential until all
parties to this Agreement agree in writing to the extent and form of disclosure.
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
SYLVAN LEARNING SYSTEMS, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
The foregoing is hereby agreed to
as of the date first written above.
<PAGE>
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:______________________________________
Name:____________________________________
Title:___________________________________
22
<PAGE>
INVESTOR (GUERNSEY) LTD.
By:_________________________________
Name:_______________________________
Title:______________________________
and
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
SCHEDULE A
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, any other
---------
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"Agreement" means this Purchase Agreement.
---------
"Antitakeover Law" means any "moratorium," "control share," "fair price,"
----------------
"affiliate transaction," "business combination" or other antitakeover laws and
regulations of, the State of Maryland, including, without limitation, and Title
3, Subtitle 6 of the General Corporation Law of Maryland.
"Applicable Agreements" means any bond, debenture, note or any other
---------------------
evidence of indebtedness, or any other agreement, lease, deed of trust,
mortgage, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries or their
respective properties is bound, specifically excluding the Prometric Agreements.
"Apollo Management" has the meaning given to such term in Section 2.
-----------------
"Business Day" means for the purposes of any provision of this Agreement,
------------
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York are required or authorized to be closed.
"Charter" has the meaning given to such term in Section 5.6.
-------
"Closing" has the meaning given to such term in Section 3.
-------
"Closing Date" means the date of the Closing.
------------
"Closing Fee" has the meaning given to such term in Section 2.
-----------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and the rules and regulations promulgated thereunder from time to time.
"Common Stock" has the meaning given to such term in Section 5.3.
------------
"Company" means Sylvan Learning Systems, Inc., a Maryland corporation.
-------
"Contribution Amount" has the meaning given to such term in Section 5.16.
-------------------
"Debentures" has the meaning given to such term in Section 1.
----------
<PAGE>
"Employment Agreement" has the meaning given to such term in Section 4.6.
--------------------
"Environmental Claim" means any claim, action, cause of action,
-------------------
investigation of which the Company or any of its Subsidiaries are aware, or
notice by any Person alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased, used or operated by the Company or any of
its Subsidiaries, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means all Laws relating to pollution or protection of
------------------
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata and natural
resources), including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" has the meaning given to such term in Section 5.14.
---------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"GAAP" means generally accepted accounting principles as in effect from
----
time to time in the United States of America.
"Governmental Authority" means (i) any Federal, state, local or foreign
----------------------
government (ii) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such government
and (iii) any arbitrator of any kind.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended from time to time.
"Incubator" means the limited liability company in which the Company and
---------
the Purchasers shall be members, formed pursuant to the Incubator Agreement.
"Incubator Agreement" means the limited liability company agreement
-------------------
pursuant to which the Incubator shall be formed, which shall contain the terms
specified in Exhibit 7.4 and such other terms as may be mutually agreed between
Apollo Management and the Company.
"Indenture" means the Indenture, to be dated the Closing Date, between the
---------
Company and the Trustee, relating to the Debentures.
"Initial Company Contribution" means the property that the Company shall
----------------------------
contribute to the Incubator on or prior to the Closing Date, as described in
Exhibit 7.4.
"Intellectual Property" has the meaning given to such term in Section 5.26.
--------------------
"Investors Agreement" has the meaning given to such term in Section 5.28.
-------------------
Schedule A - Page 2
<PAGE>
"Law" means, any Federal, state, local, and foreign statute, law,
---
regulation, ordinance, rule, judgment, order, decree, permit, concession, grant,
franchise, license, agreement or governmental restriction.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
----
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP, upon or with
respect to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).
"Management" has the meaning given to such term in Section 1.
----------
"Material" means material in relation to the business, operations, affairs,
--------
financial condition, assets, or properties of the Company and its Subsidiaries
taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, operations, affairs, condition (financial or otherwise), assets,
prospects or properties of the Company and its Subsidiaries taken as a whole, or
(b) the ability of the Company to perform its obligations under this Agreement
or any of the Other Agreements, or (c) the validity or enforceability of this
Agreement or any of the Other Agreements.
"Materials of Environmental Concern" means chemicals, pollutants,
----------------------------------
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, lead or lead-based paints or
materials, PCBs, or radon.
"Officer's Certificate" means a certificate of a Senior Financial Officer
---------------------
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.
"Other Agreements" means the Investors Agreement, the Indenture, the
----------------
Debentures, the Registration Rights Agreement, the Incubator Agreement, the
Employment Agreements and each other agreement or instrument to be executed or
delivered in connection with the transactions contemplated hereby and thereby.
"Person" means an individual, partnership, corporation, limited liability
------
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Preferred Shares" has the meaning given to such term in Section 5.3.
----------------
"Preferred Stock" means any class of capital stock of a corporation that is
---------------
preferred over any other class of capital stock of such corporation as to the
payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Prometric Agreements" means the Stock Purchase Agreement by and among the
--------------------
Company, Prometric, Inc., Prometric Acquisition Corporation and The Thomson
Corporation dated as of January 26, 2000 and the Acquisition Agreement by and
among Sylvan I B.V. and Dodd Street Holdings B.V. and each other agreement or
instrument to be executed or delivered in connection with the transactions
contemplated thereby.
"Prometric Transaction" means the transaction contemplated by the Prometric
---------------------
Agreements.
Schedule A - Page 3
<PAGE>
"property" or "properties" means, unless otherwise specifically limited,
------------------------
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"Registration Rights Agreement" has the meaning given to such term in
-----------------------------
Section 5.8.
"Rights Agreement" means the Rights Agreement between the Company and State
----------------
Street Bank and Trust Company dated October 7, 1996.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Subsidiary" means, as to any Person, any corporation, association or other
----------
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"Taxes" means all Federal, state, local and foreign taxes, and other
-----
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"TIA" has the meaning given to such term in Section 5.2.
---
"Transactions" means each of the transactions contemplated by this
------------
Agreement or any of the Other Agreements.
"Trustee" means the trustee under the Indenture, who shall be mutually
-------
acceptable to the Company and Apollo Management.
Schedule A - Page 4
<PAGE>
SCHEDULE 1.3
PURCHASER'S BANK ACCOUNTS
Apollo Investment Fund IV, L.P.
The Chase Manhattan Bank, N.A.
ABA: 021000021
A/C#: 900-9-002206
BBK: Chase Manhattan Bank, N.A.
BNF: Apollo Investment Fund IV, L.P.
A/C#: 89930113
ATTN: Mike Mooney (212) 623-2357
Ref: Sylvan Learning Systems, Inc. 5% Convertible Subordinated Debentures
due 2010
Apollo Overseas Partners IV, L.P.
The Chase Manhattan Bank, N.A.
ABA: 021000021
A/C#: 900-9-002206
BBK: Chase Manhattan Bank, N.A.
BNF: Apollo Overseas Partners IV, L.P.
A/C#: 89930114
ATTN: Mike Mooney (212) 623-2357
Ref: Sylvan Learning Systems, Inc. 5% Convertible Subordinated Debentures
due 2010
Investor (Guernsey) Ltd.
[To be provided at a later date.]
<PAGE>
SCHEDULE 2
Debenture Purchase Commitments
Apollo Investment Fund IV, L.P. $80,526,000
Apollo Overseas Partners IV, L.P. $ 4,474,000
Investor (Guernsey) Ltd. $15,000,000
<PAGE>
Exhibit 1
FORM OF INDENTURE
Exhibit 1 - Page 1
<PAGE>
Exhibit 5.8
FORM OF REGISTRATION RIGHTS AGREEMENT
Exhibit 5.8 - Page 1
<PAGE>
Exhibit 5.28
FORM OF INVESTORS AGREEMENT
Exhibit 5.28 - Page 1
<PAGE>
================================================================================
SYLVAN LEARNING SYSTEMS, INC.,
Issuer,
and
[NAME OF TRUSTEE],
Trustee
-----------------
INDENTURE
Dated as of March [__], 2000
-----------------
$100,000,000
5% Convertible Subordinated Debentures due 2010
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE............................................................... 1
Section 1.1. Definitions...................................................................... 1
Section 1.2. Incorporation by Reference of TIA............................................... 10
Section 1.3. Rules of Construction........................................................... 10
ARTICLE II.
THE SECURITIES.......................................................................................... 11
Section 2.1. Form and Dating................................................................. 11
Section 2.2. Execution and Authentication.................................................... 11
Section 2.3. Registrar and Paying Agent...................................................... 12
Section 2.4. Paying Agent to Hold Assets in Trust............................................ 12
Section 2.5. Securityholder Lists............................................................ 12
Section 2.6. Transfer and Exchange........................................................... 13
Section 2.7. Replacement Securities.......................................................... 18
Section 2.8. Outstanding Securities.......................................................... 18
Section 2.9. Treasury Securities............................................................. 18
Section 2.10. Temporary Securities............................................................ 19
Section 2.11. Cancellation.................................................................... 19
Section 2.12. Defaulted Interest.............................................................. 19
ARTICLE III.
REDEMPTION.............................................................................................. 21
Section 3.1. Right of Redemption............................................................. 21
Section 3.2. Notices to Trustee.............................................................. 21
Section 3.3. Notice of Redemption............................................................ 21
Section 3.4. Effect of Notice of Redemption.................................................. 22
Section 3.5. Deposit of Redemption Price..................................................... 22
ARTICLE IV.
COVENANTS............................................................................................... 23
Section 4.1. Payment of Securities........................................................... 23
Section 4.2. Maintenance of Office or Agency................................................. 23
Section 4.3. Corporate Existence............................................................. 23
Section 4.4. Payment of Taxes and Other Claims............................................... 24
Section 4.5. Compliance Certificate; Notice of Default....................................... 24
Section 4.6. Reports......................................................................... 24
Section 4.7. Rule 144A Information Requirement............................................... 25
Section 4.8. Further Instruments and Acts.................................................... 25
Section 4.9. Limitation on Transactions with Affiliates...................................... 25
ARTICLE V.
SUCCESSOR CORPORATION................................................................................... 26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5.1. Limitation on Merger, Sale or Consolidation..................................... 26
Section 5.2. Successor Corporation Substituted............................................... 26
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES.......................................................................... 27
Section 6.1. Events of Default............................................................... 27
Section 6.2. Acceleration of Maturity Rescission and Annulment............................... 28
Section 6.3. Collection of Indebtedness and Suits for Enforcement by Trustee................. 29
Section 6.4. Trustee May File Proofs of Claim................................................ 30
Section 6.5. Trustee May Enforce Claims Without Possession of Securities..................... 30
Section 6.6. Priorities...................................................................... 31
Section 6.7. Limitation on Suits............................................................. 31
Section 6.8. Unconditional Right of Holders to Receive Principal, Premium, Interest
and Liquidated Damages.......................................................... 32
Section 6.9. Rights and Remedies Cumulative.................................................. 32
Section 6.10. Delay or Omission Not Waiver.................................................... 32
Section 6.11. Control by Holders.............................................................. 32
Section 6.12. Waiver of Default............................................................... 33
Section 6.13. Undertaking for Costs........................................................... 33
Section 6.14. Restoration of Rights and Remedies.............................................. 33
ARTICLE VII.
TRUSTEE................................................................................................. 33
Section 7.1. Duties of Trustee............................................................... 34
Section 7.2. Rights of Trustee............................................................... 35
Section 7.3. Individual Rights of Trustee.................................................... 36
Section 7.4. Trustee's Disclaimer............................................................ 36
Section 7.5. Notice of Default............................................................... 36
Section 7.6. Reports by Trustee to Holders................................................... 36
Section 7.7. Compensation and Indemnity...................................................... 36
Section 7.8. Replacement of Trustee.......................................................... 37
Section 7.9. Successor Trustee by Merger, Etc................................................ 38
Section 7.10. Eligibility; Disqualification................................................... 39
Section 7.11. Preferential Collection of Claims Against Company............................... 39
Section 7.12. Other Capacities................................................................ 39
ARTICLE VIII.
SATISFACTION AND DISCHARGE.............................................................................. 39
Section 8.1. Satisfaction and Discharge of Indenture......................................... 39
Section 8.2. Repayment to the Company........................................................ 39
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................................... 40
Section 9.1. Supplemental Indentures Without Consent of Holders.............................. 40
Section 9.2. Amendments, Supplemental Indentures and Waivers with Consent of
Holders......................................................................... 40
Section 9.3. Compliance with TIA............................................................. 41
Section 9.4. Revocation and Effect of Consents............................................... 41
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 9.5. Notation on or Exchange of Securities........................................... 42
Section 9.6. Trustee to Sign Amendments, Etc................................................. 42
ARTICLE X.
MEETINGS OF HOLDERS..................................................................................... 42
Section 10.1. Purposes for Which Meetings May Be Called....................................... 42
Section 10.2. Manner of Calling Meetings...................................................... 43
Section 10.3. Calling of Meetings by the Company or Holders................................... 43
Section 10.4. Who May Attend and Vote at Meetings............................................. 43
Section 10.5. Regulations May Be Made by Company; Conduct of the Meeting:
Voting Rights: Adjournment...................................................... 44
Section 10.6. Voting at the Meeting and Record to Be Kept..................................... 44
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be Hindered or
Delayed by Call of Meeting...................................................... 45
ARTICLE XI.
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL.................................................... 45
Section 11.1. Repurchase of Securities at Option of the Holder Upon a Change of
Control......................................................................... 45
Section 11.2. Rescission of Change of Control Determination................................... 47
ARTICLE XII.
SUBORDINATION........................................................................................... 47
Section 12.1. Securities Subordinated to Senior Indebtedness.................................. 47
Section 12.2. No Payment on Securities in Certain Circumstances............................... 48
Section 12.3. Securities Subordinated to Prior Payment of All Senior Indebtedness on
Dissolution Liquidation or Reorganization....................................... 49
Section 12.4. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness.................................................................... 50
Section 12.5. Obligations of the Company Unconditional........................................ 50
Section 12.6. Trustee and Other Agents Entitled to Assume Payments Not Prohibited
in Absence of Notice............................................................ 50
Section 12.7. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness....................................... 51
Section 12.8. Holders Authorize Trustee to Effectuate Subordination of
Securities...................................................................... 51
Section 12.9. Right of Trustee to Hold Senior Indebtedness.................................... 51
Section 12.10. Article XII Not to Prevent Events of Default.................................... 51
Section 12.11. No Duty of Trustee and Other Agents to Holders of Senior
Indebtedness.................................................................... 52
ARTICLE XIII.
CONVERSION OF SECURITIES................................................................................ 52
Section 13.1. Conversion Privilege............................................................ 52
Section 13.2. Exercise of Conversion Privilege................................................ 52
Section 13.3. Fractional Interests............................................................ 53
Section 13.4. Conversion Price................................................................ 54
Section 13.5. Adjustment of Conversion Price.................................................. 54
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 13.6. Continuation of Conversion Privilege in Case of Reclassification,
Change, Merger, Consolidation or Sale of Assets.............................................. 57
Section 13.7. Notice of Certain Events................................................... 58
Section 13.8. Taxes on Conversion........................................................ 59
Section 13.10. Disclaimer of Responsibility for Certain Matters........................... 59
Section 13.11. Return of Funds Deposited for Redemption of Converted Securities........... 60
ARTICLE XIV.
MISCELLANEOUS......................................................................................... 60
Section 14.1. TIA Controls............................................................... 60
Section 14.2. Notices.................................................................... 60
Section 14.3. Communications by Holders with Other Holders............................... 61
Section 14.5. Statements Required in Certificate or Opinion.............................. 61
Section 14.6. Rules by Trustee, Paying Agent, Registrar.................................. 62
Section 14.7. Legal Holidays............................................................. 62
Section 14.9. No Adverse Interpretation of Other Agreements.............................. 63
Section 14.10. No Recourse Against Others................................................. 63
Section 14.11. Successors................................................................. 63
Section 14.12. Duplicate Originals........................................................ 63
Section 14.13. Severability............................................................... 63
Section 14.14. Table of Contents, Headings, Etc........................................... 63
Section 14.15. Qualification of Indenture................................................. 63
Section 14.16. Benefits of Indenture...................................................... 64
EXHIBIT A: Form of Security............................................................................ A-1
EXHIBIT B: Certificate to be Delivered Upon Exchange or
Registration of Transfer of Securities...................................................... B-1
EXHIBIT C: Form of Conversion Notice................................................................... C-1
</TABLE>
iv
<PAGE>
CROSS-REFERENCE TABLE
TIA
Indenture
Section Section
--------- ---------
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.8;
7.10;
14.2
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 14.3
(c) 14.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6;
14.2
(d) 7.6
314(a) 4.5;
4.6
14.2
(b) N.A.
(c)(1) 2.2;
7.2;
14.4
(c)(2) 7.2;
14.4
(c)(3) N.A.
(d) N.A.
(e) 14.5
(f) N.A.
315(a) 7.1(b)
(b) 7.5;
14.2
(c) 7.1(a)
(d) 2.8;
6.11;
7.1(c)
(e) 6.13
316(a)(last sentence) 2.9
(a)(1)(A) 6.11
(a)(1)(B) 6.12
v
<PAGE>
(a)(2) N.A.
(b) 6.12;
6.7;
6.8
(c) 1.1
317(a)(1) 6.3
(a)(2) 6.4
(b) 2.4
318(a) 14.1
- ---------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed a part
of the Indenture.
vi
<PAGE>
INDENTURE, dated as of March [__], 2000, between Sylvan Learning
Systems, Inc., a Maryland corporation (the "Company"), and [Name of Trustee], as
-------
trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 5%
Convertible Subordinated Debentures due 2010:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Acceleration Notice" shall have the meaning specified in Section 6.2.
-------------------
"Affiliate" means any person directly or indirectly controlling or
---------
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the terms "control," "controlling" and "controlled"
mean the power to direct the management and policies of a person, directly or
through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise. Notwithstanding the foregoing, for
purposes of this Indenture, the Initial Purchasers and their Related Parties
shall not be considered Affiliates of the Company or any of its Subsidiaries.
"Agent" means the Trustee and any Registrar, Paying Agent, co-Registrar,
-----
authenticating agent or Securities Custodian.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal, state
--------------
or foreign law for the relief of debtors.
"Beneficial Owner" for purposes of the definition of Change of Control has
----------------
the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act,
regardless of whether applicable.
"Blockage Notice" shall have the meaning specified in Section 12.2(b).
---------------
"Blockage Period" shall have the meaning specified in Section 12.2(b).
---------------
"Board of Directors" means, with respect to any person, the Board of
------------------
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a duly adopted
----------------
resolution of the Board of Directors of such person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
------------
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
----------------------------
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Capital Contribution" means any contribution to the equity of the Company
--------------------
from a direct or indirect parent of the Company for which no consideration other
than the issuance of common stock with no redemption rights and no special
preferences, privileges or voting rights is given.
<PAGE>
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participation or other equivalents of or
interests (however designated) in stock issued by that Person.
"Cash" means such coin or currency of the United States of America as at
----
the time of payment shall be legal tender for the payment of public and private
debts.
"Cash Equivalent" means (i) securities issued or directly and fully
---------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500,000,000 or (iii) commercial paper issued by others rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's Investors Service, Inc., and in the
case of each of (i), (ii), and (iii) maturing within one year after the date of
acquisition.
"Change of Control" means:
-----------------
(a) any merger or consolidation of the Company with or into any Person or
any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after giving
effect to such transaction(s), any "person" or "group" (as such terms are used
for purposes of Sections 13(d) and 14(d) of the Exchange Act, regardless of
whether applicable) (other than the Excluded Persons) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee(s) or surviving entity
or entities,
(b) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, regardless of whether applicable)
(other than the Excluded Persons) is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total voting power in the aggregate of
all classes of Capital Stock of the Company then outstanding normally entitled
to vote in elections of directors,
(c) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved, including new directors designated in or provided for in an agreement
regarding the merger, consolidation or sale, transfer or other conveyance, of
all or substantially all of the assets of the Company or the Parent, if such
agreement was approved by a vote of such majority of directors) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office or
(d) the Company adopts a plan of liquidation.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Stock" means the Company's common stock, $0.01 par value per share,
------------
or as such stock may be reconstituted from time to time.
"Company" means the party named as such in this Indenture until a successor
-------
replaces it pursuant to the Indenture, and thereafter means such successor.
2
<PAGE>
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
-----------------------
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
"Conversion Price" shall have the meaning specified in Section 13.4.
----------------
"Conversion Shares" shall have the meaning specified in Section 13.5(1).
-----------------
"Credit Facilities" means the Credit Agreement, dated as of December 23,
-----------------
1998, by and among the Company, the banks party thereto, NationsBank, N.A., as
Syndication Agent, and Bankers Trust Company, as lead arranger and
administrative agent, as amended prior to or on the Issue Date, including any
notes, guaranties, security or pledge agreements, letters of credit and other
documents or instruments executed pursuant thereto and any appendices, exhibits
or schedules to the foregoing, as the same may be in effect from time to time,
and in each case, as such agreements, notes, guaranties, security or pledge
agreements, letters of credit and other documents or instruments may be amended,
modified, supplemented, renewed, refunded, replaced, refinanced, extended or
restated from time to time (whether with the original agents and lenders or
other agents and lenders or otherwise, and whether provided under the original
credit or loan agreements or other credit or loan agreements or otherwise),
including any (i) extension of the maturity of any Indebtedness or other
obligation incurred thereunder or contemplated thereby, (ii) addition or
deletion of borrowers or guarantors thereunder, so long as the borrowers include
one or more of the Company and its Subsidiaries and their respective successors
and assigns, (iii) increase in the amount of Indebtedness or other obligations
incurred thereunder or available to be borrowed thereunder or (iv) other
alteration of the terms and conditions thereof.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
---------
or similar official under any Bankruptcy Law.
"Date of Conversion" shall have the meaning specified in Section 13.2.
------------------
"Default" means any event or condition that is, or after notice or passage
-------
of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
------------------
"Definitive Securities" means Securities that are in the form of Security
---------------------
attached hereto as Exhibit A that do not include the information called for by
footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or issued in
----------
whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Indebtedness" means any Indebtedness outstanding under
------------------------------
any of the Credit Facilities.
"Distribution Date" shall have the meaning specified in Section 13.5(1).
-----------------
"DTC" shall have the meaning specified in Section 2.3.
---
"Equity Interest" of any Person means any shares, interests, participations
---------------
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership, participation or
membership interests in, such Person.
3
<PAGE>
"Event of Default" shall have the meaning specified in Section 6.1.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated by the SEC thereunder.
"Excluded Persons" means the Initial Purchasers and any of their
----------------
Affiliates.
"Expiration Time" shall have the meaning specified in Section 13.5(f).
---------------
"GAAP" means United States generally accepted accounting principles set
----
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession which are in effect in the United States; provided,
however, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles which are
in effect as of the Issue Date.
"Global Security" means a Security that contains the paragraph referred to
---------------
in footnote 1 and the additional schedule referred to in footnote 4 to the form
of Security attached hereto as Exhibit A.
"Holder" or "Securityholder" means the person in whose name a Security is
--------------------------
registered on the Registrar's books.
"Incubator" means [________________________], a Delaware limited liability
---------
company, and its successors and assigns.
"Incubator Agreement" means the limited liability company agreement of the
-------------------
Incubator as in effect on the Issue Date.
"Indebtedness" of any Person means, without duplication,
------------
(a) all liabilities and obligations, contingent or otherwise, of any such
Person,
(i) in respect of borrowed money (whether or not the lender has
recourse to all or any portion of the assets of such Person),
(ii) evidenced by credit or loan agreements, bonds, notes, debentures
or similar instruments (including, without limitation, notes or similar
instruments given in connection with the acquisition of any business,
properties or assets of any kind),
(iii) evidenced by bankers' acceptances or similar instruments issued
or accepted by banks,
(iv) for the payment of money relating to a Capitalized Lease
Obligation or
(v) evidenced by a letter of credit, bank guarantee or a
reimbursement obligation of such Person with respect to any letter of
credit;
(b) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business);
4
<PAGE>
(c) all net obligations of such Person under Interest Swap and Hedging
Obligations;
(d) all liabilities of others of the kind described in the preceding
clauses (a), (b) or (c) that such Person has guaranteed or that is otherwise its
legal liability, or which is secured by a Lien on property of such Person (other
than carrier's, warehousemen's, mechanic's, repairmen's or other like non-
consensual statutory Liens arising in the ordinary course of business); and
(e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether direct or
indirect) of, or any indebtedness or obligation issued in exchange for, any
liability of the kind described in any of the preceding clauses (a), (b), (c) or
(d), or this clause (e), whether or not between or among the same parties.
"Indenture" means this Indenture, as amended or supplemented from time to
---------
time in accordance with the terms hereof.
"Initial Purchasers" means Apollo Investment Fund IV, L.P., Apollo Overseas
------------------
Partners IV, L.P. and Investor (Guernsey) Ltd.
"Interest Payment Date" means the stated due date of an installment of
---------------------
interest on the Securities.
"Interest Swap and Hedging Obligation" means the obligations of any Person
------------------------------------
under any interest rate or currency protection agreement, future agreement,
option agreement, swap agreement, cap agreement or other interest rate or
currency hedge agreement, collar agreement or other similar agreement or
arrangement to which such Person is a party or beneficiary.
