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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___
____________________
Commission File Number 0-22935
PEGASUS SOLUTIONS, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 75-2605174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CAMPBELL CENTRE I, 8350 NORTH CENTRAL EXPRESSWAY, SUITE 1900, DALLAS, TEXAS
75206
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (214) 234-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
The number of shares of the registrant's common stock, par value $0.01 per
share, outstanding as of August 12, 2003 was 24,982,080.
1
PEGASUS SOLUTIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2003
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited) 3
a) Condensed Consolidated Balance Sheets as of June 30, 2003
and December 31, 2002 3
b) Condensed Consolidated Statements of Operations and Comprehensive Loss
for the Three and Six Months Ended June 30, 2003 and 2002 4
c) Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2003 and 2002 5
d) Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 4. Controls and Procedures 20
Part II. Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
2
Part I. Financial Information
Item 1. Financial Statements
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
ASSETS
JUNE 30, DECEMBER 31,
2003 2002
---------- --------------
Cash and cash equivalents $ 20,363 $ 19,893
Short-term investments 4,051 4,033
Accounts receivable, net 26,492 25,886
Other current assets 7,892 8,368
---------- --------------
Total current assets 58,798 58,180
Goodwill, net 139,533 139,533
Intangible assets, net 1,398 6,013
Property and equipment, net 68,738 71,442
Other noncurrent assets 15,278 12,927
---------- --------------
Total assets $ 283,745 $ 288,095
========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 22,959 $ 26,574
Unearned income 11,217 7,812
Other current liabilities 6,633 6,799
---------- --------------
Total current liabilities 40,809 41,185
Noncurrent uncleared commission checks 5,059 4,641
Other noncurrent liabilities 16,058 16,379
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized;
zero shares issued and outstanding - -
Common stock, $0.01 par value; 50,000,000 shares authorized;
24,942,507 and 24,747,165 shares issued, respectively 249 247
Additional paid-in capital 289,326 287,676
Unearned compensation - (571)
Accumulated other comprehensive loss (1,705) (1,705)
Accumulated deficit (66,051) (59,757)
---------- --------------
Total stockholders' equity 221,819 225,890
---------- --------------
Total liabilities and stockholders' equity $ 283,745 $ 288,095
========== ==============
See accompanying notes to condensed consolidated financial statements.
3
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
------ ------ ------ ------
Revenues:
Service revenues $ 40,104 $ 45,584 $ 78,494 $ 91,491
Customer reimbursements 2,827 3,042 5,350 5,845
------ -------- ------ -------
Total revenues 42,931 48,626 83,844 97,336
Costs of services:
Cost of services 21,652 23,918 43,142 46,966
Customer reimbursements 2,827 3,042 5,350 5,845
------------------ --------- --------
Total costs of services 24,479 26,960 48,492 52,811
Research and development 1,083 1,280 2,596 3,289
General and administrative expenses 6,247 6,772 12,382 12,606
Marketing and promotion expenses 4,177 4,845 8,415 9,062
Depreciation and amortization 5,156 12,254 17,274 24,394
Restructure costs 2,676 - 5,869 -
--------- --------- --------- --------
Operating loss (887) (3,485) (11,184) (4,826)
Other income (expense):
Interest income, net 220 295 600 557
Other 64 (13) 30 (266)
-------- --------- --------- --------
Loss before income taxes (603) (3,203) (10,554) (4,535)
Income tax benefit 586 1,285 4,260 1,818
Net loss $ (17) $ (1,918) $ (6,294) $ (2,717)
========== ========== ========= ========
Other comprehensive income (loss):
Change in unrealized gain (loss), net of tax (3) 7 - (20)
------------------ --------- --------
Comprehensive loss $ (20) $ (1,911) $ (6,294) $(2,737)
========== ========== ========= ========
Basic and diluted net loss per share $ (0.00) $ (0.08) $ (0.25) $ (0.11)
========== ========== ========= ========
Basic and diluted weighted average shares outstanding 24,768 24,837 24,710 24,785
========== ========= ========= ========
See accompanying notes to condensed consolidated financial statements.
4
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------
2003 2002
---------- ---------
Cash flows from operating activities:
Net loss $ (6,294) $ (2,717)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 17,274 24,394
Other 1,112 2,572
Changes in assets and liabilities:
Accounts receivable (606) (4,870)
Other assets (4,407) 30
Accounts payable and accrued liabilities (3,615) (3,252)
Unearned income 3,405 1,988
Other liabilities 30 3,639
---------- ---------
Net cash provided by operating activities 6,899 21,784
Cash flows from investing activities:
Purchase of marketable securities - (6,740)
Proceeds from maturity of marketable securities 2,000 8,900
Purchase of property and equipment (10,009) (15,991)
Proceeds from sale of property and equipment 103 -
Investment in Travelweb, LLC - (615)
Collections of note receivable 433 -
---------- ---------
Net cash used in investing activities (7,473) (14,446)
Cash flows from financing activities:
Proceeds from issuance of common stock 1,144 1,241
Purchase of treasury stock - (1,034)
Other (100) (39)
----------- ---------
Net cash provided by financing activities 1,044 168
Net increase in cash and cash equivalents 470 7,506
Cash and cash equivalents, beginning of period 19,893 13,438
----------- ---------
Cash and cash equivalents, end of period $ 20,363 $ 20,944
========== =========
See accompanying notes to condensed consolidated financial statements.
5
PEGASUS SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Pegasus Solutions, Inc. is a leading provider of hotel room reservation
services, reservation technology systems and hotel representation services for
the global hospitality industry. The unaudited condensed consolidated financial
statements include the accounts of Pegasus Solutions, Inc. and its wholly owned
subsidiaries ("Pegasus" or "the Company"). All significant intercompany
balances have been eliminated in consolidation. Pegasus' common stock is traded
on the Nasdaq National Market under the symbol PEGS.
On February 4, 2003, the Company announced a strategic reorganization to
integrate its technology and hospitality segments into one operating unit. As a
result, the Company's operations have integrated support functions including
consolidated sales and marketing, product development, service delivery,
reservation and data management, information technology, finance and human
resources. Because the Company has changed its management approach,
organizational structure, operating performance assessment and reporting, and
operational decision making from a segment perspective (technology and
hospitality) to a single company perspective, the Company will no longer report
separate segment information.
Certain prior year amounts have been reclassified to conform to current year
presentation. In the opinion of management, the unaudited condensed
consolidated financial statements presented herein reflect all adjustments
necessary to fairly state the financial position, operating results, and cash
flows for the periods presented. Such adjustments are of a normal recurring
nature. The results for interim periods are not necessarily indicative of
results expected for the entire fiscal year. The accompanying unaudited
condensed consolidated financial statements and the notes thereto should be read
in conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.
2. NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding for the
reporting period. The effect of stock options is not included in the
calculations of diluted net loss per share for the three and six months ended
June 30, 2003 and 2002, as their effect would be anti-dilutive. Shares issuable
upon the exercise of stock options that were excluded from the calculations were
4.7 million and 4.5 million for the three and six months ended June 30, 2003 and
2002, respectively.
3. STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation utilizing the intrinsic value
method in accordance with the provisions of Accounting Principles Board Opinion
No. 25 (APB 25), "Accounting for Stock Issued to Employees" and related
Interpretations. Accordingly, no compensation expense is recognized for fixed
option plans because the exercise prices of employee stock options equal or
exceed the market prices of the underlying stock on the dates of grant. The
Company maintains stock option, restricted stock and employee stock purchase
plans. Total compensation expense recorded for stock option and restricted
stock plans was $237,000 and $94,000 for the three months ended June 30, 2003
and 2002, respectively, and $571,000 and $107,000 for the six months ended June
30, 2003 and 2002, respectively.
6
The following table represents the effect on net loss and net loss per share if
the Company had applied the fair value based method and recognition provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," to stock-based employee compensation (In thousands,
except per share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
---- ---- ---- ----
Net loss, as reported $ (17) $ (1,918) $ (6,294) $ (2,717)
Add: Stock-based employee
compensation expense included
in reported loss, net of related
tax effects 144 61 347 70
Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all awards,
net of related tax effects (1,525) (1,272) (3,091) (2,405)
------- ------- ------- -------
Pro forma net loss $ (1,398) $ (3,129) $ (9,038) $ (5,052)
Net loss per share,
basic and diluted:
As reported $ (0.00) $ (0.08) $ (0.25) $ (0.11)
Pro forma $ (0.06) $ (0.13) $ (0.37) $ (0.20)
The pro forma disclosures provided may not be representative of the effects on
reported net income (loss) for future years due to future grants and the vesting
requirements of the Company's stock option plans. For purposes of pro forma
disclosures, the estimated fair value of stock-based compensation plans and
other options is amortized over the vesting period.
4. RESTRUCTURE COSTS
On February 4, 2003, the Company announced a strategic reorganization to
integrate its technology and hospitality divisions into one operating unit. The
integration plan, which includes the elimination of redundant positions and
consolidation of certain facilities, was substantially completed during the
first half of 2003. The elimination of redundant positions represented
approximately 10 percent of the Company's workforce, primarily due to the
integration of support functions.
For the three and six months ended June 30, 2003, the Company recorded
restructure charges of $2.7 million and $5.9 million, respectively. Restructure
costs are comprised of one-time termination benefits totaling $4.4 million and
facilities-related and other charges totaling $1.5 million. As of June 30,
2003, unpaid restructure costs of $1.9 million are included in other current and
noncurrent liabilities and are primarily facilities-related costs.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue
No. 00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company does not expect the adoption of EITF Issue No. 00-21 to have any impact
on the Company's results of operations or financial condition.
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), was issued in January 2003. FIN 46
requires that if an entity is the primary beneficiary of a variable interest
entity, the assets, liabilities and results of operations of the variable
interest entity should be included in the consolidated financial statements of
the entity. The provisions of FIN 46 were effective for all arrangements
entered into after January 31, 2003. The Company has not invested in any
variable interest entities after January 31, 2003. For arrangements entered
into prior to January 31, 2003, the provisions of FIN 46 are required to be
adopted at the beginning of the first interim or annual period beginning after
June 15, 2003.
As discussed in Note 4 to the Consolidated Financial Statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002, the
Company sold its Summit Hotels and Resorts and Sterling Hotels & Resorts brand
business to Indecorp Corporation ("Indecorp") on January 10, 2001. The sale
agreement, as amended, provided for a $1.0 million and a $6.0 million promissory
note from Indecorp. The $1.0 million promissory note bears interest at an
annual rate equal to prime plus 2 percent. The $6.0 million note requires
monthly payments for a period of eight years commencing July 1, 2002, and bears
interest at an annual rate of 7 percent. The Company also accepted a $2.8
million promissory note that replaced existing outstanding trade receivables.
The $2.8 million promissory note requires monthly payments for a period of eight
years commencing July 1, 2002 and bears interest at an annual rate of 7 percent.
During 2001, the Company recognized a $4.8 million pre-tax gain on the sale of
Summit and Sterling.
7
The Company has evaluated its relationship with Indecorp and has determined that
Indecorp is a variable interest entity under FIN 46. The Company has concluded
that it is the primary beneficiary of Indecorp as defined by FIN 46 and, as a
result, despite having no voting or operational control, the Company is required
to consolidate Indecorp effective July 1, 2003.
As a result of the foregoing, the Company will account for Indecorp in
accordance with FIN 46 as if it had been consolidated since the sale of Summit
and Sterling on January 10, 2001. Accordingly, the Company will record a
cumulative-effect adjustment related to the adoption of FIN 46 in the third
quarter of 2003, which is anticipated to include the effects of the reversal of
the pre-tax gain of $4.8 million recognized on the initial sale. Additionally,
the Company will begin consolidating Indecorp's assets, liabilities and results
of operations as of July 1, 2003. Based solely on unaudited financial
information provided to the Company's management by Indecorp on a voluntary
basis (which we have not, at this point, taken any independent steps to verify),
Indecorp's total assets, liabilities, revenues, operating expenses, and net loss
as of and for the unaudited nine months ended March 31, 2003 on a stand-alone
basis were $18.0 million, $18.1 million, $17.7 million, $17.4 million, and
$(1.2) million, respectively. Indecorp is actively pursuing options to obtain
additional third-party capital that may relieve our requirement to consolidate
its financial results. However, there can be no assurance that such a
transaction will occur. To the extent that Indecorp is unsuccessful in
obtaining a sufficient capital infusion, and its shareholders' equity balance is
less than zero, Indecorp's future losses will be recognized by the Company. Any
such losses recognized by the Company would be equally offset to the extent that
Indecorp has future income prior to any allocations to minority interest
holders.
In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," ("FAS 149"). FAS 149 amends
and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
This statement is effective for contracts entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not expect the adoption of FAS 149 to have a significant impact on
the Company's results of operations or financial condition.
6. CONTINGENCIES
The Company is subject to certain legal proceedings, claims and disputes that
arise in the ordinary course of our business. Although management cannot predict
the outcomes of these legal proceedings, we do not believe these actions will
have a material adverse effect on our financial position, results of operations
or liquidity.
7. SUBSEQUENT EVENTS
On July 21, 2003, the Company issued $75 million aggregate principal amount of
convertible senior notes through a private placement offering. As part of this
offering, the Company granted initial purchasers of the notes a 30 day option to
purchase up to an additional $15 million aggregate principal amount of
convertible senior notes. The Company expects to use the net proceeds from the
offering for working capital and other general corporate purposes.
These notes bear interest at an annual rate of 3.875 percent, payable
semi-annually, through the maturity date of July 15, 2023. Each note will be
convertible into Pegasus' common stock at a conversion price of approximately
$20.13 per share (equal to an initial conversion rate of approximately 49.6808
shares per $1,000 principal amount of notes), subject to adjustment in certain
circumstances. Holders of the notes may convert their notes only if (i) the
price of Pegasus' common stock reaches specified thresholds; (ii) the notes have
been called for redemption; or (iii) specified corporate transactions occur.
8
The Company may redeem all or some of the notes for cash at any time on or after
July 15, 2008, at a redemption price equal to the principal amount of the notes
plus any accrued and unpaid interest to the redemption date. As noted above,
holders may require the Company to purchase the notes on July 16 of 2008, 2013
and 2018, or in other specified circumstances, at a purchase price equal to the
principal amount due plus any accrued and unpaid interest to the purchase date
and additional amounts, if any.
Concurrent with the issuance of the notes, the Company terminated its $30
million revolving credit facility with Chase Bank of Texas, Compass Bank and
Wells Fargo Bank (Texas). Prior to termination, there were no amounts
outstanding under this credit facility.
The Company has two existing irrevocable standby letter of credit agreements
with JPMorgan Chase Bank totaling $2.1 million, collateralizing the leases for
the Dallas and Scottsdale offices. In July 2003, the Company amended its letter
of credit agreements and funded $2.1 million as collateral for these letters of
credit.
On July 22, 2003 the Company issued options to purchase 872,150 shares of the
Company's common stock to its employees. The options vest over 4 years.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto included
in our Annual Report on Form 10-K for the year ended December 31, 2002. This
discussion and analysis contains forward-looking statements including statements
using terminology such as "may," "will," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "potential," or "continue," or a similar
negative phrase or other comparable terminology regarding beliefs, hopes, plans,
expectations or intentions for the future. This discussion and analysis
contains forward-looking statements that involve various risks and
uncertainties. Our ability to predict results or the actual effect of future
plans or strategies is inherently uncertain and the actual results and timing of
certain events could differ materially from our current expectations. Factors
that could cause or contribute to such a difference include, but are not limited
to, changes in general economic conditions, variation in demand for our products
and services and in the timing of our sales, changes in product and price
competition for existing and new competitors, changes in our level or operating
expenditures, delays in developing, marketing and deploying new products and
services, terrorist activities, action by U.S. or other military forces, global
health epidemics, changes in hotel room rates, capacity adjustments by airlines,
negative trends in the overall demand for travel, other adverse changes in
general market conditions for business and leisure travel, as well as other
risks and uncertainties described in Pegasus' filings with the Securities and
Exchange Commission, specifically including those appearing under the caption
Risk Factors in our 2002 Annual Report on Form 10-K. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
DEPENDENCE ON THE HOTEL INDUSTRY AND IMPACT OF THE ECONOMIC CLIMATE AND OTHER
WORLD EVENTS
Our business is sensitive to changes in the demand for and average daily rates
associated with hotel rooms. The weak economic climate and other world events,
such as continuing terrorist threat alerts, the war in Iraq and continuing
geopolitical uncertainty, have adversely impacted the travel industry and our
business. These events were preceded by the terrorist attacks of September 11,
2001, which resulted in sharp declines in both the number of hotel room
reservations and the average daily rate charged for hotel rooms. The overall
long-term impact of these events on Pegasus and the travel industry is
uncertain.
Subsequent to September 11, 2001, transatlantic business travel and average
daily rates have lagged behind the recovery in transaction volumes. Since our
electronic distribution and central reservation system, or CRS, revenues are
primarily transaction-based, revenues for these services, which had sharp
decreases immediately following September 11, 2001, recovered relatively quickly
and were close to the levels seen prior to September 11, 2001. However, the
recovery in transaction volumes stalled due to the weak economic environment,
continuing terrorist alerts and the war in Iraq. Further, since our hotel
representation and commission processing services are based in large part on a
combination of reservation volume and average daily rates, their recovery has
been somewhat slower. In addition, we have experienced a lengthening in the
sales cycle for some of our services, as new customers are hesitant to sign new
contracts given the uncertain economic environment.
The weak economic climate in the United States, the war in Iraq and ongoing
terrorist alerts have resulted in a decrease in the demand for hotel rooms and,
therefore, have negatively impacted our revenues. In addition, financial crises
in the airline industry and Severe Acute Respiratory Syndrome, or SARS, have
negatively impacted the hospitality industry in recent months. We do not expect
hotel reservation volume and average daily room rates to increase measurably
until corporate earnings start to show improvement and accordingly the general
corporate confidence drives business travel back to normal levels. Additional
terrorist activities, escalation of hostilities in the Middle East or elsewhere,
global health epidemics, or further delays in the economic recovery could have a
material adverse effect on our business, operating results and financial
condition.
10
OVERVIEW
Pegasus is a leading provider of hotel room reservation services, reservation
technology systems and hotel representation services for the global hospitality
industry. Our customers and distribution channels include:
- - Tens of thousands of travel agency locations around the world, including
the 10 largest U.S.-based travel agencies based on revenues;
- - More than 48,000 hotel properties around the globe, including the 50
largest hotel brands in the world based on total number of guest rooms; and
- - Thousands of Web sites that have their hotel reservations "Powered by
Pegasus" TM.
Previously, our services were organized into two business segments - technology
and hospitality. On February 4, 2003, we announced a strategic reorganization
to integrate our technology and hospitality segments into one operating unit.
As a result, we have integrated support functions, including sales and
marketing, product development, service delivery, reservation/data management,
information technology, finance and human resources functions. The integration
plan continues our existing strategy of better aligning our businesses with our
customers' needs, thus allowing for future revenue growth and the realization of
further synergies as one fully integrated company. This plan, which is
substantially complete, includes the elimination of redundant positions and the
consolidation of some functions and facilities. Beginning in 2004, the
estimated annual cost savings from the integration are expected to range from $9
million to $11 million. We estimate restructure costs will total approximately
$6 million. During the six months ended June 30, 2003, we recorded $5.9 million
of restructure costs, including $4.0 million paid in cash, which were primarily
severance benefits for terminated employees.
SERVICES
Through our comprehensive and integrated product offering we can provide one or
more of the following systems and services to the global hospitality industry:
CRS, electronic distribution, hotel representation services, travel agent
commission processing, and property management systems, or PMS.
Reservation Services. We were formed in 1989 by 16 of the world's leading hotel
and travel-related companies to be the world's premier service provider of a
streamlined and automated hotel reservation process. Our UltraSwitch(R)
technology provides a seamless electronic connection between a hotel's CRS and
the global distribution systems, or GDSs, which travel agents use to book
airline reservations. This electronic distribution service supports a variety
of distribution channels including the following:
- - GDS connectivity - Our electronic distribution service is linked to the
four major GDSs and therefore connects our hotel customers to travel agents
around the world.
- - Third-party Internet sites - We provide travel-related Internet sites
access to our hotel information database containing more than 45,000 properties
and on-line hotel reservation capability. We provide this service to several of
the leading travel Internet sites such as Expedia.com, Orbitz.com, our affiliate
Travelweb.com and our own Utell.com.
- - Hotel Internet sites - Our NetBookerTM service provides hotel companies
with a hotel information database and Internet-based reservation capabilities.