"Investment" by any Person in any other Person means (without duplication):
----------
(a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities
or otherwise) of capital stock, bonds, notes, debentures, partnership or
other ownership interests or other securities, including any options or
warrants, of such other Person or any agreement to make any such
acquisition;
(b) the making by such Person of any deposit with, or advance, loan
or other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or
any commitment to make any such advance, loan or extension (but excluding
accounts receivable, endorsements for collection or deposits arising in the
ordinary course of business);
(c) other than guarantees of Indebtedness of the Company or any
Guarantor to the extent permitted by Section 4.10, the entering into by
such Person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
Person; and
(d) the making of any capital contribution by such Person to such
other Person.
"Issue Date" means the date of first issuance of the Securities under this
----------
Indenture.
"Junior Securities" means Capital Stock in the Company and any Indebtedness
-----------------
of the Company, in each case that (a) is authorized and issued pursuant to a
plan of reorganization of the Company (which authorization states that it gives
effect to the subordination of such Junior Securities to all Senior
Indebtedness), (b) is subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the Securities are
5
<PAGE>
subordinated to Senior Indebtedness pursuant to the Indenture and (c) contains
terms, provisions, covenants and default provisions not more beneficial to the
Holders of the Securities as compared to the holders of Senior Indebtedness on
the issue date of the Securities.
"Last Sale Price" shall have the meaning specified in Section 13.3.
---------------
"Legal Holiday" shall have the meaning specified in Section 14.7.
-------------
"Lien" means any mortgage, lien, pledge, charge, security interest or other
----
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Liquidated Damages" shall have the meaning specified in the Registration
------------------
Rights Agreement.
"non-electing share" shall have the meaning specified in Section 13.6.
------------------
"Non-Payment Default" shall have the meaning specified in Section 12.2(b).
-------------------
"Non-Recourse Debt" means Indebtedness of a Person to the extent that under
-----------------
the terms thereof and pursuant to applicable law, no personal recourse could be
had against such Person for the payment of the principal of or interest or
premium or any other amounts with respect to such Indebtedness or for any claim
based on such Indebtedness and that enforcement of obligations on such
Indebtedness is limited solely to recourse against interests in specified
assets.
"Offer" shall have the meaning specified in Section 13.5(f).
-----
"Officer" means, with respect to the Company, the Chief Executive Officer,
-------
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Controller, or the Secretary or any Assistant Secretary of the Company.
"Officers' Certificate" means, with respect to the Company, a certificate
---------------------
signed by two Officers of the Company (one of whom shall be the principle
executive, financial or accounting officer of the Company) and otherwise
complying with the requirements of Section 2.2, if applicable, and Sections 14.4
and 14.5.
"Opinion of Counsel" means a written opinion from legal counsel (who can be
------------------
counsel to the Company or an employee of the Company) who is reasonably
acceptable to the Trustee and which complies with the requirements of Sections
14.4 and 14.5.
"Paying Agent" shall have the meaning specified in Section 2.3.
------------
"Payment Default" shall have the meaning specified in Section 12.2(a).
---------------
"Person" or "person" means any corporation, individual, limited liability
------------------
company, joint stock company, joint venture, partnership, unincorporated
association, governmental regulatory entity, country, state or political
subdivision thereof, trust, municipality or other entity.
"principal" of any Indebtedness means the principal of such Indebtedness
---------
plus, without duplication, any applicable premium, if any, on such Indebtedness.
"property" means any right or interest in or to property or assets of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
6
<PAGE>
"Purchase Agreement" means that certain Purchase Agreement, dated February
------------------
23, 2000, by and among the Company and the Initial Purchasers.
"Purchased Shares" shall have the meaning specified in Section 13.5(f).
----------------
"Record Date" means a record date specified in the Securities regardless of
-----------
whether such record date is a Business Day.
"Redemption Date," when used with respect to any Security to be redeemed,
---------------
means the date fixed for such redemption pursuant to Article III of this
Indenture and Paragraph 5 in the form of Security attached hereto as Exhibit A.
"Redemption Price," when used with respect to any Security to be redeemed,
----------------
means the redemption price for such redemption pursuant to Paragraph 5 in the
form of Security attached hereto as Exhibit A, which shall include, without
duplication, in each case, accrued and unpaid interest and Liquidated Damages,
if any, to but excluding, the Redemption Date.
"Registrar" shall have the meaning specified in Section 2.3.
---------
"Registration Rights Agreement" means the Registration Rights Agreement,
-----------------------------
dated the date hereof, by and among the Initial Purchasers and the Company, as
such agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"Related Party" means, with respect to any Person, (i) any Affiliate of
-------------
such Person, (ii) any investment manager, investment advisor or general partner
of such Person, and (iii) any investment fund, investment account or investment
entity whose investment manager, investment advisor or general partner is such
Person or a Related Party of such Person.
"Repurchase Date" shall have the meaning specified in Section 11.1(a).
---------------
"Repurchase Offer" shall have the meaning specified in Section 11.1(b).
----------------
"Repurchase Offer Period" shall have the meaning specified in Section 11.1
-----------------------
(b).
"Repurchase Price" shall have the meaning specified in Section 11.1(a).
----------------
"Repurchase Put Date" shall have the meaning specified in Section 11.1(b).
-------------------
"Restricted Security" means a Security, unless or until it has been (i)
-------------------
disposed of in a transaction effectively registered under the Securities Act or
(ii) distributed to the public pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means, collectively, the 5% Convertible Subordinated
----------
Debentures due 2010, as supplemented from time to time in accordance with the
terms hereof, issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
7
<PAGE>
"Securities Custodian" means the Trustee, as custodian with respect to the
--------------------
Securities in global form, or any successor entity thereto.
"Senior Indebtedness" means all obligations of the Company to pay the
-------------------
principal of, premium, if any, and interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding,
regardless of whether a claim for post-petition interest is allowed as a claim
in any such proceeding) payable on or in connection with, and all letters of
credit, reimbursement obligations and fees, costs, expenses and other amounts
and liabilities accrued or due on or under the Credit Facilities and any other
Indebtedness of the Company, unless the instrument creating or evidencing such
Indebtedness expressly provides that such Indebtedness is not senior or superior
in right of payment to the Securities or is pari passu with, or subordinated to,
the Securities; provided, however, that in no event shall Senior Indebtedness
include (a) Indebtedness of the Company owed to any Subsidiary of the Company,
(b) Indebtedness of the Company representing any trade account payable incurred
in the ordinary course of business, (c) any liability for taxes owed or owing by
the Company or any Subsidiary of the Company, (d) the Securities, or (e) any
unsecured Indebtedness of the Company.
"Shelf Registration Statement" shall have the meaning specified in the
----------------------------
Registration Rights Agreement.
"Significant Subsidiary" means as of any date of determination, (i) any
----------------------
Subsidiary of the Company that has aggregate total assets in an amount in excess
of 10% of the consolidated total assets of the Company and its Subsidiaries at
such date of determination and (ii) any Subsidiary of the Company for which the
net income of such Subsidiary and its Subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principals, during the
four fiscal quarters most recently ended preceding the date of determination,
exceeded 10% of the net income of the Company and its Subsidiaries during such
period.
"Special Record Date" for payment of any Defaulted Interest means a date
-------------------
fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security, means March
---------------
[__], 2010.
"Subordinated Indebtedness" means Indebtedness of the Company that is
-------------------------
subordinated in right of payment by its terms or the terms of any document or
instrument relating thereto to the Securities in any respect or has a stated
maturity after the Stated Maturity.
"Subordinated Obligations" shall have the meaning set forth in Article XII.
------------------------
"Subsidiary" with respect to any Person, means:
----------
(i) a corporation a majority of whose Capital Stock with voting
power normally entitled to vote in the election of directors is at the
time, directly or indirectly, owned by such Person, by such Person and one
or more Subsidiaries of such Person or by one or more Subsidiaries of such
Person,
(ii) a partnership in which such Person or a Subsidiary of such
Person is, at the time, a general partner and owns alone or together with
one or more Subsidiaries of such Person a majority of the partnership
interests, or
(iii) any other Person (other than a corporation) in which such
Person, one or more Subsidiaries of such Person, or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has at least majority ownership interest.
8
<PAGE>
"Tax" or "Taxes" means all Federal, state, local, and foreign taxes, and
--- -----
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Returns" means all Federal, state, local, and foreign tax returns,
-----------
declarations, statements, reports, schedules, forms, and information returns and
any amended Tax Returns relating to Taxes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
---
77bbbb) as in effect on the date of the execution of this Indenture, except as
provided by Section 9.3 hereof pursuant to which the term "TIA" will mean such
Trust Indenture Act as amended through and including the date specified by such
Section 9.3 for purposes thereof.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
-----------
other than any day on which securities are not traded on the Nasdaq National
Market (or, if the Common Stock is not listed thereon, on the principal national
securities exchange or any national automated quotation system on which the
Common Stock is listed or admitted to trading).
"Transfer Restricted Securities" means Securities that (i) bear or are
------------------------------
required to bear the legend set forth in Section 2.6 hereof and (ii) contain the
paragraph referred to in footnote 2 to the form of security attached hereto as
Exhibit A and the paragraph referred to in footnotes 4 and 5 to the certificate
attached hereto as Exhibit B .
"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 such successor.
"Trust Officer" means any officer within the corporate trust division (or
-------------
any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"U.S. Government Obligations" means direct noncallable obligations of, or
---------------------------
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"Wholly-Owned Subsidiary" means a Subsidiary all the Equity Interests of
-----------------------
which are owned by the Company or one or more Wholly-Owned Subsidiaries of the
Company.
Section 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
----------
"Indenture securities" means the Securities.
--------------------
"Indenture securityholder" means a Holder or a Securityholder.
------------------------
"Indenture to be qualified" means this Indenture.
-------------------------
9
<PAGE>
"Indenture trustee" or "institutional trustee" means the Trustee.
-----------------
"Obligor" on the indenture securities means the Company and any other
-------
obliger on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
Section 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions;
(f) "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; and
(g) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II.
THE SECURITIES
Section 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication, in respect
thereof, shall be substantially in the form of Exhibit A hereto, which Exhibit
is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve, with the consent of the Trustee, the form of the Securities and any
notation, legend or endorsement on them. Any such notations, legends or
endorsements not contained in the form of Security attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Security shall be dated the
date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. If any term or provision of a Security limits, qualifies, or conflicts
with the terms of this Indenture, the terms of this Indenture shall control.
Section 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign the Security for the Company by manual or facsimile
signature. The Company's seal may be, but is not required to be, impressed,
affixed, imprinted or reproduced on the
10
<PAGE>
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that or any office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. Such
signature shall be conclusive evidence, and the only evidence, that the Security
has been authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate the Securities for original issue in the
aggregate principal amount of up to $100,000,000 upon a written order of the
Company. The order shall specify (i) the amount of Securities to be
authenticated and (ii) the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed $100,000,000 except as provided in Section 2.7. Upon the written order
of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless otherwise provided in the appointment, 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 has the same rights as an
Agent to deal with the Company, any Affiliate of the Company, or any of their
respective Subsidiaries, and has the same protections under the Indenture.
Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
Section 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in New York, New York, where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent") and where notices and demands to or upon the Company in
respect of the Securities may be served. The Company may act as Registrar or
Paying Agent, except that, for the purposes of Articles III, VIII and XI and as
otherwise specified in the Indenture, neither the Company nor any Affiliate of
the Company shall act as Paying Agent. The Registrar shall keep a register of
the Securities and of their transfer and exchange. The Company may have one or
more co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. The Company hereby initially
appoints the Trustee as Registrar and Paying Agent, and the Trustee hereby
initially agrees so to act. The Company may change any Paying Agent or
Registrar without notice to any Holder.
The Company shall enter into an appropriate written agency agreement with
any Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.7.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities Custodian
with respect to the Global
11
<PAGE>
Securities.
Section 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, interest on or Liquidated Damages, if any, with
respect to, the Securities (whether such assets have been distributed to it by
the Company or any other obligor on the Securities), and shall notify the
Trustee in writing of any Default in making any such payment. If either of the
Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate
such assets and hold them as a separate trust fund for the benefit of the
Holders or the Trustee. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any Payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent (if other than
the Company or an Affiliate of the Company) shall have no further liability for
such assets.
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
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the fourth Business Day preceding each Interest Payment
Date and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee reasonably may require of the names
and addresses of Holders.
Section 2.6. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When Definitive
----------------------------------------------
Securities are presented to the Registrar or a co-Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations;
the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Definitive Securities surrendered for
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are
Definitive Securities, shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to
that effect (in substantially the form set forth on the reverse
of the Security); or
12
<PAGE>
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) that is aware that any sale
of securities to it will be made in reliance on Rule 144A under
the Securities Act and that is acquiring such Transfer Restricted
Security for its own account or for the account of another such
"qualified institutional buyer," a certification from such Holder
to that effect (in substantially the form set forth on the
reverse of the Security);
(C) if such Transfer Restricted Security is being
transferred to an institutional investor that is an "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security)
accompanied by a certificate in the form of Exhibit B to the
Indenture to the Trustee and if either the Trustee or the Company
so requests, an Opinion of Counsel satisfactory to the requesting
party to the effect that such transfer is in compliance with the
Securities Act; or
(D) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act and with all
applicable securities laws of the states of the United States, a
certification to that effect (in substantially the form set forth
on the reverse of the Security) and if either the Trustee or the
Company so requests, an Opinion of Counsel satisfactory to the
requesting party to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
----------------------------------------
exchanged for a beneficial interest in a Global Security, except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer in form reasonably satisfactory to the
Company and the Registrar or Co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the
Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act;
and
(ii) regardless of whether such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to
make, or to direct the Securities Custodian to make, an endorsement on
the Global Security to reflect an increase in the aggregate principal
amount of the Securities represented by the applicable Global
Security;
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of Securities
represented by the appropriate Global Security to be increased accordingly.
If no Global Securities are then outstanding, the Company shall issue and
the Trustee, upon receipt of the authentication order of the Company in the
form of an Officers' Certificate, shall authenticate an appropriate new
Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
------------------------------------------
exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with
13
<PAGE>
this Indenture (including the restrictions on transfer set forth herein)
and the procedures of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
------------------------------------------------------------
Definitive Security.
-------------------
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Definitive
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 Global Security and upon receipt by the Trustee of a
written instruction or such other form of instructions as is customary
for the Depositary or the Person designated by the Depositary as
having such a beneficial interest in a Transfer Restricted Security
only, the following additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial
owner, a certification from such person to that effect (in
substantially the form set forth on the reverse of the Security);
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) that is aware that any sale of Securities to
it will be made in reliance on Rule 144A under the Securities Act
and that is acquiring such beneficial interest in the Transfer
Restricted Security for its own account or the account of another
"qualified institutional buyer," a certification to that effect
from the transferor (in substantially the form set forth on the
reverse of the Security);
(C) if such Definitive Security is being transferred to an
institutional investor that is an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, a certification to that effect (in substantially
the form set forth on the reverse of the Security) accompanied by
a certificate in the form of Exhibit B to the Indenture to the
Trustee and if either the Trustee or the Company so requests, an
Opinion of Counsel satisfactory to the requesting party to the
effect that such transfer is in compliance with the Securities
Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements
of the Securities Act and in accordance with all applicable
securities laws of the states of the United States, a
certification to that effect from the transferor (in
substantially the form set forth on the reverse of the Security)
and if either the Trustee or the Company so requests, an Opinion
of Counsel satisfactory to the requesting party to the effect
that such transfer is in compliance with the Securities Act;
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian,
the aggregate principal amount of the applicable Global Security to be
reduced and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers' Certificate,
the Trustee will authenticate and deliver to the transferee a Definitive
Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global
14
<PAGE>
Security pursuant to this Section 2.6(d) shall be registered in such
names and 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 make such Definitive
Securities available for delivery to the persons in whose names such
Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
----------------------------------------------------------
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global
Security may not be transferred as a whole except (i) by the Depositary to
a nominee of the Depositary, (ii) by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or (iii) by the Depositary
or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(f) Authentication of Definitive Securities in Absence of Depositary.
----------------------------------------------------------------
If at any time:
(i) the Depositary for the Securities notifies the Company and
the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to continue as Depositary for the Global
Securities and a successor Depositary for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice;
or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Securities
under this Indenture;
then the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate requesting the authentication and delivery of
Definitive Securities, will, or its authenticating agent will, authenticate
and deliver Definitive Securities, in an aggregate principal amount equal
to the principal amount of the Global Securities, in exchange for such
Global Securities.
(g) Legends.
-------
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor
or substitution thereof) shall bear a legend in substantially the
following form:
"This Security (or its predecessor) has not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, may not be offered, sold, pledged or otherwise
transferred except as set forth in the next sentence hereof. By its
acquisition hereof or of a beneficial interest herein, the holder (1)
represents that either (a) it is a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities Act) (a "QIB"), (b) it is an
institutional "Accredited Investor" within the meaning of rule
501(a)(1), (2), (3) or (7) under the Securities Act (an "IAI"), (2)
agrees that it will not resell or otherwise transfer this security
except (a) to the Company or any of its subsidiaries, (b) to a person
whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the
requirements of Rule 144A under the Securities Act, (c) to an IAI
that, prior to such transfer, furnishes the trustee a signed letter
containing certain representations and agreements relating to the
transfer of this security (a form of which can be obtained from the
Trustee), (d) in a transaction meeting the requirements of Rule 144
under the Securities Act, (e) in accordance with another exemption
from the registration requirements of the Securities Act (and based
upon an opinion of counsel acceptable to the Company) or (f) pursuant
to an effective
15
<PAGE>
registration statement and, in each case, in accordance with the
applicable securities laws of any state of the united states or any
other applicable jurisdiction and (3) agrees that it will deliver to
each person to whom this security or an interest herein is transferred
a notice substantially to the effect of this legend. The Indenture
contains a provision requiring the trustee to refuse to register any
transfer of this security in violation of the foregoing."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security (1) in the case of a sale or transfer
pursuant to Rule 144 under the Securities Act, after delivery of
a customary Opinion of Counsel satisfactory to the Company to the
effect that such transfer is in compliance with the Securities
Act or (2) in the case of a sale or transfer pursuant to an
effective registration statement under the Securities Act; and
(B) any such Transfer Restricted Security represented by a
Global Security shall not be subject to the provisions set forth
in (i) above (such sales or transfers being subject only to the
provisions of Section 2.6(c) hereof); provided, however, that
with respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Security for
a Definitive Security that does not bear a legend, which request
is made in reliance upon Rule 144, the Holder thereof shall
certify in writing to the Registrar that such request is being
made pursuant to Rule 144 (such certification to be substantially
in the form set forth on the reverse of the Security).).
(h) Cancellation and/or Adjustment of Global Security. At such time
-------------------------------------------------
as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or canceled, such Global
Security shall be returned to or retained and canceled by the Trustee. At
any time prior to such cancellation, if any beneficial interest in a Global
Security is exchanged for Definitive Securities, redeemed, repurchased or
canceled, the principal amount of Securities represented by such Global
Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the written
direction of the Trustee, to reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of Definitive
-----------------------------------------------------------------
Securities.
----------
(1) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee or any authenticating agent
of the Trustee, upon receipt of the authentication order of the
Company in the form of an Officers' Certificate, shall
authenticate Definitive Securities and Global Securities at the
Registrar's or co-Registrar's written request.
(2) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than
any such transfer taxes, assessments, or similar governmental
16
<PAGE>
charge payable upon exchanges or transfers pursuant to Section
2.2 (fourth paragraph), 2.10, 3.7, 9.5, or 1 1.1 (final
paragraph)).
(3) The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of (a) any Definitive
Security selected for redemption in whole or in part pursuant to
Article III, except the unredeemed portion of any Definitive
Security being redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article XI hereof or the mailing
of a notice of redemption of Securities pursuant to Article III
hereof and ending at the close of business on the day of such
mailing.
(j) General. The Trustee shall have no obligation or duty to
-------
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect
to any transfer of any interest in any Security (including any transfers
between or among Depositary participants or beneficial owners of interests
in any Global Security) other than to require delivery of such certificates
and other documentation or evidence as are expressly required by, and to do
so if and when expressly required by the terms of, this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
Section 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims and submits an affidavit or other evidence, satisfactory to the
Trustee and the Company, to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee, upon
receipt of the authentication order of the Company in the form of an Officers'
Certificate, shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Company and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge such Holder for their expenses in replacing a
Security.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion, but
subject to any conversion rights, may, instead of issuing a new Security, pay
such Security, upon satisfaction of the conditions set forth in the preceding
paragraph.
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, regardless of whether the
mutilated, destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and such new Security shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities duly
issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies of any Holder 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 the Securities that have been
authenticated by the Trustee (including any Security represented by a Global
Security) except those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Security effected by the Trustee
hereunder and
17
<PAGE>
those described in this Section 2.8 as not outstanding. A Security does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Security, except as provided in Section 2.9.
If a Security is replaced or paid pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), the replaced or paid Security
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced or paid Security is held by a bona fide purchaser. A
mutilated Security ceases to be outstanding upon surrender of such Security and
replacement thereof pursuant to Section 2.7.
Securities for whose payment or redemption money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent (other than
the Company or its Affiliates) in trust or set aside and segregated in trust by
the Company or one of its Subsidiaries (if the Company or one of its
Subsidiaries shall act as the Paying Agent) for the Holders of such Securities
shall be deemed to be no longer outstanding on and after the date for such
payment or redemption and shall cease to accrue interest.
Section 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee actually
knows are so owned shall be disregarded. The Company shall notify the Trustee,
in writing, when the Company or an Affiliate of the Company repurchases or
otherwise acquires Securities and of the principal amount of such Securities so
repurchased or otherwise acquired. Notwithstanding the foregoing, Securities
that are to be acquired by the Company or any Affiliate of the Company pursuant
to an exchange offer, tender offer or other agreement shall not be deemed to be
owned by the Company or such Affiliate until legal title to such Securities has
passed to such entity.
Section 2.10. Temporary Securities.
--------------------
Until Definitive Securities are ready for delivery, the Company may prepare
and the Trustee (upon written request from the Company) shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of Definitive Securities but may have variations that the Company reasonably and
in good faith considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
Definitive Securities in exchange for temporary Securities. Until so exchanged,
the temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as permanent Securities authenticated and delivered
hereunder.
Section 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Securities
to replace Securities that have been paid or delivered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities canceled as provided in this Section 2.11, except as
expressly permitted in the form of Securities and as permitted by this
Indenture. All cancelled Securities shall be destroyed (subject to the record
retention requirements of the Exchange Act) and certification of their
destruction delivered to the Company, unless the Company shall direct in writing
that cancelled Securities be returned to it.
18
<PAGE>
Section 2.12. Defaulted Interest.
------------------
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Security (or one or more predecessor Securities) is registered at the
close of business on the Record Date for such interest.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date plus, to the extent lawful,
any interest payable on the defaulted interest (collectively, herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date, and such Defaulted Interest shall be paid by
the Company, at 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 (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment. Thereupon the Trustee shall
fix a special record date for the payment of such Defaulted Interest which
shall be not more than 15 Business Days and not less than 10 Business Days
prior to the date of the proposed payment and not less than 10 Business
Days after the receipt by the Trustee of the notice of the proposed payment
("Special Record Date"). The Trustee shall promptly notify the Company in
writing of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder at such Holder's address as it appears in
the registry books of the Registrar not less than 10 Business 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 (or their respective predecessor Securities) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following clause (2). Prior to noon New York time on the
date on which the Defaulted Interest is to be paid, the Company shall
deposit with the Trustee an amount of Cash equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after written notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the grace period provided in Section 6.1 shall be paid to the
Holders of the Securities as of the regular Record Date for such Interest
Payment Date for which interest has not been paid.
Section 2.13. CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided
19
<PAGE>
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.
Section 2.14. Deposit of Moneys.
-----------------
Prior to noon New York time on each Interest Payment Date, Redemption Date
and Repurchase Date, and on the Stated Maturity Date, the Company shall have
deposited with the Paying Agent such amounts in immediately available funds
sufficient to make Cash payments, if any, due on such Interest Payment Date,
Redemption Date, Repurchase Date or Stated Maturity Date, as the case may be, in
a timely manner which permits the Paying Agent to remit payment to the Holders
on such Interest Payment Date, Redemption Date, Repurchase Date or Stated
Maturity Date.
ARTICLE III.
REDEMPTION
Section 3.1. Right of Redemption.
-------------------
Redemption of Securities, as permitted by any provision of this Indenture,
shall be made in accordance with Paragraph 5 of the Securities and this Article
III. The Company will not have the right to redeem any Securities prior to
March [__], 2003. If, for any period of 30 consecutive Trading Days following
March [__], 2003, the average Last Sale Price of the Common Stock is greater
than 150% of the average Conversion Price during such period (computed as the
mean of the Conversion Prices applicable at the close of business on each of the
Trading Days during such period), then, subject to the other provisions of this
Article III, on or after the 30/th/ day following the last day of such period,
the Company will have the right, subject to the Holders' right to first convert
the Securities pursuant to Article XIII of this Indenture, to redeem the
Securities in whole, but not in part, at the Redemption Prices specified in
Paragraph 5 of the Securities under the caption "Redemption," in each case
including accrued and unpaid interest and Liquidated Damages, if any, to, but
excluding, the Redemption Date.
Section 3.2. Notices to Trustee.
------------------
If the Company has the right to redeem Securities and it elects to redeem
the 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, the Redemption Price and whether it wants the Trustee, on behalf of
the Company, to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to be
redeemed pursuant to Paragraph 5 of the Securities by crediting against any such
redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee in writing of the amount of the
reduction and deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days but not more than 75 days before the Redemption
Date (unless a shorter notice period shall be satisfactory to the Trustee)
together with an Officer's Certificate stating that such redemption will comply
with the conditions contained herein. Any such notice to the Trustee may be
canceled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
20
<PAGE>
Section 3.3. Notice of Redemption.
--------------------
(a) At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first-class mail,
postage prepaid, to the Trustee and each Holder whose Securities are to be
redeemed at such Holder's address as it appears on the security register
maintained by the Registrar. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense. Each notice of redemption shall identify the Securities to be
redeemed and shall state:
(i) the Redemption Date, and that the Securities called for
redemption may not be converted after the Business Day immediately
prior to the Redemption Date;
(ii) the Redemption Price, including the amount of accrued and
unpaid interest and Liquidated Damages, if any, to be paid upon such
redemption;
(iii) the name, address and telephone number of the Paying Agent;
(iv) that Securities called for redemption must be surrendered
to the Paying Agent at the address specified in such notice to collect
the Redemption Price plus accrued interest;
(v) that, unless (A) the Company defaults in its obligation to
deposit Cash with the Paying Agent in accordance with Section 3.5
hereof or (B) such redemption payment is prohibited pursuant to
Article XII hereof or otherwise, interest on, and Liquidated Damages,
if any, with respect to, Securities called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right
of the Holders of such Securities is to receive payment of the
Redemption Price, including accrued and unpaid interest and Liquidated
Damages, if any, to, but excluding the Redemption Date, upon surrender
to the Paying Agent of the Securities called for redemption and to be
redeemed;
(vi) the CUSIP number of the Securities to be redeemed; and
(vii) that the notice is being sent pursuant to this Section 3.3
and pursuant to the redemption provisions of Paragraph 5 of the
Securities.
(b) The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been given, regardless of whether the Holder
receives such notice.
Section 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.3,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Redemption Date. Upon
surrender to the Trustee or Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price, including accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding, the Redemption Date; provided
that if the Redemption Date is after a regular Record Date and on or prior to
the corresponding Interest Payment Date, the accrued interest and Liquidated
Damages, if any, shall be payable to the Holder of the redeemed Securities
registered on the relevant Record Date; and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day. Notices mailed as provided in this
Article III shall be conclusively presumed to have been given regardless of
whether
21
<PAGE>
a given Holder receives the Notice.
Section 3.5. Deposit of Redemption Price.
---------------------------
(a) Prior to noon New York time on the Redemption Date, the Company
shall deposit with the Paying Agent (other than the Company or an Affiliate
of the Company) Cash sufficient to pay the Redemption Price of, including
accrued and unpaid interest on, and Liquidated Damages, if any, with
respect to, all Securities to be redeemed on such Redemption Date (other
than Securities called for redemption on that date that have been delivered
by the Company to the Trustee for cancellation). The Paying Agent shall
promptly return to the Company any Cash so deposited which is not required
for that purpose upon the written request of the Company.
(b) If the Company complies with the preceding paragraph and the
other provisions of this Article III and payment of the Securities called
for redemption is not prohibited under Article XII or otherwise, interest
on the Securities to be redeemed will cease to accrue on and after the
applicable Redemption Date, regardless of whether such Securities are
presented for payment. Notwithstanding anything herein to the contrary, if
any Security surrendered for redemption in the manner provided in the
Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such
payment is made on the unpaid principal, and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the rate and in
the manner provided in Section 4.1 hereof and the Security.
ARTICLE IV.
COVENANTS
Section 4.1. Payment of Securities.
---------------------
(a) The Company shall pay the principal of, interest on, and
Liquidated Damages, if any, with respect to, the Securities on the dates
and in the manner provided in this Indenture and the Securities, as
applicable. An installment of principal of, interest on, or Liquidated
Damages, if any, with respect to, the Securities shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds for the benefit of the
Holders, on or before noon New York time on that date, Cash deposited and
designated for and sufficient to pay the installment.
(b) The Company shall pay interest on overdue principal and on
overdue installments of interest at the rate specified in the Securities
compounded semi-annually, to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
-------------------------------
(a) The Company shall maintain in New York, New York, an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and
for conversion and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 14.2.
(b) The Company may also from time to time designate one or more
other offices or
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agencies where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or
agency in New York, New York, for such purposes. The Company shall give
prior written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby initially designates the corporate trust office of the
Trustee in New York, New York, as the office contemplated by this Section
4.2.
Section 4.3. Corporate Existence.
-------------------
Subject to Article V, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence in accordance with its organizational documents and the rights
(charter and statutory) and corporate franchises of the Company; provided,
however, that the Company shall not be required to preserve, with respect to
itself, any right or franchise, if the Company shall, in good faith, reasonably
determine that the preservation thereof is no longer necessary or desirable in
the conduct of the business of such entity and the loss thereof is not adverse
in any material respect to the Holders.
Section 4.4. Payment of Taxes and Other Claims.
---------------------------------
The Company shall, and shall cause each of its Subsidiaries to, (a)
file timely all Tax Returns required to be filed by the Company or any of its
Subsidiaries, and (b) pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, all Taxes levied or imposed upon the Company
or any of its Subsidiaries or any of their respective properties and assets;
provided, however, that neither the Company nor any Subsidiary shall be required
to pay or discharge or cause to be paid or discharged any such Tax the
applicability or validity of which is being contested in good faith by
appropriate proceedings timely filed and diligently pursued and for which
disputed amounts adequate reserves have been established on the book and records
of the Company or any such Subsidiary in accordance with GAAP.
Section 4.5. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to a Trust Officer of the Trustee
within 120 days after the end of its fiscal year an Officers' Certificate
complying with Section 314(a)(4) of the TIA and stating that a review of
its activities and the activities of its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers
with a view to determining, without regard to notice periods or periods of
grace, whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such
Officer signing such certificate, regardless of whether the signer knows of
any failure by the Company or any Subsidiary of the Company to comply with
any conditions or covenants in this Indenture and, if such signor does know
of such a failure to comply, the certificate shall describe such failure
with reasonable particularity. The Officers' Certificate shall also notify
the Trustee should the relevant fiscal year end on any date other than the
current fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to a Trust Officer of the Trustee, promptly upon
becoming aware of any Default, Event of Default or fact which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, an Officers' Certificate specifying such Default, Event of
Default or fact and what action the Company is taking or proposes to take
with respect thereto. The Trustee shall not be deemed to have knowledge of
any Default, any Event of Default or any such fact unless one of its Trust
Officers receives written notice thereof from the Company or any of the
Holders.
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Section 4.6. Reports.
-------
(a) Regardless of whether the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
deliver to the Trustee within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated
financial statements substantially equivalent to financial statements that
would have been included in reports filed with the SEC if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be
required in such reports to the SEC and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required.
(b) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 4.7. Rule 144A Information Requirement.
---------------------------------
If at any time there are Transfer Restricted Securities outstanding
and the Company shall cease to have a class of equity securities registered
under Sections 12(b) or 12(g) of the Exchange Act or shall cease to be subject
to Section 15(d) of the Exchange Act, the Company shall furnish, within a
reasonable period of time, to the Holders or beneficial holders of the
Securities or the underlying Common Stock and prospective purchasers of
Securities or the underlying Common Stock designated by the Holders of Transfer
Restricted Securities, upon their written request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such
time as the Shelf Registration Statement has become effective under the
Securities Act. The Company shall also furnish such information during the
pendency of any suspension of effectiveness of the Shelf Registration Statement.
Section 4.8. Further Instruments and Acts.
----------------------------
Upon the 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 purpose of this Indenture.
Section 4.9. Limitation on Transactions with Affiliates.
------------------------------------------
(a) Neither the Company nor any of its Subsidiaries shall be
permitted on or after the Issue Date to enter into or suffer to exist any
contract, agreement, arrangement or transaction with any Affiliate (an
"Affiliate Transaction"), or any series of related Affiliate Transactions,
(i) unless the terms of such Affiliate Transaction are fair and
reasonable to the Company, and no less favorable to the Company, than
could have been obtained in an arm's length transaction with a non-
Affiliate, and
(ii) if involving consideration to either party in excess of
$1,000,000, unless such Affiliate Transaction or any series of related
Affiliate Transactions is approved by a majority of the members of the
Board of Directors that are disinterested in such transaction and
(iii) if involving consideration to either party in excess of
$5,000,000, unless the
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Company, prior to the consummation thereof, obtains a written
favorable opinion as to the fairness of such transaction to the
Company from a financial point of view from an independent investment
banking firm of national reputation or, if pertaining to a matter for
which such investment banking firms do not customarily render such
opinions, an appraisal or valuation firm of national reputation.
(b) Notwithstanding the foregoing, the following will be deemed not
to be Affiliate Transactions:
(i) employment agreements or arrangements entered into by the
Company or any Subsidiary of the Company in the ordinary course of
business with the approval of the disinterested members of the
Company's Board of Directors or, if none, unanimously by such Board of
Directors;
(ii) any transaction solely between the Company and any of its
Wholly-Owned Subsidiaries or solely between Wholly-Owned Subsidiaries;
(iii) transactions pursuant to the Incubator Agreement; and
(iv) reasonable and customary fees and compensation paid to, and
indemnity provided on behalf of, directors of the Company.
ARTICLE V.
SUCCESSOR CORPORATION
Section 5.1. Limitation on Merger, Sale or Consolidation.
-------------------------------------------
(a) The Company shall not, directly or indirectly, consolidate with
or merge with or into another Person or sell, lease or otherwise dispose of
all or substantially all of its assets (on a consolidated basis), whether
in a single transaction or a series of related transactions, to another
Person or group of affiliated Persons (other than to its Wholly-Owned
Subsidiaries), unless:
(i) either (a) in the case of a merger or consolidation, the
Company is the surviving entity or (b) the resulting, surviving Person
in such merger or consolidation (if not the Company), or transferee
entity (in the case of a sale, lease or other disposition of assets)
is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in
connection with the Securities and the Indenture;
(ii) no Default or Event of Default shall exist or shall occur
immediately before or after giving effect on a pro forma basis to such
transaction; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and, if a supplemental indenture is
required, such supplemental indenture comply with the Indenture and
that all conditions precedent in the Indenture relating to such
transactions have been satisfied.
(b) For purposes of clause (a) of this Section 5.1 and Section 13.6,
the sale, lease or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
25
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would constitute all or substantially all of the properties and assets of
the Company on a consolidated basis, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company,
unless such disposition is to the Company or a Wholly-Owned Subsidiary of
the Company.
Section 5.2. Successor Corporation Substituted.
---------------------------------
Upon any permitted consolidation or merger or any permitted sale, lease or
other disposition of all or substantially all of the assets of the Company in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such sale, lease
or other disposition is made, shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the same
effect as if such successor corporation had been named therein as the Company,
and when a successor corporation duly assumes all of the obligations of the
Company pursuant hereto and pursuant to the Securities, the predecessor shall be
released from such obligations.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the following
----------------
events (whatever the reason for such Event of Default and whether it shall be
caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure by the Company to pay any installment of interest or
Liquidated Damages, if any, on the Securities as and when each becomes due
and payable and the continuance of such failure for a period of 30 days,
regardless of whether such payment is prohibited by Article XII;
(b) failure by the Company to pay all or any part of the principal
of, or premium, if any, on the Securities when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, failure to pay all or any part of the
Repurchase Price on the Repurchase Date in accordance with Article XI,
regardless of whether such payment is prohibited by Article XII;
(c) failure by the Company to observe or perform any covenant or
agreement contained in the Securities or this Indenture (other than a
default in the performance of any covenant or agreement which is
specifically dealt with elsewhere in this Section 6.1), and continuance of
such failure for a period of 30 days;
(d) failure to make any payment at final stated maturity, including
any applicable grace period, in respect of Indebtedness of the Company
(other than Non-Recourse Debt) in an amount in excess of $5,000,000, and
continuance of such failure for 30 days after written notice is given to
the Company by the Trustee or to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of Securities outstanding
specifying the nature of the purported default, and that the same, if not
cured, would constitute an Event of Default under this Indenture;
(e) default with respect to any Indebtedness of the Company, which
default results in the acceleration of Indebtedness (other than Non-
Recourse Debt) in an amount in excess of $5,000,000 without such
Indebtedness having been discharged or such acceleration having been
rescinded or annulled for 30 days after written notice is given to the
Company by the Trustee or to
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the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of Securities outstanding specifying the nature of the
purported default, and that the same, if entered, would constitute an Event
of Default under this Indenture;
(f) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Significant
Subsidiaries as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company or any of its Significant
Subsidiaries under any bankruptcy or similar law, and such decree or order
shall have continued undischarged and unstayed for a period of 30 days; or
a decree or order of a court of competent jurisdiction over the appointment
of a receiver, liquidator, trustee, or assignee in bankruptcy or insolvency
of the Company, any of its Significant Subsidiaries, or of the property of
any such Person, or for the winding up or liquidation of the affairs of any
such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 30
days;
(g) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file
a petition or answer or consent seeking reorganization under any bankruptcy
or similar law or similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a Custodian,
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of
it or any of its assets or property, or shall make a general assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as they
become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing; or
(h) final unsatisfied judgments not covered by insurance, aggregating
in excess of $5,000,000 at any one time shall have been rendered against
the Company or any of its Significant Subsidiaries and not have been
stayed, bonded or discharged for a period (during which execution shall not
be effectively stayed) of 60 days after the right to appeal such judgment
has expired (or, in the case of any such final judgment which provides for
payment over time, which shall so remain unstayed, unhanded or undischarged
beyond any applicable payment date provided therein).
Section 6.2. Acceleration of Maturity Rescission and Annulment.
-------------------------------------------------
(a) If an Event of Default (other than an Event of Default specified
in Section 6.1(f) or Section 6.1(g) relating to the Company) occurs and is
continuing, then in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or
the Holders of at least 25% in aggregate principal amount of then
outstanding Securities, by a notice in writing to the Company (and to the
Trustee if given by Holders) (an "Acceleration Notice"), may declare all
-------------------
unpaid principal, premium, if any, accrued interest and Liquidated Damages,
if any, of the Securities (or the Repurchase Price if the Event of Default
includes failure to pay the Repurchase Price, determined as set forth
below), with respect thereto, to be due and payable immediately without any
other declaration or act on the part of the Trustee or the Holders. If an
Event of Default specified in Section 6.1(f) or Section 6.1(g) relating to
the Company occurs, all principal, premium, if any, accrued interest and
Liquidated Damages on or with respect thereto will be immediately due and
payable on all outstanding Securities without any declaration or other act
on the part of Trustee or the Holders.
(b) At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter provided in this Article VI, the
Holders of no less than a majority in aggregate principal amount of
27
<PAGE>
then outstanding Securities, by written notice to the Company and the
Trustee, may rescind, on behalf of all Holders, any such declaration of
acceleration if:
(i) the Company has paid or deposited with the Trustee Cash
sufficient to pay:
(1) the principal of (and premium, if any, applicable to)
any Securities which would then be due otherwise than by such
declaration of acceleration, and interest thereon at the rate
borne by the Securities,
(2) to the extent that payment of such interest is lawful,
interest upon overdue interest and Liquidated Damages, if any, at
the rate borne by the Securities,
(3) all sums paid or advanced by the Trustee hereunder and
the compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and
(ii) all Events of Default, other than the non-payment of the
principal of, premium, if any, interest on and Liquidated Damages, if
any, with respect to Securities that have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 6.12, including, if applicable, any Event of Default relating
to the covenants contained in Section 11.1.
(c) Notwithstanding the previous sentence of this Section 6.2, no
waiver shall be effective against any Holder for any Event of Default or
event which with notice or lapse of time or both would be an Event of
Default with respect to any covenant or provision which cannot be modified
or amended without the consent of the Holder of each outstanding Security
affected thereby, unless all such affected Holders agree, in writing, to
waive such Event of Default or other event. No such waiver shall cure or
waive any subsequent Default or Event of Default or impair any right
consequent thereon.
Section 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
(a) The Company covenants that if an Event of Default in payment of
principal, premium, if any, interest or Liquidated Damages, if any,
specified in clause (a) or clause (b) of Section 6.1 occurs and is
continuing, the Company shall, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium, if any, interest,
Liquidated Damages, if any, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal
(and premium, if any), Liquidated Damages, if any, and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs, fees and
expenses of collection, including compensation to, and expenses,
disbursements and advances of the Trustee, its agents and counsel.
(b) If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust in
favor of the Holders, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company or
any other obligor upon the Securities and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the property of
the Company or any other obligor upon the Securities, wherever situated.
(c) If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial
28
<PAGE>
proceedings as the Trustee shall deem most effective to protect and enforce
any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
Section 6.4. Trustee May File Proofs of Claim.
--------------------------------
(a) 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 (which term as used in this
Section shall include any predecessor Trustee) (irrespective of whether the
principal 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
overdue principal, interest or Liquidated Damages) shall be entitled and
empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including:
(i) to file and prove a claim for the whole amount of
principal (and premium, if any), interest and Liquidated Damages, if
any, owing and unpaid in respect of the Securities and to file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim under Section 7.7
for the compensation, fees, expenses, disbursements and advances of
the Trustee, its agent and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) To collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same
in accordance with Section 6.6;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the compensation,
expenses, fees, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 7.7. To the
extent that the payment of such compensation, expenses, fees, disbursements
and advances of Trustee, its agents and counsel and any other amounts due
to the Trustee under Section 7.7 hereof out of the estate in any such
judicial proceeding shall be denied for any reason, payment of the same
shall be secured by a perfected first priority security interest in and
lien on, and shall be paid out of, any and all distributions, dividends,
money securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise, and any such security interest
and lien in favor of any predecessor Trustee shall be senior to the
security interest and lien in favor of the current Trustee.
(b) 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 6.5. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, fees, disbursements and advances of the
29
<PAGE>
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities in respect of which such judgment has been recovered.
Section 6.6. Priorities.
----------
(a) Any money collected by the Trustee pursuant to this Article
VI shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal, premium, if any, interest or Liquidated Damages, if any, upon
presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee (including any predecessor Trustee) in
payment of all amounts due pursuant to Section 7.7;
SECOND: To the holders of Senior Indebtedness of the Company to
the extent provided in Article XII;
THIRD: To the Holders in payment of the amounts then due and
unpaid for principal of, premium, if any, interest on and Liquidated
Damages, if any, with respect to, the Securities in respect or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Securities for principal, premium, if any, interest and Liquidated Damages,
if any, respectively; and
FOURTH: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
(b) The Trustee may fix a Record Date and Payment Date for any
payment to Holders pursuant to this Section at least 15 days before such
Record Date. The Trustee shall mail to each Holder and the Company a notice
stating the Record Date, Payment Date and amount to be paid.
Section 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred or reasonably probable to be incurred in compliance with such
request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of then outstanding Securities;
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it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 6.8. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium, Interest and Liquidated Damages.
- ----------------------------------------
Notwithstanding any other provision of this Indenture, the Holder of any
Security shall, subject to the provisions of Article XII, have the right, which
is absolute and unconditional, to receive payment of the principal of, premium,
if any, interest on, and Liquidated Damages, if any, with respect to such
Security when due (including, in the case of redemption, the Redemption Price on
the applicable Redemption Date, and in the case of the Repurchase Price, on the
applicable Repurchase Date), to convert such Security in accordance with Article
XIII, and to institute suit for the enforcement of any such payment and right to
convert after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
Section 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in Section 2.7, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Security to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event of
Default. Every right and remedy given by this Article VI or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 6.11. Control by Holders.
------------------
The Holder or Holders of no less than a majority in aggregate principal
amount of then outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred upon the Trustee, provided
that:
(a) such direction shall be made in writing to the Trustee and
shall not be in conflict with any rule of law or with this Indenture,
(b) the Trustee shall not have determined that the action so
directed would be unjustly prejudicial to the Holders not taking part in
such direction or would expose the Trustee to personal liability, and
(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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Section 6.12. Waiver of Default.
-----------------
(a) The Holder or Holders of not less than a majority in
aggregate principal amount of then outstanding Securities may, on behalf of
all Holders, prior to the declaration of acceleration of the maturity of
the Securities, waive any default hereunder and its consequences or
compliance with any provision of this Indenture or the Securities, except a
default or compliance:
(i) in the payment of the principal of, premium, if any,
interest on or Liquidated Damages, if any, with respect to any
Security not yet cured as specified in clauses (a) and (b) of Section
6.1, or
(ii) in respect of a covenant or provision hereof which,
under Article IX, cannot be modified or amended without the consent of
the Holder of each outstanding Security affected.
(b) Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair the exercise of any right arising
therefrom.
Section 6.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security by its
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 6.13 shall not apply to any
suit instituted by the Company, to any suit instituted by the Trustee, to any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in aggregate principal amount of then outstanding Securities, or
to any suit instituted by any Holder for enforcement of the payment of principal
of, premium, if any, interest on or Liquidated Damages, if any, with respect to,
any Security on or after the respective Stated Maturity of such Security
(including, in the case of redemption, on or after the Redemption Date).
Section 6.14. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed.
Section 7.1. Duties of Trustee.
-----------------
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(a) If a Default or 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 their
exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no others, and
no covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine regardless of whether they conform to the
requirements of this Indenture (but need not confirm or investigate
the accuracy of mathematical calculations or other facts purported to
be stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a written
direction received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any liability. The Trustee shall
be under no obligation to perform any of its rights or duties hereunder or
to take or omit to take any action under this Indenture or at the request,
order or direction of the Holders or in the exercise of any of its rights
or powers unless such Holders shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
(e) Regardless of whether therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), (c), (d) and (f) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
33
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Section 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may conclusively rely on any document reasonably
believed by it to be genuine and to have been signed or presented by the
proper Person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and 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 any such
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any attorney
or agent (other than an agent who is an employee of the Trustee) appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which reasonably believes to be authorized or
within its discretion, rights or powers conferred upon it by this
Indenture.
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, 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.
(f) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company shall
be sufficient if signed by an Officer of the Company.
(g) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of the Company's covenants in
Article IV hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default, except (i) any Event of
Default occurring pursuant to Sections 6.1(a) or 6.1(b), or (ii) any
Default or Event of Default of which a Trust Officer of the Trustee shall
have received written notification or obtained actual knowledge.
(h) No permissive right of the Trustee to act hereunder shall be
construed as a duty.
(i) If in the administration of this Indenture the Trustee deems
it desirable that a matter be proved or established prior to taking,
suffering or omitting to take any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate, an Opinion of
Counsel, or both.
(j) The Trustee shall not be deemed to have notice or knowledge
(including actual knowledge) of any matter unless a Trust Officer has
actual knowledge thereof or unless written notice thereof is received by
the Trustee at the office specified in Section 14.2 and such notice
references the Securities generally, the Company or this Indenture.
(k) The Trustee may consult with counsel with respect to legal
matters relating to this Indenture or Securities and the advice or opinion
of counsel shall be full and complete authorization and protection from
liability with respect to any action taken, omitted or suffered by it
hereunder in
34
<PAGE>
good faith and in accordance with the advice or opinion of such counsel.
Section 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any of
its Subsidiaries, or their respective Affiliates 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 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Registration Rights Agreement or the Securities and 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 this Indenture or the
Securities, other than the Trustee's certificate of authentication, or the use
or application of any funds received by a Paying Agent other than the Trustee.
Section 7.5. Notice 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 Holder notice of the
uncured Default or Event of Default within 90 days after the date the same is
known by the Trustee or the Trustee receives written notice of the occurrence of
such Default or Event of Default unless such Default is cured or waived. The
Trustee may withhold such notice if and so long as a Trust Officer in good faith
determines that withholding the notice is in the interest of the Holders, except
in the case of a Default in payment of principal (or premium, if any) of,
interest on or Liquidated Damages with respect to, any Security (including the
payment of the Repurchase Price on the Repurchase Date and the payment of the
Redemption Price on the Redemption Date).
Section 7.6. Reports by Trustee to Holders.
-----------------------------
(a) Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required by
law, mail to each Holder a brief report dated as of such reporting date
that complies with TIA (S) 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA (S)(S) 313(b) and
313(c).
(b) A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and, if required, filed with the SEC and
each stock exchange, if any, on which the Securities are listed.
(c) The Company shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or automatic quotation
system or of any delisting thereof.
Section 7.7. Compensation and Indemnity.
--------------------------
(a) The Company agrees to pay to the Trustee from time to time
such compensation for its services as the parties shall agree from time to
time in writing and, in the absence of such agreement, reasonable
compensation for its acceptance of this Indenture and services hereunder.
The Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee
upon request for all reasonable disbursements, expenses, fees and advances
incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements, fees and expenses of the Trustee's agents,
accountants, experts and counsel.