Hotel Internet sites that are "Powered by Pegasus" offer brand-loyal Internet
shoppers real-time rates, availability and booking capabilities.
Our CRS is provided on an application service provider basis to approximately
8,000 hotel properties, representing approximately 1.4 million hotel rooms
worldwide. Pegasus also provides CRS software licenses to an additional 20
hotel brands, representing approximately 12,000 properties.
Our CRS service provides hotel customers with a license for our RezViewTM CRS
software as well as the hardware and facilities necessary to process
reservations. Our CRS service also includes the following support and
outsourcing services:
- - System administration
- - Database administration
- - Electronic distribution channel management
- - Telecommunications management
- - Private-label voice reservation services
11
Hotel Representation Services. Hotel Representation Services, offered under the
Utell brand, include marketing programs, sales representation, a voice
reservation network in 41 countries, and distribution through all GDSs and a
proprietary Internet booking site, www.Utell.com, with thousands of linked
third-party Internet sites. In order to sell their rooms in the marketplace,
many independent hotels and small hotel chains associate themselves with our
Utell brand, and use our systems and infrastructure to market and accept
reservations for their rooms. Hotels typically utilize our hotel representation
service for the following reasons:
- - To achieve a cost-effective presence in the primary electronic
distribution channels - GDSs and the Internet.
- - To obtain a global voice reservation capability through which travel
agents can book their rooms over the telephone via a local call with local
language capabilities.
- - To enhance the market image of the hotel by affiliation with a well-known
name in hotel distribution.
- - To benefit from worldwide sales and marketing support.
Utell is the oldest, largest and most diverse hotel representation service in
the world providing hotel sales, marketing, voice reservation and GDS and
Internet services for nearly 4,500 hotels in approximately 145 countries. Utell
uses Pegasus' CRS, which offers advanced electronic distribution capabilities
and provides both a GDS and Internet presence for member hotels.
In addition, Utell has two financial service offerings, Paytell and TravelCom.
In some international markets, it is customary for travelers to prepay for hotel
rooms and other travel arrangements. Paytell is a service that allows travelers
to prepay for reservations, with Pegasus remitting amounts to hotels when the
guest stay occurs. TravelCom is an Internet-based proprietary system that
allows member hotels to expedite commission payments to travel agents.
Financial Services. Financial Services provides comprehensive commission
processing and payment solutions to hotels, other travel suppliers and travel
agencies in more than 200 countries. Key services include commission
processing, commission reconciliation and tracking for member agencies, global
commission solutions for participating hotels and PegsPay, our payment service
targeted at travel distributors that operate under the merchant model.
Each month, Pegasus consolidates, distributes, reconciles, tracks and reports
millions of dollars in commission payments to travel agency locations worldwide
on behalf of more than 35,000 participating hotel properties. Traditionally,
the process of reconciling and paying hotel commissions to travel agencies was
based on transaction-specific hotel data and consisted of a number of relatively
small payments to travel agencies, often including payments in multiple
currencies. Our value-added commission consolidation and reporting service
facilitates more efficient and effective operation for both hotel and travel
agency participants by providing a single, monthly commission payment to member
travel agencies from participating hotels in their choice of currency. Our
commission processing service processed over $226 million of hotel commissions
in the six months ended June 30, 2003.
Property Systems and Services. PegasusCentralTM is our Internet-based PMS
service. Traditionally, hotel CRSs and PMSs had separate databases that
communicated only intermittently, often resulting in unbalanced inventories.
With PegasusCentral, when a hotel reservation is made from a central
reservations office, via the Internet, or at the property, only one database is
accessed. This centralized inventory stores all pertinent information for both
the central reservation and property management functions and provides
consistent, real-time access to rates, availability and other detailed property
information. PegasusCentral benefits both hotel chains and independent
properties by assisting in the management and operation of many hotel functions,
including:
12
- - Enhanced property management
- - Multi-property central reservation
- - Customer relationship management
- - Sales and catering
- - Point-of-sale
- - Back-office modules such as receivables, payables and purchasing
In 2002, Inter-Continental Hotel Group named PegasusCentral as one of two
preferred PMS standards for its 2,500-plus Holiday Inn and Holiday Inn Express
properties. Particularly in today's economic climate, these and other hotel
companies can realize the benefits of PegasusCentral through the following:
- - Reduced capital equipment expenditures - Other PMS services typically
require significant capital expenditures. Because PegasusCentral is
Internet-based, hotel properties will incur only the cost of a computer with
Internet access to operate this system. Centrally hosted hardware and data
services are located at Pegasus' data center, providing secure central storage
for applications and data.
- - Reduced employee training costs - PegasusCentral's Internet-based
technology is easy to use, offering convenient pull-down menus, substantially
reducing the customer's learning curve. In addition, users can take advantage
of interactive online training modules.
- - Reduced IT staffing costs - PegasusCentral performs system upgrades from a
centralized facility resulting in instant product rollouts to all locations.
This reduces the need for on-site technical experts and eliminates long rollout
schedules and complex system upgrades.
- - Available per-transaction pricing - With available per-transaction
pricing, hotels pay transaction fees only as their rooms are occupied, better
aligning technology costs with room revenues.
In addition to PegasusCentral, we obtained two proprietary software solutions as
part of the acquisitions of REZ, Inc., or REZ, and Global Enterprise Technology
Solutions, LLC, or GETS. Revenues for the first six months of 2003 consisted of
maintenance and support fees related to these PMS software solutions, as well as
revenues from our PegasusCentral service.
REVENUES
The classification of service revenues and customer reimbursements has been
reflected in the financial statements to conform with current-year presentation
and to give effect to the 2002 adoption of the Emerging Issues Task Force, or
EITF, Issue 01-14. Under EITF 01-14, Pegasus' billings for out-of-pocket
expenses, such as third-party vendor GDS and telecommunication charges, are
classified as customer reimbursements, which is a component of total revenues,
and the related costs are classified as customer reimbursements, which is a
component of total costs of services. The adoption of EITF 01-14 had no effect
on our financial position, operating loss, cash flows or per-share results.
Revenues applicable to customer reimbursements are primarily related to GDS fees
that we pay on behalf of and subsequently bill our customers. In the future, if
our customers decide to pay their bills directly, our customer reimbursements
revenue and customer reimbursements cost of services will decrease accordingly.
Reservation Services. Reservation Services revenues consist of CRS and
electronic distribution revenues. CRS revenues consist of transaction fees as
well as license, maintenance and support fees related to our RezView software.
Electronic distribution revenues primarily consist of transaction fees,
commissions and monthly subscription or maintenance fees. In addition, new
hotel customers typically pay a one-time fee for establishing the connection
between the hotel's central reservation system and the electronic distribution
technology. New third-party Internet site customers typically pay a one-time
fee for establishing the connection between the third-party Internet site and
our electronic distribution technology, which is amortized over the related
contract period. Reservation Services revenues represented approximately 42
percent of service revenues for the six months ending June 30, 2003.
13
Hotel Representation Services. Hotel Representation Services revenues consist
of reservation processing fees, membership fees and fees for various marketing
services. In addition, the Paytell service allows international travelers, who
book rooms at hotels for which we provide representation services, to prepay for
their hotel rooms in the hotel's local currency. When a traveler arrives at the
hotel, Pegasus remits the amount to the hotel in the hotel's local currency.
Revenues for this service are derived from transaction fees and the difference
in the exchange rate between the date the traveler pays and the date the guest
stay occurs. Hotel Representation Services revenues represented approximately
35 percent of service revenues for the six months ending June 30, 2003.
Financial Services. Financial Services revenues consist of both travel agency
and hotel fees. Travel agency fees are based on a percentage of the value of
hotel commissions processed by Pegasus on behalf of participating travel
agencies. Revenues from travel agency fees can vary substantially from period
to period based on the demand for hotel rooms, the types of hotels (such as
upscale or economy) at which reservations are made and fluctuations in overall
room rates. In addition, participating hotels generally pay fees based on the
number of commissionable transactions that Pegasus processes for the hotel.
Financial Services revenues represented approximately 19 percent of service
revenues for the six months ending June 30, 2003.
Property Systems and Services. Property Systems and Services revenues primarily
consist of maintenance and support fees related to the REZ and GETS
acquisitions. In addition, Property Systems and Services revenues include fees
from our PegasusCentral product, which are recognized monthly. Property Systems
and Services represented approximately 4 percent of service revenues for the six
months ending June 30, 2003.
Other Services. Pegasus regularly seeks to develop new services to capitalize
on its existing technology and customer base and to provide additional
electronic hotel reservation capabilities and information services to its
existing customers and to other participants in the travel distribution process.
Pegasus has not received a material amount of revenue from these services, and
there can be no assurance that any of these services will produce a material
amount of revenue in the future.
COSTS
Pegasus' costs of services consists principally of personnel costs relating to
information technology, customer service and telemarketing, facilities and
equipment maintenance costs. Costs of services also includes the cost of
customer reimbursements. Research and development costs consist principally of
personnel costs, related overhead costs and fees paid to outside consultants.
General and administrative expenses are primarily personnel, legal and
accounting-related, and certain facilities costs. Marketing and promotion
expenses consist primarily of personnel costs, advertising, public relations and
participation in trade shows and other industry events. Depreciation and
amortization expense includes depreciation of computer equipment, office
furniture, office equipment and leasehold improvements as well as amortization
of software and intangible assets.
FLUCTUATION OF FOREIGN CURRENCIES
Pegasus derives a significant portion of its revenue from customers located
outside the United States. Particularly in Europe, fluctuations of foreign
currencies such as the Euro and the British Pound relative to the U.S. Dollar
result in Pegasus earning more or less revenue and expending more or less in
expenses than it otherwise might have earned if currency rates had remained
stable.
RESULTS OF OPERATIONS
Pegasus' service revenues are predominantly transaction-based. In addition to
these service revenues, Pegasus bills some customers for certain reimbursable
expenses, primarily GDS fees for those customers who do not pay these fees
directly. The classification of service revenues and customer reimbursements
has been adjusted to conform with the current-year presentation and to give
effect to the 2002 adoption of EITF 01-14.
14
THREE MONTHS ENDED JUNE 30, 2003 AND 2002
Revenues. As reflected in the table below, total revenues for the three months
ended June 30, 2003 and 2002 were $42.9 million and $48.6 million, respectively.
Total service revenues decreased $5.5 million, or 12 percent to $40.1 million
for the three months ended June 30, 2003, compared to $45.6 million for the same
period in 2002. Overall, year-over-year revenue comparisons are impacted by the
economic climate in the United States and internationally, the war in Iraq,
financial crises in the airline industry and the emergence of SARS, as well as
the effect the September 11, 2001 events had on the three months ended June 30,
2002. These factors were partially offset by the positive impact of foreign
currency fluctuations.
Other changes in the business are described in the paragraphs that follow the
presentation of revenues below (In thousands):
Three months ended
June 30,
2003 2002
----- -----
Reservation Services $16,719 $18,917
Hotel Representation Services 14,318 17,691
Financial Services 7,364 7,448
Property Systems & Services 1,703 1,528
------ ------
Total service revenues 40,104 45,584
Customer reimbursements 2,827 3,042
------- -------
Total revenues $42,931 $48,626
Reservation Services revenues decreased $2.2 million, or 12 percent, to $16.7
million for the three months ended June 30, 2003, compared to $18.9 million for
the same period in 2002. The decrease was primarily due to the termination of a
customer contract that provided $2.3 million of revenue for the three months
ended June 30, 2002 as well as a decrease in ongoing customer service revenue of
$745,000, caused by a 7 percent decrease in CRS transactions. These decreases
were offset by an $825,000 increase in electronic distribution revenues,
primarily due to a 30 percent increase in Internet transactions.
Hotel Representation Services revenues decreased by $3.4 million, or 19 percent,
to $14.3 million for the three months ended June 30, 2003, compared to $17.7
million for the same period in 2002. The reduction in revenues was due to a
decrease in reservation fees, caused primarily by the global economic climate
and other world events, which led to a sharp decline in domestic and
transatlantic bookings for Utell hotels, as well as a 15 percent decrease in the
number of hotels Utell represents, as a result of a strategic initiative in 2002
to upgrade Utell's hotel portfolio. These items were partially offset by the
favorable impact of foreign currency fluctuations.
Financial Services revenues for the three months ended June 30, 2003 and 2002
were $7.4 million. Current-year revenues reflect an increase in electronic
reconciliation and tracking services of $540,000 and fees for our new PegsPay
service of $130,000. These increases were offset by decreased fees resulting
from a 6 percent decrease in transaction volume and a 4 percent decrease in the
average daily rate charged by hotels.
Property Systems and Services revenues increased $175,000, or 11 percent, to
$1.7 million for the three months ended June 30, 2003 compared to $1.5 million
for the same period in 2002. The increased revenue was primarily due to
incremental properties and transaction volumes associated with PegasusCentral.
Customer reimbursements decreased approximately $200,000 to $2.8 million for the
three months ended June 30, 2003, compared to $3.0 million in the same period in
2002 due to a decrease in our customers' GDS transaction volume.
15
Cost of services. Cost of services, excluding customer reimbursements, was $21.7
million for the three months ended June 30, 2003, compared to $23.9 million for
the same period in 2002. The decrease was primarily due to lower payroll
expenses due to the Company's 2003 restructuring, a $450,000 reduction in bad
debt expense due to an overall improvement in the collectibility of the
Company's accounts receivable as compared to the prior year, and consulting
services and employee-related costs of $470,000 and $370,000, respectively, that
were incurred in 2002 but not in 2003. These decreases were offset by
non-recurring costs of approximately $400,000 incurred in 2003 for transition
activities resulting from the Company's strategic integration and by the impact
of foreign currency fluctuations. Cost of services as a percentage of service
revenues was 54 percent and 52 percent for the three months ended June 30, 2003
and 2002, respectively.
Research and development. Research and development expenses were $1.1 million
for the three months ended June 30, 2003, compared to $1.3 million in the same
period in 2002. The decrease was primarily due to an increase in the
capitalization of payroll costs associated with an increase in the number of
projects that are eligible for capitalization. Research and development
expenses as a percentage of service revenues were 3 percent for the three months
ended June 30, 2003 and 2002.
General and administrative expenses. General and administrative expenses were
$6.2 million for the three months ended June 30, 2003, compared to $6.8 million
for the same period in 2002. The decrease was primarily due to consulting costs
of $400,000 incurred in 2002 but not in 2003 and cost-saving measures initiated
in 2003. General and administrative expenses as a percentage of service
revenues were 16 percent and 15 percent for the three months ended June 30, 2003
and 2002, respectively.
Marketing and promotion expenses. Marketing and promotion expenses were $4.2
million for the three months ended June 30, 2003, compared to $4.8 million for
the same period in 2002. The decrease was primarily due to lower payroll
expenses, due to the Company's 2003 restructuring, as well as an increased focus
on reducing overall marketing expenditures. Marketing and promotion expenses as
a percentage of service revenues were 10 percent and 11 percent for the three
months ended June 30, 2003 and 2002, respectively.
Depreciation and amortization. Depreciation and amortization expenses were $5.2
million for the three months ended June 30, 2003, compared to $12.3 million for
the same period in 2002. The decrease is primarily due to a $7.1 million impact
as a result of the completion of amortization of certain intangible assets in
March 2003.
Restructure costs. During the three months ended June 30, 2003, Pegasus
incurred $2.7 million of restructuring charges, consisting of termination
benefits and facilities-related costs related to reorganizing its operations
from a business unit structure into distinct functional areas.
Income tax benefit. Pegasus recorded income tax benefit of $586,000 for the
three months ended June 30, 2003, compared to an income tax benefit of $1.3
million for the three months ended June 30, 2002. The benefit for June 30, 2003
and 2002 reflects an estimated full year effective rate of 40 percent and
differed from the statutory rate of 35 percent, primarily due to the benefit of
lower foreign tax rates, offset by nondeductible expenses.
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
Revenues. As reflected in the table below, total revenues for the six months
ended June 30, 2003 and 2002 were $83.8 million and $97.3 million, respectively.
Total service revenues decreased $13 million, or 14 percent to $78.5 million for
the six months ended June 30, 2003, compared to $91.5 million for the same
period in 2002. Excluding a $3.5 million termination fee received from a
customer following the termination of its contract in March 2002, service
revenues decreased $9.5 million. Overall, year-over-year revenue comparisons
are impacted by the economic climate in the United States and internationally,
the war in Iraq, foreign currency fluctuations, financial crises in the airline
industry and the emergence of SARS, as well as the effect the September 11, 2001
events had on the six months ended June 30, 2002.
16
Other changes in the business are described in the paragraphs that follow the
presentation of revenues below (In thousands):
Six months ended
June 30,
2003 2002
---- ----
Reservation Services $33,364 $41,602
Hotel Representation Services 27,351 32,283
Financial Services 14,598 14,396
Property Systems & Services 3,181 3,210
------ ------
Total service revenues 78,494 91,491
Customer reimbursements 5,350 5,845
------- -------
Total revenues $83,844 $97,336
Total service revenues from
continuing operations,
excluding revenues for
customer reimbursements (1) $78,494 $87,957
(1) Excludes a $3.5 million termination fee included in Reservation Services in
March 2002.
Reservation Services revenues decreased $8.2 million, or 20 percent, to $33.4
million for the six months ended June 30, 2003, compared to $41.6 million for
the same period in 2002. Excluding the impact of the $3.5 million termination
fee noted above, reservation services revenues decreased $4.7 million, or 12
percent. The decrease was primarily due to the termination of two customer
contracts that provided $6.1 million of revenue in the six months ended June 30,
2002, as well as a decrease in ongoing customer service revenue of $1.1 million,
caused by a 16 percent decrease in CRS transactions. These decreases were
partially offset by a $2.5 million increase in electronic distribution revenues,
primarily due to a 32 percent increase in Internet transactions.
Hotel Representation Services revenues decreased by $4.9 million, or 15 percent,
to $27.4 million for the six months ended June 30, 2003, compared to $32.3
million for the same period in 2002. The reduction in revenues was due to a
decrease in reservation fees, caused primarily by the global economic climate
and other world events, which led to a sharp decline in domestic and
transatlantic bookings for Utell hotels, as well as a 15 percent decrease in the
number of hotels Utell represents as a result of a strategic initiative in 2002
to upgrade Utell's hotel portfolio. These items were partially offset by the
favorable impact of foreign currency fluctuations.
Financial Services revenues increased approximately $200,000 to $14.6 million
for the six months ended June 30, 2003, compared to $14.4 million for the same
period in 2002. The increased revenue was primarily attributable to an increase
in electronic reconciliation and tracking services of approximately $1.0 million
and fees for our new PegsPay service of $200,000. These increases were offset
by a 6 percent decrease in transaction volume and the impact of a 4 percent
reduction in average daily rates charged by hotels.
Property Systems and Services revenues for the six months ended June 30, 2003
and 2002 were essentially flat.
Customer reimbursements decreased to $5.4 million in the six months ended June
30, 2003, compared to $5.8 million in the same period in 2002 due to a decrease
in our customers' GDS transaction volume.
Cost of services. Cost of services, excluding customer reimbursements, was $43.1
million for the six months ended June 30, 2003, compared to $47.0 million for
the same period in 2002. The decrease was primarily due to lower payroll
expenses due to the Company's 2003 restructuring, a $1.4 million reduction in
bad debt expense due to an overall improvement in the collectibility of the
Company's accounts receivable as compared to the prior year, and consulting
services of $800,000 that were incurred in 2002 but not in 2003. These
decreases were offset by non-recurring costs of $1.2 million incurred in 2003
for the Company's move of the Arizona office and data center and transition
activities resulting from the Company's strategic integration and also by the
impact of foreign currency fluctuations. Cost of services as a percentage of
service revenues was 55 percent and 51 percent for the six months ended June 30,
2003 and 2002, respectively.
17
Research and development. Research and development expenses were $2.6 million
for the six months ended June 30, 2003, compared to $3.3 million in the same
period in 2002. The decrease was primarily due to an increase in the
capitalization of payroll costs associated with an increase in the number of
projects that are eligible for capitalization. Research and development
expenses as a percentage of service revenues were 3 percent and 4 percent for
the six months ended June 30, 2003 and 2002, respectively.
General and administrative expenses. General and administrative expenses were
$12.4 million for the six months ended June 30, 2003, compared to $12.6 million
for the same period in 2002. The decrease was primarily due to consulting costs
of $400,000 incurred in 2002 but not in 2003 and cost-saving measures initiated
in 2003. These decreases were offset by higher employee-related and insurance
costs in 2003. General and administrative expenses as a percentage of service
revenues were 16 percent and 14 percent for the six months ended June 30, 2003
and 2002, respectively.
Marketing and promotion expenses. Marketing and promotion expenses were $8.4
million for the six months ended June 30, 2003, compared to $9.1 million for the
same period in 2002. The decrease was primarily due to lower payroll expenses,
due to the Company's 2003 restructuring. Marketing and promotion expenses as a
percentage of service revenues were 11 percent and 10 percent for the six months
ended June 30, 2003 and 2002, respectively.
Depreciation and amortization. Depreciation and amortization expenses were
$17.3 million for the six months ended June 30, 2003, compared to $24.4 million
for the same period in 2002. The decrease is primarily due to a $7.3 million
impact as a result of the completion of amortization for certain purchased
intangible assets in March 2003.
Restructure costs. During the six months ended June 30, 2003, Pegasus incurred
$5.9 million of restructuring charges, consisting of termination benefits and
facilities-related costs related to reorganizing its operations from a business
unit structure into distinct functional areas.
Income tax benefit. Pegasus recorded income tax benefit of $4.3 million and
$1.8 million for the six months ended June 30, 2003 and 2002 respectively,
representing an effective tax rate of 40 percent. The effective tax rate for
the six months ended June 30, 2003 differed from the statutory rate of 35
percent, primarily due to the benefit of lower foreign tax rates, offset by
nondeductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
Pegasus' principal sources of liquidity at June 30, 2003 included cash and cash
equivalents of $20.4 million, short-term investments of $4.1 million and an
unused revolving credit facility of $30.0 million with Chase Bank of Texas,
Compass Bank and Wells Fargo Bank (Texas).
Concurrent with the issuance of the convertible senior notes discussed below,
Pegasus terminated its $30.0 million revolving credit facility. Prior to
termination, there were no amounts outstanding under this credit facility.
Pegasus has two existing irrevocable standby letter of credit agreements with
JPMorgan Chase Bank totaling $2.1 million collateralizing the leases for the
Dallas and Scottsdale offices. In July 2003, the Company amended its letter of
credit agreements and funded $2.1 million as collateral for these letters of
credit.
On July 21, 2003, Pegasus issued $75 million aggregate principal amount of
convertible senior notes through a private placement offering. As part of this
offering, Pegasus granted initial purchasers of the notes a 30 day option to
purchase up to an additional $15 million aggregate principal amount of
convertible senior notes. Pegasus expects to use the net proceeds from the
offering for working capital and other general corporate purposes.
These notes bear interest at an annual rate of 3.875 percent, payable
semi-annually through the maturity date of July 15, 2023. Each note will be
convertible into Pegasus' common stock at a conversion price of approximately
$20.13 per share (equal to an initial conversion rate of approximately 49.6808
shares per $1,000 principal amount of notes), subject to adjustment in certain
circumstances. Holders of the notes may convert their notes only if (i) the
price of Pegasus' common stock reaches specified thresholds; (ii) the notes have
been called for redemption; or (iii) specified corporate transactions occur.
18
Pegasus may redeem all or some of the notes for cash at any time on or after
July 15, 2008, at a redemption price equal to the principal amount of the notes
plus any accrued and unpaid interest to the redemption date. As noted above,
holders may require Pegasus to purchase the notes on July 16 of 2008, 2013 and
2018, or in other specified circumstances, at a purchase price equal to the
principal amount due plus any accrued and unpaid interest to the purchase date
and additional amounts, if any.
Pegasus had working capital of $18.0 million at June 30, 2003, compared to a
working capital of $17.0 million at December 31, 2002. Net cash provided by
operating activities decreased to $6.9 million for the six months ending June
30, 2003, from $21.8 million for the same period in 2002, primarily due to a
reduction in service revenues and the impact of restructure costs incurred in
2003.
Net cash used in investing activities decreased to $7.5 million for the six
months ended June 30, 2003, compared to $14.4 million for the same period in
2002. This decrease was primarily the result of a decrease in purchases of
property and equipment associated with the finalization of our Dallas office
relocation in 2002.
Pegasus expects to continue to incur capital expenditures related to adding
capacity to existing systems and software development, which we estimate will
total from $20 million to $23 million for 2003. Operating leases continue to be
the only off-balance sheet financing arrangements in which Pegasus engages.
On June 5, 2002, the Board of Directors authorized the repurchase of up to 2.5
million shares of Pegasus' common stock. No shares were repurchased during the
six months ended June 30, 2003. Any future repurchases are at the discretion of
the Board of Directors' Stock Repurchase Committee and may be made on the open
market, in privately negotiated transactions or otherwise, depending on market
conditions, price, share availability and other factors.
We estimate total restructure costs to implement our strategic reorganization
will total approximately $6 million, of which $5.9 million has been expensed
through June 30, 2003. Beginning in 2004, the estimated annual cost savings
expected to result from the reorganization range from $9 million to $11 million.
Our future liquidity and capital requirements will depend on numerous factors,
including:
- - Our profitability
- - Operational cash requirements, including payments for severance and
redundant facilities related to our restructuring
- - Competitive pressures
- - Development of new services and applications
- - Acquisition of and investment in complementary businesses or technologies
- - Common stock repurchases
- - Response to unanticipated cash requirements
We believe that the Company's financial condition is strong and that its cash
and cash flows from operations will be sufficient to meet its foreseeable
operating and capital requirements through at least the next twelve months.
Pegasus may consider other financing alternatives to fund its requirements,
including possible public or private debt or equity offerings. However, there
can be no assurance that any financing alternatives sought by Pegasus will be
available or will be on terms that are attractive to Pegasus. Further, any debt
financing may involve restrictive covenants, and any equity financing may be
dilutive to stockholders.
19
OTHER MATTERS
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), was issued in January 2003. FIN 46
requires that if an entity is the primary beneficiary of a variable interest
entity, the assets, liabilities and results of operations of the variable
interest entity should be included in the consolidated financial statements of
the entity. The provisions of FIN 46 were effective for all arrangements
entered into after January 31, 2003. The Company has not invested in any
variable interest entities after January 31, 2003. For arrangements entered
into prior to January 31, 2003, the provisions of FIN 46 are required to be
adopted at the beginning of the first interim or annual period beginning after
June 15, 2003.
As discussed in Note 4 to the Consolidated Financial Statements contained in the
Pegasus' Annual Report on Form 10-K for the year ended December 31, 2002,
Pegasus sold its Summit Hotels and Resorts and Sterling Hotels & Resorts brand
business to Indecorp Corporation on January 10, 2001. The sale agreement, as
amended, provided for a $1.0 million and a $6.0 million promissory note from
Indecorp. The $1.0 million promissory note bears interest at an annual rate
equal to prime plus 2 percent. The $6.0 million note requires monthly payments
for a period of eight years commencing July 1, 2002, and bears interest at an
annual rate of 7 percent. Pegasus also accepted a $2.8 million promissory note
that replaced existing outstanding trade receivables. The $2.8 million
promissory note requires monthly payments for a period of eight years commencing
July 1, 2002 and bears interest at an annual rate of 7 percent. During 2001,
Pegasus recognized a $4.8 million pre-tax gain on the sale of Summit and
Sterling.
The Company has evaluated its relationship with Indecorp and has determined that
Indecorp is a variable interest entity under FIN 46. The Company has concluded
that it is the primary beneficiary of Indecorp as defined by FIN 46 and, as a
result, despite having no voting or operational control, we are required to
consolidate Indecorp effective July 1, 2003.
As a result of the foregoing, Pegasus will account for Indecorp in accordance
with FIN 46 as if it had been consolidated since the sale of Summit and Sterling
on January 10, 2001. Accordingly, Pegasus will record a cumulative-effect
adjustment related to the adoption of FIN 46 in the third quarter of 2003, which
is anticipated to include the effects of the reversal of the pre-tax gain of
$4.8 million recognized on the initial sale. Additionally, Pegasus will begin
consolidating Indecorp's assets, liabilities and results of operations as of
July 1, 2003. Based solely on unaudited financial information provided to
Pegasus' management by Indecorp on a voluntary basis (which we have not taken
any independent steps to verify), Indecorp's total assets, liabilities,
revenues, operating expenses, and net loss as of and for the unaudited nine
months ended March 31, 2003 on a stand-alone basis were $18.0 million, $18.1
million, $17.7 million, $17.4 million, and $(1.2) million, respectively.
Indecorp is actively pursuing options to obtain additional third-party capital
that may negate our requirement to consolidate its financial results. However,
there can be no assurance that such a transaction will occur. To the extent
that Indecorp is unsuccessful in obtaining a sufficient capital infusion, and
its shareholders' equity balance is less than zero, Indecorp's future losses
will be recognized by Pegasus. Any such losses recognized by Pegasus would be
equally offset to the extent that Indecorp has future income prior to any
allocations to minority interest holders.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
it is able to collect the information it is required to disclose in the reports
it files with the Securities and Exchange Commission, or SEC, and to process,
summarize and disclose this information within the time periods specified in the
rules of the SEC. As of the end of the period covered by this report, Pegasus
carried out an evaluation, under the supervision and with the participation of
Pegasus' management, including its Chief Executive Officer and Chief Financial
Officer, of the effectiveness of Pegasus' disclosure controls and procedures.
Based upon that evaluation, Pegasus' Chief Executive Officer and Chief Financial
Officer concluded that Pegasus' disclosure controls and procedures, as defined
in Rules 13(a) -15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934,
are effective in timely alerting them to material information required to be
included in Pegasus' periodic SEC reports.
20
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company maintains a system of internal controls designed to provide
reasonable assurance that transactions are executed in accordance with
management's general or specific authorization and that transactions are
recorded as necessary:
to permit preparation of financial statements in conformity with generally
accepted accounting principles, and
to maintain accountability for assets.
Since the date of the most recent evaluation of the Company's internal controls
by the Chief Executive Officer and Chief Financial Officer, there have been no
significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pegasus is subject to certain legal proceedings, claims and disputes that arise
in the ordinary course of our business. Although management cannot predict the
outcomes of these legal proceedings, we do not believe these actions will have a
material adverse effect on our financial position, results of operations or
liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 21, 2003, the Company completed a private placement of $75 million
aggregate principal amount of 3.875% Convertible Senior Notes due 2023 (the
"Notes") to qualified institutional buyers as defined in Rule 144A pursuant to
the Securities Act of 1933, as amended. Bear, Stearns & Co. Inc., J.P. Morgan
Securities Inc., and Thomas Weisel Partners LLC were the initial purchasers of
the notes. Pegasus has granted the initial purchasers of the notes a 30 day
option to purchase up to an additional $15 million principal amount of the
Notes. Pegasus received net proceeds of approximately $72.7 million, after
deducting the initial purchasers' discount payable by the Company.
Interest on the notes will be 3.875% per annum and will be payable in cash in
arrears semi-annually through July 15, 2023. Each note will be convertible into
Pegasus' common stock at a conversion price of approximately $20.13 per share
(equal to an initial conversion rate of 49.6808 shares per $1,000 principal
amount of notes), subject to adjustment in certain circumstances. Holders of the
notes may convert their notes only if (i) the price of Pegasus's common stock
reaches specified thresholds; (ii) the notes have been called for redemption; or
(iii) specified corporate transactions occur.
Pegasus may redeem all or some of the notes for cash at any time on or after
July 15, 2008, at a redemption price equal to the principal amount of the notes
plus any accrued and unpaid interest to the redemption date. As noted above,
holders may require Pegasus to purchase the notes on July 16 of 2008, 2013 and
2018, or in other specified circumstances, at a purchase price equal to the
principal amount due plus any accrued and unpaid interest to the purchase date
and additional amounts, if any.
The Notes were issued pursuant to an Indenture, dated as of July 21, 2003,
between the Company and JPMorgan Chase Bank, as trustee. Under the terms of the
Registration Rights Agreement, dated July 15, 2003, between the Company and the
initial purchasers, entered into in connection with the private placement, the
Company is obligated to register for resale the Notes and the shares of common
stock issuable upon conversion of the Notes.
The offer and sale of the Notes was made under an exemption from registration
pursuant to the Securities Act of 1933, as amended, in reliance upon Section
4(2) thereof and Rule 506 of Regulation D promulgated thereunder, relative to
sales by an issuer not involving a public offering.
21
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Pegasus held its annual meeting of stockholders on Tuesday, May 6, 2003. At the
annual meeting, Pegasus stockholders took the following actions:
1) By a vote of 21,402,537 for, 156,237 against and 3,191,977 withheld, the
stockholders elected Michael A. Barnett as Class III Director for a term
expiring at the annual meeting to be held in 2006 and until his successor is
elected and qualified.
2) By a vote of 21,347,213 for, 211,561 against and 3,191,977 withheld, the
stockholders elected John F. Davis, III as Class III Director for a term
expiring at the annual meeting to be held in 2006 and until his successor is
elected and qualified.
3) By a vote of 21,347,425 for, 211,349 against and 3,191,977 withheld, the
stockholders elected Jeffrey A. Rich as Class III Director for a term expiring
at the annual meeting to be held in 2006 and until his successor is elected and
qualified.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 4.6 - Indenture, dated July 21, 2003, by and between the Company and
JPMorgan Chase Bank, as trustee.
Exhibit 4.7 - Registration Rights Agreement, dated July 21, 2003, by and between
the Company and Bear, Stearns & Co, Inc., J.P. Morgan Securities Inc. and Thomas
Weisel Partners, LLC.
Exhibit 4.8 - Form of Note (included in Exhibit 4.6)
Exhibit 10.27 - Employment agreement dated May 19, 2003 between the Company and
Robert J. Boles, Jr.
Exhibit 31.1 - Certification of Chief Executive Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 - Certification of Chief Financial Officer, Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 - Certification of Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 32.2 - Certification of Chief Financial Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
b) Reports on Form 8-K filed
On April 30, 2003 Pegasus Solutions, Inc. filed a report on Form 8-K which
furnished information under Item 9 - Regulation FD Disclosure for its press
release announcing its financial results for the first quarter ended March 31,
2003.
On July 11, 2003 Pegasus Solutions, Inc. filed a report on Form 8-K under Item 5
- - Other Events, disclosing the impact of the adoption of Financial Accounting
Standards Board Interpretation No. 46, "Consolidation of Variable Interest
Entities," and under Item 9 - Regulation FD Disclosure, furnishing its press
release providing information on its financial results for the second quarter
ended June 30, 2003 and guidance for future reporting periods.
22
On July 14, 2003 Pegasus Solutions, Inc. filed a report on Form 8-K under Item 5
- - Other Events and Regulation FD Disclosure, and Item 7 Financial Statements and
Exhibits, for its press release announcing its intention to offer $75 million in
convertible senior notes.
On July 16, 2003 Pegasus Solutions, Inc. filed a report on Form 8-K under Item 5
- - Other Events and Regulation FD Disclosure, and Item 7 - Financial Statements
and Exhibits, for its press release announcing the pricing of the $75 million in
convertible senior notes.
On August 5, 2003 Pegasus Solutions, Inc. filed a report on Form 8-K which
furnished information under Item 12 - Results of Operation and Financial
Condition for its press release announcing its financial results for the second
quarter ended June 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEGASUS SOLUTIONS, INC.
August 14, 2003 /s/ JOHN F. DAVIS, III
John F. Davis, III,
- ----- -----------------------------
Chairman, Chief
Executive Officer and President
August 14, 2003 /s/ SUSAN K. COLE
Susan K. Cole,
------------------------------
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
23
EXHIBIT INDEX
Exhibit Number Description
- --------------- -----------
4.6 Indenture, dated July 21, 2003, by and between the Company and JPMorgan
Chase Bank, as trustee.
4.7 Registration Rights Agreement, dated July 21, 2003, by and between the
Company and Bear, Stearns & Co, Inc., J.P. Morgan Securities Inc.
and Thomas Weisel Partners LLC.
4.8 Form of Note (included in Exhibit 4.6)
10.27 Employment agreement dated May 19, 2003 between the Company and Robert
J. Boles, Jr
31.1 Certification of Chief Executive Officer, Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Exhibit 4.6
PEGASUS SOLUTIONS, INC.,
AS ISSUER
________________________
JPMORGAN CHASE BANK,
AS TRUSTEE
_________________________
UP TO $90,000,000 AGGREGATE PRINCIPAL AMOUNT OF
3.875% CONVERTIBLE SENIOR NOTES DUE 2023
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE 1
Section 1.1. Definitions 1
Section 1.2. Incorporation by Reference of Trust Indenture Act 9
Section 1.3. Rules of Construction 10
Section 1.4. Acts of Holders 10
ARTICLE II THE SECURITIES 11
Section 2.1. Form and Dating 11
Section 2.2. Execution and Authentication 12
Section 2.3. Registrar, Paying Agent and Conversion Agent 14
Section 2.4. Paying Agent to Hold Cash and Securities in Trust 14
Section 2.5. Holder Lists 15
Section 2.6. Transfer and Exchange 15
Section 2.7. Replacement Securities 16
Section 2.8. Outstanding Securities; Determinations of
Holders' Action 17
Section 2.9. Temporary Securities 17
Section 2.10. Cancellation 18
Section 2.11. Persons Deemed Owners 18
Section 2.12. Additional Transfer and Exchange Requirements 18
Section 2.13. CUSIP Numbers 24
Section 2.14. Ranking 24
ARTICLE III REDEMPTION 24
Section 3.1. The Company's Right to Redeem; Notice to Trustee 24
Section 3.2. Selection of Securities to Be Redeemed 25
Section 3.3. Notice of Redemption 25
Section 3.4. Effect of Notice of Redemption 26
Section 3.5. Deposit of Redemption Price 26
Section 3.6. Securities Redeemed in Part 27
Section 3.7. Repayment to the Company 27
Section 3.8. No Sinking Fund 27
ARTICLE IV PURCHASE AT THE OPTION OF HOLDERS ON SPECIFIC DATES 27
Section 4.1. Optional Put 27
Section 4.2. Effect of Purchase Notice 30
Section 4.3. Deposit of Purchase Price 30
Section 4.4. Securities Purchased in Part 31
Section 4.5. Covenant to Comply With Securities Laws Upon Purchase
of Securities 31
Section 4.6. Repayment to the Company 32
Section 4.7. No Purchase Upon Event of Default 32
ARTICLE V PURCHASE AT THE OPTION OF HOLDERS UPON A
FUNDAMENTAL CHANGE 32
Section 5.1. Fundamental Change Put 32
Section 5.2. Effect of Fundamental Change Purchase Notice 35
Section 5.3. Deposit of Fundamental Change Purchase Price 36
Section 5.4. Securities Purchased in Part 36
Section 5.5. Covenant to Comply With Securities Laws Upon
Purchase of Securities 37
Section 5.6. Repayment to the Company 37
ARTICLE VI COVENANTS 37
TABLE OF CONTENTS
Section 6.1. Payment of Securities 37
Section 6.2. SEC and Other Reports to the Trustee 38
Section 6.3. Compliance Certificate 39
Section 6.4. Further Instruments and Acts 39
Section 6.5. Maintenance of Office or Agency of the Trustee, Registrar,
Paying Agent and Conversion Agent 39
Section 6.6. Delivery of Information Required Under Rule 144A 39
Section 6.7. Waiver of Stay, Extension or Usury Laws 40
Section 6.8. Statement by Officers as to Default 40
ARTICLE VII SUCCESSOR CORPORATION 40
Section 7.1. When Company May Merge or Transfer Assets 40
ARTICLE VIII DEFAULTS AND REMEDIES 41
Section 8.1. Events of Default 41
Section 8.2. Acceleration 43
Section 8.3. Other Remedies 44
Section 8.4. Waiver of Past Defaults 44
Section 8.5. Control by Majority 44
Section 8.6. Limitation on Suits 45
Section 8.7. Rights of Holders to Receive Payment or to Convert 45
Section 8.8. Collection Suit by Trustee 45
Section 8.9. Trustee May File Proofs of Claim 45
Section 8.10. Priorities 46
Section 8.11. Undertaking for Costs 47
ARTICLE IX TRUSTEE 47
Section 9.1. Duties of Trustee 47
Section 9.2. Rights of Trustee 48
Section 9.3. Individual Rights of Trustee 49
Section 9.4. Trustee's Disclaimer 50
Section 9.5. Notice of Defaults 50
Section 9.6. Reports by Trustee to Holders 50
Section 9.7. Compensation and Indemnity 50
Section 9.8. Replacement of Trustee 51
Section 9.9. Successor Trustee by Merger 52
Section 9.10. Eligibility; Disqualification 52
Section 9.11. Preferential Collection of Claims Against Company 52
ARTICLE X DISCHARGE OF INDENTURE 53
Section 10.1. Discharge of Liability on Securities 53
Section 10.2. Repayment to the Company 53
ARTICLE XI AMENDMENTS 53
Section 11.1. Without Consent of Holders 53
Section 11.2. With Consent of Holders 54
Section 11.3. Compliance with Trust Indenture Act 56
Section 11.4. Revocation and Effect of Consents, Waivers and Actions 56
Section 11.5. Notation on or Exchange of Securities 56
Section 11.6. Trustee to Sign Supplemental Indentures 56
Section 11.7. Effect of Supplemental Indentures 56
ARTICLE XII CONVERSION 57
Section 12.1. Conversion Right 57
Section 12.2. Conversion Procedures; Fractional Shares 58
Section 12.3. Adjustment of Conversion Rate 60
Section 12.4. Consolidation or Merger of the Company 68
Section 12.5. Notice of Adjustment 69
Section 12.6. Notice in Certain Events 70
Section 12.7. Company To Reserve Stock: Registration; Listing 71
Section 12.8. Taxes on Conversion 71
Section 12.9. Conversion After Regular Record Date 71
Section 12.10. Company Determination Final 72
Section 12.11. Responsibility of Trustee for Conversion Provisions 72
Section 12.12. Unconditional Right of Holders to Convert 72
ARTICLE XIII MISCELLANEOUS 72
Section 13.1. Trust Indenture Act Controls 72
Section 13.2. Notices 73
Section 13.3. Communication by Holders with Other Holders 73
Section 13.4. Certificate and Opinion as to Conditions Precedent 74
Section 13.5. Statements Required in Certificate or Opinion 74
Section 13.6. Separability Clause 74
Section 13.7. Rules by Trustee, Paying Agent, Conversion Agent and
Registrar 74
Section 13.8. Legal Holidays 74
Section 13.9. Governing Law; Submission to Jurisdiction; Service
of Process 75
Section 13.10. No Recourse Against Others 75
Section 13.11. Successors 76
Section 13.12. Multiple Originals 76
EXHIBIT A Form of Security
EXHIBIT B Form of Certificate to be Delivered by Transferee in
Connection with Transfers to Institutional Accredited
Investors
EXHIBIT C Form of Restrictive Legend for Common Stock Issues
Upon Conversion
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318 OF THE
TRUST INDENTURE ACT ("TIA") OF 1939*
TIA Indenture
Section Section
- ------- -------
Section 310 (a) (1) 9.10
(a) (2) 9.10
(a) (3) N.A.**
(a) (4) N.A.