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<PAGE>
(b) The Company agrees to indemnify the Trustee (in its capacity
as Trustee) and each of its officers, directors, employees, attorneys-in-
fact and agents (each an "Indemnified Party") for, and hold them harmless
against, any and all claims, demands, expenses (including but not limited
to reasonable compensation, fees, disbursements and expenses of the
Trustee's agents and counsel), losses, damages or liabilities incurred by
it without negligence, bad faith or willful misconduct on the part of such
Indemnified Party, arising out of, related to, or in connection with the
acceptance or administration of this trust and its rights or duties
hereunder, including the reasonable costs and expenses, and the costs and
expenses of enforcing this Indenture (including this Section 7.7) against
the Company and of defending itself against any claim (whether asserted by
the Company, or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
An Indemnified Party shall notify the Company promptly of any claim
asserted against such Indemnified Party for which it may seek indemnity.
Failure by an Indemnified Party to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the
claim and an Indemnified Party shall provide reasonable cooperation at the
Company's expense in the defense. An Indemnified Party may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel; provided that (i) the Company will not be required to pay such
fees and expenses if it assumes the Indemnified Party's defense and there
is no conflict of interest between the Company and the Indemnified Party in
connection with such defense and (ii) the Company shall not be obligated to
pay the fees and expenses of more than one counsel (plus local counsel, if
any) in any one proceeding (or related proceedings), which counsel shall be
selected by the Trustee. The Company need not pay for any settlement made
without its written consent.
(c) The Company need not reimburse any expense or indemnify
against any loss or liability to the extent attributable to the negligence,
bad faith or willful misconduct of the Trustee or any other Indemnified
Party.
(d) To secure the Company's payment obligations in this Section
7.7, the Trustee and each predecessor Trustee shall have a perfected lien
prior to the Securities on all assets held or collected by the Trustee, in
its capacity as Trustee, except assets held in trust to pay principal and
premium, if any, of or interest on particular Securities. Any lien in favor
of a predecessor Trustee shall be senior to any lien in favor of the
current Trustee.
(e) When the Trustee incurs expenses or fees or renders services
after an Event of Default specified in Section 6.1(f) or Section 6.1(g)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
(f) The Trustee shall comply with the provision of Section
313(b)(2) of the TIA, to the extent applicable.
(g) The Company's obligations under this Section 7.7 and any
lien arising hereunder shall survive indefinitely, including upon the
resignation or removal of the Trustee, the discharge of the Company's
obligations pursuant to Article VIII of this Indenture and any rejection or
termination of this Indenture under any Bankruptcy Law.
Section 7.8. Replacement of Trustee.
----------------------
(a) The Trustee may resign by so notifying the Company in
writing. The Holder or Holders of a majority in principal amount of then
outstanding Securities may remove the Trustee by so notifying the Company
and the Trustee in writing. The Company, by Board of Directors resolution,
may remove the Trustee if:
36
<PAGE>
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent or an
order for relief is entered with respect to the Trustee under any
bankruptcy law;
(iii) a receiver, Custodian, or other public officer takes
charge of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(b) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee in accordance
with the applicable requirements of this Section 7.8.
(c) If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint
a successor Trustee. Within one year after the successor Trustee takes
office, the Holder or Holders of a majority in principal amount of then
outstanding Securities may, with the Company's consent, appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
(d) A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Immediately
upon delivery of such notice and provided that all sums owing to the
retiring Trustee provided for in Section 7.7 have been paid, the retiring
Trustee shall transfer all property held by it as trustee to the successor
Trustee, subject to the lien provided in Section 7.7, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under
this Indenture. A successor Trustee shall mail notice of its succession to
each Holder.
(e) 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 Holder or Holders of at least 10% in principal amount of
then outstanding Securities may, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) If the Trustee, after written request by any Holder who has
been a Holder for at least six months, fails to comply with Section 7.10,
any such Holder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(g) Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue
indefinitely for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the resulting, surviving or transferee corporation without any further act
shall, if such resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA (S)
310(a)(1), (2) and (5). The Trustee
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<PAGE>
and its direct parent or, in the case of a corporation included in a bank
holding company system, the related bank 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. The Trustee shall comply with TIA (S)
310(b).
Section 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
Section 7.12. Other Capacities.
----------------
All references in this Indenture to the Trustee shall be deemed to refer to
the Trustee in its capacity as Trustee and in its capacities as any Agent, to
the extent acting in such capacities, and every provision of this Indenture
relating to the conduct or affecting the liability or offering protection,
immunity or indemnity to the Trustee shall be deemed to apply with the same
force and effect to the Trustee acting in its capacity as any Agent.
ARTICLE VIII.
SATISFACTION AND DISCHARGE
Section 8.1. Satisfaction and Discharge of Indenture.
---------------------------------------
The Company may terminate its obligations under this Indenture (subject to
the provisions of this Article VIII and Section 7.7) when it shall have
delivered to the Trustee for cancellation all Securities theretofore
authenticated (other than any Securities which shall have been destroyed, lost
or stolen and which shall have been replaced or paid as provided in Article II
hereof) and the following conditions shall be satisfied:
(a) The Company has paid all sums payable under the Indenture;
and
(b) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating
that all conditions precedent have been complied with as contemplated by
this Section 8.1.
Section 8.2. Repayment to the Company.
------------------------
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, for the payment of the principal of, premium, if any, interest on
or Liquidated Damages, if any, with respect to any Security and remaining
unclaimed for two years after such principal, premium, if any, interest or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its written request; and the Holder of such Security shall thereafter
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money shall thereupon cease.
38
<PAGE>
ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
(a) Without the consent of any Holder, the Company, when
authorized by Board Resolutions, and the Trustee, at any time and from time
to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(i) to cure any ambiguity, defect, or inconsistency;
(ii) to create additional covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or to make any other change that does
not materially adversely affect the rights of any Holder;
(iii) to provide for collateral for or guarantors of the
Securities;
(iv) to evidence the succession of another Person to the
Company and the assumption by any such successor of the
obligations of the Company herein and in the Securities in
accordance with Article V;
(v) to comply with the TIA; or
(vii) to provide for uncertificated Securities in addition
to or in place of certificated Securities.
(b) The Company shall deliver to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with this
Section 9.1.
Section 9.2. Amendments, Supplemental Indentures and Waivers with Consent
------------------------------------------------------------
of Holders.
- ----------
(a) Subject to the last sentence of this paragraph, with the
consent of the Holders of not less than a majority in aggregate principal
amount of the Securities at the time outstanding, by written act of said
Holders delivered to the Company and the Trustee, the Company, when
authorized by Board Resolutions, and the Trustee may amend or supplement
this Indenture or the Securities or enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or the
Securities or of modifying in any manner the rights of the Holders under
this Indenture or the Securities. Subject to the last sentence of this
paragraph, the Holder or Holders of not less than a majority in aggregate
principal amount of then outstanding Securities may, in writing, waive
compliance by the Company with any provision of this Indenture or the
Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall, without the consent of the Holder
of each outstanding Security affected thereby:
(i) change the Stated Maturity of any Security or reduce
the principal amount thereof or the rate (or extend the time for
payment) of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the
coin or currency in which, any Security or any premium or the
interest thereon or any Liquidated Damages with respect thereto
is payable, or impair the right to institute suit for the
39
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conversion of any Security or the enforcement of any such payment
on or after the due date thereof (including, in the case of
redemption, on or after the Redemption Date), or reduce the
Repurchase Price, or alter the Repurchase Offer (other than as
set forth herein) or redemption provisions in a manner adverse to
the Holders;
(ii) reduce the percentage in principal amount of the
outstanding Securities, the consent of whose Holders is required
for any such amendment, supplemental indenture or waiver provided
for in the Indenture;
(iii) adversely affect the right of such Holder to convert
Securities or the rights of any holder conferred by Article XIII;
or
(iv) modify any of the waiver provisions, except to
increase any required percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Security affected
thereby.
(b) It shall not be necessary for the consent of the Holders
under this Section 9.2 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
(c) After an amendment, supplement or waiver under this Section
9.2 becomes effective, the Company shall mail to the Holders affected
thereby at such Holders' addresses as the same appear on the registry books
of the Registrar a notice briefly describing the amendment, supplement or
waiver. 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 supplemental indenture or waiver.
(d) After an amendment, supplement or waiver under this Section
9.2 or Section 9.4 becomes effective, it shall bind each Holder.
(e) In connection with any amendment, supplement or waiver under
this Article IX, the Company may, but shall not be obligated to, offer to
any Holder who consents to such amendment, supplement or waiver, or (at the
option of the Company) to all Holders, consideration for consent to such
amendment, supplement or waiver.
Section 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
---------------------------------
(a) Until an amendment, supplement or waiver 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 is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of his Security
by written notice to the Company, the Trustee or the Person designated by
the Company as the Person to whom consents should be sent if such
revocation is received by the Company or such Person before the date on
which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Securities have consented (and
not theretofore revoked such consent) to the amendment, supplement or
waiver.
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<PAGE>
(b) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be the date so
fixed by the Company notwithstanding the provisions of the TIA. If a record
date is fixed, then notwithstanding the last sentence of the immediately
preceding paragraph, those Persons who were Holders at such record date,
and only those Persons (or their duly designated proxies), shall be
entitled to revoke any consent previously given, regardless of whether such
Persons continue to be Holders after such record date.
(c) Notwithstanding the preceding paragraph, after an amendment,
supplement or waiver becomes effective, it shall bind every Holder, unless
it makes a change described in any of clauses (1) through (4) of Section
9.2, in which case, the amendment, supplement or waiver shall bind only
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 unless consent of all Holders has been
obtained pursuant to clauses (1) through (4) of Section 9.2.
Section 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee or
require the Holder to put an appropriate notation on the Security. The Trustee
may place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Any failure
to make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment, supplement or waiver.
Section 9.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article IX; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
ARTICLE X.
MEETINGS OF HOLDERS
Section 10.1. Purposes for Which Meetings May Be Called.
-----------------------------------------
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or
to give any directions to the Trustee, or to waive or to consent to the
waiving of any Default or Event of Default hereunder and its consequences,
or to take any other action authorized to be taken by Holders pursuant to
any of the provisions of Article VI;
(b) to remove the Trustee or appoint a successor Trustee
pursuant to the provisions of Article VII;
(c) to consent to an amendment, supplement or waiver
pursuant to provisions of Section
41
<PAGE>
9.2; or
(d) to take any other action (i) authorized to be taken by
or on behalf of the Holder or Holders of any specified aggregate principal
amount of the Securities under any other provision of this Indenture, or
authorized or permitted by law or (ii) which the Trustee deems necessary or
appropriate in connection with the administration of this Indenture.
Section 10.2. Manner of Calling Meetings.
--------------------------
(a) The Trustee may at any time call a meeting of Holders
to take any action specified in Section 10.1, to be held at such time and
at such place in New York, New York or elsewhere as the Trustee shall
determine. Notice of every meeting of Holders, setting forth the time and
place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed at the Company's expense by the Trustee,
first-class postage prepaid, to the Company and to the Holders at their
last addresses as they shall appear on the registration books of the
Registrar, not less than 10 nor more than 60 days prior to the date fixed
for a meeting.
(b) Any meeting of Holders shall be valid without notice if
the Holders of all Securities then outstanding are present in Person or by
proxy, or if notice is waived before or after the meeting by the Holders of
all Securities outstanding, and if the Company and the Trustee are either
present by duly authorized representatives or have, before or after the
meeting, waived notice.
Section 10.3. Calling of Meetings by the Company or Holders.
---------------------------------------------
In case at any time the Company or the Holders of not less than 10% in
aggregate principal amount of the Securities then outstanding, shall have
requested the Trustee to call a meeting of Holders to take any action specified
in Section 10.1, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such written
request, then the Company or the Holders of Securities in the amount above
specified may determine the time and place in New York, New York or elsewhere
for such meeting and may call such meeting for the purpose of taking such
action, by mailing or causing to be mailed notice thereof as provided in Section
10.2, or by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any Business Day during such week) in a newspaper
or newspapers printed in the English language, customarily published at least
five days a week of a general circulation in the City of New York, State of New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
Section 10.4. Who May Attend and Vote at Meetings.
-----------------------------------
To be entitled to vote at any meeting of Holders, a Person shall (a) be a
registered Holder of one or more Securities, or (b) be a Person appointed by an
instrument in writing as proxy for the registered Holder or Holders of
Securities. The only Persons who shall be entitled to be present or to speak at
any meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Company, and its counsel.
Section 10.5. Regulations May Be Made by Company; Conduct of the Meeting:
-----------------------------------------------------------
Voting Rights: Adjournment.
- --------------------------
(a) Notwithstanding any other provision of this Indenture, the
Company may make such reasonable regulations as it may deem advisable for
any action by or any meeting of Holders, in regard to proof of the holding
of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and
examination of proxies,
42
<PAGE>
certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think
appropriate. Such regulations may fix a record date and time for
determining the Holders of record of Securities entitled to vote at such
meeting, in which case those and only those Persons who are Holders of
Securities at the record date and time so fixed, or their proxies, shall be
entitled to vote at such meeting regardless of whether they shall be such
Holders at the time of the meeting.
(b) The Holders shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 10.3, in which
case the Company or the Holders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman
and a permanent secretary of the meeting shall be elected by vote of the
Holders of a majority in principal amount of the Securities represented at
the meeting and entitled to vote.
(c) At any meeting each Securityholder or proxy shall be
entitled to one vote for each $1,000 principal amount of Securities held or
represented by him, in whole vote increments; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Securities
challenged as not outstanding and ruled by the chairman of the meeting to
be not then outstanding. The chairman of the meeting shall have no right to
vote other than by virtue of Securities held by him or instruments in
writing as aforesaid duly designating him as the proxy to vote on behalf of
other Holders. Any meeting of Holders duly called pursuant to the
provisions of Section 10.2 or Section 10.3 may be adjourned from time to
time by vote of the Holder or Holders of a majority in aggregate principal
amount of the Securities represented at the meeting and entitled to vote,
and the meeting may be held as so adjourned without further notice.
Section 10.6. Voting at the Meeting and Record to Be Kept.
-------------------------------------------
(a) Voting at any meeting of Holders shall be by written ballots
on which shall be subscribed the signatures of the Holders of Securities or
of their representatives by proxy and the principal amount of the
Securities voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and
there shall be attached to such record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more Persons having knowledge of the facts, setting forth a copy of
the notice of the meeting and showing that such notice was mailed as
provided in Section 10.2 or published as provided in Section 10.3. The
record shall be signed and verified by the affidavits of the permanent
chairman and the secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by
the Trustee, the latter to have attached thereto the ballots voted at the
meeting.
(b) Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
Section 10.7. Exercise of Rights of Trustee or Holders May Not Be Hindered
------------------------------------------------------------
or Delayed by Call of Meeting.
- -----------------------------
Nothing contained in this Article X shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Holders under any of the provisions of this Indenture or of
the Securities.
43
<PAGE>
ARTICLE XI.
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL
Section 11.1. Repurchase of Securities at Option of the Holder Upon a
-------------------------------------------------------
Change of Control.
- -----------------
(a) Subject to Section 11.2, in the event that a Change of
Control has occurred, the Company shall offer, subject to the terms and
conditions of this Indenture, to purchase all or any part of each Holder's
Securities (provided that the principal amount of such Securities must be
$1,000 or an integral multiple thereof) on the date (the "Repurchase Date")
---------------
fixed in the manner provided in this Section 11.1 that is no later than 45
Business Days (except as hereinafter provided) after the occurrence of such
Change of Control, at a cash price (the "Repurchase Price") equal to 101%
----------------
of the principal amount thereof, together with accrued and unpaid interest
and Liquidated Damages, if any, to (but excluding) the Repurchase Date.
(b) In the event that, pursuant to this Section 11.1, the
Company shall be required to commence an offer to purchase Securities (a
"Repurchase Offer"), the Company shall follow the procedures set forth in
-----------------
this Section 11.1 as follows:
(i) the Repurchase Offer shall commence on the date
specified by the Company that shall be within 25 Business Days
following a Change of Control;
(ii) the Repurchase Offer shall remain open for 20 Business
Days following its commencement, except to the extent that a
longer period is required by applicable law (the "Repurchase
Offer Period");
(iii) upon the expiration of a Repurchase Offer, the Company
shall purchase all Securities tendered in response to the
Repurchase Offer;
(iv) if the Repurchase Date is on or after an interest
payment Record Date and on or before the related Interest Payment
Date, any accrued interest and Liquidated Damages will be paid to
the Person in whose name a Security is registered at the close of
business on such Record Date, and no additional interest or
Liquidated Damages will be payable to Holders who tender
Securities pursuant to the Repurchase Offer;
(v) the Company shall provide the Trustee with written
notice of the Repurchase Offer at least 5 Business Days before
the commencement of any Repurchase Offer (or such shorter period
that is satisfactory to the Trustee); and
(vii) on or before the commencement of any Repurchase Offer,
the Company or the Trustee (upon the request and at the expense
of the Company) shall send, by first-class mail, a notice to each
of the Holders, which (to the extent consistent with this
Indenture) shall govern the terms of the Repurchase Offer and
shall state:
(1) that the Repurchase Offer is being made pursuant
to such notice and this Section 11.1 and that all
Securities, or portions thereof, tendered will be accepted
for payment;
(2) the Repurchase Price (including the amount of
accrued and unpaid interest and Liquidated Damages, if any),
the Repurchase Date and the Repurchase Put Date;
44
<PAGE>
(3) that any Security, or portion thereof, not tendered and
accepted for payment will continue to accrue interest and
Liquidated Damages, if any;
(4) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of
this clause (b) or such payment is prevented pursuant to Article
XII, any Security, or portion thereof, accepted for payment
pursuant to the Repurchase Offer shall cease to accrue interest
after the Repurchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Repurchase Offer will be
required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent (which may not for
purposes of this Section 11.1, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the
close of business on the earlier of (a) the third Business Day
prior to the Repurchase Date and (b) the third Business Day
following the expiration of the Repurchase Offer (such earlier
date being the "Repurchase Put Date");
(6) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not
for purposes of this Section 11.1, notwithstanding anything in
this Indenture to the contrary, be the Company or any Affiliate
of the Company) receives, up to the close of business on the
Repurchase Put Date, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Securities the Holder is withdrawing and a statement that such
Holder is withdrawing his election to have such principal amount
of Securities purchased; and
(7) a brief description of the events resulting in such
Change of Control.
(c) Any notice of a Repurchase Offer mailed in accordance with the
foregoing provisions shall be conclusively presumed to have been duly given
regardless of whether a given Holder receives the same.
(d) Any such Repurchase Offer shall comply with all applicable
provisions of federal and state laws, including those regulating tender
offers, if applicable, and any provisions of this Indenture which conflict
with such laws shall be deemed to be superseded by the provisions of such
laws.
(e) On or before the Repurchase Date, the Company shall, to the
extent lawful, (i) accept for payment Securities or portions thereof
properly tendered pursuant to the Repurchase Offer on or before the
Repurchase Put Date, (ii) deposit with the Paying Agent Cash sufficient to
pay the Repurchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any) of all Securities or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee the
Securities so accepted together with an Officers' Certificate listing the
Securities or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to Holders of Securities so accepted payment in
an amount equal to the Repurchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any), and the Trustee will promptly
authenticate and mail or deliver to such Holders a new Security or
Securities equal in principal amount to any unpurchased portion of the
Securities surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results
45
<PAGE>
of the Repurchase Offer on or as soon as practicable after the Repurchase
Date.
Section 11.2. Rescission of Change of Control Determination.
---------------------------------------------
(a) At any time prior to the close of business on the Business
Day immediately preceding the Repurchase Date, the Holders of more than
66 2/3% in aggregate principal amount of the then outstanding Securities,
by written act of said Holders delivered to the Company and the Trustee,
may determine that the event giving rise to the Change of Control shall not
be treated as a Change of Control for purposes of Section 11.1, in which
event:
(i) the provisions of Section 11.1(a) shall not apply;
(ii) if a Repurchase Offer has been made by the Company
pursuant to Section 11.1(b), such Repurchase Offer shall be deemed
revoked; and
(iii) if any Securities have been tendered in response to
the revoked Repurchase Offer, such tenders shall be deemed
rescinded and the Securities promptly returned to the Holders
thereof.
(b) Following a determination by the Holders pursuant to this
Section 11.2, the Company shall mail to all Holders a notice briefly
describing such determination. 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 determination. An effective determination
under this Section 11.2 shall be binding on all holders.
ARTICLE XII.
SUBORDINATION
Section 12.1. Securities Subordinated to Senior Indebtedness.
----------------------------------------------
(a) The Company and each Holder, by its acceptance of
Securities, agree that (i) the payment of the principal of, premium, if
any, and interest on and Liquidated Damages, if any, with respect to, the
Securities and (ii) any other payment in respect of the Securities,
including on account of the acquisition or redemption of the Securities by
the Company (but specifically excluding payments to the Trustee for its own
benefit), is subordinated, to the extent and in the manner provided in this
Article XII, to the prior payment in full of all Senior Indebtedness of the
Company, whether outstanding at the date of this Indenture or thereafter
created, incurred, assumed or guaranteed, and that these subordination
provisions are for the benefit of the holders of Senior Indebtedness.
(b) This Article XII shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or
continue to hold, Senior Indebtedness, and such provisions are made for the
benefit of the holders of Senior Indebtedness, and such holders are made
obligees hereunder and any one or more of them may enforce such provisions.
In addition, the payment of cash, property or securities (other than Junior
Securities) upon conversion of a Security pursuant to Article XIII will
constitute payment on a Security and therefore will be subject to the
subordination provisions contained in this Indenture.
46
<PAGE>
Section 12.2. No Payment on Securities in Certain Circumstances.
-------------------------------------------------
(a) No payment (by setoff or otherwise) may be made by or on
behalf of the Company, directly or indirectly through a Subsidiary of the
Company, on account of the principal of, premium, if any, interest on, or
Liquidated Damages, if any, or any other obligations under or with respect
to, the Securities, or to acquire any of the Securities (including
repurchases of Securities at the option of the Holder) for cash or property
(other than Junior Securities), or on account of the redemption provisions
of the Securities (collectively, the "Subordinated Obligations"), (i) upon
------------------------
the maturity of any Senior Indebtedness by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of, premium,
if any, and interest on, and fees, charges, expenses, indemnifications and
all other amounts payable in respect of Senior Indebtedness are first paid
in full in cash, or (ii) in the event of default in the payment of any
principal of, premium, if any, or interest in respect of Senior
Indebtedness when it becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise (collectively, a
"Payment Default"), unless and until such Payment Default has been cured or
----------------
waived or otherwise has ceased to exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits, or would permit, with (w) the passage of
time, (x) the giving of notice, (y) the making of any payment of the
Securities then required to be made, or (z) any combination thereof
(collectively, a "Non-Payment Default"), the holders of any Designated
-------------------
Senior Indebtedness or their representative immediately to accelerate its
maturity and (ii) written notice of such Non-Payment Default given to the
Company and the Trustee by the holders of such Designated Senior
Indebtedness or their representative (a "Blockage Notice"), then, unless
---------------
and until such Non-Payment Default has been cured or waived or otherwise
has ceased to exist, no payment (by set-off or otherwise) may be made by or
on behalf of the Company directly or through any Subsidiary on account of
the Subordinated Obligations. Notwithstanding the foregoing, on the first
to occur of (i) the date that is 179 days after the Blockage Notice is
delivered as set forth above (the "Payment Blockage Period"), and (ii) the
-----------------------
date on which all Payment Defaults and Non-Payment Defaults have been cured
or waived, the Company shall be required to pay to the Holders of the
Securities all regularly scheduled payments on the Securities that were not
paid to the Holders of the Securities during the Payment Blockage Period
due to the foregoing prohibitions (and upon the making of such payments any
acceleration of the Securities made or other remedies commenced during the
Payment Blockage Period shall be of no further force or effect) and to
resume all other payments as and when due on the Securities, provided that
no Payment Default shall have occurred and be continuing. Not more than
one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Senior Indebtedness
during such period. In no event, however, may the total number of days
during which any Payment Blockage Period is or Payment Blockage Periods are
in effect exceed 179 days in the aggregate during any consecutive 360-day
period.
(c) In furtherance of the provisions of Section 12.1, in the
event that, notwithstanding the foregoing provisions of this Section 12.2,
any payment or distribution of assets of the Company (other than Junior
Securities) shall be received by the Trustee on behalf of the Holders or
any Paying Agent for the benefit of the Holders at a time when such payment
or distribution is prohibited by the provisions of this Section 12.2, such
payment or distribution (subject to the provisions of Sections 12.6 and
12.9) shall be held in trust for the benefit of the holders of Senior
Indebtedness, and shall be paid or delivered by such Holders or the Trustee
or such Paying Agent, as the case may be, to the holders of Senior
Indebtedness of the Company remaining unpaid 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 of the
Company may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness of the Company held
or represented by each, for application to the payment of all Senior
Indebtedness of
47
<PAGE>
the Company in full after giving effect to any concurrent payment and
distribution to the holders of such Senior Indebtedness.
Section 12.3. Securities Subordinated to Prior Payment of All Senior
------------------------------------------------------
Indebtedness on Dissolution Liquidation or Reorganization.
- ---------------------------------------------------------
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshaling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company shall
first be entitled to receive payments in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment (other than Junior
Securities) on account of the Subordinated Obligations;
(b) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than
Junior Securities) to which the Holders or the Trustee on behalf of the
Holders would be entitled (by setoff or otherwise), except for the
provisions of this Article XII, shall be paid by the liquidating trustee or
agent or other Person making such a payment or distribution directly to the
holders of Senior Indebtedness or their representative to the extent
necessary to make payment in full of all such Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness (but this Section 12.3(b) shall not
apply to payments or distributions to the Trustee for its own benefit); and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company or any Subsidiary of any
kind or character, whether in cash, property or securities (other than
Junior Securities as aforesaid), shall be received by the Trustee for the
benefit of the Holders or the Holders or any Paying Agent for the benefit
of the Holders (or, if the Company or any Affiliate of the Company is
acting as its own Paying Agent, money for any such payment or distribution
shall be segregated or held in trust) on account of Subordinated
Obligations before all Senior Indebtedness is paid in full, such payment or
distribution (subject to the provisions of Sections 12.6 and 12.9) shall be
held in trust for the benefit of the holders of Senior Indebtedness, and
shall be paid or delivered by such Holders or the Trustee or such Paying
Agent, as the case may be, to the holders of Senior Indebtedness of the
Company remaining unpaid 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 of the Company may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior
Indebtedness of the Company in full in cash after giving effect to any
concurrent payment and distribution to the holders of such Senior
Indebtedness.
Section 12.4. Holders to Be Subrogated to Rights of Holders of Senior
-------------------------------------------------------
Indebtedness.
- ------------
(a) Subject to the payment in full of all Senior Indebtedness of
the Company as provided herein, the Holders of Securities shall be
subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of assets of the Company applicable to
the Senior Indebtedness until all amounts owing on the Securities shall be
paid in full, and for the purpose of such subrogation no such payments or
distributions to the holders of such Senior Indebtedness by the Company, or
by or on behalf of the Holders by virtue of this Article XII, which
otherwise would have been made to the Holders shall, as between the Company
and the Holders, be deemed to be payment by the Company or on account of
such Senior Indebtedness, it being
48
<PAGE>
understood that the provisions of this Article XII are and are intended
solely for the purpose of defining the relative rights of the Holders, on
the one hand, and the holders of such Senior Indebtedness, on the other
hand.
(b) If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XlI
shall have been applied, pursuant to the provisions of this Article XII, to
the payment of amounts payable under Senior Indebtedness of the Company,
then the Holders shall be entitled to receive from the holders of such
Senior Indebtedness any payments or distributions received by such holders
of Senior Indebtedness in excess of the amount sufficient to pay all
amounts payable under or in respect of such Senior Indebtedness in full.
Section 12.5. Obligations of the Company Unconditional.
----------------------------------------
Nothing contained in this Article XII or elsewhere in this Indenture or in
the Securities is intended to or shall impair as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on, the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XII, of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Notwithstanding anything to the contrary in this Article XII or elsewhere in
this Indenture or in the Securities, upon any distribution of assets of the
Company referred to in this Article XII, the Trustee, subject to the provisions
of Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are 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 XII so long as such court has been
apprised of the provisions of, or the order, decree or certificate makes
reference to, the provisions of this Article XII. Nothing in this Section 12.5
shall apply to the claims of, or payments to, the Trustee under or pursuant to
Section 7.7 or otherwise for its own benefit.
Section 12.6. Trustee and Other Agents Entitled to Assume Payments Not
--------------------------------------------------------
Prohibited in Absence of Notice.
- -------------------------------
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 by virtue of the operation of this Article
XII, but failure to give such notice shall not affect the subordination of the
Securities pursuant to this Article XII. The Trustee and all other Agents 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 a
Trust Officer of the Trustee or any Paying Agent shall have actually received,
no later than one Business Day prior to such payment, written notice thereof in
compliance with Section 14.2 from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, shall be entitled in all respects conclusively to assume
that no such fact exists.
49
<PAGE>
Section 12.7. Subordination Rights Not Impaired by Acts or Omissions of
---------------------------------------------------------
the Company or Holders of Senior Indebtedness.
- ---------------------------------------------
No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article XII shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. Without the consent of or notice to the Trustee or the
Holders, the holders of Senior Indebtedness may extend, renew, modify or amend
the terms of the Senior Indebtedness or any security therefor and release, sell
or exchange such security and otherwise deal freely with the Company, all
without impairing the liabilities and obligations of the parties to this
Indenture or the Holders.
Section 12.8. Holders Authorize Trustee to Effectuate Subordination of
--------------------------------------------------------
Securities.
- ----------
Each Holder of the Securities by his acceptance thereof authorizes the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provisions contained in this Article XII pursuant
to this Indenture, and appoints the Trustee his attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the immediate filing of a claim for the unpaid balance of his Securities in the
form required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of the Senior Indebtedness or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of any Securityholder in any such
proceeding.
Section 12.9. Right of Trustee to Hold Senior Indebtedness.
--------------------------------------------
(a) The Trustee and any Agent shall be entitled to all of the
rights set forth in this Article XII 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 or any Agent of any of its rights as such holder.
(b) Nothing in this Article XII shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
Section 12.10. Article XII Not to Prevent Events of Default.
--------------------------------------------
The failure to make a payment on account of principal of, premium, if any,
interest on, or Liquidated Damages, if any, with respect to, the Securities by
reason of any provision of this Article XII shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 6.1 or in any
way prevent the Holders from exercising any right hereunder other than the right
to receive payment on the Securities.
50
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Section 12.11. No Duty of Trustee and Other Agents to Holders of Senior
--------------------------------------------------------
Indebtedness.
- ------------
(a) The Trustee and the other Agents shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders (other than for its willful misconduct or
negligence) if it shall in good faith mistakenly pay over or distribute to
the Holders of Securities or the Company or any other Person, cash,
property or securities to which any holders of Senior Indebtedness shall be
entitled by virtue of this Article XII or otherwise. Nothing in this
Section 12.12 shall affect the obligation of any other such Person
receiving such payment or distribution from the Trustee or any other Agent
to hold such payment for the benefit of, and to pay such payment over to,
the holders of Senior Indebtedness or their representative.
(b) With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants or
obligations as are specifically set forth in this Article XII and no
implied covenants or obligations with respect to holders of Senior
Indebtedness shall be read into this Indenture as against the Trustee.
ARTICLE XIII.
CONVERSION OF SECURITIES
Section 13.1. Conversion Privilege.
--------------------
Subject to and upon compliance with the provisions of this Article XIII, at
the option of the Holder thereof, any Security may at any time, be converted, in
whole, or in part in multiples of $1,000 principal amount, into fully paid and
non-assessable shares of Common Stock issuable upon conversion of the
Securities, at the conversion price in effect at the Date of Conversion, until
and including, but not after the close of business on the Stated Maturity,
unless such Security or some portion thereof shall have been called for
redemption or delivered for repurchase prior to such date and no default is made
in making due provision for the payment of the Redemption Price in accordance
with the terms of this Indenture, in which case, with respect to such Security
or portion thereof as has been so called for redemption or delivered for
repurchase, such Security or portion thereof may be so converted until and
including, but not after, the close of business on the Business Day immediately
prior to the Redemption Date or Repurchase Date, as applicable, for such
Security, unless the Company subsequently fails to pay the applicable Redemption
Price or Repurchase Price, as the case may be.
Section 13.2. Exercise of Conversion Privilege.
--------------------------------
(a) In order to exercise the conversion privilege, the Holder of
any Security to be converted shall surrender such Security to the Company
at any time during usual business hours at its office or agency maintained
for the purpose as provided in this Indenture, accompanied by a fully
executed written notice, in substantially the form set forth on the reverse
of the Security, that the Holder elects to convert such Security or a
stated portion thereof constituting a multiple of $1,000 principal amount.
Interest payable in respect of a Security surrendered for conversion on or
after an Interest Payment Date shall be paid to the Holder of such Security
as of the next preceding Record Date, notwithstanding the exercise of the
right of conversion. Such notice of conversion shall also state the name or
names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued.
(b) Securities surrendered for conversion shall (if reasonably
required by the Company or the Trustee) be duly endorsed by, or be
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by, the Holder or his attorney
duly
51
<PAGE>
authorized in writing, with appropriate signature guarantee. As promptly as
practicable after the receipt of such notice and the surrender of such
Security as aforesaid, the Company shall, subject to the provisions of
Section 13.8 hereof, issue and deliver at such office or agency to such
Holder, or on his written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion of
Securities in accordance with the provisions of this Article XIII and Cash,
as provided in Section 13.3 hereof, in respect of any fraction of a share
of Common Stock otherwise issuable upon such conversion. Such conversion
shall be deemed to have been effected immediately prior to the close of
business on the date (herein called the "Date of Conversion") on which such
------------------
Security shall have been surrendered as aforesaid, and the person or
persons in whose name or names any certificate or certificates for shares
of Common Stock shall be issuable upon such conversion shall be deemed to
have become on the Date of Conversion the holder or holders of record of
the shares represented thereby; provided, however, that any such surrender
on any date when the stock transfer books of the Company shall be closed
shall cause the person or persons in whose name or names the certificate or
certificates for such shares are to be issued to be deemed to have become
the record holder or holders thereof for all purposes at the opening of
business on the next succeeding day on which such stock transfer books are
open but such conversion shall nevertheless be at the conversion price in
effect at the close of business on the date when such Security shall have
been so surrendered with the conversion notice. In the case of conversion
of a portion, but less than all, of a Security, the Company shall as
promptly as practicable execute, and the Trustee shall thereafter
authenticate and deliver to the Holder thereof, at the expense of the
Company, a Security or Securities in the aggregate principal amount of the
unconverted portion of the Security surrendered. Except as otherwise
expressly provided in this Indenture, no payment or adjustment shall be
made for interest accrued on any Security (or portion thereof) converted or
for dividends or distributions on any Common Stock issued upon conversion
of any Security.
Section 13.3. Fractional Interests.
--------------------
No fractions of shares of Common Stock or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of Securities. If more
than one Security shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities so surrendered. If any fraction of a share of Common
Stock would, except for the foregoing provisions of this Section 13.3, be
issuable on the conversion of any Security or Securities, the Company shall make
payment in lieu thereof in an amount of Cash equal to the value of such fraction
computed on the basis of the last sale price of the Common Stock as reported on
the Nasdaq National Market (or if not listed for trading thereon, then on the
principal national securities exchange or on the principal automated quotation
system on which the Common Stock is listed or admitted to trading) at the close
of business on the Date of Conversion or if no such sale takes place on such
day, the last sale price for such day shall be the average of the closing bid
and asked prices regular way on the Nasdaq National Market (or if not listed for
trading thereon, on the principal national securities exchange or on the
principal automated quotation system on which the Common Stock is listed or
admitted to trading) for such day (any such last sale price being hereinafter
referred to as the "Last Sale Price"). If on the Date of Conversion, the Common
---------------
Stock is not quoted by any such organization, the fair value of such Common
Stock on such day, as reasonably determined in good faith by the Board of
Directors of the Company, shall be used.
Section 13.4. Conversion Price.
----------------
The conversion price per share of Common Stock issuable upon conversion of
the Securities (as such price may be adjusted, herein called the "Conversion
----------
Price") shall initially be $15.735 (which reflects a conversion rate of 63.5526
- -----
shares of Common Stock per $1,000 in principal amount of Securities).
52
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Section 13.5. Adjustment of Conversion Price.
------------------------------
The Conversion Price shall be subject to adjustment from time to time as
follows:
(a) In case there shall be made or paid a dividend or made a
distribution in shares of Common Stock on any class of Capital Stock of the
Company, the Conversion Price in effect immediately following the record
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on such date
and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution. An
adjustment made pursuant to this subsection (a) shall become effective
immediately, except as provided in subsection (i) and (j) below, after such
record date.
(b) In case the Company shall (1) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares or (2)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price in effect immediately following the
effectiveness of such action shall be adjusted by multiplying such
Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding immediately prior to such subdivision
or combination and the denominator shall be the number of shares
outstanding immediately after giving effect to such subdivision,
combination or reclassification. An adjustment made pursuant to this
subsection (b) shall become effective immediately, except as provided in
subsection (i) and (j) below, after the effective date of a subdivision,
combination or reclassification.
(c) In case there shall be an issuance of rights, options or
warrants to all or substantially all holders of Common Stock entitling them
to subscribe for or purchase shares of Common Stock at a price per share
less than the then current market price per share of the Common Stock (as
determined pursuant to subsection (g) below) on the record date fixed for
determination of the shareholders entitled to receive such rights, option
or warrants, the Conversion Price in effect immediately following such
record date shall be adjusted to a price, computed to the nearest cent, so
that the same shall equal the price determined by multiplying such
Conversion Price by a fraction, of which:
(i) the numerator shall be (A) the number of shares of
Common Stock outstanding on such record date plus (B) the number of
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered for subscription
or purchase would purchase at such current market price (determined
by multiplying such total number of shares of Common Stock by the
exercise price of such rights, options or warrants and dividing the
product so obtained by such current market price), and of which
(ii) the denominator shall be (A) the number of shares of
Common Stock outstanding on such record date plus (B) the number of
additional shares of Common Stock which are so offered for
subscription or purchase.
Such adjustment shall become effective immediately, except as
provided in subsection (i) and (j) below, after the record date for the
determination of holders entitled to receive such rights, options or
warrants; provided, however, that if any such rights, options or warrants
issued by the Company as described in this subsection (c) are only
exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted as provided in this subsection (c)
53
<PAGE>
until such triggering events occur. Upon the expiration or termination
of any rights, options or warrants without the exercise of such rights,
options or warrants, the Conversion Price then in effect shall be adjusted
immediately to the Conversion Price which would have been in effect at the
time of such expiration or termination had such rights, options or
warrants, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
(d) In case there shall be a distribution to all or
substantially all holders of Common Stock, of any assets, evidences of
indebtedness, cash or securities, including without limitation any
distribution of any securities of the Incubator (other than (x) any
dividend or distribution for which an adjustment is required to be made in
accordance with subsection (a) or (c) above and in mergers and
consolidations to which Section 13.6 applies, or (y) any distribution of
rights or warrants subject to subsection (1) below or any distribution in
connection with a liquidation, dissolution or winding up of the Company)
then in each such case the Conversion Price in effect immediately following
the record date fixed for the determination of the shareholders entitled to
such distribution shall be adjusted so that the same shall equal the price
determined by multiplying such Conversion Price by a fraction of which the
numerator shall be the then current market price per share of the Common
Stock (determined as provided in subsection (g) below) on such record date
less the then fair market value (as reasonably determined in good faith by
the Board of Directors of the Company) of the portion of the assets so
distributed applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of the Common
Stock (determined as provided in subsection (g) below). Such adjustment
shall become effective immediately, except as provided in subsection (j)
below, after the record date for the determination of shareholders entitled
to receive such distribution.
(e) [Intentionally Omitted]
(f) In case the Company or any Subsidiary of the Company shall
complete a tender offer for all or any portion of the Common Stock (any
such tender offer being referred to as an "Offer") that involves an
aggregate consideration having a fair market value as of the expiration of
such Offer (the "Expiration Time") that, together with (i) any cash and the
fair market value of any other consideration payable in respect of any
other tender offer, as of the expiration of such other tender offer,
expiring within the 12 months preceding the expiration of such Offer and in
respect of which no Conversion Price adjustment pursuant to this subsection
(f) has been made and (ii) the aggregate amount of any all-cash
distributions referred to in subsection (e) of this Section 13.5 to all
holders of Common Stock within the 12 months preceding the expiration of
such Offer for which no conversion price adjustment pursuant to such
subsection (e) has been made, exceeds 15.0% of the product of the then
current market price per share (determined as provided in subsection (g)
below) of the Common Stock at the Expiration Time times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, the Conversion Price in effect immediately following such
Expiration Time shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be (i) the product of the then
current market price per share (determined as provided in subsection (g)
below) of the Common Stock at the Expiration Time times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time minus (ii) the fair market value of the aggregate
consideration payable to shareholders based on the acceptance (up to any
maximum specified in the terms of the Offer) of all shares validly tendered
and not withdrawn as of the Expiration Time (the shares deemed so accepted
being referred to as the "Purchased Shares") and the denominator shall be
the product of (i) such current market price per share at the Expiration
Time times (ii) such number of outstanding shares at the Expiration Time
less the number of Purchased Shares, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time.
(g) For the purpose of any computation under subsections (c),
(d) and (f) above, the
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<PAGE>
current market price per share of Common Stock on any date shall be deemed
to be the average of the Last Sale Prices of a share of Common Stock for
the five consecutive Trading Days selected by the Company commencing not
more than 20 Trading Days before, and ending not later than, the earlier of
the date in question and the date before the "'ex' date," with respect to
the issuance, distribution or Offer requiring such computation. If on any
such Trading Day the Common Stock is not quoted by any organization
referred to in the definition of Last Sale Price in Section 13.3 hereof,
the fair value of the Common Stock on such day, as reasonably determined in
good faith by the Board of Directors of the Company, shall be used. For
purposes of this paragraph, the term "'ex' date," when used with respect to
any issuance, distribution or payments with respect to an Offer, means the
first date on which the Common Stock trades regular way on the Nasdaq
National Market (or if not listed or admitted to trading thereon, then on
the principal national securities exchange or the principal automated
quotation system if the Common Stock is listed or admitted to trading
thereon) without the right to receive such issuance, distribution or Offer.
(h) In addition to the foregoing adjustments in subsections (a),
(b), (c), (d) and (f) above, the Company, from time to time and to the
extent permitted by law, may reduce the Conversion Price by any amount for
at least 20 Business Days, if the Board of Directors has made a
determination, which determination shall be conclusive, that such reduction
would be in the best interests of the Company. The Company shall give
notice to the Trustee and cause notice of such reduction to be mailed to
each Holder of Securities at such Holder's address as the same appears on
the registry books of the Registrar, at least 15 days prior to the date on
which such reduction commences. The Company may, at its option, also make
such reductions in the Conversion Price in addition to those set forth
above, as the Board of Directors deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend
or distribution of stock (or rights to acquire stock) or from any event
treated as such for United States federal income tax purposes.
(i) [Intentionally Omitted]
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least
1.0% of the Conversion Price; provided that any adjustments which by reason
of this subsection (j) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Article XIII shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. In no event shall the Conversion
Price be less than the par value of a share of the Company's Common Stock.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly (i) file with the Trustee and each
conversion agent an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment and showing in reasonable detail the facts
upon which such adjustment is based, which certificate shall be conclusive
evidence of the correctness of such adjustment, and (ii) mail or cause to
be mailed a notice of such adjustment to each Holder of Securities at such
Holder's address as the same appears on the registry books of the
Registrar. Unless and until a Trust Officer has received an Officers'
Certificate setting forth an adjustment of the Conversion Price, the
Trustee may assume that no such adjustment has been made and that the last
Conversion Price for which the Trustee has received an Officers'
Certificate is the current Conversion Price. Neither the Trustee nor any
Conversion Agent shall be under any duty or responsibility with respect to
any such Officer's Certificate or the information and calculation contained
therein, except to exhibit the same to any Holder deserving inspection
thereof, at its office during normal business hours.
(l) In the event that the Company distributes rights or warrants
(other than those referred to in subsection (c) above) pro rata to holders
--- ----
of Common Stock, so long as any such rights
55
<PAGE>
or warrants have not expired or been redeemed by the Company, instead of
making an adjustment in the Conversion Price, the Company may make proper
provision so that the Holder of any Security surrendered for conversion
will be entitled to receive upon such conversion, in addition to the shares
of Common Stock issuable upon such conversion (the "Conversion Shares"), a
number of rights or warrants to be determined as follows: (i) if such
conversion occurs on or prior to the date for the distribution to the
holders of rights or warrants of separate certificates evidencing such
rights or warrants (the "Distribution Date"), the same number of rights or
warrants to which a holder of a number of shares of Common Stock equal to
the number of Conversion Shares is entitled at the time of such conversion
in accordance with the terms and provisions of and applicable to the rights
or warrants, and (ii) if such conversion occurs after such Distribution
Date, the same number of rights or warrants to which a holder of the number
of shares of Common Stock into which the principal amount of such Security
so converted was convertible immediately prior to such Distribution Date
would have been entitled on such Distribution Date in accordance with the
terms and provisions of and applicable to the rights or warrants.
Section 13.6. Continuation of Conversion Privilege in Case of
-----------------------------------------------
Reclassification, Change, Merger, Consolidation or Sale of Assets.
- -----------------------------------------------------------------
If there shall occur:
(a) any reclassification or change of outstanding 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 of the Company with or into any
other Person, or the consolidation or merger of any other Person with or
into the Company (other than a merger which does not result in any
reclassification, change, conversion, exchange or cancellation of
outstanding shares of Common Stock) or
(c) any sale, transfer or conveyance of all or substantially all
of the assets of the Company (computed on a consolidated basis),
then the Company, or such successor or purchasing entity, 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 only into the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance by
a holder of the number of shares of Common Stock issuable upon conversion of
such Security immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or conveyance assuming such holder of Common Stock of the
Company failed to exercise his rights of an election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance
(provided that if the kind or amount of securities, cash, and other property
receivable upon such reclassification, change, consolidation, merger, sale,
transfer or conveyance is not the same for each share of Common Stock of the
Company held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or conveyance in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purpose of
this Section 13.6 the kind and amount of securities, cash and other property
receivable upon such reclassification, change, consolidation, merger, sale,
transfer or conveyance by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares).
Such supplemental indenture shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article XIII. 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 shares of Common
56
<PAGE>
Stock includes shares of stock or other securities and property (including cash)
of a corporation other than the successor or purchasing corporation, as the case
may be, in such consolidation, merger, sale or conveyance, then such
supplemental indenture shall also be executed by such other corporation and
shall contain such additional provisions to protect the interests of the Holders
of the Securities as the Board of Directors of the Company shall reasonably
consider necessary by reason of the foregoing. The provisions of this Section
13.6 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
Notice of the execution of each such supplemental indenture shall be
mailed to each Holder of Securities at such Holder's address as the same appears
on the registry books of the Registrar.
Section 13.7. Notice of Certain Events.
------------------------
In case:
(a) the Company shall declare a dividend (or any other distribution)
payable to the holders of Common Stock (other than cash dividends);
(b) the Company shall authorize the granting to all or substantially
all the holders of Common Stock of rights, warrants or options to subscribe
for or purchase any shares of stock of any class or of any other rights;
(c) the Company shall authorize any reclassification or change of the
Common Stock (including a subdivision or combination of its outstanding
shares of Common Stock), or any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the
Company is required, or the sale or conveyance of all or substantially all
the property or business of the Company;
(d) there shall be proposed any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(e) the Company or any of its Subsidiaries shall complete an Offer,
as defined in Section 13.5;
then, the Company shall cause to be filed at the office or agency maintained for
the purpose of conversion of the Securities as provided in Section 13.2 hereof,
and shall cause to be mailed to each Holder of Securities, at such Holder's
address as it shall appear on the registry books of the Registrar, at least 10
days before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating the date on which (1) a record is expected to be taken for the
purpose of such dividend, distribution, rights, warrants or options or Offer, or
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, rights, warrants or
options or to participate in such Offer are to be determined, or (2) such
reclassification, change, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding-up is expected to become effective and the date, if any
is to be fixed, as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification, change, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding-up.
Section 13.8. Taxes on Conversion.
-------------------
The Company will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of shares of
Common Stock on conversion of Securities pursuant thereto; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved
57
<PAGE>
in the issue or delivery of shares of Common Stock in a name other than that of
the Holder of the Securities to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue or delivery has paid
to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid. The Company extends no
protection with respect to any other taxes imposed in connection with conversion
of Securities.
Section 13.9. Company to Provide Stock.
------------------------
(a) The Company shall reserve, free from preemptive rights, out
of its authorized but unissued shares of Common Stock, sufficient shares of
Common Stock to provide for the conversion of the Securities from time to
time as such Securities are presented for conversion, provided that nothing
contained in this Section 13.9 shall be construed to preclude the Company
from satisfying its obligations in respect of the conversion of Securities
by delivery of repurchased shares of Common Stock which are held in the
treasury of the Company.
(b) If any shares of Common Stock to be reserved for the
purpose of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or state law
before such shares may be validly issued or delivered upon conversion, then
the Company covenants that it will in good faith and as expeditiously as
possible use its reasonable efforts to secure such registration or
approval, as the case may be, provided, however, that nothing in this
Section 13.9 shall be deemed to limit in any way the obligations of the
Company provided in this Article XIII.
(c) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the
Common Stock, the Company will take all corporate action which may, in the
Opinion of Counsel, be necessary in order that the Company may validly and
legally issue fully paid and non-assessable shares of Common Stock at such
adjusted Conversion Price.
(d) The Company covenants that all shares of Common Stock which
may be issued upon conversion of Securities will upon issue be fully paid
and non-assessable by the Company and free of preemptive rights.