(a) (5) 9.10
(b) 9.8; 9.10
(c) N.A.
Section 311 (a) 9.11
(b) 9.11
(c) N.A.
Section 312 (a) 2.5
(b) 13.3
(c) 13.3
Section 313 (a) 9.6
(b) (1) 9.6
(b) (2) 9.6
(c) 9.6; 12.2
(d) 9.6
Section 314 (a) 6.2; 6.4; 12.2
(b) N.A.
(c) (1) 13.4
(c) (2) 13.4
(c) (3) N.A.
(d) N.A.
(e) 13.5
(f) N.A.
Section 315 (a) 9.1
(b) 9.5; 12.2
(c) 9.1
(d) 9.1
(e) 8.11
Section 316 (a) (1) (A) 8.5
(a) (1) (B) 8.4
(a) (2) N.A.
(b) 8.7
(c) 1.4
Section 317 (a) (1) 8.8
(a) (2) 8.9
(b) 2.4
Section 318 (a) 13.1
(b) 13.1
(c) 13.1
______________
* This reconciliation and tie shall not, for any purpose, be deemed to be a part
of this Indenture.
** N.A. means Not Applicable.
INDENTURE, dated as of July 21, 2003, between PEGASUS SOLUTIONS, INC., a
Delaware Corporation (the "COMPANY"), and JPMORGAN CHASE BANK, a New York state
banking organization, as Trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Company's 3.875% Convertible
Senior Notes due 2023:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Additional Amounts" has the meaning set forth in the Registration Rights
Agreement. All references herein or in the Securities to interest accrued or
payable as of any date shall include any Additional Amounts accrued or payable
as of such date as provided in the Registration Rights
Agreement.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power
to direct or cause the direction of the management and policies of such
person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent Members" has the meaning set forth in Section 2.1(b).
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the
Depositary for such Security, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Applicable Stock" means (a) the Common Stock and (b) in the event of
a merger, consolidation or other similar transaction involving the Company
that is otherwise
permitted hereunder in which the Company is not the surviving
corporation, the common stock of such surviving corporation or its direct or
indirect parent corporation.
"Bankruptcy Law" means Title 11, United States Code, or any similar Federal
or State law for the relief of debtors.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of such board.
"Board Resolution" means a resolution of the Board of Directors.
"Business Day" means each day of the year other than a Saturday or a
Sunday or other day on which banking institutions in New York, New York
or Houston, Texas are required or authorized by law, regulation or executive
order to close.
"Calendar Quarter" means a three month period ending on March 31, June 30,
September 30 or December 31.
"cash" means such coin or currency of the United States as at any time of
payment is legal tender for the payment of public and private debts.
1
"Certificated Securities" means Securities that are in substantially the
form attached hereto as Exhibit A and that do not include the information called
for by footnotes 1 and 3 thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $0.01 par value per share, of the
Company as that stock exists on the date of this Indenture or any other shares
of Equity Interest of the Company into which such Common Stock shall
be reclassified or changed.
"Company" means the party named as the "Company" in the first paragraph of
this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, means such successor. The
foregoing sentence shall likewise apply to any subsequent such successor
or successors.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any two Officers, at least one of whom
is the Chief Executive Officer, the President or the Chief Financial Officer.
"Conversion Agent" has the meaning set forth in Section 2.3.
"Conversion Notice" has the meaning set forth in Section 12.2(b).
"Conversion Period" means the period from and including the 30th Trading
Day in a fiscal quarter to, but excluding, the 30th Trading Day in the
immediately following fiscal quarter.
"Conversion Price" means, at any time, $1,000 divided by the Conversion
Rate in effect at such time, rounded to two decimal places (rounded up if the
third decimal place thereof is 5 or more and otherwise rounded down).
"Conversion Rate" means the number of shares of Common Stock issuable
upon conversion of each $1,000 of Principal Amount at Issuance of Securities,
which is initially 49.6808 shares, subject to adjustments as set forth in
this Indenture.
"Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered,
which office at the date hereof is located at 4 New York Plaza, 15th Floor,
New York, NY 10004, or such other address as the Trustee may designate from
time to time by notice to the Holders and the Company, or the principal
corporate trust office of any successor Trustee (or such other address as a
successor Trustee may designate from time to time by notice to the Holders and
the Company).
"Current Market Price" has the meaning set forth in Section 12.3(g).
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any
Bankruptcy Law.
"Default" means, when used with respect to the
Securities, any event which is, or after notice or passage of time or both
would be, an Event of Default.
"Depositary" means, with respect to any Global Securities, a
clearing agency that is registered as such under the Exchange Act and is
designated by the Company to act as Depositary for such Global Securities
(or any successor securities clearing agency so registered), which shall
initially be DTC.
"Designated Subsidiary" means any existing or future, direct or
indirect, Subsidiary of the Company whose assets constitute 15% or more of the
total assets of the Company on a consolidated basis.
2
"Disqualified Equity Interests" means any Equity Interest that,
either by their terms or by the terms of any security into which they are
convertible or exchangeable or otherwise, are, or upon the happening of an
event or passage of time would be, required to be redeemed prior to any
Stated Maturity of the principal of the Securities or are redeemable at the
option of the holder thereof at any time prior to any such Stated Maturity
(other than upon a Fundamental Change or sale of assets by the Company
in circumstances where the holders of the Securities would have similar rights),
or are convertible into or exchangeable for debt securities at any time
prior to any such Stated Maturity at the option of the holder thereof.
"distributed assets" has the meaning set forth in Section 12.3(d).
"DTC" means The Depository Trust Company, a New York corporation.
"Equity Interest" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents
of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, of such Person.
"Event of Default" has the meaning set forth in Section 8.1.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Ex-Dividend Time" means, with respect to any issuance or distribution on
Common Stock, the first Trading Day on which the Common Stock trades regular
way on the principal securities market on which the Common Stock is then
traded without the right to receive such issuance or distribution.
"Expiration Time" has the meaning set forth in Section 12.3(f).
"Fair Market Value" has the meaning set forth in Section 12.3(g).
"Fundamental Change" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total outstanding Voting Stock of the Company; (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors or whose
nomination for election by the stockholders of the Company, was approved by a
vote of at least 66-2/3% 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) cease for any reason to
constitute a majority of such Board of Directors then in office, provided,
however, that if during such two-year period, every director of the
Company dies, and such vacancies are filled by a vote of the Company's
stockholders in accordance with the Company's certificate
of incorporation, such replacement upon death shall not
constitute a "Fundamental Change"; (iii) the Company
consolidates with or merges with or into any Person or conveys, transfers
or leases all or substantially all of its assets to any Person, or any
corporation consolidates with or merges into or with the Company, in any
such event pursuant to a transaction in which the outstanding Voting Stock
of the Company is changed into or exchanged for cash, securities or other
property, other than any such transaction where the outstanding Voting
Stock of the Company is not changed or exchanged at all (except to the
extent necessary to reflect a change in the jurisdiction of incorporation of
the Company) or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock
of the surviving corporation which is not Disqualified Equity Interests or (y)
cash, securities and other property (other than Equity Interest of the
surviving corporation) and (B) no "person" or "group" owns immediately after
such transaction, directly or indirectly, more than
50% of the total outstanding Voting Stock of the surviving
corporation; (iv) the Company or any Designated Subsidiary or any group of
two or more Subsidiaries that, taken as a whole, would constitute a
Designated Subsidiary, is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions described under Article VII; or (v) the Company's Common Stock
ceases to be listed on a national securities exchange or quoted on the Nasdaq
National Market or another established automated over-the-counter trading
market in the United States.
3
A "Fundamental Change" will not be deemed to have occurred if
either:
(1) the last Sale Price of the Common Stock for any five Trading
Days within:
(i) the period of the ten consecutive Trading Days immediately
after the later of the Fundamental Change or the public announcement of the
Fundamental Change, in the case of a Fundamental Change resulting solely from a
Fundamental Change in clause (i) of the definition of Fundamental Change; or
(ii) the period of the ten consecutive Trading Days immediately
preceding the Fundamental Change, in the case of a Fundamental Change resulting
from a Fundamental Change in clauses (ii), (iii) or (iv) of the definition of
Fundamental Change;
is at least equal to 105% of the quotient where the numerator is the Principal
Amount at Issuance and the denominator is the Conversion Rate in effect on each
of such five Trading Days, with such calculation being made for each Trading
Day; or
(2) in the case of a merger or consolidation, at least 95% of
the consideration, excluding cash payments for fractional shares in the merger
or consolidation constituting the Fundamental Change, consists of common stock
traded on a U.S. national securities exchange or quoted on the Nasdaq National
Market (or which will be so traded or quoted when issued or exchanged in
connection with such Fundamental Change) and as a result of such transaction or
transactions the Securities become convertible solely into such common stock.
For purposes of clarification, a "Fundamental Change" will not be
deemed to occur solely as a result of the transfer of all or substantially
all of the Company's assets to a Wholly Owned Subsidiary of the Company
where that Subsidiary assumes all or substantially all of the
Indebtedness of the Company (other than the Securities).
"Fundamental Change Purchase Date" has the meaning set forth in
Section 5.1(a).
"Fundamental Change Purchase Notice" has the meaning set forth in
Section 5.1(c).
"Fundamental Change Purchase Price" has the meaning set forth in
Section 5.1(a).
"Global Securities" means Securities that are in
substantially the form attached hereto as Exhibit A and that include the
information called for by footnotes 1 and 3 thereof and that are deposited
with the Depositary or its custodian and registered in the name of, the
Depositary or its nominee.
"Holder" means a person in whose name a Security is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, without
duplication, any liability of such Person:
(a) for borrowed money;
(b) evidenced by bonds, debentures, notes;
(c) in respect of letters of credit or bankers acceptances or similar
instruments (or reimbursement obligations with respect thereto);
4
(d) to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business;
(e) as lessee, the obligations of which are capitalized in accordance with
generally accepted accounting principles; and
(f) for Indebtedness of others guaranteed by such Person or for which such
Person is legally responsible or liable (whether by agreement to purchase
indebtedness of, or to supply funds or to invest in, others).
The amount of Indebtedness of any Person at any date shall be (i) the
outstanding principal amount of all unconditional obligations described
above, as such amount would be reflected on a balance sheet prepared in
accordance with generally accepted accounting principles, and the maximum
liability at such date of such Person for any contingent obligations
described above, (ii) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (iii) the principal
amount thereof, together with any interest thereon that is more than 30
days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or
supplemented from time to time in accordance with the terms hereof, including
the provisions of the TIA that are explicitly incorporated in this
Indenture by reference to the TIA.
"Interest Payment Date" has the meaning set forth in Exhibit A attached
hereto.
"Issue Date" of any Security means the date on which such Security was
originally issued or deemed issued as set forth on the face of the Security.
"Legal Holiday" means any day other than a Business Day.
"Market Price" means the average of the Sale Prices of one share of
Applicable Stock for the 20-Trading Day period immediately preceding and
including the Business Day
immediately preceding the Purchase Date or Fundamental Change Purchase
Date, as the case may be (or if the Business Day immediately preceding the
Purchase Date or Fundamental Change Purchase Date, as the case may be, is not
a Trading Day, then on the last Trading Day immediately preceding the Business
Day), appropriately adjusted to take into account
the occurrence, during the period commencing on the first of such Trading Days
during such 20-Trading Day period and ending on the Purchase Date or
Fundamental Change Purchase Date, as the case may be, of any event described in
Sections 12.3 or 12.4.
"Non-Electing Share" has the meaning set forth Section 12.4.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President,
the Treasurer, the Controller, the Secretary, any Assistant Treasurer or
Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 13.4 and 13.5, signed in the name of the
Company by any two Officers, at least one of whom is the Chief Executive
Officer, the President or the Chief Financial Officer, and delivered to the
Trustee. An Officers' Certificate given pursuant to Section 6.3 shall be
signed by the Chief Financial Officer of the Company and one other Officer.
"Opinion of Counsel" means a written opinion containing the information
specified in Sections 13.4 and 13.5, from legal counsel. The counsel may
be an employee of, or counsel to, the Company.
"Paying Agent" has the meaning set forth in Section 2.3.
5
"Person" or "person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or government or any agency or
political subdivision thereof (and for purposes of the definition of
"Fundamental Change" shall also have the meaning set forth in such
definition).
"Principal Amount at Issuance" of a Security means the initial issue price
of the Security as set forth on the face of the Security.
"Purchase Date" has the meaning set forth in
Section 4.1(a).
"Purchase Notice" has the meaning set forth in
Section 4.1(c).
"Purchase Price" has the meaning set forth in
Section 4.1(a).
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Record Date" has the meaning set forth in Section 12.3(g).
"Redemption Date" means, when used with respect to any Security to be
redeemed, the date fixed for redemption pursuant to this Indenture.
"Redemption Price" has the meaning set forth in
Section 3.1.
"Reference Period" has the meaning set forth in Section
12.3(d).
"Registrar" has the meaning set forth in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated July 21, 2003, between the Company and Bear, Stearns & Co. Inc., J.P.
Morgan Securities Inc. and Thomas Weisel Partners LLC.
"Regular Record Date" has the meaning set forth in Exhibit A attached
hereto.
"Responsible Officer" means, when used with respect to the Trustee, the
officer within the Institutional Trust Services department of the
Trustee, having direct responsibility for the administration of this
Indenture.
"Restricted Certificated Security" means a Certificated Security which is a
Transfer Restricted Security.
"Restricted Global Security" means a Global Security
that is a Transfer Restricted Security.
"Restricted Security" means a Restricted Certificated Security or a
Restricted Global Security.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Sale Price" of a share of Applicable Stock on any date means the closing
per share sale price (or, if no closing sale price is reported, the average
of the bid and ask prices or, if more than one in either case, the average
of the average bid and the average ask prices) on such date as reported on a
U.S. national securities exchange or, if the shares of Applicable Stock are
not listed on a U.S. national securities exchange, as reported by the Nasdaq
National Market system. In the absence of such quotations, the Company
shall be entitled to determine the sale price on the basis of such quotations as
it considers appropriate.
6
"SEC" means the United States Securities and Exchange Commission.
"Securities" means any of the Company's 3.875% Convertible
Senior Notes due 2023, as amended or supplemented from time to time,
issued under this Indenture.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Special Record Date" has the meaning set forth in Exhibit A attached
hereto.
"Spin-Off" has the meaning set forth in Section 12.3(d).
"Stated Maturity", when used with respect to any Security, means
July 15, 2023.
"Subsidiary" means any person of which at least a majority of the
outstanding Voting Stock shall at the time directly or indirectly be owned or
controlled by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries.
"TIA" means the United States Trust Indenture Act of 1939 as in
effect on the date of this Indenture, provided, however, that in the event the
TIA is amended after such date, TIA means, to the extent required by
any such amendment, the TIA as so amended.
"Trading Day" means:
(a) if the applicable security is listed or
admitted for trading on a U.S. national or regional securities exchange,
a day on which such exchange is open for business;
(b) if the applicable security is quoted on the
Nasdaq National Market, a day on which trades may be made on the Nasdaq
National Market; or
(c) if the applicable security is not so listed
or admitted for trading on a U.S. national or regional securities exchange
and not so quoted on the Nasdaq National Market, a day on which the
principal U.S. exchange or trading system on which the Securities are
listed or traded is open for business.
"Transfer Certificate" has the meaning set forth in Section
2.12(f).
"Transfer Restricted Security" has the meaning set forth in
Section 2.12(f).
"Trigger Event" has the meaning set forth in Section 12.3(d).
"Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent
such successor or successors.
"Unrestricted Certificated Security" means a Certificated
Security that is not a Transfer Restricted Security.
"Unrestricted Global Security" means a Global Security that is not a
Transfer Restricted Security.
"Voting Stock" of a person means Equity Interest of such person
of the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such person (irrespective of
whether or not at the time Equity Interest of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
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"Wholly Owned Subsidiary" means a Subsidiary all the Equity
Interest of which are owned by the Company or another Wholly Owned Subsidiary.
Section 1.2. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the
TIA, the provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used but not defined in this Indenture that
are defined by the TIA, defined by TIA reference to another statute or
defined by SEC rule have the meanings assigned to them by such definitions.
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 accounting principles generally accepted in the United
States as in effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural, and words in the
plural include the singular.
Section 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company, as described in Section 13.2. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
8
(b) The fact and date of the execution by any person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to such officer the execution thereof. Where such
execution is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of such signer's authority, if it so states. The fact and date
of the execution of any such instrument or writing, or the authority of the
person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The principal amount and certificate number of any Security and the
ownership of Securities shall be proved by the register maintained by the
Registrar for the Securities.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, which is a part of
this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage (provided that any such
notation, legend or endorsement required by usage is in a form acceptable to
the Company). The Company shall provide any such notations, legends or
endorsements to the Trustee in writing. Each Security shall be dated the date
of its authentication.
(a) Restricted Global Securities. All of the Securities are being offered
and sold within the United States to QIBs in
reliance on Rule 144A and shall be issued, initially in the form of one or more
Restricted Global Securities, which shall be deposited with the Trustee at its
Corporate Trust Office, as custodian for the Depositary and registered in the
name of DTC or the nominee thereof, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Restricted Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
as hereinafter provided.
9
(b) Global Securities in General. Each Global Security shall represent such of
the outstanding Securities as shall be specified therein and each shall provide
that it shall initially represent the aggregate amount of outstanding Securities
stated thereon, but that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions, purchases and conversions of
such Securities.
Any adjustment of the aggregate principal amount of a
Global Security to reflect the amount of any increase or decrease in the amount
of outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by
Section 2.12 and shall be made on the records of the Trustee and the Depositary.
Neither any members of, or participants in, the
Depositary (collectively, the "Agent Members") nor any other persons on
whose behalf Agent Members may act shall have any rights under this
Indenture with respect to any Global Security registered in the name of the
Depositary or any nominee thereof, or under any such Global Security, and the
Depositary or such nominee, as the case may be, may be treated by the
Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner and holder of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing
contained herein shall (A) prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or such nominee, as
the case may be, or (B)
impair, as between the Depositary, its Agent Members and any other person
on whose behalf an Agent Member may act, the operation of customary
practices of such Persons governing the exercise of the rights of a holder of
any Security.
(c) Certificated Securities. Certificated Securities will be issued
only under the limited circumstances provided in Section 2.12(a)(i).