Section 13.10. Disclaimer of Responsibility for Certain Matters.
------------------------------------------------
Neither the Trustee nor any agent of the Trustee shall at any time be under
any duty or responsibility to any Holder of Securities to determine whether any
facts exist which may require any adjustment of the Conversion Price, or with
respect to the Officers' Certificate referred to in Section 13.5 hereof, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Trustee nor any agent
of the Trustee shall be accountable with respect to the validity or value (or
the kind or amount) of any shares of Common Stock, or of any securities or
property (including cash), which may at any time be issued or delivered upon the
conversion of any Security; and neither the Trustee nor any conversion agent
makes any representation with respect thereto. Neither the Trustee nor any
agent of the Trustee shall be responsible for any failure of the Company to
issue, register the transfer of or deliver any shares of Common Stock or stock
certificates or other securities or property (including cash) upon the surrender
of any Security for the purpose of conversion or, subject to Article VIII
hereof, to comply with any of the covenants of the Company contained in this
Article XIII.
58
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Section 13.11. Return of Funds Deposited for Redemption of Converted
-----------------------------------------------------
Securities.
----------
Any funds which at any time shall have been deposited by the Company or on
its behalf with the Trustee or any other Paying Agent for the purpose of paying
the principal of and interest on any of the Securities and which shall not be
required for such purposes because of the conversion of such Securities, as
provided in this Article XIII, shall promptly after such conversion be repaid to
the Company by the Trustee or such other Paying Agent in accordance with the
Company's written instructions.
ARTICLE XIV.
MISCELLANEOUS
Section 14.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, regardless
of whether this Indenture has been qualified under the TIA, shall control. If
any provision of this Indenture modifies or excludes any provision of the TIA
that may be so modified or excluded, then the applicable TIA provision shall be
deemed to apply to this Indenture as so modified, or shall be excluded, as the
case may be.
Section 14.2. Notices.
-------
(a) Any notices or other communications to the Company or the
Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by recognized overnight
courier, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Company:
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21202
Attention: Chief Financial Officer
Telephone: (410) 843-8000
Telecopy: (410) 843-8065
if to the Trustee:
[Name and address to come]
Attention: [ ]
Telephone: ([___]) [___]-[____]
Telecopy: ([___]) [___]-[____]
(b) Any party by notice to each other party may designate additional
or different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or
made as of the date so delivered, if personally delivered; when receipt is
acknowledged, if telecopied; the next Business Day after delivery to an
overnight courier; and five Business Days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually
received by
59
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the addressee).
(c) Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his
address as it appears on the registration books of the Registrar and shall
be sufficiently given to him if so mailed within the time prescribed.
(d) Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Holders. If a notice or communication is given in the manner provided
above, it is duly given, regardless of whether the addressee receives it
except for notices and communications to the Trustee which shall be
effective only upon actual receipt thereof.
Section 14.3. Communications by Holders with Other Holders.
--------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders 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
(S) 312(c).
Section 14.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take any
action (other than the original issuance of the Securities pursuant to this
Indenture) under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion
of the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have
been satisfied or complied with; and
(ii) upon the Trustee's request, an Opinion of Counsel (in
form and substance reasonably satisfactory to the Trustee) stating
that, in the opinion of such counsel, all such conditions precedent
and covenants have been satisfied or complied with.
Section 14.5. Statements Required in Certificate or Opinion.
---------------------------------------------
(a) Each Officers' Certificate or Opinion of Counsel with respect
to compliance with or satisfaction of with a condition or covenant provided
for in this Indenture shall include:
(i) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(ii) 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;
(iii) 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 regardless of
whether such covenant or condition has been satisfied or complied
with; and
(iv) a statement as to whether, in the opinion of each such
Person, such condition or covenant has been satisfied or complied
with; provided, however, that with
60
<PAGE>
respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
(b) Any certificate or opinion of an Officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such Officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous, and provided that any such
certificate or opinion names the Trustee as an addressee and is furnished
to the Trustee at the time of delivery of such certificate or opinion. Any
such certificate or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Company stating the information with
respect to such factual matters is in the possession of the Company, unless
such counsel knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to such matters
are erroneous. Opinions of Counsel required to be delivered to the Trustee
may have qualifications customary for opinions of the type required and
counsel delivering such Opinions of Counsel may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact,
including that various financial covenants have been complied with.
Section 14.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 14.7. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or any day that is not a Business
Day. If a payment date is a Legal Holiday at such place, payment may be made at
such place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 14.8. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed in
accordance with the internal laws of the State of New York, as applied to
contracts made and performed within the State of New York. The Company hereby
irrevocably submits to the jurisdiction of any New York state court sitting in
the Borough of Manhattan in The City of New York or any federal court sitting in
the Borough of Manhattan in The City of New York in respect of any suit, action
or proceeding arising out of or relating to this Indenture and the Securities,
and irrevocably accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the aforesaid courts. The Company irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Trustee or any
Securityholder to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
Section 14.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
61
<PAGE>
Section 14.10. No Recourse Against Others.
--------------------------
No direct or indirect partner, employee, shareholder, director or officer,
as such, past, present or future of the Company or any successor corporation,
shall have any personal liability in respect of the obligations of the Company
under the Securities or this Indenture (or for any claim based on, or in respect
of, or by reason of, such obligations or their creation) by reason of his, her
or its status as such partner, shareholder, employee, director or officer. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
Section 14.11. 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 and assigns.
Section 14.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
Section 14.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
Section 14.14. Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and the 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.
Section 14.15. Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs, fees and expenses (including attorneys' fees and expenses for the
Company and the Trustee) incurred in connection therewith, including, but not
limited to, costs, fees and expenses of qualification of the Indenture and the
Securities and printing this Indenture and the Securities. The Trustee shall be
entitled to receive from the Company any such Officers' Certificates, Opinions
of Counsel or other documentation as it may reasonably request in connection
with any such qualification of this Indenture under the TIA.
Section 14.16. Benefits of Indenture.
---------------------
Nothing in this Indenture or the Securities, express or implied, shall
give to any Person other than the parties hereto, the holders of Senior
Indebtedness (subject to Article XII), the persons contemplated by Section 7.7
and the Holders, any benefits or any legal or equitable right, remedy or claim
under this Indenture or the Securities.
62
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
SYLVAN LEARNING SYSTEMS, INC.
By:__________________________
Name:________________________
Title:_______________________
[NAME OF TRUSTEE], as Trustee
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
EXHIBIT A
---------
[FORM OF SECURITY]
SYLVAN LEARNING SYSTEMS, INC.
5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2010
No. CUSIP No. ______
$
SYLVAN LEARNING SYSTEMS, INC., a Maryland corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________________, or registered assigns, the principal sum of
_________ Dollars, on March [__], 2010.
Interest Payment Dates: [________] [__], and [________] [__];
commencing [________] [__], 2000.
Record Dates: [________] [__] and [________] [__].
Reference is made to the further provisions of this Security
hereinafter set forth, which will, for all purposes, have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
SYLVAN LEARNING SYSTEMS, INC.
By:__________________________
Name:________________________
Title:_______________________
By:__________________________
Name:________________________
Title:_______________________
Certificate of Authentication:
This is one of the Securities described in the within-mentioned Indenture.
Dated:_____________
[NAME OF TRUSTEE], as Trustee
By: ______________________________
Authorized Signatory
<PAGE>
SYLVAN LEARNING SYSTEMS, INC.
5% Convertible Subordinated Debentures due 2010
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
Depository Trust Company, a New York corporation ("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. Unless this
certificate is presented by an authorized representative of the Depository 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 Depositary (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein./1/
This Note (or its predecessor) has not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly,
may not be offered, sold, pledged or otherwise transferred except as set
forth in the next sentence hereof. By its acquisition hereof or of a
beneficial interest herein, the holder (1) represents that either (a) it is a
"Qualified Institutional Buyer" (as defined in Rule 144A under the Securities
Act) (a "QIB"), (b) it is an institutional "Accredited Investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (an
"IAI"), (2) agrees that it will not resell or otherwise transfer this note
except (a) to the Company or any of its subsidiaries, (b) to a person whom
the seller reasonably believes is a QIB purchasing for its own account or for
the account of a QIB in a transaction meeting the requirements of Rule 144A
under the Securities Act, (c) to an IAI that, prior to such transfer,
furnishes the Trustee a signed letter containing certain representations and
agreements relating to the transfer of this Note (a form of which can be
obtained from the Trustee), (d) in a transaction meeting the requirements of
Rule 144 under the Securities Act, (e) in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel acceptable to the Company) or (f) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (3) agrees that it will deliver to each person to whom this
Note or an interest herein is transferred a notice substantially to the
effect of this legend. The Indenture contains a provision requiring the
Trustee to refuse to register any transfer of this note in violation of the
foregoing./2/
1. Interest. Sylvan Learning systems, Inc., a Maryland corporation
--------
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Security at the rate of 5% per annum. To the extent it is
lawful, the Company promises to pay interest on any interest payment due but
unpaid on such principal amount at a rate of 7% per annum compounded semi-
annually.
The Company will pay interest semi-annually in cash in arrears on [________]
[__] and [________] [__] of each year (each, an "Interest Payment Date"),
commencing [________] [__], 2000. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid on the Securities, from [________] [__], 2000. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Securities
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date. Any such interest not so punctually paid, and defaulted interest relating
thereto, may be paid to the Persons who are registered Holders at the close of
business on a Special Record Date for the payment of such defaulted interest, as
more fully provided in the Indenture referred to below. Holders must surrender
Securities to a Paying Agent to collect principal payments. Except as provided
below, the Company shall pay principal and interest in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
payment of public and private debts ("U.S. Legal Tender"). The Securities will
be payable as to principal, premium, interest and
____________________________
/1/ This paragraph should only be added if the Security is issued in global
form.
/2/ This paragraph should be included only for Transfer Restricted
Securities.
A-2
<PAGE>
Liquidated Damages at the office or agency of the Company maintained for such
purpose within or without New York, New York, or at the option of the Company,
payment of principal, premium, if any, interest and Liquidated Damages, if any,
may be made by check mailed to the Holders at their addresses set forth in the
registry of Holders, and provided that, upon the request of The Depository Trust
Company, a New York corporation (the "Depositary"), payment by wire transfer to
an account within the United States of immediately available funds will be
required with respect to principal of, premium, if any, and interest on and
Liquidated Damages, if any, with respect to Global Securities and all other
Securities held of record by the Depositary, or its nominee, if the Depositary
shall have provided wire transfer instructions to the Company or the Paying
Agent.
3. Paying Agent and Registrar. Initially, [Name of Trustee] (the
--------------------------
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.
4. Indenture. The Company issued the Securities under an Indenture,
---------
dated as of March [__], 2000 (as amended or supplemented from time to time the
"Indenture"), between the Company and the Trustee. Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the TIA, as in effect on the date of the Indenture.
The Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and said TIA for a statement of them. The Securities
are general unsecured obligations of the Company limited in aggregate principal
amount to $100,000,000.
5. Redemption. Except as provided below, the Securities shall not be
----------
redeemed at any time. The Company will not have the right to redeem any
Securities prior to March [__], 2003. If, for any period of 30 consecutive
Trading Days following March [__], 2003, the average Last Sale Price of the
Common Stock is greater than 150% of the average Conversion Price during such
period (computed as the mean of the Conversion Prices applicable at the close of
business on each of the Trading Days during such period), then, subject to the
other provisions of this Article III, on or after the 30/th/ day following the
last day of such period, the Company will have the right, subject to the
Holders' right to first convert the Securities pursuant to Article XIII of this
Indenture, to redeem the Securities in whole, but not in part, at the Redemption
Price (expressed as a percentage of principal amount) set forth below with
respect to the indicated Redemption Date, in each case, plus any accrued but
unpaid interest and Liquidated Damages to, but excluding the Redemption Date.
If redeemed during
the 12-month period
beginning on [________] [__] Redemption Price
-----------------
2003 .............................. 105.000%
2004 .............................. 103.333%
2005 .............................. 101.667%
2006 and thereafter ............... 100.000%
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption. Notice of redemption will be sent by first
--------------------
class mail, at least 30 days and not more than 60 days prior to the Redemption
Date to the Holder of each Security to be redeemed at such Holder's last address
as then shown upon the registry books of the Registrar. Securities may be
redeemed in part in integral multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption Date, if
monies for the redemption of the Securities called for redemption shall have
been deposited with the Paying Agent on such Redemption Date and payment of the
Securities called for redemption is not prohibited under Article XII of the
Indenture, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price, plus any accrued and unpaid interest and Liquidated
Damages, if any, to the Redemption Date.
A-3
<PAGE>
7. Denominations; Transfer; Exchange. The Securities are in registered
---------------------------------
form, without coupons, in denominations of $1,000 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 and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities selected for
redemption.
8. Persons Deemed Owners. The registered Holder of a Security may be
---------------------
treated as the owner of it for all purposes, subject to the provisions of the
Indenture and the Securities with respect to record dates.
9. Unclaimed Money. If money for the payment of principal, interest or
---------------
Liquidated Damages, if any, remains unclaimed for one year, the Trustee and the
Paying Agent(s) will pay the money back to the Company at the Company's written
request. After that, all liability of the Trustee and such Paying Agent(s) with
respect to such money shall cease.
10. Amendment; Supplement; Waiver. Subject to specified exceptions, the
-----------------------------
Indenture or the Securities may be amended or supplemented, and any existing
Default or Event of Default or compliance with any provision may be waived, with
the written consent of the Holders of a majority in aggregate principal amount
of the Securities then outstanding. Without notice to or consent of any Holder,
the parties thereto 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 materially adversely affect the rights of any Holder
of a Security.
11. Conversion Rights. Subject to the provisions of the Indenture, the
-----------------
Holders have the right to convert the principal amount of the Securities into
fully paid and nonassessable shares of Common Stock of the Company at an office
or agency maintained for such purpose as provided in the Indenture at the
initial conversion price per share of Common Stock of $15.735 (which reflects a
conversion rate of approximately 63.5526 shares of Common Stock per $1,000 in
principal amount of Securities), or at the adjusted conversion price then in
effect, if adjustment has been made as provided in the Indenture, upon surrender
of the Security to the Company, together with a fully executed notice in
substantially the form attached hereto and, if required by the Indenture, an
amount equal to accrued interest payable on such Security.
12. Ranking. Payment of principal, premium, if any, interest on and
-------
Liquidated Damages, if any, and other amounts with respect to the Securities is
subordinated, in the manner and to the extent set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness.
13. Repurchase at Option of Holder Upon a Change of Control. If there is
-------------------------------------------------------
a Change of Control, the Company shall, subject to certain exceptions, be
required, subject to the provisions of the Indenture, to offer to purchase on
the Repurchase Date all outstanding Securities at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to, but excluding, the Repurchase Date. Holders of Securities
will receive a Repurchase Offer from the Company prior to any related Repurchase
Date and may elect to have such Securities purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
14. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing (other than an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization), then in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture.
Holders of Securities may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal, interest or Liquidated Damages), if it determines that withholding
notice is in their interest.
A-4
<PAGE>
16. Trustee Dealings with 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 its Affiliates, and may otherwise deal
with the Company or its Affiliates as if it were not the Trustee.
17. No Recourse Against Others. No direct or indirect partner,
--------------------------
shareholder, director, officer or employee, as such, past, present or future, of
the Company or any successor corporation shall have any personal liability in
respect of the obligations of the Company under the Securities or the Indenture,
or for any claim based on, in respect of, or by reason of, such obligations or
their creation, by reason of his, her or its status as such partner,
shareholder, director, officer or employee. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
18. Authentication. This Security shall not be valid until the Trustee or
--------------
authenticating agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Security 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).
20. Governing Law. The Indenture and the Securities shall be governed by
-------------
and construed in accordance with the internal laws of the State of New York, as
applied to contracts made and performed within the State of New York. The
Company hereby irrevocably submits to the jurisdiction of any New York state
court sitting in the Borough of Manhattan in The City of New York or any federal
court sitting in the Borough of Manhattan in The City of New York in respect of
any suit, action or proceeding arising out of or relating to this Indenture and
the Securities, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the aforesaid courts.
The Company irrevocably waives, to the fullest extent it may effectively do so
under applicable law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Nothing herein shall affect the
right of the trustee or any Securityholder to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. Additional Rights of Holders of Transfer Restricted Securities. In
--------------------------------------------------------------
addition to the rights provided to Holders of Securities under the Indenture,
Holders of Securities shall have all the rights set forth in the Registration
Rights Agreement.
23. Copies of Agreements. The Company will furnish to any Holder upon
--------------------
written request and without charge a copy of the Indenture and/or the
Registration Rights Agreement. Request may be made to:
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21202
Attention: Secretary
A-5
<PAGE>
FORM OF ASSIGNMENT
I or we assign this Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_____________________
and irrevocably appoint _______________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated:________________ Signed:__________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guaranty:______________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guaranty program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-6
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant
to Article XI of the Indenture, check the box: [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Article XI of the Indenture, state the amount you want to be
purchased:
$__________________
Dated:________________ Signed:___________________________________________
(Sign exactly as your name appears on the other
side of this Security)
Signature Guaranty:_______________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guaranty program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-7
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES/3/
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease Amount of increase of this Global authorized
in Principal in Principal Security following signatory of Trustee
Date of Amount of this Amount of this such decrease (or or Securities
Exchange Global Security Global Security increase) Custodian
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
____________________
/3/ This schedule should only be added if the Security is issued in global
form.
A-8
<PAGE>
EXHIBIT B
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES/4/
Re: 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2010 OF TOTAL RENAL CARE
HOLDINGS, INC.
This Certificate relates to $__________ principal amount of Securities held
in __________ book-entry or ____________ definitive form by
____________________________ (the "Transferor").
1. The Transferor (check applicable box):
-------------------------------------
[_] (a) has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a Security
or Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
[_] (b) has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
2. In connection with any such request and in respect of each such
Security, the Transferor does hereby certify that Transferor is familiar with
the Indenture relating to the above-captioned Securities and as provided in
Section 2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act because (check applicable box):
[_] (a) Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[_] (b) Such Security is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion that is aware that the transfer is being made in reliance on Rule
144A (in satisfaction of Section 2.6(a)(ii)(B), Section 2.6(b)(i)(x) or Section
2.6(d)(i)(B) of the Indenture).
[_] (c) Such Security is being transferred to an institutional investor that
is an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3) or (7)
under the Securities Act which delivers a certificate in the form of Exhibit B
to the Indenture to the Trustee (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture), and delivers an opinion of counsel, if
the Company or the Trustee so requests.
[_] (d) Such Security is being transferred in reliance on and in compliance
with another exemption from the registration requirements of the Securities Act.
If requested by either the Company, an Opinion of Counsel to the effect that
such transfer does not require registration under the Securities Act accompanies
this Certificate (in satisfaction of Section 2.6(a)(ii)(D) or Section
2.6(d)(i)(D) of the Indenture).
_______________________________________________________
[INSERT NAME OF TRANSFEROR]
By:____________________________________________________
Date:_______________
____________________
/4/ This Certificate shall be included only for the Transfer Restricted
Securities.
B-1
<PAGE>
3. Affiliation with the Company [check if applicable]:
[_] (a) The undersigned represents and warrants that it is, or at some time
during which it held this Security was, an Affiliate of the Company.
[_] (b) If 3(a) above is checked and if the undersigned was not an Affiliate
of the Company at all times during which it held this Security, indicate the
periods during which the undersigned was an Affiliate of the Company:
---------------------------------------
[_[ (c) If 3(a) above is checked and if the Transferee will not pay the full
purchase price for the transfer of this Security on or prior to the date of
transfer indicate when such purchase price will be paid:
---------------------------------------
B-2
<PAGE>
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:/5/
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information.
Dated:_______________ __________________________________________________
NOTICE: To be executed by an officer.
______________________
/5/ This certificate shall be included only for the Transfer Restricted
Securities.
B-3
<PAGE>
EXHIBIT C
---------
FORM OF CONVERSION NOTICE
-------------------------
TO: SYLVAN LEARNING SYSTEMS, INC.
The undersigned owner of this Security hereby: (i) irrevocably exercises
the option to convert this Security, or the portion hereof below designated, for
shares of Common Stock of Sylvan Learning Systems, Inc. in accordance with the
terms of this Indenture referred to in this Security and (ii) directs that such
shares of Common Stock deliverable upon the conversion, together with any check
in payment for fractional shares and any Securities representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. The undersigned acknowledges
that if such shares of Common Stock have not yet been registered with the
Securities and Exchange Commission, such shares may be required to bear a
restrictive legend. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and deliver the Certificate to be delivered upon
Exchange or Registration of Transfer of Securities. Any amount required to be
paid by the undersigned on account of interest accompanies this Security.
Dated:_________________
_____________________________________________
Signature
Fill in for registration of shares if to be delivered, and of Securities if to
be issued, otherwise than to and in the name of the registered holder.
_______________________________________________________
Social Security or other Taxpayer Identifying Number
________________________________
(Name)
________________________________
(Street Address)
________________________________
City, State and Zip Code)
(Please print name and address)
Principal amount to be converted (if less than
all)
$_________________________________________________
C-1
<PAGE>
================================================================================
INVESTORS AGREEMENT
among
SYLVAN LEARNING SYSTEMS, INC.
AND
APOLLO MANAGEMENT IV, L.P.
Dated as of March [__], 2000
================================================================================
<PAGE>
INVESTORS AGREEMENT
-------------------
INVESTORS AGREEMENT, dated as of March [__], 2000 (this "Agreement"), among
---------
Sylvan Learning Systems, Inc., a Maryland corporation (the "Company"), and
-------
Apollo Management IV, L.P., a Delaware limited partnership ("Apollo"), on behalf
------
of Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
(together with their Related Parties, the "Apollo Entities").
---------------
WHEREAS, the Company and certain of the Apollo Entities have entered into
the Purchase Agreement, dated as of February 23, 2000 (the "Purchase
--------
Agreement"), pursuant to which the Company is issuing and selling to such Apollo
- ---------
Entities $100,000,000 aggregate principal amount of 5% Convertible Subordinated
Debentures due 2010 of the Company (the "Debentures");
----------
WHEREAS, the Debentures are convertible at any time at the option of the
holders thereof, in part or in whole, into shares of Common Stock; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used but not defined herein
-----------
have the respective meanings given to such terms in the Indenture. As used in
this Agreement, the following terms shall have the meanings set forth below:
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
---------------------
any person existing at the time such person becomes a Subsidiary of the Company,
including by designation, or is merged or consolidated into or with the Company
or one of its Subsidiaries.
"Acquisition" means (i) any purchase or other acquisition of any Person,
-----------
whether by purchase, merger, consolidation, or other transfer or (ii) any
purchase or other acquisition of any assets (including without limitation any
securities).
"Affiliate Transaction" means any contract, agreement, arrangement or
---------------------
transaction between (a) the Company or any Subsidiary of the Company, on the one
hand, and (b) either any director, officer or employee of the Company or any
Subsidiary of the Company or any Affiliate of any such director, officer or
employee (other than the Company or any of its Subsidiaries), on the other hand.
"Base Price" means the price per share equal to $13.1125; provided,
----------
however, that the "Base Price" shall be subject to the same adjustment
----------
provisions applicable to the term "Conversion Price" set forth in the Indenture.
"Board" means the board of directors of the Company.
-----
"Closing" and "Closing Date" have the respective meanings given to such
------- ------------
terms in the Purchase Agreement.
"Common Stock" means common stock, par value $.01 per share, of the Company
------------
or any other capital stock of the Company into which such stock is reclassified
or reconstituted.
"Competitor" means any Person that, in the reasonable opinions of both the
----------
Company and Apollo (which shall be based on good faith discussions between the
Company and Apollo), is a Person that (i) as
<PAGE>
the primary component of its business, competes with the Company with respect to
the primary business of the Company or (ii) is any Affiliate of any such Person.
"Consolidated EBITDA" means, with respect to any person, for any period,
-------------------
(a) the Consolidated Net Income of such person for such period
adjusted to add thereto (to the extent deducted from net revenues in
determining Consolidated Net Income), without duplication, the sum of:
(i) consolidated income tax expense,
(ii) consolidated depreciation and amortization expense,
(iii) consolidated interest expense, and
(iv) non cash charges,
less
(b) the amount of all cash payments made by such person or any of its
Subsidiaries during such period to the extent such payments relate to non-
cash charges that were added back in determining Consolidated EBITDA for
such period or any prior period,
provided that consolidated income tax expense and depreciation and amortization
of a Subsidiary that is a less than Wholly-Owned Subsidiary shall only be added
to the extent of the equity interest of the Company in such Subsidiary.