Section 2.2. Execution and Authentication.
The Securities shall be executed on behalf of the
Company by any Officer. The signature of the Officer on the
Securities may be manual or facsimile.
A Security bearing the manual or facsimile signature of
an individual who was at the time of the execution of the
Security an Officer shall bind the Company, notwithstanding that
such individual has ceased to hold such office(s) prior to the
authentication and delivery of such Securities or did not hold such office(s)
at the date of authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee
by manual or facsimile signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver the
Securities for original issue in an aggregate principal amount of up to
$90,000,000 upon one or more Company Orders (which shall include the matters
required to be set forth in an Officer's Certificate pursuant to Sections
13.4 and 13.5) without any further action by the Company (other than as
contemplated below and in Section 13.4 and Section 13.5). The aggregate
principal amount of the Securities due at the Stated Maturity
thereof
outstanding at any time may not exceed the amount set forth in the foregoing
sentence except as provided in Section 2.7. In
authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities,
the Trustee shall receive and shall be fully protected in relying upon:
(a) a copy of the Board Resolution in or pursuant to which the terms and
form of the Securities were established, the issuance
and sale of the Securities was authorized, this Indenture was
authorized and specified Officers were authorized to establish the form and
determine the terms of the Securities and the form of this Indenture, to execute
the Securities and this Indenture on behalf of the Company and to take any other
necessary actions relating thereto and evidence of any actions taken by
authorized Officers pursuant to that Board Resolution, certified by the
Secretary, an Assistant Secretary or the General Counsel of the Company to have
been duly adopted by the Board of Directors or taken by any authorized Officer
and to be in full force and effect as of the date of such certificate; and
10
(b) an Opinion of Counsel which shall state:
(i) that the form of such Securities has been established by or
pursuant to a resolution of the Board of Directors and in
conformity with the provisions of this Indenture;
(ii) that the terms of such Securities have been established in or pursuant to a
resolution of the Board of Directors and in conformity with the other provisions
of this Indenture;
(iii) that such Securities, when authenticated and delivered
by the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting the enforcement of creditors'
rights and to general equity principles;
(iv) that all laws and requirements in respect of the execution and delivery by
the Company of such Securities have been complied with; and
(v) that this Indenture has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company enforceable
in accordance with its terms.
The Trustee shall act as the initial authenticating agent.
Thereafter, the Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication
by such agent.
The Securities shall be issued only in registered form without
coupons and only in denominations of $1,000 of principal amount and any integral
multiple of $1,000.
Section 2.3. Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency where Securities may
be presented for redemption, purchase or payment ("Paying
Agent"), an office or agency where Securities may be presented for conversion
("Conversion Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be
served. Pursuant to Section 6.5, the Company will at all times maintain a
Registrar, Paying Agent, Conversion Agent and an office or agency where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served in the Borough of Manhattan, New York City. The
Registrar shall keep a register of the Securities and of their transfer and
exchange.
The Company may have one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents.
The term Paying Agent includes any additional paying agent, including any named
pursuant to Section 6.5. The
term Conversion Agent includes any additional conversion agent, including any
named pursuant to Section 6.5.
The Company shall enter into an appropriate limited agency
agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar
(in each case, if such Registrar, agent or co-registrar is a Person other than
the Trustee). The agreement shall implement the provisions of this Indenture
that relate to such agent. The Company shall notify the Trustee of the name
and address of any 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 9.7. The Company or any
Subsidiary or an Affiliate of either of them may act as Paying Agent,
Registrar, Conversion Agent or co-registrar and, if the Company fails to
maintain a Conversion Agent, the Company shall act as such.
The Company hereby initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
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Section 2.4. Paying Agent to Hold Cash and Securities in Trust.
Except as otherwise provided herein, prior to 10:00
a.m., New York City time, on each due date of payments in respect
of any Security, the Company shall deposit with the Paying Agent cash (in
immediately available funds if deposited on the due date) or number of shares
of Applicable Stock sufficient to make such payments when so becoming due.
The Company shall require each Paying Agent (other than the Trustee) to agree
in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all cash and Applicable Stock held by the Paying Agent
for the making of payments in respect of the Securities and shall notify
the Trustee of any default by the Company in making any such payment. If the
Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent,
it shall segregate the money and Applicable Stock held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time may require a
Paying Agent to pay all cash and Applicable Stock held by it to the Trustee,
and to account for any funds and Applicable Stock disbursed by it, and the
Trustee may at any time during the continuance of any such default, upon the
written request to the Paying Agent, require such Paying Agent to
forthwith pay to the Trustee all cash and Applicable Stock so held in
trust. Upon doing so, the Paying Agent shall have no further liability for
the cash or Applicable Stock.
Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Holders. If the Trustee is not the Registrar, the Company shall cause to
be furnished to the Trustee on or before each semiannual interest payment date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Holders.
Section 2.6. Transfer and Exchange.
(a) Subject to compliance with any applicable additional requirements
contained in Section 2.12, when a Security is presented to the Registrar with a
request to register a transfer
thereof or to exchange such Security for an equal principal amount of Securities
of other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested; provided, however, that every Security presented
or surrendered for registration of transfer or exchange shall be duly endorsed
or accompanied by an assignment form and, if applicable, a transfer certificate,
each in the form included in Exhibit A attached hereto and in form satisfactory
to the Registrar and each duly executed by the Holder thereof or its attorney
duly authorized in writing. To permit registration of transfers and exchanges,
upon surrender of any Security for registration of transfer or exchange at an
office or agency maintained for such purpose pursuant to Section 2.3, the
Company shall execute, and the Trustee shall authenticate Securities of a like
aggregate principal amount at the Registrar's request. Any transfer or exchange
shall be without charge, except that the Company or the Registrar may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the transfer or exchange of the
Securities from the Holder requesting such transfer or exchange.
Neither the Company, the Registrar nor the Trustee shall be required
to exchange or register a transfer of (i) any Securities selected for
redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed), (ii) any Securities in respect of which
a Purchase Notice or a Fundamental Change Purchase Notice has been given and
not withdrawn by the Holder thereof in accordance with the terms of this
Indenture (except, in the case of Securities to be purchased in part, the
portion thereof not to be purchased) or (iii) any Securities for a period of
15 days before the mailing of a notice of redemption of Securities to be
redeemed.
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All Securities issued upon any transfer or exchange of Securities shall
be valid obligations of the Company, evidencing the same debt and entitled
to the same benefits under this Indenture, as the Securities surrendered
upon such transfer or exchange.
(b) Any Registrar appointed pursuant to Section 2.3 shall provide to the
Trustee such information as the Trustee may reasonably require in connection
with the delivery by such
Registrar of Securities upon transfer or exchange of Securities.
(c) Each Holder of a Security agrees to indemnify the Company, the Registrar
and the Trustee against any liability that may result from the transfer,
exchange or assignment of such Holder's Security in violation of any provision
of this Indenture and/or applicable United States federal or state securities
law.
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 Agent Members or other 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) any mutilated Security is surrendered to the Company, the
Registrar or the Trustee, or (b) the Company, the Registrar and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is
delivered to the Company, the Registrar and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, the Registrar or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall
execute and upon its written request the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and
principal amount, bearing a certificate number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be redeemed by
the Company pursuant to Article III or purchased by the Company pursuant to
Article IV or V, the Company in its discretion may, instead of issuing a new
Security, pay, redeem or purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.7,
the Company may require the payment of a sum sufficient to cover any
tax, assessment or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee or the Registrar) connected therewith.
Every new Security issued pursuant to this Section 2.7 in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all benefits of this Indenture equally
and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 2.7 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.8. Outstanding Securities; Determinations of Holders'
Action.
Securities outstanding at any time are all the
Securities authenticated by the Trustee, except for those
cancelled by it, those paid, redeemed or purchased pursuant to Section 2.7,
those delivered to it for cancellation and those described in this Section 2.8
as not outstanding.
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A Security does not cease to be outstanding because the Company or
an Affiliate thereof holds the Security; provided, however, that in
determining whether the Holders of the requisite principal amount of
Securities have given or concurred in any request, demand, authorization,
direction, notice, consent, waiver, or other Act hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent, waiver or other Act, only Securities which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Subject to the foregoing, only Securities outstanding at the time
of such determination shall be considered in any such determination.
If a Security is replaced pursuant to Section 2.7, the
replaced Security ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Security is held by a bona
fide purchaser unaware that such Security has been replaced.
If the Paying Agent holds, in accordance with the terms of this Indenture,
prior to 10:00 a.m., New York City time, on a Redemption Date, a Purchase
Date, a Fundamental Change Purchase Date or Stated Maturity, as the case may
be, cash or securities, if permitted hereunder, sufficient to pay Securities
payable on that date, then on such Redemption Date, Purchase Date,
Fundamental Change Purchase Date or Stated Maturity, as the case may be, such
Securities shall cease to be outstanding and interest and Additional
Amounts, if any, on such Securities shall cease to accrue.
If a Security is converted in accordance with
Article XII, then from and after the time of conversion on the date of
conversion, such Security shall cease to be outstanding and interest and
Additional Amounts, if any, on such Security shall cease to accrue.
Section 2.9. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation
of definitive Securities, the temporary Securities shall be exchangeable
for definitive Securities upon surrender of the temporary Securities at
the office or agency of the Company designated for such purpose pursuant
to Section 2.3, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Securities
the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as
definitive Securities.
Section 2.10. Cancellation.
All Securities surrendered for payment, purchase by the Company pursuant
to Articles IV or V, conversion, redemption or registration of transfer or
exchange shall, if surrendered to any person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. The
Company may not issue new Securities to replace Securities it has paid or
delivered to the Trustee for cancellation or that any Holder has converted
pursuant to Article XII. No Securities
shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by
this Indenture. All cancelled Securities
held by the Trustee shall be disposed of by the Trustee in accordance
with the Trustee's customary procedure.
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Section 2.11. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may
treat the person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment (whether in cash or
Applicable Stock) of principal of, Redemption Price, Purchase Price or
Fundamental Change Purchase Price, and interest and Additional Amounts, if
any, on, the Security, for the purpose of receiving cash or Applicable Stock
upon conversion and for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Section 2.12. Additional Transfer and Exchange Requirements.
(a) Transfer and Exchange of Global Securities.
(i) Certificated Securities shall be issued in exchange for interests
in the Global Securities only if (x) the Depositary
notifies the Company that it is unwilling or unable to continue
as Depositary for the Global Securities or if it at any time ceases to be a
"clearing agency" registered under the Exchange Act, if so required by
applicable law or regulation and a successor Depositary is not appointed by the
Company within 90 days, or (y) an Event of Default has occurred and is
continuing. In either case, the Company shall execute, and the Trustee shall,
upon receipt of a Company Order (which the Company agrees to deliver promptly),
authenticate and deliver Certificated Securities in an aggregate principal
amount equal to the principal amount of such Global Securities in exchange
therefor. Only Restricted Certificated Securities shall be issued in exchange
for beneficial interests in Restricted Global Securities, and only Unrestricted
Certificated Securities shall be issued in exchange for beneficial interests in
Unrestricted Global Securities. Certificated Securities issued in exchange for
beneficial interests in Global Securities shall be registered in such names and
shall be in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver or cause to be delivered such
Certificated Securities to the Persons in whose name such Securities are so
registered. Such exchange shall be effected in accordance with the Applicable
Procedures.
(ii) Notwithstanding any other provisions of this Indenture other
than the provisions set forth in Section 2.12(a)(i), a Global Security may not
be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(b) Transfer and Exchange of Certificated Securities. In the event
that Certificated Securities are issued in exchange for
beneficial interests in Global Securities in accordance with Section 2.12(a)(i),
and, on or after such event, Certificated Securities are presented by a Holder
to the Registrar with a request:
(x) to register the transfer of the Certificated
Securities to a person who will take delivery thereof in the form of
Certificated Securities only; or
(y) to exchange such Certificated
Securities for an equal principal amount of Certificated Securities of other
authorized denominations,
such Registrar shall register the transfer or make the exchange as requested;
provided, however, that the Certificated Securities presented or surrendered for
register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in accordance with the proviso to the
first paragraph of Section 2.6; and
(ii) in the case of a Restricted Certificated Security, such
15
request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Certificated Security is being delivered to
the Registrar by a Holder for registration in the name of such
Holder, without transfer, or such Restricted Certificated
Security is being transferred to the Company or a Subsidiary of the Company, a
certification to that effect from such Holder (in substantially the form set
forth in the Transfer Certificate);
(B) if such Restricted Certificated Security is being
transferred to a person the Holder reasonably believes is a QIB in accordance
with Rule 144A or pursuant to an effective registration statement under the
Securities Act, a certification to that effect from such Holder (in
substantially the form set forth in the Transfer Certificate); or
(C) if such Restricted Certificated Security is being transferred pursuant to
an exemption from the registration requirements of the Securities Act in
accordance with Rule 144 or to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) pursuant to and in compliance with an exemption from the registration
requirements under the Securities Act, a certification to that effect from the
Holder (in substantially the form set forth in the Transfer Certificate) and, in
the case of a transfer to an institutional accredited investor, a certificate
containing certain representations and warranties (in substantially the form set
forth in Exhibit B) and, in either case, if the Company or the Registrar so
requests, a customary Opinion of Counsel, certificates and other information
reasonably acceptable to the Company and the Registrar to the effect that such
transfer does not require registration under the Securities Act.
(c) Transfer of a Beneficial Interests in a Restricted Global
Security for a Beneficial Interest in an Unrestricted Global
Security. Any person having a beneficial interest in a Restricted Global
Security may upon request, subject to the Applicable Procedures, transfer such
beneficial interest to a person who is required or permitted to take delivery
thereof in the form of an Unrestricted Global Security. Upon receipt by the
Trustee of written instructions, or such other form of instructions as is
customary for the Depositary, from the Depositary or its nominee on behalf of
any person having a beneficial interest in a Restricted Global Security and the
following additional information and documents in such form as is customary for
the Depositary from the Depositary or its nominee on behalf of the person having
such beneficial interest in the Restricted Global Security (all of which may be
submitted by facsimile or electronically):
(i) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certification to
that effect from the Holder (in substantially
the form set forth in the Transfer Certificate); or
(ii) if such beneficial interest is being transferred pursuant to an exemption
from the registration requirements of the Securities Act in accordance with Rule
144, a certification to that effect from the Holder (in substantially the form
set forth in the Transfer Certificate) and, if the Company or the Trustee so
requests, a customary Opinion of Counsel, certificates and other information
reasonably acceptable to the Company and the Trustee to the effect that such
transfer does not require registration under the Securities Act,
the Trustee, as the Registrar, shall reduce or cause to be reduced the aggregate
principal amount of the Restricted Global Security by the appropriate principal
amount and shall increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Security by a like principal amount. Such
transfer shall otherwise be effected in accordance with the Applicable
Procedures. If no Unrestricted Global Security is then outstanding, the Company
shall execute and the Trustee shall, upon receipt of a Company Order (which the
Company agrees to deliver promptly), authenticate and deliver an Unrestricted
Global Security.
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(d) Transfer of a Beneficial Interest in an Unrestricted Global Security
for a Beneficial Interest in a Restricted Global
Security. Any person having a beneficial interest in an Unrestricted Global
Security may upon request, subject to the Applicable Procedures, transfer such
beneficial interest to a person who is required or permitted to take delivery
thereof in the form of a Restricted Global Security (it being understood that
only QIBs may own beneficial interests in Restricted Global Securities). Upon
receipt by the Trustee of written instructions, or such other form of
instructions as is customary for the Depositary, from the Depository or its
nominee on behalf of any person having a beneficial interest in an Unrestricted
Global Security and the following additional information and documents in such
form as is customary for the Depositary, from the Depositary or its nominee on
behalf of the person having such beneficial interest in the Unrestricted Global
Security (all of which may be submitted by facsimile or electronically): a
certification from the Holder (in substantially the form set forth in the
Transfer Certificate) to the effect that such beneficial interest is being
transferred to a person that the transferor reasonably believes is a QIB in
accordance with Rule 144A. The Trustee, as the Registrar, shall reduce or cause
to be reduced the aggregate principal amount of the Unrestricted Global Security
by the appropriate principal amount and shall increase or cause to be increased
the aggregate principal amount of the Restricted Global Security by a like
principal amount. Such transfer shall otherwise be effected in accordance with
the Applicable Procedures. If no Restricted Global Security is then
outstanding, the Company shall execute and the Trustee shall, upon receipt of a
Company Order (which the Company agrees to deliver promptly), authenticate and
deliver a Restricted Global Security.
(e) Transfers of Certificated Securities for Beneficial Interest in Global
Securities. In the event that Certificated Securities are issued in exchange
for beneficial interests in Global Securities and, thereafter, the events or
conditions specified in Section 2.12(a)(i) which required such exchange shall
cease to exist, the Company shall mail notice to the Trustee and to the Holders
stating that Holders may exchange Certificated Securities or interests in Global
Securities by complying with the procedures set forth in this Indenture and
briefly describing such procedures and the events or circumstances requiring
that such notice be given. Thereafter, if Certificated Securities are
presented by a Holder to a Registrar with a request:
(x) to register the transfer of such
Certificated Securities to a person who will take delivery thereof in the
form of a beneficial interest in a Global Security, which request shall
specify whether such Global Security will be a Restricted Global
Security or an Unrestricted Global Security, or
(y) to exchange such Certificated
Securities for an equal principal amount of beneficial interests in a
Global Security, which beneficial interests will be owned by the Holder
transferring such Certificated Securities (provided that in the case of such an
exchange, Restricted Certificated Securities may be exchanged only for
Restricted Global Securities and Unrestricted Certificated Securities may be
exchanged only for Unrestricted Global Securities), the Registrar shall
register the transfer or make the exchange as requested by canceling
such Certificated Security and causing, or directing the
Registrar to cause, the aggregate principal amount of the applicable Global
Security to be increased accordingly and, if no such Global Security is then
outstanding, the Company shall issue and the Trustee shall, upon receipt of a
Company Order (which the Company agrees to deliver promptly)
authenticate and deliver a new Global Security;
provided, however, that the Certificated Securities presented or surrendered for
registration of transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in accordance with the proviso to the
first paragraph of Section 2.6;
(2) in the case of a Restricted Certificated Security to be
transferred for a beneficial interest in an Unrestricted Global Security, such
request shall be accompanied by the following additional information and
documents, as applicable:
(i) if such Restricted Certificated Security is being transferred pursuant
to an effective registration statement under the Securities Act, a certification
to that effect from such Holder (in substantially the form set forth in the
Transfer Certificate); or
(ii) if such Restricted Certificated Security is being
17
transferred pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144, a certification to that effect from
such Holder (in substantially the form set forth in the Transfer Certificate)
and, if the Company or the Registrar so requests, a customary Opinion of
Counsel, certificates and other information reasonably acceptable to the Company
and the Trustee to the effect that such transfer does not require registration
under of the Securities Act;
(3) in the case of a Restricted Certificated Security to be transferred or
exchanged for a beneficial interest in a
Restricted Global Security, such request shall be accompanied by a certification
from such Holder (in substantially the form set forth in the Transfer
Certificate) to the effect that such Restricted Certificated Security is being
transferred to a person the Holder reasonably believes is a QIB (which, in the
case of an exchange, shall be such Holder) in accordance with Rule 144A;
(4) in the case of an Unrestricted Certificated Security to be
transferred or exchanged for a beneficial interest in an
Unrestricted Global Security, such request need not be accompanied by any
additional information or documents; and
(5) in the case of an Unrestricted Certificated Security to be transferred or
exchanged for a beneficial interest in a Restricted Global Security, such
request shall be accompanied by
a certification from such Holder (in substantially, the form set forth in the
Transfer Certificate) to the effect that such Unrestricted Certificated Security
is being transferred to a person the Holder reasonably believes is a QIB (which,
in the case of an exchange, shall be such Holder) in accordance with Rule 144A.
(f) Legends.
(1) Except as permitted by the following paragraphs (2), (3) and (4), each
Global Security and Certificated Security (and all
Securities issued in exchange therefor or upon registration of transfer or
replacement thereof) shall bear a legend in substantially the form called for by
footnote 2 to Exhibit A attached hereto (each a "Transfer Restricted Security"),
for so long as it is required by this Indenture to bear such legend. Each
Transfer Restricted Security shall have attached thereto a certificate (a
"Transfer Certificate") in substantially the form called for by footnote 4 to
Exhibit A attached hereto.
(2) Upon any sale or transfer of a Transfer Restricted Security
(x) after the expiration of the holding period applicable to
sales of the Securities under Rule 144(k) of the Securities Act;
(y) pursuant to Rule 144 or (z) pursuant to an effective
registration statement under the Securities Act:
(i) in the case of any Restricted Certificated Security, any Registrar
shall permit the Holder thereof to exchange such Restricted Certificated
Security for an Unrestricted Certificated Security, or (under the circumstances
described in Section 2.12(e)) to transfer such Restricted Certificated Security
to a transferee who shall take such Security in the form of a beneficial
interest in an Unrestricted Global Security, and in each case shall rescind any
restriction on the transfer of such Security; provided, however, that the Holder
of such Restricted Certificated Security shall, in connection with such exchange
or transfer, comply with the other applicable provisions of this Section 2.12;
and
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(ii) in the case of any beneficial interest in a Restricted
Global Security, the Trustee shall permit the beneficial owner thereof to
transfer such beneficial interest to a transferee who shall take such interest
in the form of a beneficial interest in an Unrestricted Global Security and
shall rescind any restriction on transfer of such beneficial interest; provided,
that such Unrestricted Global Security shall continue to be subject to the
provisions of Section 2.12(a)(ii); and provided, further, that the owner of such
beneficial interest shall, in connection with such transfer, comply with the
other applicable provisions of this Section 2.12.
(3) Upon the exchange, registration of transfer or replacement of
Securities not bearing the legend described in paragraph (1)
above, the Company shall execute, and the Trustee shall
authenticate and deliver Securities that do not bear such legend and that do not
have a Transfer Certificate attached thereto.
(4) After the expiration of the holding period pursuant to Rule
144(k) of the Securities Act, the Company may with the consent of the Holder of
a Restricted Global Security or a Restricted Certificated Security, remove any
restriction of transfer on such Security, and the Company shall execute, and the
Trustee shall authenticate and deliver Securities that do not bear such legend
and that do not have a Transfer Certificate attached thereto.
(5) Until the expiration of the holding period applicable to sales of the
Securities under Rule 144(k) of the Securities Act or a transfer pursuant to
Rule 144 or pursuant to an effective registration statement under the Securities
Act, the Common Stock issued upon conversion of the Securities shall bear the
legend insubstantially the form called for by Exhibit C attached hereto.
(g) Transfers to the Company. Nothing contained in this Indenture or in
the Securities shall prohibit the sale or other transfer of any Securities
(including beneficial interests in Global Securities) to the Company or any of
its Subsidiaries, which Securities shall thereupon be cancelled in accordance
with Section 2.10.
Section 2.13. CUSIP Numbers.
The Company may issue the Securities with one or more "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
Section 2.14. Ranking.
The indebtedness of the Company arising under or in connection with this
Indenture and every outstanding Security issued under this Indenture from time
to time constitutes and will constitute a senior unsecured general obligation
of the Company, ranking equally with other existing and future
senior unsecured
Indebtedness of the Company and ranking senior in right of payment to
any future Indebtedness of the Company that is expressly made subordinate
to the Securities by the terms of such Indebtedness.
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ARTICLE III
REDEMPTION
SECTION 3.1. The Company's Right to Redeem; Notice to Trustee.
Prior to July 15, 2008, the Securities will not be
redeemable at the Company's option. On or after July 15, 2008,
the Company, at its option, may redeem the Securities in accordance
with this Article III for cash at any time as a whole, or from time to time in
part, at a redemption price equal to 100% of the principal amount of those
Securities plus any accrued and unpaid interest and Additional Amounts, if
any, on those Securities to, but excluding, the Redemption Date
(the "Redemption Price").
In the event that the Company elects to redeem the Securities on a
date that is after any Regular Record Date but on or before the corresponding
Interest Payment Date, the Company shall be required to pay any accrued and
unpaid interest and Additional Amounts, if any, to the holder of the
redeemed Security and not the Holder on the corresponding Regular Record Date.
If the Company elects to redeem Securities, it shall notify the
Trustee in writing of the Redemption Date, the principal amount of
Securities to be redeemed and the Redemption Price. The Company shall give
this notice to the Trustee by a Company Order at least 40 days before the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee).
Section 3.2. Selection of Securities to Be Redeemed.
If fewer than all of the outstanding Securities are to be redeemed,
unless the procedures of the Depositary provide otherwise, the Trustee shall
select the Securities to be redeemed by lot or on a pro rata basis or by
another method the Trustee considers fair and appropriate. The Trustee
shall make the selection within five Business Days after it receives the
notice provided for in Section 3.1 from outstanding Securities not
previously called for redemption.
Securities and portions of Securities that the Trustee selects shall
be in principal amounts of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption. The Trustee
shall notify the Company promptly of the Securities or portions of the
Securities to be redeemed.
Securities and portions of Securities that are to be redeemed are
convertible by the Holder until 5:00 p.m., New York City time, on the second
Business Day immediately preceding the Redemption Date. If any Security
selected for partial redemption is converted in part before termination of the
conversion right with respect to the portion of the Security so selected,
the converted portion of such Security shall be deemed (so far as may be) to be
the portion selected for redemption. Securities which have been converted
during a selection of Securities to be redeemed may be treated by the
Trustee as outstanding for the purpose of such selection.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first-class mail, postage
prepaid, to each Holder of Securities to be redeemed.
The notice of redemption shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) the Conversion Rate and any adjustments thereto;
(d) the name and address of the Paying Agent and Conversion Agent;
(e) that Securities called for redemption may be converted at any time prior to
5:00 p.m., New York City time, on the second Business Day preceding the
Redemption Date;
20
(f) that Holders who want to convert their Securities must satisfy the
requirements set forth in Article XII;
(g) that Securities called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price;
(h) if fewer than all of the outstanding Securities are to be redeemed, the
certificate numbers, if any, and principal amounts of the particular Securities
to be redeemed;
(i) that, unless the Company defaults in making payment of such Redemption
Price, interest and Additional Amounts, if any, on Securities called for
redemption will cease to accrue on and after the Redemption Date;
(j) the CUSIP number(s) of the Securities; and
(k) any other information the Company wants to present.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company makes such request at least five Business Days
(unless a shorter period shall be satisfactory to the Trustee) prior to the
date by which such notice of redemption must be given to Holders in
accordance with
this Section 3.3; provided, further, that the text of the notice of redemption
shall be prepared by the Company.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is given, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price,
except for Securities which are converted in accordance with the terms of
this Indenture. Upon surrender to the Paying Agent, such Securities shall be
paid at the Redemption Price.
Section 3.5. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the applicable
Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an
amount of cash (in immediately available funds if deposited on the
Redemption Date) sufficient to pay the aggregate Redemption Price of all
Securities or portions thereof which are to be redeemed as of such
Redemption Date other than Securities or portions of Securities called
for redemption which on or prior thereto have been delivered by the Company to
the Trustee for cancellation or have been converted.
If the Paying Agent holds, in accordance with the terms hereof, at 10:00
a.m., New York City time, on the applicable Redemption Date, cash sufficient
to pay the Redemption Price of any Securities for which notice of redemption
is given, then, on such Redemption Date, such Securities will cease to
be
outstanding and interest and Additional Amounts, if any, on such Securities
will cease to accrue, whether or not such Securities are delivered to the
Paying Agent, and the rights of the Holders in respect thereof shall terminate
(other than the right to receive the Redemption Price upon delivery of such
Securities).
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Section 3.6. Securities Redeemed in Part.
Any Certificated Security which is to be redeemed only in part shall be
surrendered at the office of the Paying Agent and the Company shall execute
and the Trustee shall authenticate and deliver to the Holder of such Security,
without charge, a new Security or Securities, of any authorized
denomination as
requested by such Holder in aggregate principal amount equal to the unredeemed
portion of the Security surrendered.
Section 3.7. Repayment to the Company.
To the extent that the aggregate amount of cash deposited by the
Company pursuant to Section 3.5 exceeds the aggregate Redemption Price of the
Securities or portions thereof which the Company is redeeming as of the
Redemption Date, then, promptly after the Redemption Date, the Paying Agent
shall return any such excess to the Company.
Section 3.8. No Sinking Fund.
The Securities shall not have a sinking fund.
ARTICLE IV
PURCHASE AT THE OPTION OF HOLDERS ON SPECIFIC DATES
SECTION 4.1. Optional Put.
(a) Each Holder shall have the right, at the Holder's option, but
subject to the provisions of this Section 4.1, to require the Company to
purchase, and upon the exercise of such right, the
Company shall purchase, all of such Holder's Securities not theretofore called
for redemption, or any portion of the Principal Amount at Issuance thereof that
is equal to $1,000 or an integral multiple thereof, as directed by such Holder
pursuant to this Section 4.1, on each of July 16, 2008, July 16, 2013 and July
16, 2018 (each a Purchase Date"). The Company shall be required to purchase
such Securities at a purchase price in cash equal to 100% of the Principal
Amount at Issuance plus any accrued and unpaid cash interest (including any
Additional Amounts) to, but excluding, the Purchase Date (the "Purchase Price").
(b) No later than 20 Business Days prior to each Purchase Date, the Company
shall mail a written notice of the purchase right by first class mail to the
Trustee (and the Paying Agent if the Trustee is not then acting as a Paying
Agent) and to each Holder at its address shown in the Security Register of the
Registrar, and to beneficial owners as required by applicable law. The notice
shall include a form of Purchase Notice to be completed by the Holder and shall
briefly state, as applicable:
(i) the date by which the Purchase Notice must be delivered to the
Paying Agent in order for a Holder to exercise the purchase
right pursuant to this Section 4.1;
(ii) the Purchase Date;
(iii) the Purchase Price;
(iv) the name and address of the Paying Agent and the Conversion
Agent;
(v) the Conversion Rate and any adjustments thereto;
(vi) that the Securities as to which a Purchase Notice has been
22
given may be converted into Common Stock if they are otherwise convertible
pursuant to Article XII of this Indenture only if the Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;
(vii) that the Securities must be surrendered to the Paying
Agent to collect payment;
(viii) that the Purchase Price for any Security as to which a
Purchase Notice has been duly given and not withdrawn will be paid promptly
following the later of the Purchase Date and the time of surrender of such
Security as described in
Section 4.1(b)(vii);
(ix) the procedures the Holder must follow to exercise its rights under this
Section 4.1 and a brief description of such rights; (x) briefly, the conversion
rights of the Securities, if any, and that the Holder must satisfy the
requirements set forth in the Indenture in order to convert the Securities;
(xi) the procedures for withdrawing a Purchase Notice, including a form of
notice of withdrawal;
(xii) that, unless the Company defaults in making payment of
such Purchase Price, interest (including any Additional Amounts), if any, on
Securities surrendered for purchase by the Company will cease to accrue on and
after the Purchase Date; and
(xiii) the CUSIP number(s) of the Securities.
At the Company's request, the Trustee shall give the notice of
purchase right in the Company's name and at the Company's expense;
provided, however, that the Company makes such request at least five Business
Days (unless a shorter period shall be satisfactory to the Trustee) prior to
the date by which such notice of purchase right must be given to the Holders
in accordance with this Section 4.1(b); provided, further, that the text of
the notice of purchase right shall be prepared by the Company.
If any of the Securities is in the form of a Global Security, then the
Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to the purchase of Global Securities.
Simultaneously with delivering the written notice pursuant to this
Section 4.1(b), the Company shall publish a notice containing all
information specified in such written notice in a newspaper of general
circulation in New York, New York, or publish such information on the
Company's website, or through such other public medium that reasonably
could be expected to inform Holders of such information.
(c) A Holder may exercise its rights specified in clause (a) of this
Section 4.1 upon delivery of a written notice (which shall
be in substantially the form included on the reverse side of the Securities
entitled "Option of Holder to Elect Purchase" hereto and which may be delivered
by letter, overnight courier, hand delivery, facsimile transmission or in any
other written form and, in the case of Global Securities, may be delivered
electronically or by other means in accordance with the Depositary's customary
procedures) of the exercise of such rights (a "Purchase Notice") to the Paying
Agent at any time from the opening of business on the date that is 20 Business
Days prior to the relevant Purchase Date until the close of business on the
fifth Business Day prior to such Purchase Date.
The Purchase Notice delivered by a Holder shall state (i) the relevant
Purchase Date, (ii) if certificated Securities, the certificate number or
numbers of the Security or Securities which the Holder will deliver to
be purchased (if not
certificated, the notice must comply with Applicable Procedures), (iii) the
portion of the Principal Amount at Issuance of the Security which the
Holder will deliver to be purchased, which portion must be $1,000 or an
integral multiple thereof, and (iv) that such Security shall be purchased
pursuant to the terms and conditions specified in the Securities and this
Indenture.
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Delivery of a Security to the Paying Agent by book-entry transfer or
physical delivery prior to, on or after the applicable Purchase Date
(together with all necessary
endorsements) at the offices of the Paying Agent is a condition to receipt
by the Holder of the Purchase Price therefor; provided, however, that
such Purchase Price shall be so paid pursuant to this Section 4.1 only if
the Security so delivered to the Paying Agent shall conform in all respects to
the description thereof in the related Purchase Notice, as determined by
the Company.
The Company shall purchase from the Holder thereof, pursuant to this
Section 4.1, a portion of a Security if the Principal Amount at Issuance of
such portion is $1,000 or an integral multiple of $1,000. Provisions of
this Indenture that apply to the purchase of all of a Security pursuant to
Sections 4.1 through 4.7 also apply to the purchase of such portion of such
Security.
Notwithstanding anything contained herein to the
contrary, any Holder delivering to the Paying Agent a Purchase Notice
contemplated by this clause (c) shall have the right to withdraw such
Purchase Notice in whole or in a portion thereof that is a Principal Amount
at Issuance of $1,000 or in an integral multiple thereof at any time
prior to the close of business on the Business Day next preceding the
Purchase Date by delivery of a written notice of withdrawal to the Paying Agent
in accordance with Section 4.2.
The Paying Agent shall promptly notify the Company of the receipt by it
of any Purchase Notice or written withdrawal thereof.
Anything herein to the contrary notwithstanding, in the case of Global
Securities, any Purchase Notice may be delivered or withdrawn and such
Securities may be surrendered or delivered for purchase in accordance with the
Applicable Procedures as in effect from time to time.
Section 4.2. Effect of Purchase Notice.
Upon receipt by the Paying Agent of the Purchase Notice specified in
Section 4.1(c), the Holder of the Security in respect of which such
Purchase Notice was given shall (unless such Purchase Notice is withdrawn as
specified in the following paragraph) thereafter be entitled to receive solely
the Purchase Price with respect to such Security. Such Purchase Price shall
be paid to such Holder, subject to receipt of cash by the Paying Agent,
promptly following the later of (a) the Purchase Date with respect to such
Security (provided the conditions in
Section 4.1(c) have been satisfied) and (b) the time of book-
entry transfer or delivery of such Security to the Paying Agent by the
Holder thereof in the manner required by Section 4.1(c). Securities in respect
of which a Purchase Notice has been given by the Holder thereof may not
be converted pursuant to
Article XII on or after the date of the delivery of such Purchase Notice unless
such Purchase Notice has first been validly withdrawn as specified in the
following paragraph.
A Purchase Notice may be withdrawn by means of a written notice
(which may be delivered by letter, overnight courier, hand delivery,
facsimile transmission or in any other written form and, in the case of
Global Securities, may be delivered electronically or by other means in
accordance with the Depositary's customary procedures) of withdrawal delivered
by the Holder to the Paying Agent at any time prior to the close of
business on the Business Day immediately preceding the Purchase Date,
specifying (a) the Principal Amount at Issuance of the Security or portion
thereof (which must be a Principal Amount at Issuance of $1,000 or an integral
multiple of $1,000 in excess thereof) with respect to which such notice of
withdrawal is being submitted, (b) if certificated Securities have been issued,
the certificate numbers of the withdrawn Securities, or if not
certificated, such notice must comply with Applicable Procedures, and (c) the
Principal Amount at Issuance, if any, which remains subject to the Purchase
Notice.
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Section 4.3. Deposit of Purchase Price.
Prior to 10:00 a.m., New York City time, on the applicable
Purchase Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is acting as the
Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an
amount of cash (in immediately available funds if deposited on such
Business Day) sufficient to pay the aggregate Purchase Price of all the
Securities or portions thereof which are to be purchased as of such Purchase
Date.
If the Paying Agent holds, in accordance with the terms hereof, at 10:00
a.m., New York City time, on the applicable Purchase Date, cash sufficient to
pay the Purchase Price of any Securities for which a Purchase Notice has been
tendered and not withdrawn pursuant to Section 4.2, then, on such Purchase
Date,
such Securities will cease to be outstanding and interest and Additional
Amounts, if any, on such Securities will cease to accrue, whether or not
such Securities are delivered to the Paying Agent, and the rights of the
Holders in respect thereof shall terminate (other than the right to receive
the Purchase Price upon delivery of such Securities).
The Company shall publicly announce the Principal Amount at
Issuance of Securities purchased on the applicable Purchase Date on such
date or as soon as practicable thereafter, by publishing a notice containing
such information in a newspaper of general circulation in New York, New York
or by publishing such information on the Company's website, or through such
other public medium that reasonably could be expected to inform Holders of such
information.
Section 4.4. Securities Purchased in Part.
Any Certificated Security which is to be purchased only in part
shall be surrendered at the office of the Paying Agent (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing)
and promptly after the applicable Purchase Date the Company shall execute
and the Trustee shall authenticate and deliver to the Holder of such
Security, without charge, a new Security or Securities, of any authorized
denomination or denominations as may be requested by such Holder, in
aggregate principal amount equal to, and in exchange for, the portion of
the Principal Amount at Issuance of the Security so surrendered that is not
purchased.
Section 4.5. Covenant to Comply With Securities Laws Upon Purchase
of Securities.
When complying with the provisions of Section 4.1 hereof
(provided that such offer or purchase constitutes an "issuer tender offer"
for purposes of Rule 13e-4 (which term, as used herein, includes any successor
provision thereto) under the Exchange Act at the time of such offer or
purchase), and subject
to any exemptions available under applicable law, the Company shall:
(a) comply with Rule 13e-4 and Rule 14e-1 (or any successor provision)
under the Exchange Act;
(b) file the related Schedule TO (or any successor schedule,
form or report) under the Exchange Act; and
(c) otherwise comply with all Federal and state securities laws
so as to permit the rights and obligations under Article IV to be exercised in
the time and in the manner specified therein.
Section 4.6. Repayment to the Company.
To the extent that the aggregate amount of cash deposited by
the Company pursuant to Section 4.3 exceeds the aggregate Purchase Price of
the Securities or portions thereof which the Company is obligated to
purchase as of the applicable Purchase Date, then, promptly after such
Purchase Date, the Paying Agent shall return any such excess to the Company.
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Section 4.7. No Purchase Upon Event of Default. There shall be no
purchase of any Securities pursuant to Article IV if there has
occurred (prior to, on or after, as the case may be, the giving by each of the
Holders of such Securities of the required Purchase Notice but, in any event,
prior to the applicable Purchase Date) and is continuing, as of such Purchase
Date, an
Event of Default (other than a default in the payment of the Purchase Price with
respect to such Securities). The Paying Agent will promptly return to the
respective Holders thereof any Securities (a) with respect to which a Purchase
Notice has been delivered in compliance with this Indenture, or (b) held by it
during the continuance of an Event of Default (other than a default in the
payment of the Purchase Price with respect to such Securities), in which case,
upon such return, the Purchase Notice with respect thereto shall be deemed to
have been withdrawn.
ARTICLE V
PURCHASE AT THE OPTION OF HOLDERS
UPON A FUNDAMENTAL CHANGE
SECTION 5.1. Fundamental Change Put.
(a) In the event that a Fundamental Change shall occur, each Holder
shall have the right, at the Holder's option, but subject
to the provisions of this Section 5.1, to require the Company to purchase, and
upon the exercise of such right, the Company shall purchase, all of such
Holder's Securities not theretofore called for redemption, or any portion of the
Principal Amount at Issuance thereof that is equal to $1,000 or an integral
multiple thereof, as directed by such Holder pursuant to this Section 5.1, on
the date (the "Fundamental Change Purchase Date") that is a Business Day no
later than 35 Business Days after the date of notice pursuant to Section
5.1(b) of the occurrence of a
Fundamental Change (subject to extension to comply with applicable law). The
Company shall be required to purchase such Securities at a purchase price in
cash equal to 100% of the Principal Amount at Issuance plus any accrued and
unpaid interest (including any Additional Amounts) to, but excluding, the
Fundamental Change Purchase Date (the "Fundamental Change Purchase Price"). In
the event that a Fundamental Change Purchase Date is a date that is after any
Regular Record Date but on or before the corresponding Interest Payment Date,
the Company shall be required to pay accrued and unpaid interest and Additional
Amounts, if any, to the holder of the repurchased Security and not the Holder on
the Regular Record Date.