"Consolidated Leverage Ratio" on any date of determination (the
---------------------------
"Transaction Date") means the ratio, on a pro forma basis, of:
- -----------------
(a) the sum of (x) the aggregate principal amount of Indebtedness of
the Company and its Subsidiaries on a consolidated basis outstanding on
such date plus (y) the aggregate liquidation preference of Disqualified
Capital Stock outstanding on such date, less (z) the aggregate principal
amount of outstanding Debentures on such date, to
(b) the aggregate amount of Consolidated EBITDA of the Company
attributable to continuing operations and business (exclusive of amounts
attributable to operations and businesses permanently discontinued or
disposed of) for the Reference Period;
provided, that for purposes of calculating Consolidated EBITDA for this
definition,
(i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date
shall be assumed to have occurred on the first day of the Reference Period;
(ii) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (including as a
result of an Acquisition), and the application of the proceeds therefrom to
the extent used to refinance or retire other Indebtedness or Disqualified
Capital Stock, shall be assumed to have occurred on the first day of the
Reference Period; and
3
<PAGE>
(iii) interest on any Indebtedness bearing a floating interest rate
shall be computed on a pro forma basis as if the average rate in effect
from the beginning of the Reference Period to the Transaction Date had been
the applicable rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap or Hedging Obligation (which
shall remain in effect for the 12-month period immediately following the
Transaction Date) that has the effect of fixing the interest rate on the
date of computation, in which case such rate (whether higher or lower)
shall be used.
"Consolidated Net Income" means, with respect to any person for any period,
-----------------------
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication):
(a) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain from the sale or other disposition of assets outside
the ordinary course of business or from the issuance or sale of any capital
stock),
(b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such person or a
Consolidated Subsidiary of such person during such period, but in any case
not in excess of such person's pro rata share of such person's net income
for such period,
(c) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition,
(d) the net income, if positive, of any of such person's
Consolidated Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Consolidated Subsidiary.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
-----------------------
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
"Converted Shares" means the shares of Common Stock received upon
----------------
conversion of, some or all of, the Debentures.
"Disqualified Capital Stock" means (a) with respect to any Person, Equity
--------------------------
Interests of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time or both would be, required to be redeemed or
repurchased ( including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to 91 days following
the Stated Maturity of the Debentures and (b) with respect to any Subsidiary of
such Person (including with respect to any Subsidiary of the Company), any
preferred stock.
"Early Termination Date" has the meaning given to such term in Section 5(b)
----------------------
hereof.
"Equity Interest" means (i) with respect to a corporation, any and all
---------------
Capital Stock or warrants, options or other rights to acquire Capital Stock
(including any debt security which is convertible into, or exchangeable or
exercisable for, Capital Stock) and (ii) with respect to a partnership, limited
liability
4
<PAGE>
company or similar Person, any and all units, interests, rights to purchase,
warrants, options or other equivalents of, or other ownership interests in any
such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"GAAP" means United States generally accepted accounting principles set
----
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession which are in effect in the United States; provided,
however, that for purposes of determining compliance with the provisions hereof,
"GAAP" means such generally accepted accounting principles which are in effect
as of the date hereof.
"Incubator" means [_________________________], a Delaware limited liability
---------
company, and its successors and assigns.
"Incubator Transaction" any contract, agreement, arrangement or
---------------------
transaction, or any series of related contracts, agreements, or transactions,
between (i) the Company or any of its Subsidiaries and (ii) the Incubator (other
than any such transaction pursuant to the Incubator Agreement).
"Indenture" means the Indenture dated as of March [__], 2000 by and between
---------
the Company and [______________], as trustee, relating to the Debentures, as in
effect on the Closing Date.
"Initial Interest" means the aggregate number of shares of Common Stock
----------------
into which the Debentures held by Apollo Entities may be converted as of the
Closing Date.
"Investor Directors" means any person designated by the Apollo Entities who
------------------
is elected to the Board pursuant to this Agreement.
"Liquidation" means the liquidation under applicable bankruptcy or
-----------
reorganization legislation, or the dissolution or winding up, of the Company.
"Other Agreement" has the meaning given to such term in the Purchase
---------------
Agreement.
"Reference Period" with regard to any Person means the four full fiscal
----------------
quarters (or such lesser period during which such Person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms hereof.
"Related Party" means, with respect to any Person, (i) any Affiliate of
-------------
such Person, (ii) any investment manager, investment advisor or general partner
of such Person, and (iii) any investment fund, investment account or investment
entity whose investment manager, investment advisor or general partner is such
Person or a Related Party of such Person.
"SEC" means the United States Securities and Exchange Commission.
---
"Shares" means shares of Common Stock held by the Apollo Entities and
------
Converted Shares the Apollo Entities have the right to receive upon conversion
of the Debentures.
"Stockholders" means the holders of Common Stock.
------------
"Termination Date" means any date on which the Shares represent less than
----------------
one-third of the Initial Interest.
5
<PAGE>
"Total Voting Power" means the total combined Voting Power, on a fully
------------------
diluted basis, of all the Voting Securities then outstanding.
"Transfer" means to (i) sell, assign, transfer (voluntarily or
--------
involuntarily), exchange (by merger or otherwise) or otherwise dispose of or
(ii) grant a lien, encumbrance, pledge or other form of security interest.
"Voting Power" means, as of the date of determination, the voting power in
------------
the general election of directors of the Company, and shall be calculated for
each Voting Security by reference to the maximum number of votes such Voting
Security is or would be entitled to cast in the general election of directors,
and, in the case of convertible (or exercisable or exchangeable) securities, by
reference to the maximum number of votes such Voting Security would be entitled
to cast in unconverted or converted (or exercised, unexercised, exchanged or
unexchanged) status. For purposes of determining Voting Power under this
Agreement, a Voting Security which is convertible into or exchangeable for a
Voting Security shall be counted as having the greater of (i) the number of
votes to which such Voting Security is entitled prior to conversion or exchange
and (ii) the number of votes to which the Voting Security into which such Voting
Security is convertible or exchangeable is entitled. Notwithstanding anything
else to the contrary contained in this Agreement, there shall not be included in
calculating Voting Power any votes which a Person shall have upon and by reason
of the nonpayment of dividends on preferred shares in accordance with the terms
of such preferred shares.
"Voting Securities" means (i) any securities entitled, or which may be
-----------------
entitled, to vote generally in the election of directors of the Company, (ii)
any securities convertible or exercisable into or exchangeable for such
securities, or (iii) any direct or indirect rights or options to acquire such
securities; provided that unexercised options granted pursuant to any employment
benefit or similar plan and rights issued pursuant to any shareholder rights
plan shall be deemed not to be "Voting Securities" (or to have Voting Power).
Section 2. Transfer Restrictions; Hedging.
------------------------------
(a) Without the prior written approval of the Company, Apollo
shall not, and shall cause its Affiliates not to, Transfer
(i) any Debentures to any Person that is a Competitor of
the Company, or
(ii) more than $25,000,000 aggregate principal amount of
Debentures to any other Person , unless as a condition to such
Transfer, such Person agrees to be subject to the restrictions on
Transfer set forth in this Section 2(a).
(b) Without the prior written approval of the Company, Apollo
shall not and shall cause its Affiliates not to sell short any Common Stock
during any period during which Apollo or any of its Affiliates owns any
Debentures, any Shares received upon exchange of any Debentures, or any
Shares acquired at a time when Apollo or any of its Affiliates owned any
Debentures or Shares received upon exchange of any Debentures.
(c) Without the prior written approval of the Company, prior to
the second anniversary of the Closing Date, Apollo shall not, and shall
cause its Affiliates not to, Transfer any Debentures to any Person, unless
the transferee agrees to not sell short any Common Stock at any time prior
to the second anniversary of the Closing Date while such transferee owns
any Debentures or Common Stock issuable upon conversion of such Debentures.
(d) Apollo shall not, and shall cause its Affiliates not to,
Transfer any Debentures or any Shares to any Person in violation of the
applicable securities laws of the United States.
6
<PAGE>
Section 3. Corporate Governance.
--------------------
(a) Nomination and Election of Directors.
------------------------------------
(i) So long as the Shares represent at least two-thirds of
the Initial Interest, the Apollo Entities shall have the right to
designate two persons for election to the Board. So long as the
Shares represent at least one-third but less than two-thirds of the
Initial Interest, the Apollo Entities shall have the right to
designate one person for election to the Board. Notwithstanding the
foregoing, if at any time after the third anniversary of the
Closing Date, the Shares represent less than 3% of the fully
diluted equity interests in the Company (calculated giving effect
to the exercise of all outstanding options, warrants and other
rights to purchase to acquire any Equity Interests of the Company),
then the Apollo Entities shall not have the right to designate more
than one person for election to the Board.
(ii) On the Closing Date, the Board shall appoint two
Investor Directors as members of the Board.
(iii) The Apollo Entities shall no longer be entitled to
designate persons for election to the Board from and after the
Termination Date.
(iv) At all times prior to the Termination Date, the
Company shall support the nominations of the persons designated by
the Apollo Entities pursuant to this Section 3(a), and the Board
(and the Company's nominating committee, if any) shall recommend
the inclusion of such persons in the slate of nominees recommended
to stockholders for election as directors at each annual meeting of
stockholders of the Company.
(v) As long as at least one Investor Director is a member
of the Board, at least one Investor Director shall be appointed to
each committee of the Board.
(vi) If at any time, a vacancy is created on the Board by
reason of the incapacity, death, removal or resignation of any
Investor Director, then the Board shall appoint an individual
designated by the Apollo Entities to fill such vacancy until the
next meeting of Stockholders.
(b) Bylaw Amendment. The provisions of Section 3(a) and Section
---------------
4 hereof shall be further effected pursuant to an amendment to the
Company's Bylaws in a form reasonably acceptable to the Apollo Entities,
which shall not be further amended by the Board prior to the Termination
Date.
(c) Investor Directors.
------------------
(i) The Company shall provide the Investor Directors
notice of each meeting of the Board at the same time and in the
same manner as other members of the Board.
(ii) The Investor Directors shall be entitled to
compensation and indemnification rights similar to those of other
non-employee directors of the Company, including without
limitation, any rights to participate in stock option or similar
plans. At all times on and after the Closing Date, the Company
shall be a party to and comply with indemnification agreements (in
form mutually satisfactory to Apollo and the Company) with each of
the members of the Board. The Company shall at all times maintain a
directors' and officers' insurance policy covering the Investor
Directors that provides in the aggregate at
7
<PAGE>
least $15,000,000 of liability coverage, and in any event
substantially no less coverage than the policy covering the current
directors of the Company as of the date of this Agreement.
(d) Apollo Obligations. During the period beginning on the
------------------
Closing Date and ending on the earlier to occur of (i) the tenth
anniversary of the Closing Date and (ii) the date on which the Shares
represent less than 3% of the fully diluted equity interests in the Company
(calculated giving effect to the exercise of all outstanding options,
warrants and other rights to purchase equity interests of the Company), the
Apollo Entities shall vote any Converted Shares that they hold in favor of
the election to the Board of all persons nominated by the Board and in
favor of all actions by shareholders recommended by the Board; provided,
that the persons so nominated include the person(s) designated pursuant to
the provisions of Section 3(a) and at least one Investor Director is a
member of the Board.
Section 4. Certain Actions of the Company.
------------------------------
(a) Prior to the Termination Date, the Company shall not, and
shall not permit any of its Subsidiaries to, take, approve or otherwise
ratify any Affiliate Transaction or series of related Affiliate
Transactions, involving consideration to either party in excess of
$1,000,000, without the approval of all of the Investor Directors.
(b) The following provisions of this Section 4(b) shall apply
and be in effect only for so long as any of the Apollo Entities own any
Debentures:
(i) Prior to the Termination Date, without the approval of
either (x) all of the Investor Directors or (y) all of the members
of the Board other than the Investor Directors, the Company shall
not, and shall not permit any of its Subsidiaries to, enter into,
approve or otherwise ratify any Acquisition or series of related
Acquisitions, if the aggregate value of the consideration paid by
the Company or any of its Subsidiaries in connection therewith is
in excess of $100,000,000.
(ii) Prior to the Termination Date, the Company shall not,
and shall not permit any of its Subsidiaries to, take, approve or
otherwise ratify any of the following actions (whether occurring in
one or a series of related transactions) without the approval of
all of the Investor Directors:
(1) the direct or indirect, issuance, assumption,
guarantee, incurrence, or other action pursuant to which the
Company or any of its Subsidiaries would become directly or
indirectly liable with respect to (including as a result of
an Acquisition), or otherwise become responsible for,
contingently or otherwise (individually and collectively, to
"incur" or, as appropriate, an "incurrence"), any
----------
Indebtedness or any Disqualified Capital Stock (including
Acquired Indebtedness), unless on the date of such
incurrence (the "Incurrence Date"), the Consolidated
---------------
Leverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such
Indebtedness or Disqualified Capital Stock and the use of
proceeds thereof, would not be greater than 3.5 to 1;
(2) any declaration or payment of any dividend or
other payment to holders of securities junior in right of
payment to the Debentures (other than scheduled interest and
principal payments with respect to any indebtedness of the
Company) or any purchase, redemption, or other acquisition
or retirement for value of, any payment in respect of any
amendment of the terms of or any defeasance of,
8
<PAGE>
any securities junior in right of payment to the Debentures,
prior to the scheduled maturity, any scheduled repayment of
principal, or scheduled sinking fund payment, as the case
may be, of such securities; and
(3) the issuance of any Equity Interests, in a public
offering or otherwise, other than (A) the issuance of Common
Stock upon exercise of employee stock options granted prior
to the date of this Agreement, (B) the issuance of Converted
Shares, (C) the issuance and sale of Common Stock at price
per share not less than the Base Price, (D) the issuance and
sale of convertible preferred stock of the Company, which is
convertible into Common Stock upon payment of a conversion
price per share of Common Stock not less than the Base Price
or (E) options to purchase up to the number of shares of
Common Stock authorized (as of the date of the Purchase
Agreement) for issuance under any stock option plan of the
Company (as in effect on such date) issued to employees
under such option plans, provided, that such options have an
exercise price not less than the fair market value of such
shares on the date of grant of such options.
(iii) Prior to the Termination Date, the Company shall not,
and shall not permit any of its Subsidiaries to, take, approve or
otherwise ratify any Incubator Transaction,
(1) unless the terms of such Incubator Transaction are
fair and reasonable to the Company, and no less favorable to
the Company, than could have been obtained in an arm's
length transaction with a third party that is not affiliated
with the Company, and
(2) if involving consideration to either party in
excess of $1,000,000, unless such Incubator Transaction or
any series of related Incubator Transactions is approved by
a majority of the members of the Board of Directors of the
Company that are disinterested in such Incubator
Transaction.
Section 5. Standstill.
----------
(a) At all times prior to the Early Termination Date, Apollo
shall not, and shall cause its Affiliates not to, acquire, offer to
acquire, or agree to acquire, by purchase or otherwise, any Voting
Securities of the Company or any of its Affiliates, other than:
(i) the Converted Shares, or an acquisition as a result of
a stock split, stock dividend or similar recapitalization,
(ii) acquisitions of Voting Securities that together with
all Voting Securities owned by Apollo and its Affiliates do not
exceed 15% of the Total Voting Power.
(iii) stock options or similar rights granted as
compensation for performance as a director or officer of the
Company or its Subsidiaries (and any shares issuable upon exercise
thereof),
(iv) transfers between or among the Apollo Entities,
(v) any rights that are granted to all Stockholders (and
any shares issuable upon exercise thereof), and
(vi) acquisitions of Voting Securities approved by the
Company.
9
<PAGE>
provided, however, that (A) if Apollo or any of its Affiliates in
good faith inadvertently acquires Voting Securities in violation of
these provisions and within 30 business days after the first date
on which it has actual knowledge (including by way of written
notice given by the Company) that a violation has occurred Apollo
or any of its Affiliates shall have transferred any shares of
Common Stock held in violation of these provisions to unrelated
third parties so that Apollo and its Affiliates no longer
beneficially own any such shares or have any agreement or
understanding relating to such shares, this Section 5(a) shall be
deemed to not have been violated; and (B) no violation of this
provision shall be deemed to have occurred by reason of the
indirect acquisition of beneficial ownership of securities
resulting from (x) investments in investment funds as to which
Apollo has no control or power to control with respect to voting or
investment decisions or (y) acquisitions of securities by a limited
partner in Apollo or an Affiliate thereof as to which limited
partner Apollo has no control or power to control;
(b) The obligations of Stockholders under Section 5(a) shall
terminate on the first date (the "Early Termination Date") on which any of
----------------------
the following events occurs:
(i) At any time after the fifth anniversary of the Closing
Date, the Shares represent less than 3% of the fully diluted equity
interests in the Company (calculated giving effect to the exercise
of all outstanding options, warrants and other rights to purchase
to acquire any Equity Interests of the Company).
(ii) If the Company shall, in breach of its obligations
under this Agreement, fail to nominate for election to the Board
the designees set forth by Apollo pursuant to Section 3(a).
(iii) The Company shall be in material breach of any of its
other obligations under the Purchase Agreement or any Other
Agreement and such breach shall not have been cured within 10 days.
Section 6. Financial Statements and Reports. The Company will
--------------------------------
maintain, and will cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
At all times prior to the Termination Date, the Company shall comply with the
following provisions:
(a) Monthly Financials. As soon as available and in any event
------------------
within fifteen (15) days after the end of each month ending after the
Closing Date, the Company shall deliver to the Apollo Entities duplicate
copies of preliminary flash financial reports, if any, prepared monthly
in the normal course of business for the Company's management and/or the
Board with respect to the Company's operations by region and business
segment, and as soon as available and in any event within 30 days after
the end of each month, the Company shall deliver to the Apollo Entities
duplicate copies of operational summaries, if any, prepared monthly in
the normal course of business for Company management and/or the Board
with respect to the Company's regional and geographical results of
operations.
(b) Quarterly Financials. As soon as available and in any event
--------------------
within forty-five (45) days after the end of each fiscal quarter (other
than the last quarter of any fiscal year),the Company shall deliver to
the Apollo Entities duplicate copies of, (i) a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such quarter,
and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending
10
<PAGE>
with such quarter, setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally, and certified by the chief
financial officer of the Company as fairly presenting, in all material
respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting
from year-end adjustments; provided that delivery within the time period
specified above of copies of the Company's Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
SEC shall be deemed to satisfy the requirements of this Section 6(b).
(c) Year-End Financials. As soon as available and in any event
-------------------
within ninety (90) days after the end of each fiscal year, the Company
shall deliver to the Apollo Entities duplicate copies of, (i) a
consolidated balance sheet of the Company and its Subsidiaries, as at
the end of such year, and (ii) consolidated statements of income,
changes in shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP and accompanied by an opinion thereon
of independent certified public accountants of recognized national
standing, which opinion shall state that such financial statements
present fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and cash
flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, provided that the Company's Annual Report
on Form 10-K for such fiscal year (together with the Company's annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under
the Exchange Act) prepared in accordance with the requirements therefor
and sent to shareholders with the annual proxy statement and filed with
the SEC shall be deemed to satisfy the requirements of this Section
6(c).
(d) Copies of Reports and Other Materials. Promptly upon
-------------------------------------
receipt thereof, the Company shall deliver the following to the Apollo
Entities:
(i) copies of all reports submitted to the management of
the Company by independent public accountants, whether in
connection with each annual, interim or special audit of the
consolidated financial statements of the Company made by such
accountants or otherwise, including the management letter submitted
by such accountants to management in connection with their annual
audit;
(ii) copies of any financial or other report or notice
delivered to, or received from, any lenders to the Company or any
of its Subsidiaries;
(iii) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to public
securities holders generally;
(iv) each regular or periodic report, each registration
statement that shall have become effective (without exhibits except
as expressly requested by such holder), and each final prospectus
and all amendments thereto filed by the Company or any Subsidiary
with the SEC;
(v) copies of all material reports, letters and other
correspondence from local, state or Federal regulatory or other
agencies relating to business, licenses or operating contracts of
the Company or any of its Subsidiaries;
11
<PAGE>
(vi) copies of such other information and data with respect
to the Company or any of its Subsidiaries as from time to time may
be reasonably requested by any Holder.
Section 7. Confidentiality. Any information that is reasonably and in
---------------
good faith designated by the Company in writing as confidential at the time of
delivery of such information to any of the Apollo Entities shall be kept
confidential by such persons, unless (A) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (B) disclosure of such information is
required by law, (C) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (D) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement. Apollo further agrees, and shall cause its Affiliates to agree, not
to purchase or sell any securities of the Company while in possession of
material non-public information about the Company in violation of the applicable
securities laws of the United States.
Section 8. Miscellaneous.
-------------
(a) Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
or sent by facsimile, certified, registered or express mail, postage
prepaid. Any such notice shall be deemed given when so delivered
personally, or sent by facsimile, certified, registered or express mail or,
if mailed, five days after the date of deposit in the United States mail,
as follows:
(i) if to the Company:
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21202
Attention: General Counsel
Facsimile: (410) 843-8065
with a copy to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attention: Elizabeth R. Hughes
Facsimile: (410) 244-7742
(ii) if to the Investor:
Apollo Management IV, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067
Attention: Michael Weiner
Facsimile: (310) 201-4198
12
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Michael A. Woronoff
Facsimile: (213) 687-5900
Any party may, by notice given in accordance with this Section 8(a),
designate another address or person for receipt of notices hereunder.
(b) Amendment and Waiver.
--------------------
(i) No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the parties hereto at law,
in equity or otherwise.
(ii) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the
terms of any provision of this Agreement, shall be effective (i)
only if it is made or given in writing and signed by the Company
and Apollo and (ii) only in the specific instance and for the
specific purpose for which made or given.
(c) Specific Performance. The parties hereto intend that each of
--------------------
the parties has the right to seek damages or specific performance in the
event that any other party hereto wilfully fails to perform such party's
obligations hereunder. Therefore, if any party shall institute any
action or proceeding to enforce the provisions hereof, any party against
whom such action or proceeding is brought hereby waives any claim or
defense therein that the plaintiff party has an adequate remedy at law.
(d) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(e) Severability. If any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any
way impaired, unless the provisions held invalid, illegal or
unenforceable shall substantially impair the benefits of the remaining
provisions hereof.
(f) Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or
therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
13
<PAGE>
(g) Governing Law; Submission to Jurisdiction. This Agreement
-----------------------------------------
shall be governed by and construed in accordance with the laws of the
State of Maryland, without regard to the conflict of law rules thereof.
Each of the parties hereto hereby irrevocably submits to the
jurisdiction of any Maryland state court sitting in the City of
Baltimore or any federal court sitting in the City of Baltimore in
respect of any suit, action or proceeding arising out of or relating to
this Agreement and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably waives, to the fullest
extent it may effectively do so under applicable law, any objection
which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(h) Further Assurances. Each of the parties shall, and shall
------------------
cause their respective Affiliates to, execute such instruments and take
such action as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
(i) Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective permitted
successors and assigns. All assignments of rights and obligations under
this Agreement shall be void; provided, however, that this Agreement and
the rights and obligations of any of the Apollo Entities hereunder may
be assigned to any Affiliate of Apollo.
(j) No Third Party Beneficiaries. This Agreement is not intended
----------------------------
to, and does not, create any rights or benefits of any Person other than
the parties hereto.
(k) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument.
(l) Effectiveness. Notwithstanding anything to the contrary
-------------
contained in this Agreement, this Agreement shall not become effective,
and Apollo shall have no rights hereunder, unless and until the purchase
and sale of the Debentures pursuant to the Purchase Agreement is
consummated.
14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
SYLVAN LEARNING SYSTEMS, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:_________________________________________
Name:_______________________________________
Title:______________________________________
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:_________________________________________
Name:_______________________________________
Title:______________________________________
<PAGE>
5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2010
REGISTRATION RIGHTS AGREEMENT
Dated as of March [__], 2000
by and among
Sylvan Learning Systems, Inc.
and
The Initial Purchasers Listed on the Signature Pages Hereof
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of March [__], 2000, by and among Sylvan Learning Systems, Inc.,
a Maryland corporation (the "Company"), and the initial purchasers listed on the
-------
signature pages hereof (each an "Initial Purchaser" and, collectively, the
-----------------
"Initial Purchasers"), each of whom has agreed to purchase the Company's 5%
- -------------------
Convertible Subordinated Debentures due 2010 (the "Debentures") pursuant to the
----------
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
February 23, 2000, (the "Purchase Agreement"), by and among the Company and the
------------------
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Debentures, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the obligations of the Initial Purchasers set forth in Section 4.6 of the
Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture, dated the date hereof,
between the Company and [____________________________], as trustee, relating to
the Debentures (the "Indenture").
---------
The parties hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following
-----------
capitalized terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Common Stock: Common Stock, $0.01 par value per share,
------------
of the Company.
Commission: The Securities and Exchange Commission.
----------
Effectiveness Deadline: As defined in Section 2(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as
------------
amended.
Filing Deadline: As defined in Section 2(a) hereof.
---------------
Holder: A beneficial owner of Transfer
------
Restricted Securities.
Debentures: The 5% Convertible Subordinated
----------
Debentures due 2010 being issued and
sold pursuant to the Purchase Agreement.
Piggyback Notice: As defined in Section 4 hereof.
----------------
Piggyback Registration Statement: As defined in Section 4 hereof.
--------------------------------
Prospectus: The prospectus included in a
----------
Registration Statement at the time such
Registration Statement is declared
effective, as amended or supplemented by
any prospectus supplement and by all
other amendments thereto,including post-
effective amendments, all material
incorporated by reference into such
Prospectus and any information
previously omitted in reliance upon Rule
430A of the Act.
1
<PAGE>
Recommencement Date: As defined in Section 5 hereof.
-------------------
Registration Default: As defined in Section 3 hereof.
--------------------
Registration Statement: Any registration statement under the Act
----------------------
filed pursuant to the terms hereof,
including without limitation any Shelf
Registration Statement and any Piggyback
Registration Statement.
Rule 144: Rule 144 promulgated under the Act.
--------
Shelf Registration Statement: As defined in Section 2 hereof.
----------------------------
Suspension Notice: As defined in Section 5 hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15
---
U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: The Debentures and the shares of Common
------------------------------
Stock into which the Debentures are
convertible, upon original issuance
thereof, and at all times subsequent
thereto, until, in the case of any such
Debentures or shares of Common Stock,
(a) the date on which such Debentures or
shares of Common Stock have been
disposed of in accordance with a
Registration Statement, (b) the date on
which such Debentures or shares of
Common Stock are distributed to the
public pursuant to Rule 144 under the
Act or (c) the date on which such
Debentures or shares of Common Stock
cease to be outstanding.
Section 2. Shelf Registration
------------------
(a) Shelf Registration. As soon as practicable after the receipt
------------------
of the written request of the Holders of a majority of the Transfer
Restricted Securities (determined on an as converted basis) but in no event
later than 30 days after the receipt of such request (such 30th day, the
"Filing Deadline"), the Company shall file with the Commission a
---------------
registration statement under the Act (the "Shelf Registration Statement"),
----------------------------
which may, if so requested by such Holders, be a shelf registration
statement pursuant to Rule 415 under the Act in any such case, relating to
registration for resale of the number of Transfer Restricted Securities
specified in such request, and shall use its best efforts to cause such
registration statement to become effective on or prior to 60 days after the
Filing Deadline (such 60th day, the "Effectiveness Deadline"). The rights
----------------------
of the Holders pursuant to this Section 2(a) may be exercised at any time
and from time to time, but not more than three times.
The Company shall use its best efforts to keep any Shelf Registration
Statement continuously effective, supplemented and amended as required by
and subject to the provisions of Sections 5(a) and (b) hereof to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Securities by the Holders thereof entitled to the benefit of this Section,
and the Company shall use its best efforts to ensure that any Shelf
Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as
announced from time to time, for the shorter of (i) two years (as extended
pursuant to Section 5(b)(i)) or (ii) the date on which all Transfer
Restricted Securities covered by any Registration Statement have been sold
pursuant thereto.
2
<PAGE>
(b) Provision by Holders of Certain Information in Connection
---------------------------------------------------------
with the Shelf Registration Statement. No Holder may include any of its
-------------------------------------
Transfer Restricted Securities in any Shelf Registration Statement or other
Registration Statement pursuant to this Section 2, unless and until such
Holder furnishes to the Company in writing, within 20 days after receipt of
a request therefor, the information specified in Item 507 or 508 of
Regulation S-K, as applicable, of the Act (and any other information
regarding such Holder required by applicable law) for use in connection
with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. Each selling Holder agrees to promptly furnish
additional information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not
materially misleading.
(c) Holdback Agreement of Company. The Company agrees, if
-----------------------------
requested by the managing underwriter of an underwritten offering of Common
Stock registered pursuant to a Shelf Registration Statement or other
Registration Statement required pursuant to this Section 2, not to effect
any public or private sale or distribution (other than pursuant to an
employee benefit plan) of Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock), including a sale pursuant to
Regulation D under the Securities Act, during the 10-day period prior to,
and during the 90-day period (or shorter period requested by the
underwriter) beginning on the date of the consummation of such underwritten
offering.
Section 3. Liquidated Damages.
------------------
(a) If (i) the Shelf Registration Statement is not filed with
the Commission on or prior to the Filing Deadline, (ii) such Shelf
Registration Statement has not been declared effective by the Commission on
or prior to the Effectiveness Deadline, or (iii) such Shelf Registration
Statement required by this Agreement is filed and declared effective but
shall thereafter cease to be effective or fail to be usable for its
intended purpose without being succeeded within five Business Days by a
post-effective amendment to such Shelf Registration Statement that cures
such failure and that is itself declared effective within five Business
Days of filing such post-effective amendment to the Shelf Registration
Statement (each such event referred to in clauses (i) through (iii), a
"Registration Default"), then the Company hereby agrees to pay to each
--------------------
Holder affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount or $[____] per share of Common
Stock(/1/) of Transfer Restricted Securities, as applicable, held by such
Holder for each week or portion thereof that the Registration Default
continues for the first 90 day period immediately following the occurrence
of such Registration Default. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90 day
period until all Registration Defaults have been cured; provided that the
Company shall in no event be required to pay liquidated damages for more
than one Registration Default at any given time. Notwithstanding anything
to the contrary set forth herein, (1) upon filing of the Shelf Registration
Statement, in the case of (i) above, (2) upon the effectiveness of the
Shelf Registration Statement, in the case of (ii) above, or (3) upon the
filing of a post-effective amendment to the Shelf Registration Statement
that causes the Shelf Registration Statement to again be declared effective
or made usable, in the case of (iii) above, the liquidated damages payable
with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), or (iii), as applicable, shall cease.
(b) All accrued liquidated damages shall be paid to the Holders
entitled thereto, in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date as more fully set forth in the
Indenture and the Debentures. Notwithstanding the fact that any Debentures
_____________________
/1/ The amount payable on Common Stock should be equal to that amount which
would have been payable if the Debentures had not been converted.
3
<PAGE>
and/or shares of Common Stock for which liquidated damages are due cease to
be Transfer Restricted Securities, all obligations of the Company to pay
liquidated damages with respect to any such Debentures and/or shares of
Common Stock shall survive until such time as all such obligations shall
have been satisfied in full.
Section 4. Piggyback Registration.
----------------------
(a) Right to Piggyback. If at any time, or from time to time,
------------------
the Company determines to file a registration statement with the Commission
covering any of the Company's securities for the Company's own account or
for the account of any Holder or for the account of any holder of the
Company's securities other than a Holder (a "Piggyback Registration
----------------------
Statement"), then the Holders will be entitled to include their Transfer
---------
Restricted Securities in such Piggyback Registration Statement and related
underwritten offering, if any, on the terms set forth in this Section.
(b) Piggyback Notice. The Company shall promptly give written
----------------
notice of the Company's determination to file a Piggyback Registration
Statement with the Commission to the Holders (a "Piggyback Notice") and
----------------
each Holder will have the right to request, by written notice given to the
Company within ten days of the date the Piggyback Notice was received by
such Holder, that a specific number of Transfer Restricted Securities held
by such Holder be included in the Piggyback Registration Statement and
related underwritten offering, if any. If the Piggyback Registration
Statement relates to an underwritten offering, the Piggyback Notice will
specify the name of the managing underwriter for such offering. The
Piggyback Notice will also specify the number and type of securities to be
registered for the account of the Company or, if applicable, for the
account of any other Person, and the intended method of disposition of such
securities.
(c) Provision by Holders of Certain Information in Connection
---------------------------------------------------------
with the Piggyback Registration Statement. No Holder may include any of
-----------------------------------------
its Transfer Restricted Securities in any Piggyback Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the
Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable,
of the Act (and any other information regarding such Holder required by
applicable law) for use in connection with any Piggyback Registration
Statement or Prospectus or preliminary Prospectus included therein. Each
selling Holder agrees to promptly furnish additional information required
to be disclosed in order to make the information previously furnished to
the Company by such Holder not materially misleading.
(d) Priority. If the Piggyback Registration Statement relates
--------
to an underwritten offering, the Company shall cause the managing
underwriter of the proposed underwritten offering to permit the Holders to
include in such offering all Transfer Restricted Securities owned by them,
on the same terms and conditions as the other securities included therein;
provided, however, if the managing underwriter of such offering delivers an
opinion to the Holders that the total number of securities that such
Holders and any other Persons having rights to participate in such
registration proposed to include in such offering is such as to materially
and adversely affect the success of such offering, the Company shall
include in such registration: (w) first, the number of securities being
sold by the Company, (x) second, the number of securities of Persons
exercising "demand" registration rights that, in the opinion of such
managing underwriter, can be sold, which shall be allocated among such
Persons as it may otherwise determine; and (y) third, the number of
securities in excess of the number of securities described in the foregoing
clause (x) that (i) are owned by the Holders and other Persons exercising
"piggyback" registration rights, and (ii) in the opinion of such managing
underwriter, can be sold, with such number of securities allocated pro rata
among the Holders and such other Persons based on the number of securities
owned by each prior to the effectiveness of the Piggyback Registration
Statement.
4
<PAGE>
(e) Withdrawal. Each Holder may withdraw such Holder's Transfer
----------
Restricted Securities from the Piggyback Registration Statement at any time
prior to the date that the Commission declares such Piggyback Registration
Statement effective.
(f) Holdback Agreement of Holders. If requested by the managing
-----------------------------
underwriter of an underwritten offering of Common Stock registered pursuant
to a Piggyback Registration Statement, the Holders shall not to effect any
public sale or distribution of Common Stock into which the Notes are
convertible, including, but not limited to, a sale pursuant to Rule 144 of
the Securities Act (except as part of such underwritten offering), during
the 10-day period prior to, and during the 90-day period (or shorter period
requested by the underwriter) beginning on the effective date of such
Piggyback Registration Statement.
Section 5. Registration Procedures.
-----------------------
(a) Procedures. In connection with each Registration
----------
Statement, the following procedures shall be followed:
(i) The Company shall use its best efforts to effect such
registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information
furnished to the Company pursuant to Sections 2(b) and 4(c) hereof),
and pursuant thereto the Company will prepare and file with the
Commission a Registration Statement relating to the registration on
any appropriate form under the Act, which form shall be available
for the sale of the Transfer Restricted Securities in accordance
with the intended method or methods of distribution thereof
(including, without limitation, one or more underwritten offerings)
within the time periods and otherwise in accordance with the
provisions hereof. The Company shall not include in the Shelf
Registration Statement any securities other than the Transfer
Restricted Securities.
(ii) The Company shall notify each Holder of its right to
include its Transfer Restricted Securities in such Registration
Statement.
(iii) The Company shall use its best efforts to keep the
Shelf Registration Statement continuously effective and provide all
requisite financial statements for the period specified in Section 2
of this Agreement. Upon the occurrence of any event that would cause
any Registration Statement or the Prospectus contained therein (A)
to contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of
Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment
to such Registration Statement curing such defect, and, if
Commission review is required, use its best efforts to cause such
amendment to be declared effective as soon as practicable.
(iv) The Company shall prepare and file with the Commission
such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary to keep such Shelf
Registration Statement effective for the applicable period set forth
in Section 2 hereof, cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act, and to comply fully with Rules
424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the
disposition of all Transfer Restricted Securities covered by such
Registration Statement during the applicable
5
<PAGE>
period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus.
(v) The Company shall advise the Holders and
underwriters, if any, promptly and, if requested by such Persons,
confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed,
and, with respect to any Registration Statement or any post-
effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes,
and (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or
any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or
changes in the Prospectus in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any
state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest
possible time.
(vi) Subject to Section 5(a)(iii) hereof, if any fact or
event contemplated by Section 5(a)(v)(D) above shall exist or have
occurred, the Company shall prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of Transfer Restricted Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(vii) The Company shall furnish to each Holder named in any
Registration Statement or Prospectus and underwriter, if any, in
connection with such sale before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after
the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Persons in
connection with such sale, if any, for a period of at least five
Business Days (in the case of a Shelf Registration Statement) or one
Business Day (in the case of a Piggyback Registration Statement),
and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated
by reference) to which such Persons shall reasonably object within
five Business Days after the receipt thereof.
(viii) Promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, the Company shall provide copies of such document to the
Holders, and underwriters, if any, in connection with such sale,
make the Company's representatives available for discussion of such
document and other
6
<PAGE>
customary due diligence matters, and include such information in
such document prior to the filing thereof as such Holders may
reasonably request.
(ix) The Company shall make available at reasonable times
for inspection by the Holders and underwriters, if any, and any
attorney or accountant retained by such Holders, or underwriters, if
any, all financial and other records, pertinent corporate documents
of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Holder, underwriters, if any, attorney or accountant in connection
with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness; provided, however, that such persons shall first
agree in writing with the Company that (1) any information that is
reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be
kept confidential by such persons, unless (A) disclosure of such
information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (B)
disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in
connection with the filing of any Registration Statement or the use
of any Prospectus referred to in this Agreement), (C) such
information becomes generally available to the public other than as
a result of a disclosure or failure to safeguard by any such person
or (D) such information becomes available to any such person from a
source other than the Company and such source is not bound by a
confidentiality agreement and (2) not to purchase or sell any
securities of the Company while in possession of material non-public
information about the Company in violation of the applicable
securities laws of the United States.
(x) If requested by any Holders or underwriters, if any,
in connection with such sale, the Company shall promptly include in
any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
Holders or underwriters, if any, may reasonably request to have
included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment.
(xi) The Company shall furnish to each Holder and
underwriter, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference).
(xii) The Company shall deliver to each Holder and
underwriter, if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each Holder
and each underwriter, if any, in connection with the offering and
the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto.
(xiii) Upon the request of any Holder or underwriter, if
any, the Company shall enter into such agreements (including
underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith
in order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably
7
<PAGE>
requested by such Person in connection with any sale or resale
pursuant to any applicable Registration Statement and in such
connection, the Company shall:
(1) upon request of any Holder or underwriter, if any, the
Company shall furnish (or in the case of subparagraphs (B) and
(C) below, use its best efforts to cause to be furnished) to each
Holder or underwriter, if any, upon the effectiveness of the
Registration Statement:
(A) a certificate, dated such date, signed on behalf of
the Company by (x) the President or any Vice President and
(y) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set
forth in Section 5 of the Purchase Agreement and such other
similar matters as the Holders may reasonably request;
(B) an opinion, dated the date of effectiveness of the
Registration Statement, of counsel for the Company, which
shall address matters customarily addressed in opinions of
counsel for issuers of securities in public offerings
registered under the Act and shall be in form an substance
satisfactory to the Holders in their reasonable judgment),
and in any event include a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
that, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that
the Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date, contained an untrue
statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(C) a customary comfort letter, dated as of the date of
effectiveness of the Registration Statement from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with underwritten
offerings; and
(2) The Company shall deliver such other documents and
certificates as may be reasonably requested by the Holders and
underwriters, if any, to evidence compliance with the matters set
forth in clause (A) above and with any customary
8
<PAGE>
conditions contained in the any agreement entered into by the
Company pursuant to this clause (2).
(xiv) Prior to any public offering of Transfer Restricted
Securities, the Company shall cooperate with the Holders,
underwriters, if any, and their respective counsel in connection with
the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions
as such Persons may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not
be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject.
(xv) In connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Securities, the Company shall cooperate with the
Holders to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the
Holders may request at least two Business Days prior to such sale of
Transfer Restricted Securities.
(xvi) The Company shall (A) list all Shares of Common Stock
covered by such Registration Statement on any securities exchange on
which the Common Stock is then listed or (B) authorize for quotation
on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or the National Market System of NASDAQ all Shares
of Common Stock covered by such Registration Statement if the Common
Stock is then so authorized for quotation.
(xvii) The Company shall use its best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xiv) above.
(xviii) The Company shall provide a CUSIP number for all
Transfer Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted Securities
and provide the Trustee under the Indenture with printed certificates
for the Transfer Restricted Securities which are in a form eligible
for deposit with the Depository Trust Company.
(xix) The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders with regard to
any applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act).
(xx) If underwritten, the Company shall make appropriate
officers of the Company available to the underwriters for meetings
with prospective purchasers of the Transfer Restricted Securities and
prepare and present to potential investors customary
9
<PAGE>
"road show" material in a manner consistent with other new issuances
of other securities similar to the Transfer Restricted Securities.
(xxi) In the event the Company shall be required to register
the sale or disposition of any Debentures pursuant to a Registration
Statement required by this Agreement, the Company shall cause the
Indenture to be qualified under the TIA not later than the effective
date of such Registration Statement and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to
be so qualified in a timely manner.
(xxii) The Company shall provide promptly to each Holder upon
request each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act.
(b) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to
in Section 5(a)(v)(C) or any notice from the Company of the existence of
any fact of the kind described in Section 5(a)(v)(D) hereof (in each case,
a "Suspension Notice"), such Holder will forthwith discontinue disposition
-----------------
of Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder's has received copies of the supplemented
or amended Prospectus contemplated by Section 5(a)(vi) hereof, or (ii) such
Holder is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case,
the "Recommencement Date"). Each Holder receiving a Suspension Notice
-------------------
hereby agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Holder's possession which have been
replaced by the Company with more recently dated Prospectuses or (ii)
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time
of receipt of the Suspension Notice. The time period regarding the
effectiveness of the Shelf Registration Statement set forth in Section 2
hereof, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension
Notice to the date of delivery of the Recommencement Date.
Section 6. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement required by this Agreement becomes
effective, including without limitation:
(i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing
certificates for the Common Stock to be issued upon conversion of
the Debentures and printing of Prospectuses), messenger and delivery
services and telephone;
10
<PAGE>
(iv) all fees and disbursements of counsel for the Company
and the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with
listing the Common Stock on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified
public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit
and the fees and expenses of any Person, including special experts,
retained by the Company. All underwriting fees and commissions with
respect to an underwritten offering, and transfer taxes, if any, will be
borne by the Company and each Holder in proportion to the number of
Registrable Securities sold by the Company and such Holder.
(b) In connection with any Registration Statement required by
this Agreement, the Company will reimburse the Initial Purchasers and the
Holders selling Transfer Restricted Securities pursuant to the "Plan of
Distribution" contained in the Registration Statement, for the reasonable
fees and disbursements of not more than one counsel, who shall be Skadden,
Arps, Slate, Meagher & Flom LLP, unless another firm shall be chosen by the
Holders of a majority in principal amount (number of shares, if applicable)
of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
Section 7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Holder, its directors, its officers and each Person, if any, who controls
such Holder (within the meaning of Section 15 of the Act and Section 20 of
the Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary Prospectus or Prospectus (or any amendment or
supplement thereto) provided by the Company to any Holder or any
prospective purchaser of registered Debentures or registered shares of
Common Stock or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or
omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the
Company by any of the Holders.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company and its directors and officers, and each
person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company, to the same extent as the
foregoing indemnity from the Company set forth in Section 7(a) above, but
only with reference to information relating to such Holder furnished in
writing to the Company by such Holder expressly for use in any Registration
Statement. In no event shall any Holder, its directors, its officers or any
Person, if any, who controls such Holder be liable or responsible for any
amount in excess of the dollar amount of the proceeds (net of payment of
all expenses) received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
11
<PAGE>
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b)
(the "indemnified party"), the indemnified party shall promptly notify the
-----------------
person against whom such indemnity may be sought (the "indemnifying
------------
person") in writing and the indemnifying party shall assume the defense of
------
such action, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of
which indemnity may be sought pursuant to both Sections 7(a) and 7(b), a
Holder shall not be required to assume the defense of such action pursuant
to this Section 7(c), but may employ separate counsel and participate in
the defense thereof, but the fees and expenses of such counsel, except as
provided below, shall be at the expense of the Holder). Any indemnified
party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in
writing by the indemnifying party, (ii) the indemnifying party shall have
failed to assume the defense of such action or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any
such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the indemnifying party (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 7(a), and by the Company, in the case of parties indemnified
pursuant to Section 7(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty Business
Days after the indemnifying party shall have received a bona fide request
from the indemnified party for reimbursement for the fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement or compromise of, or consent
to the entry of judgment with respect to, any pending or threatened action
in respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of the indemnified
party.
(d) To the extent that the indemnification provided for in this
Section 7 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company, on the one hand, and the Holders, on the other hand, from
their sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause 7(d)(i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 7(d)(i) above but also the relative fault of the
Company on the one
<PAGE>
hand, and of the Holders, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of
the Holders, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company, on the one hand, or by the Holders,
on the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be
deemed to include, subject to the limitations set forth in the Section
7(b), any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
incurred by such indemnified party in connection with investigating or
defending any matter, including any action that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding
the provisions of this Section 7, no Holder or its related Indemnified
Holders shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the amount of any damages which such Holder
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Holders' obligations to
contribute pursuant to this Section 7(d) are several in proportion to the
respective principal amount of Transfer Restricted Securities held by each
of the Holders hereunder and not joint.
Section 8.
(a) Rule 144A and Rule 144. The Company agrees with each
----------------------
Holder, for so long as any Transfer Restricted Securities remain
outstanding and during any period in which the Company (i) is not subject
to Section 13 or 15(d) of the Exchange Act, to make available, upon request
of any Holder, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective
purchaser of Transfer Restricted Securities designated by such Holder or
beneficial owner, the information required by Rule 144(d)(4) under the Act
in order to permit resales of such Transfer Restricted Securities pursuant
to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange
Act, to make all filings required thereby in a timely manner in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144.
(b) Block Trades. The Company agrees with each Holder, for so
------------
long as any Transfer Restricted Securities remain outstanding, to cooperate
fully with all reasonable requests by such Holder relating to block trades
by such Holder of Transfer Restricted Securities.
Section 9. Underwritten Registrations.
--------------------------
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that
will administer the offering will be selected by the Holders of a
13
<PAGE>
majority in amount of such Transfer Restricted Securities included in such
offering, subject to the consent of the Company (which will not be
unreasonably withheld or delayed).
No Holder may participate in any underwritten registration hereunder
unless such Holder (i) agrees to sell its 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 required under the terms of
such underwriting arrangements.
(b) Each Holder agrees, if requested (pursuant to a timely
written notice) by the managing underwriters in an underwritten offering
made pursuant to a Registration Statement, not to effect any private sale
or distribution (including a sale pursuant to Rule 144(k) and Rule 144A,
but excluding non-public sales to any of its affiliates, officers,
directors, employees and controlling persons) of any of the Debentures, in
the case of an underwritten offering of the Debentures, or the Common
Stock, in the case of an underwritten offering of shares of Common Stock
constituting Transfer Restricted Securities, during the period beginning 10
days prior to, and ending 90 days after, the closing date of such
underwritten offering.
The foregoing provisions of Section 9(b) shall not apply to any
Holder if such Holder is prevented by applicable statute or regulation from
entering into any such agreement.
(c) If any of the Transfer Restricted Securities covered by any
Registration Statement are to be sold in an underwritten offering, the
underwriters, their controlling persons and their respective officers,
directors, employees, representatives and agents shall be entitled to
indemnity (substantially similar to the indemnity set forth in Section 7 of
the Agreement) from the Company and the Holders, which indemnity may be set
forth in an underwriting agreement.
Section 10. Miscellaneous.
-------------
(a) Remedies. The Company acknowledges and agrees that any
--------
failure by the Company to comply with its obligations hereunder may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any
such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations. The
Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or
--------------------------
after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders
in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement (which has not
expired or been terminated) granting any registration rights with respect
to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) No Piggybacks on Shelf Registration Statement. The
---------------------------------------------
Company shall not grant to any of its security holders (other than the
holders of Transfer Restricted Securities in such capacity) the right to
include any of its securities in any Shelf Registration Statement provided
for in this Agreement other than the Transfer Restricted Securities.
(d) Amendments and Waivers. The provisions of this Agreement
----------------------
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may
14
<PAGE>
not be given unless (i) in the case of Section 3 hereof and this Section
10(d)(i), the Company has obtained the written consent of Holders of all
outstanding Transfer Restricted Securities and (ii) in the case of all
other provisions hereof, the Company has obtained the written consent of
Holders of a majority of the outstanding principal amount (and shares, if
applicable) of Transfer Restricted Securities (excluding Transfer
Restricted Securities held by the Company or its Affiliates).
(e) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(f) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, first class
mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii if to the Company:
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21202
Telecopier No.:
Attention: General Counsel
Facsimile: ([___]) [___]-[____]
with a copy to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attention: Elizabeth R. Hughes
Facsimile: (410) 244-7742
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt acknowledged, if telecopied; and on the next Business
Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities. If any
transferee of any Holder shall acquire Transfer Restricted Securities in
any manner, whether by
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operation of law or otherwise, such Transfer Restricted Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Transfer Restricted Securities such Person shall be entitled
to receive the benefits hereof.
(h) Counterparts. This Agreement may be executed in any number of
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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.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the State of Maryland, without regard to the
conflict of law rules thereof. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of any Maryland state court sitting
in the City of Baltimore or any federal court sitting in the City of
Baltimore in respect of any suit, action or proceeding arising out of or
relating to this Agreement and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the
aforesaid courts. Each of the parties hereto irrevocably waives, to the
fullest extent it may effectively do so under applicable law, any objection
which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
(k) Severability. If any term, provision, covenant or restriction of
------------
this Agreement (including, without limitation, any provision regarding the
payment of liquidated damages) is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their best efforts to find
and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Company:
SYLVAN LEARNING SYSTEMS, INC.
By:__________________________
Name:________________________
Title:_______________________
Initial Purchasers:
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:__________________________________
Name:________________________________
Title:_______________________________
APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:__________________________________
Name:________________________________
Title:_______________________________
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INVESTOR (GUERNSEY) LTD.
By:__________________________
Name:________________________
Title:_______________________
and
By:__________________________
Name:________________________
Title:_______________________
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