(b) No later than 20 days after the occurrence of a Fundamental Change, the
Company shall mail a written notice of the Fundamental Change by first class
mail to the Trustee (and the Paying Agent if the Trustee is not then acting as
Paying Agent) and to each Holder at its address shown in the Security Register
of the Registrar, and to beneficial owners as required by applicable law. The
notice shall include a form of Fundamental Change Purchase Notice to be
completed by the Holder and shall briefly state, as applicable:
(i) the date of such Fundamental Change and, briefly, the events
causing such Fundamental Change;
(ii) the date by which the Fundamental Change Purchase Notice
must be delivered to the Paying Agent in order for a Holder to exercise the
purchase right pursuant to this Section 5.1; (iii) the Fundamental Change
Purchase Date;
(iv) the Fundamental Change Purchase Price;
(v) the name and address of the Paying Agent and Conversion Agent;
(vi) the Conversion Rate and any adjustments thereto;
(vii) that the Securities as to which a Fundamental Change
Purchase Notice has been given may be converted into Common Stock pursuant to
Article XII of this Indenture only if the Fundamental Change Purchase Notice has
been withdrawn in accordance with the terms of this Indenture;
26
(viii) that the Securities must be surrendered to the Paying
Agent to collect payment;
(ix) that the Fundamental Change Purchase Price for any Security as to which a
Fundamental Change Purchase Notice has been duly given and not withdrawn will be
paid promptly following the later of the Fundamental Change Purchase Date and
the time of surrender of such Security as described in Section 5.1(b)(viii);
(x) the procedures the Holder must follow to exercise rights under this Section
5.1 and a brief description of such rights; (xi) briefly, the conversion rights
of the Securities, and that the Holder must satisfy the requirements set forth
in the Indenture in order to convert the Securities;
(xii) the procedures for withdrawing a Fundamental Change
Purchase Notice, including a form of notice of withdrawal;
(xiii) that, unless the Company defaults in making payment of
such Fundamental Change Purchase Price, interest (including any Additional
Amounts), if any, on Securities surrendered for purchase by the Company will
cease to accrue on and after the Fundamental Change Purchase Date; and
(xiv) the CUSIP number(s) of the Securities.
At the Company's request, the Trustee shall give the notice of purchase
right in the Company's name and at the Company's expense; provided, however,
that the Company makes such request at least five Business Days (unless a
shorter period shall be satisfactory to the Trustee) prior to the date by which
such notice of purchase right must be given to the Holders in accordance with
this Section 5.1(b); provided, further, that the text of the notice of purchase
right shall be prepared by the Company.
If any of the Securities is in the form of a Global Security, then the
Company shall modify such notice to the extent necessary to accord with the
procedures of the Depositary applicable to the purchase of Global Securities.
Simultaneously with delivering the written notice pursuant to this
Section 5.1(b), the Company shall publish a notice containing all
information specified in such written notice in a newspaper of general
circulation in New York, New York or publish such information on the
Company's website, or through such other public medium that reasonably
could be expected to inform Holders of such information.
(c) A Holder may exercise its rights specified in clause (a) of this
Section 5.1 upon delivery of a written notice (which shall
be in substantially the form included on the reverse side of the Securities
entitled "Option of Holder to Elect Purchase" hereto and which may be delivered
by letter, overnight courier, hand delivery, facsimile transmission or in any
other written form and, in the case of Global Securities, may be delivered
electronically or by other means in accordance with the Depositary's customary
procedures) of the exercise of such rights (a "Fundamental Change Purchase
Notice") to the Paying Agent at any time on or before the 30th Business Day
after the date of the Company's notice of the Fundamental Change (subject to
extension to comply with applicable law).
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The Fundamental Change Purchase Notice delivered by a Holder shall state
(i) if certificated Securities, the certificate number or numbers of the
Security or Securities which the Holder will deliver to be purchased (if not
certificated, the notice must comply with Applicable Procedures), (ii) the
portion of the Principal Amount at Issuance of the Security which the Holder
will deliver to be purchased, which portion must be $1,000 or an integral
multiple thereof, and (iii) that such Security shall be purchased pursuant to
the terms and conditions specified
in the Securities and this Indenture.
Delivery of a Security to the Paying Agent by book-entry transfer or
physical delivery prior to, on or after the Fundamental Change Purchase Date
(together with all necessary endorsements) at the offices of the Paying Agent is
a condition to receipt by the Holder of the Fundamental Change Purchase Price
therefor; provided, however, that such Fundamental Change Purchase Price shall
be so paid pursuant to this Section 5.1 only if the Security so delivered to the
Paying Agent shall conform in all respects to the description thereof in the
related Fundamental Change Purchase Notice, as determined by the Company.
The Company shall purchase from the Holder thereof, pursuant to this
Section 5.1, a portion of a Security if the Principal Amount at Issuance of such
portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture
that apply to the purchase of all of a Security pursuant to
Sections 5.1 through 5.6 also apply to the purchase of such
portion of such Security.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent a Fundamental Change Purchase Notice contemplated by this
clause (c) shall have the right to withdraw such Fundamental Change Purchase
Notice in whole or in a portion thereof that is a Principal Amount at Issuance
of $1,000 or in an integral multiple thereof at any time prior to the close of
business on the Business Day next preceding the Fundamental Change Purchase Date
by delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 5.2.
A Paying Agent shall promptly notify the Company of the receipt by it of
any Fundamental Change Purchase Notice or written withdrawal thereof.
Anything herein to the contrary notwithstanding, in the case of Global
Securities, any Fundamental Change Purchase Notice may be delivered or
withdrawn and such Securities may be surrendered or delivered for purchase
in accordance with the Applicable Procedures as in effect from time to
time.
Section 5.2. Effect of Fundamental Change Purchase Notice.
Upon receipt by the Paying Agent of the Fundamental
Change Purchase Notice specified in Section 5.1(c), the Holder of
the Security in respect of which such Fundamental Change Purchase Notice was
given shall (unless such Fundamental Change Purchase Notice is withdrawn as
specified in the following paragraph) thereafter be entitled to receive the
Fundamental Change Purchase Price with respect to such Security. Such
Fundamental Change Purchase Price shall be paid to such Holder, subject to
receipt of cash by the Paying Agent, promptly following the later of
(a) the Fundamental Change Purchase Date with respect to such Security (provided
the conditions in Section 5.1(c) have been satisfied) and (b) the time of
book-entry transfer or delivery of such Security to the Paying Agent by the
Holder thereof in the manner required by Section 5.1(c). Securities in respect
of which a Fundamental Change Purchase Notice has been given by the Holder
thereof may not be converted pursuant to Article XII on or after the date of the
delivery of such Fundamental Change Purchase Notice unless such Fundamental
Change Purchase Notice has first been validly withdrawn as specified in the
following paragraph.
A Fundamental Change Purchase Notice may be withdrawn
by means of a written notice (which may be delivered by letter, overnight
courier, hand delivery, facsimile transmission or in any other written form
and, in the case of Global Securities, may be delivered electronically or by
other means in accordance with the Depositary's customary procedures) of
withdrawal delivered by the Holder to the Paying Agent at any time prior to the
close of business on the Business Day immediately preceding the
Fundamental Change Purchase Date, specifying (a) the Principal Amount at
Issuance of the Security or portion thereof (which must be a Principal Amount
at Issuance of $1,000 or an integral multiple of $1,000 in excess thereof)
with respect to which such notice of withdrawal is being submitted, (b) if
certificated Securities have been issued, the certificate numbers of the
withdrawn Securities, or if not certificated, such notice must comply with
Applicable Procedures, and (c) the Principal Amount at Issuance, if any,
which remains subject to the Fundamental Change Purchase Notice.
28
Section 5.3. Deposit of Fundamental Change Purchase Price.
Prior to 10:00 a.m., New York City time, on the applicable
the Fundamental Change Purchase Date or the Business
Day following the Fundamental Change Purchase Date, the Company shall deposit
with the Paying Agent (or if the Company or a Subsidiary or an Affiliate
of either of them is acting as the Paying Agent, shall segregate and hold in
trust as provided in Section 2.4) an amount of cash (in immediately available
funds if deposited on such Business Day) sufficient to pay the aggregate
Fundamental Change Purchase Price of all the Securities or portions
thereof which are to be purchased as of such Fundamental Change Purchase Date.
If the Paying Agent holds, in accordance with the terms hereof, at
10:00 a.m., New York City time, on the applicable Fundamental Change
Purchase Date, cash sufficient to pay the Fundamental Change Purchase Price
of any Securities for which a Fundamental Change Purchase Notice has been
tendered and not withdrawn pursuant to Section 5.2, then, on such
Fundamental Change Purchase Date, such Securities will cease to
be
outstanding and interest and Additional Amounts, if any, on such Securities
will cease to accrue, whether or not such Securities are delivered to the
Paying Agent, and the rights of the Holders in respect thereof shall terminate
(other than the right to receive the Fundamental Change Purchase Price
upon delivery of such Securities).
The Company shall publicly announce the Principal Amount at
Issuance of Securities purchased as a result of such Fundamental Change on
or as soon as practicable after the Fundamental Change Purchase Date
by publishing a notice containing such information in a newspaper of
general circulation in New York, New York or by publishing such information on
the Company's website, or through such other public medium that reasonably
could be expected to inform Holders of such
information.
Section 5.4. Securities Purchased in Part.
Any Certificated Security that is to be purchased only in part
shall be surrendered at the office of the Paying Agent (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing)
and promptly after the Fundamental Change Purchase Date the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Security, without charge, a new Security or
Securities, of any authorized denomination or denominations as may be
requested by such Holder, in aggregate Principal Amount at Issuance equal to,
and in exchange for, the portion of the Principal Amount at Issuance of the
Security so surrendered that is not purchased.
Section 5.5. Covenant to Comply With Securities Laws Upon
Purchase of Securities.
When complying with the provisions of Section 5.1 hereof
(provided that such offer or purchase constitutes an "issuer tender offer"
for purposes of Rule 13e-4 (which term, as used herein, includes any successor
provision thereto) under the Exchange Act at the time of such offer or
purchase), and subject
to any exemptions available under applicable law, the Company shall:
(a) comply with Rule 13e- 4 and Rule 14e-1 (or any successor provision)
under the Exchange Act;
(b) file the related Schedule TO (or any successor schedule,
form or report) under the Exchange Act; and
(c) otherwise comply with all Federal and state securities laws
so as to permit the rights and obligations under Article V to be exercised in
the time and in the manner specified therein.
Section 5.6. Repayment to the Company.
To the extent that the aggregate amount of cash deposited by
the Company pursuant to Section 5.3 exceeds the aggregate Fundamental Change
Purchase Price of the Securities or portions thereof which the Company is
obligated to purchase as of the Fundamental Change Purchase Date then,
promptly after the Fundamental Change Purchase Date, the Paying Agent shall
return any such excess to the Company.
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ARTICLE VI
COVENANTS
SECTION 6.1. Payment of Securities.
The Company shall promptly make all payments in respect of the
Securities on the dates and in the manner provided in the Securities or
pursuant to this Indenture. Principal amount, Redemption Price, Purchase
Price and Fundamental Change Purchase Price and accrued and unpaid interest and
Additional Amounts, if any, shall be considered paid on the applicable date
due if by 10:00 a.m., New York City time, on such date the Paying Agent
holds, in accordance with this Indenture, cash or securities, if permitted
hereunder, sufficient to pay all such amounts then due. The Company shall, to
the fullest extent permitted by law, pay interest on overdue principal and
overdue installments of
interest and Additional Amounts, if any, at the rate borne by the Securities
per annum. All references in this Indenture or the Securities to interest
shall be deemed to include Additional Amounts, if any, payable pursuant to
the Registration Rights Agreement.
Payment of the principal of and interest and Additional Amounts, if
any, on the Securities shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts or in Applicable Stock, as the case may be.
The Company shall pay interest and Additional Amounts, if any, on
the Securities to the Person in whose name the Securities are registered at
the close of business on the Regular
Record Date next preceding the corresponding Interest Payment Date. Any
such interest and Additional Amounts, if any, not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may be paid (a) to the Person in whose name the Securities are
registered at the close of business on a Special Record Date for the payment of
such defaulted interest and Additional Amounts, if any, to be fixed by the
Trustee, notice whereof will be given to the Holders not less than 10 calendar
days prior to such Special Record Date or (b) at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange.
The Holder must surrender the Securities to the Paying Agent to
collect payment of principal. Payment of interest and Additional Amounts, if
any, on Certificated Securities will be made by check mailed to the
address of the Person entitled thereto as such address appears in the
Register, and payment of interest and Additional Amounts, if any, on
Certificated Securities in aggregate principal amount in excess of $5,000,000
will be made by wire transfer in immediately available funds at the election
of such Holder. Notwithstanding the foregoing, so long as the Securities are
registered in the name of a Depositary or its nominee, all payments with respect
to the Securities shall be made by wire transfer of immediately available funds
to the account of the Depositary or its nominee.
Section 6.2. SEC and Other Reports to the Trustee.
The Company shall ensure delivery to the Trustee within 15 calendar
days after it files such annual and quarterly reports, information,
documents and other reports with the SEC, copies of its annual report and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act in accordance with TIA Section 314(a). In the
event the Company is at any time no longer
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, it shall continue to provide the Trustee with reports containing
substantially the same information as would have been required to be filed
with the SEC had the Company continued to have been subject to such
reporting requirements. In such event, such reports shall be provided at the
times the Company would have been required to provide reports had it
continued to have been subject to such reporting requirements. The Company
also shall comply with the other provisions of TIA Section 314(a). 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 conclusively on Officers' Certificates). The
Trustee shall have no duty or responsibility to review such reports,
information or documents.
30
Section 6.3. Compliance Certificate.
The Company shall deliver to the Trustee within 120 calendar days
after the end of each fiscal year of the Company (beginning with the fiscal
year ending December 31, 2003) an Officers' Certificate, stating whether or
not to the knowledge of the signers thereof, the Company is in Default in the
performance and observance of any of the terms, provisions and conditions of
this Indenture and if the Company shall be in Default, specifying all such
Defaults and the nature and status thereof of which they may have knowledge.
Section 6.4. Further Instruments and Acts.
Upon request of the Trustee, or as otherwise necessary, the Company will
execute and deliver such further instruments and do such further acts as may
be reasonably necessary or proper to carry out more effectively the purposes
of this Indenture.
Section 6.5. Maintenance of Office or Agency of the Trustee,
Registrar, Paying Agent and Conversion Agent.
The Company will maintain in the Borough of Manhattan,
New York, New York, an office or agency of the Trustee, Registrar,
Paying Agent and Conversion Agent where Securities may
be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer, exchange, redemption, purchase or conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The office of JPMorgan Chase Bank, 4 New
York Plaza, 15th Floor, New York, New York 10004 (Attention: Institutional
Trust Services), shall initially be such office or agency for all of the
aforesaid purposes. The Company shall give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency (other than a change in the location of the office of the Trustee).
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 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, New York, New York, for such
purposes.
Section 6.6. Delivery of Information Required Under Rule 144A.
At any time when the Company is not subject to
Section 13 or 15(d) of the Exchange Act, upon the request of a
Holder or any beneficial owner of Securities or holder or beneficial
owner of Common Stock issued upon conversion thereof, the Company will
promptly furnish or cause to be furnished the information required pursuant
to Rule 144A(d)(4) under the Securities Act to such Holder or any
beneficial owner of Securities or holder or beneficial owner of Common Stock,
or to a prospective purchaser of any such security designated by any such
holder, as the case may be, to the extent required to permit compliance by
such Holder or holder with Rule 144A under the Securities Act in
connection with the resale of any such security. Whether a person is a
beneficial owner shall be determined by the Company to the
Company's reasonable
satisfaction.
Section 6.7. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or
31
advantage of, any stay or extension law or any usury or other law wherever
enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the principal amount,
Redemption Price, Purchase Price or Fundamental Change Purchase Price in respect
of Securities, or any interest and Additional Amounts, if any, on such amounts,
as contemplated herein, or which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Section 6.8. Statement by Officers as to Default.
The Company shall deliver to the Trustee, as soon as practicable
and in any event within five Business Days after the Company becomes aware of
the occurrence of any Default or Event of Default, an Officers' Certificate
setting forth the details of such Default or Event of Default and the action
which the Company proposes to take with respect thereto.
ARTICLE VII
SUCCESSOR CORPORATION
SECTION 7.1. When Company May Merge or Transfer Assets. The Company shall not
consolidate with or merge with or
into any other person or convey, transfer, sell, lease or otherwise
dispose of all or substantially all of its properties and assets to any person,
unless:
(a) either (i) the Company shall be the continuing corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance, transfer,
sale, lease or other disposition all or substantially all of the properties and
assets of the Company substantially as an entirety (1) shall be
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (2) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
reasonably satisfactory to the Trustee, all of the obligations of the Company
under the Securities and this Indenture;
(b) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer, sale, lease or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this Article VII and that all conditions precedent herein
provided for relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of the properties and assets of one or more Subsidiaries
(other than to the Company or another Subsidiary), which, if such assets were
owned by the Company, would constitute all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
The successor Person formed by such consolidation or
into which the Company is merged or the successor Person to which such
conveyance, transfer, 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 this Indenture with the same effect as if such successor had
been named as the Company herein; and thereafter, except in the case
of a conveyance, transfer, sale, lease or other disposition and any
obligations the Company may have under a supplemental indenture, the Company
shall be discharged from all obligations and covenants under this
Indenture and the Securities. Subject to Section 11.6, the Company, the
Trustee and the successor Person shall enter into a supplemental indenture
to evidence the succession and substitution of such successor Person and
such discharge and release of the Company.
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ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.1. Events of Default.
So long as any Securities are outstanding, each of the following
shall be an "Event of Default":
(a) the Company defaults in the payment of the principal amount of
any Security when the same becomes due and payable as therein provided or as
provided in this Indenture, whether at Stated
Maturity or by declaration of acceleration;
(b) the Company defaults in the payment of any accrued and
unpaid interest on any Security and Additional Amounts, if any, in each case,
when due and payable, and such default shall continue for a period of 30 days;
(c) the Company fails to convert any portion of the principal amount of any
Security following the exercise by the Holder of the right to convert such
Security into Common Stock pursuant to and in accordance with Article XII;
(d) the Company defaults in its obligation to redeem any Security, or any
portion thereof, called for redemption by the Company pursuant to and in
accordance with Article III;
(e) the Company defaults in its obligation to purchase any Security, or any
portion thereof, upon the exercise by the Holder of such Holder's right to
require the Company to purchase such Securities pursuant to and in accordance
with Article IV or Article V;
(f) the Company defaults in its obligation to provide notice in the event of a
Fundamental Change in accordance with
Section 5.1(b);
(g) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company under this Indenture
(other than a default in the performance or breach of a covenant or agreement
which is specifically dealt with in clause (a), (b), (d) or (e)) and such
default or breach shall continue for a period of 30 days after written notice
has been given, by certified mail, (1) to the Company by the Trustee or (2) to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding;
(h) there shall have occurred a default under any credit agreement, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or any of its Subsidiaries
whether such Indebtedness now exists, or is created after the date of this
Indenture, which default (i) involves the failure to pay principal of or any
premium or interest on such Indebtedness when such Indebtedness becomes due and
payable at the stated maturity
thereof, and such default shall continue after any applicable grace period or
(ii) results in the acceleration of such Indebtedness unpaid prior to the stated
maturity thereof (without such acceleration being rescinded or annulled) and, in
the case of (i) or (ii), the principal amount of such Indebtedness, together
with the principal amount of any other Indebtedness so unpaid at its stated
maturity or the stated maturity of which has been so accelerated, aggregates
$5,000,000 or more;
(i) there shall be a failure by the Company or any of its Subsidiaries to pay
final judgments not covered by insurance aggregating in excess of $5,000,000,
which judgments are not paid, discharged or stayed for a period of 60 days;
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(j) the Company or any Designated Subsidiary, or any group of two or more
Subsidiaries that, taken as a whole, would constitute
a Designated Subsidiary, pursuant to or under or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of any order for relief against it in
an involuntary case or proceeding or the commencement of any case against it;
(iii) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(iv) makes a general assignment for the benefit of its creditors; (v) files a
petition in bankruptcy or answer or consent seeking reorganization or relief; or
(vi) consents to the filing of such petition or the appointment of or taking
possession by a Custodian; or
(k) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any Designated Subsidiary,
or any group of two or more Subsidiaries that, taken
as whole, would constitute a Designated Subsidiary, in an
involuntary case or proceeding, or adjudicates the Company or any Designated
Subsidiary, or any group of two or more Subsidiaries that, taken as whole, would
constitute a Designated Subsidiary, insolvent or bankrupt;
(ii) appoints a Custodian of the Company or any Designated
Subsidiary, or any group of two or more Subsidiaries that, taken as whole, would
constitute a Designated Subsidiary, or for any substantial part of its property;
or
(iii) orders the winding up or liquidation of the Company or
any Designated Subsidiary, or any group of two or more Subsidiaries that, taken
as whole, would constitute a Designated Subsidiary,
and the order of decree remains unstayed and in effect for 60 days.
Section 8.2. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 8.1(j) or (k)) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
Securities at the time outstanding by notice to the Company and the Trustee,
may declare the principal amount plus accrued and unpaid interest and
Additional Amounts, if any, on all the Securities to be immediately
due and payable. Upon such a declaration, such accelerated amount shall be
due and payable immediately.
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If an Event of Default specified in Section 8.1(j) or (k) occurs
and is continuing, the principal amount plus accrued and unpaid interest and
Additional Amounts, if any, on all the
Securities shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders.
The Holders of a majority in aggregate principal amount of the
Securities at the time outstanding, by notice to the Trustee (and without
notice to any other Holder) may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
the principal amount plus accrued and unpaid interest and Additional Amounts,
if any, that have become due solely as a result of acceleration and if
all amounts due to the Trustee under Section 9.7 have been paid. No
such rescission shall affect any
subsequent Default or impair any right consequent thereto.
Section 8.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may, but shall not be obligated to, pursue any available remedy to collect
the payment of the principal amount plus accrued and unpaid interest and
Additional Amounts, if any, on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee
does not possess any of the Securities or does not produce any of the
Securities in the proceeding. A delay or omission by the Trustee or any
Holder in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of, or
acquiescence in, the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
Section 8.4. Waiver of Past Defaults.
Subject to Sections 8.7 and 11.2, the Holders of a majority
in aggregate principal amount of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Holder), may waive
an existing Default and its consequences except:
(a) an Event of Default described in Section 8.1(a), (b), (d) or (e);
(b) a Default which constitutes a failure to convert any
Security in accordance with the terms of Article XII; or
(c) a Default in respect of any provision of this Indenture or the Securities,
which, under Section 11.2, cannot be amended or modified without the consent of
each Holder affected thereby.
When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right. This Section 8.4 shall be in lieu of Section 316(a)1(B) of
the TIA and such Section 316(a)1(B) is hereby expressly excluded from this
Indenture, as permitted by the TIA.
Section 8.5. Control by Majority.
The Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is prejudicial to the
rights of other Holders or would involve the Trustee in personal liability
unless the Trustee is offered indemnity satisfactory to it. This Section 8.5
shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A)
is hereby expressly excluded from this Indenture, as permitted by the TIA.
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Section 8.6. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(a) the Holder gives to the Trustee written notice stating that an Event
of Default is continuing;
(b) the Holders of at least 25% in aggregate principal amount of
the Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer to the Trustee security or indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after receipt
of such notice, request and offer of security or indemnity; and
(e) the Holders of a majority in aggregate principal amount of the Securities
at the time outstanding do not give the Trustee a direction inconsistent with
the request during such 60-day period.
A Holder may not use this Indenture to prejudice the rights of any
other Holder or to obtain a preference or priority over any other Holder.
Section 8.7. Rights of Holders to Receive Payment or to Convert.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of the principal amount, Redemption Price,
Purchase Price, Fundamental Change Purchase Price or interest and Additional
Amounts, if any, in respect of the Securities held by such Holder, on or
after the respective due dates expressed in the Securities and in this
Indenture, and to convert such Securities in accordance with Article XII,
or to bring suit for the enforcement of any such payment on or after such
respective dates or the right to convert, is absolute and unconditional and
shall not be impaired or affected adversely without the consent of such Holder.
Section 8.8. Collection Suit by Trustee.
If an Event of Default described in Section 8.1(a), (b), (d) or
(e) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or another
obligor on the Securities for the whole amount owing with respect to the
Securities and the amounts provided for in Section 9.7.
Section 8.9. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon
the Securities or the property of the Company or of such other obligor
or their creditors, the Trustee (irrespective of whether the principal
amount, Redemption Price, Purchase Price, Fundamental Change Purchase
Price or interest and Additional Amounts, if any, in respect of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective
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of whether the Trustee shall have made any demand on the Company for the
payment of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the
principal amount, Redemption Price, Purchase Price, Fundamental Change Purchase
Price, or interest and Additional Amounts, if
any, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel or any other amounts due the Trustee under
Section 9.7) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under
Section 9.7.
Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 8.10. Priorities.
If the Trustee collects any money pursuant to this Article
VIII, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under
Section 9.7;
SECOND: to Holders for amounts due and unpaid on the Securities
for the principal amount, Redemption Price, Purchase Price, Fundamental
Change Purchase Price or interest and Additional Amounts, if any, as the
case may be, ratably, without preference or priority of any kind,
according to such amounts due and payable on the Securities; and
THIRD: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section 8.10. At least 10 calendar days prior to
such record date, the Trustee shall mail to each Holder and the Company a
notice that states the record date, the payment date and the amount to be
paid.
Section 8.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the
filing by any party litigant (other than the Trustee) in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess
reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party litigant. This
Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 8.7 or a suit by Holders of more than 10% in aggregate
principal amount of the Securities at the time outstanding. This
Section 8.11 shall be in lieu of Section 315(e) of the TIA and
such Section 315(e) is hereby expressly excluded from this Indenture, as
permitted by the TIA.
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ARTICLE IX
TRUSTEE
SECTION 9.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its
exercise of those rights and powers 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 an Event of Default:
(i) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates
or opinions furnished to the Trustee and conforming to the requirements of this
Indenture, but in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture, but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein.
This Section 9.1(b) shall be in lieu of Section 315(a) of the TIA and such
Section 315(a) is hereby expressly excluded from this Indenture, as permitted by
the TIA.
(c) The Trustee may not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to
act or its own willful misconduct, except that:
(i) this clause (c) does not limit the effect of clause (b) of this
Section 9.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith unless it is proved that the Trustee was grossly negligent in
ascertaining the pertinent facts; and (iii) the Trustee shall not be liable
with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.5.
Subparagraphs (c)(i), (ii) and (iii) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA, respectively, and such Sections 315(d)(1),
315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as
permitted by the TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of
this Section 9.1.
(e) The Trustee may refuse to perform any duty or exercise any
right or power or extend or risk its own funds or otherwise incur any financial
liability unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee (acting in any
capacity hereunder) shall be under no liability for interest on any money
received by it hereunder unless otherwise agreed in writing with the Company.
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Section 9.2. Rights of Trustee.
Subject to its duties and responsibilities under the
TIA,
(a) the Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, conclusively rely upon an Officers' Certificate;
(c) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
(d) the Trustee shall not be liable for any action taken, suffered, or omitted
to be taken by it in good faith which it believes to be authorized or within its
rights or powers conferred under this Indenture;
(e) the Trustee may consult with counsel selected by it and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in reliance on such advice or Opinion of Counsel;
(f) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request, order or direction of any
of the Holders, pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities which may be incurred therein or
thereby;
(g) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(h) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney at the
sole cost of the Company and shall incur no liability or additional liability of
any kind by reason of such inquiry or investigation; (i) the Trustee shall not
be deemed to have notice of any Default or Event of Default unless a Responsible
Officer of the
Trustee has actual knowledge thereof or unless written notice of any event which
is in fact such a default is received by the Trustee at the Corporate Trust
Office of the Trustee, and such notice references the Securities and this
Indenture;
(j) the rights, privileges, protections, immunities and benefits given to the
Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other person employed to act
hereunder; and
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(k) the Trustee may request that the Company deliver an Officers' Certificate
setting forth the names of individuals and/or titles of officers authorized at
such time to take specified actions pursuant to this Indenture, which Officers'
Certificate may be signed by any person authorized to sign an Officers'
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.
Section 9.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any
Paying Agent, Registrar, Conversion Agent or co-registrar may do the same
with like rights. However, the Trustee must comply with Sections 9.10 and
9.11.
Section 9.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use or application of the proceeds from the Securities, it shall not be
responsible for any statement in any registration statement for the Securities
under the Securities Act or in any offering document for the
Securities, this Indenture or the Securities (other than its certificate of
authentication), or the determination as to which beneficial owners are
entitled to receive any notices hereunder.
Section 9.5. Notice of Defaults.
If a Default occurs and if it is known to the Responsible
Officer of the Trustee, the Trustee shall give to each Holder notice of the
Default within 90 days after it occurs or, if later, within 15 days after it
is known to the Trustee, unless such Default shall have been cured or waived
before the giving of such notice. Notwithstanding the preceding sentence,
except in the case of a Default described in Section 8.1(a), (b), (d) or (e),
the Trustee may withhold the notice if and so long as the Responsible Officer in
good faith determines that withholding the notice is in the interest of the
Holders. The preceding sentence shall be in lieu of the proviso to Section
315(b) of the TIA and such proviso is hereby expressly excluded from this
Indenture, as permitted by the TIA.
Section 9.6. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall mail to each Holder a brief
report dated as of such May 15 that complies with TIA Section 313(a),
if required by such Section 313(a). The Trustee also shall comply
with TIA
Section 313(b).
A copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each securities exchange, if any, on which the Securities are
listed. The Company agrees to notify
the Trustee promptly whenever the Securities become listed on any securities
exchange and of any delisting thereof.
Section 9.7. Compensation and Indemnity.
The Company agrees to:
(a) pay to the Trustee from time to time such compensation as the Company
and the Trustee shall from time to time agree in writing for all services
rendered by it hereunder (which compensation shall not be limited (to the extent
permitted by law) by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) reimburse the Trustee upon its request for all expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the compensation and the expenses, advances and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its own gross negligence or willful
misconduct; and
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(c) fully indemnify the Trustee or any predecessor Trustee and their agents
for, and to hold them harmless against, any and all loss, damage, claim,
liability, cost or expense (including attorney's fees and expenses, and taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee)) incurred without gross negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself against any
claim (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, or in connection with enforcing the provisions of this Section
9.7.
With regard to its indemnification rights under Section 9.7(c) where
the Company has assumed the defense in any action or proceeding, the Trustee
shall have the right to employ separate counsel in any such action or
proceeding and participate in the investigation and defense thereof, and the
Company shall pay the reasonable fees and expenses of such separate counsel;
provided, however, that the Trustee may only employ separate counsel at the
expense of the Company if in the judgment of the Trustee (i) a conflict of
interest exists by reason of common representation or (ii) there are legal
defenses available to the Trustee that are different from or are in addition
to those available to the Company or if all parties commonly represented do
not agree as to the action (or inaction) of counsel.
To secure the Company's payment obligations in this Section
9.7, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee,
except that held in trust to pay the principal amount, Redemption Price,
Purchase Price, Fundamental Change Purchase Price or interest and Additional
Amounts, if any, as the case may be, on particular Securities.
The Company's payment obligations pursuant to this Section 9.7
shall survive the discharge of this Indenture and the resignation or removal of
the Trustee. When the Trustee incurs expenses after the occurrence of a
Default specified in Section 8.1(j) or (k), the expenses including the
reasonable
charges and expenses of its counsel, are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 9.8. Replacement of Trustee.
The Trustee may resign by so notifying the Company; provided, however,
that no such resignation shall be effective until a successor Trustee has
accepted its appointment pursuant to this Section 9.8. The Holders of a
majority in aggregate principal amount of the Securities at the time
outstanding may remove the Trustee by so notifying the Trustee and the
Company. The Company shall remove the Trustee if:
(a) the Trustee fails to comply with Section 9.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or public officer takes charge of the Trustee or its property;
or
(d) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form
and substance to the retiring Trustee and the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of
the Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, upon payment of
all the retiring Trustee's fees and expenses then due and payable and
subject to the lien provided for in Section 9.7.
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If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may petition at the expense of the
Company any court of competent jurisdiction at the expense of the Company for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 9.10, any
Holder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Section 9.9. Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
Section 9.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA Sections
310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a
combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. Nothing contained
herein shall prevent the Trustee from filing with the Commission
the
application referred to in the penultimate paragraph of TIA Section
310(b).
Section 9.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE X
DISCHARGE OF INDENTURE
SECTION 10.1. Discharge of Liability on Securities.
When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced or repaid pursuant to Section 2.7)
for cancellation or (ii) all outstanding Securities have become due and payable
(whether at the Stated Maturity or upon acceleration, or on any
Redemption Date, Purchase Date or Fundamental Change Purchase Date, or
upon conversion) and the Company deposits with the Paying Agent or
Conversion Agent cash or Applicable Stock sufficient to pay all amounts due
and owing on all outstanding Securities (other than Securities replaced
pursuant to Section 2.7), and if in either case the Company pays all other
sums payable hereunder by the Company, then this Indenture shall, subject to
Section 9.7, cease to be of further effect. The Trustee shall join in the
execution of a document prepared by the Company acknowledging satisfaction and
discharge of this Indenture on demand of the Company accompanied by an
Officers' Certificate and Opinion of Counsel and at the cost and expense of
the Company.
Section 10.2. Repayment to the Company.
The Trustee and the Paying Agent shall return to the Company upon
written request any cash or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
subject to applicable unclaimed property law. After return to the Company,
Holders entitled to the cash or securities must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person and the Trustee and the Paying Agent shall have
no further liability to the Holders with respect to such cash or securities
for that period commencing after the return thereof.
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ARTICLE XI
AMENDMENTS
SECTION 11.1. Without Consent of Holders.
The Company and the Trustee may amend this Indenture or the Securities
without the consent of any Holder to:
(a) add to the covenants of the Company for the benefit of the Holders of
Securities;
(b) surrender any right or power herein conferred upon the
Company;
(c) provide for conversion rights of Holders of Securities if
any reclassification or change of the Common Stock or any
consolidation, merger or sale of all or substantially all of the Company's
assets occurs;
(d) provide for the assumption of the Company's obligations to the Holders of
Securities in the case of a merger, consolidation, conveyance, transfer, sale,
lease or other disposition pursuant to Article VII;
(e) increase the Conversion Rate; provided, however, that such increase in the
Conversion Rate shall not adversely affect the
interests of the Holders of Securities (after taking into account tax and other
consequences of such increase);
(f) comply with the requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA; (g) make any changes or
modifications necessary in connection with the registration of the Securities
under the Securities Act as contemplated in the Registration Rights Agreement;
provided, however, that such action pursuant to this clause (g) does not, in the
good faith opinion of the Board of Directors of the Company (as evidenced by a
Board Resolution) and the Trustee, adversely affect the interests of the Holders
of Securities in any material respect;
(h) cure any ambiguity, correct or supplement any provision herein which may be
inconsistent with any other provision herein or which is otherwise defective, or
to make any other provisions with respect to matters or questions arising under
this Indenture which the Company may deem necessary or desirable and which shall
not be inconsistent with the provisions of this Indenture; provided, however,
that such action pursuant to this clause (h) does not, in the good faith opinion
of the Board of Directors of the Company (as evidenced by a Board Resolution)
and the Trustee, adversely affect the interests of the Holders of Securities in
any material respect; and
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(i) to evidence the succession of another Person to the Company or
any other obligor upon the Securities, and the assumption by
any such successor of the covenants of the Company or such
obligor herein and in the Securities, in each case in compliance
with the provisions of this Indenture;
(j) to evidence and provide the acceptance of the appointment of
a successor trustee hereunder;
(k) add or modify any other provisions herein with respect to matters or
questions arising hereunder which the Company and the Trustee may deem necessary
or desirable and which will not adversely affect the interests of the Holders of
Securities.
Section 11.2. With Consent of Holders.
Except as provided below in this Section 11.2, this
Indenture or the Securities may be amended, modified or supplemented,
and noncompliance in any particular instance with
any provision of this Indenture or the Securities may be waived, in each case
with the written consent or affirmative vote of the Holders of at least a
majority of the principal amount of the Securities at the time outstanding.
Without the written consent or the affirmative vote of each Holder
of Securities affected thereby (in addition to the written consent or the
affirmative vote of the holders of at least a majority of the principal
amount of the Securities at the time outstanding), an amendment or waiver under
this Section 11.2 may not:
(a) change the maturity of the principal amount of, or the payment date of
any installment of interest or Additional Amounts, if any, on, any Security;
(b) reduce the principal amount of, or interest or Additional Amounts, if any,
on, or the Redemption Price, Purchase Price or Fundamental Change Purchase Price
of, any Security;
(c) change the currency of payment of principal amount of, or interest or
Additional Amounts, if any, on, or the Redemption
Price, Purchase Price or Fundamental Change Purchase Price of, any Security from
U.S. Dollars;
(d) impair or adversely affect the rate of accrual of interest or Additional
Amounts, if any, on any Security, or the manner of
calculation thereof;
(e) impair the right of any Holder to institute suit for the enforcement of any
payment or with respect to, or conversion of, any Security;
(f) modify the obligation of the Company to maintain an agency in New York, New
York pursuant to Section 6.5;
(g) impair or adversely affect the conversion rights of the Holder of the
Securities as provided in Article XII;
(h) impair or adversely affect the purchase rights of the Holders of the
Securities as provided in Article IV or V;
(i) modify the optional redemption provisions of Article III in a manner
adverse to the Holders of the Securities;
(j) reduce the percentage of the principal amount of the outstanding Securities
the written consent or affirmative vote of whose Holders is required for any
such supplemental indenture; or (k) reduce the percentage of the principal
amount of the outstanding Securities the written consent or affirmative vote of
whose Holders is required for any waiver of any past Default provided for in
this Indenture.
It shall not be necessary for the consent of the Holders under
this Section 11.2 to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 11.2 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.
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Nothing contained in this Section 11.2 shall impair the ability of the
Company and the Trustee to amend this Indenture or the Securities without the
consent of any Holder to provide for the assumption of the Company's
obligations to the Holders of Securities in the case of a merger,
consolidation, conveyance, transfer, sale, lease or other disposition
pursuant to
Article VII.
Section 11.3. Compliance with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
comply with the TIA.
Section 11.4. Revocation and Effect of Consents, Waivers and
Actions.
Until an amendment, waiver or other action by Holders becomes
effective, a consent thereto by a Holder of a Security hereunder is a
continuing consent by the Holder and every subsequent Holder of that
Security or portion of the Security
that evidences the same obligation as the consenting Holder's Security,
even if notation of the consent, waiver or action is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent, waiver
or action as to such Holder's Security or portion of the Security if
the Trustee receives the notice of revocation before the date the amendment,
waiver or action becomes effective. After an amendment, waiver or action
becomes effective, it shall bind every Holder.
Section 11.5. Notation on or Exchange of Securities.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article XI may, and shall
if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If
the Company shall so determine, new Securities so modified as to conform, in
the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.
Section 11.6. Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental indenture authorized
pursuant to this Article XI if the amendment contained therein does not
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign such supplemental indenture.
In signing such supplemental indenture the Trustee shall receive, and
(subject to the provisions of Section 9.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.
Section 11.7. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
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ARTICLE XII
CONVERSION
SECTION 12.1. Conversion Right.
(a) Subject to and upon compliance with the provisions of this
Article XII, a Holder of a Security shall have the right, at such Holder's
option, to convert all or any portion (if the portion to
be converted is $1,000 or an integral multiple of $1,000) of such
Security into Common Stock:
(i) during any Calendar Quarter, if the Sale Price of the Common
Stock for at least 20 Trading Days in the 30 consecutive Trading
Day period ending on the last day of the immediately preceding Calendar Quarter
is greater than or equal to 120% of the Conversion Price in effect on such 30th
Trading Day;
(ii) if such Security has been called for redemption pursuant to Article III; or
(iii) as provided in clause (b) of this Section 12.1.
The Conversion Agent shall, on behalf of the Company, determine on
a daily basis whether the Securities shall be convertible as a result of
the occurrence of an event specified in clause (i) above and, if the
Securities shall be so
convertible, the Conversion Agent shall promptly deliver to the Company and
the Trustee written notice thereof. Whenever the Securities shall become
convertible pursuant to this Section 12.1, the Company or, at the
Company's request, the Trustee in the name and at the expense of the
Company, shall notify the Holders of the event triggering such convertibility
in the manner provided in Section 13.2, and the Company shall also publicly
announce such information and publish it on the Company's Website.
Any notice so given shall be conclusively presumed to have been duly given,
whether or not the Holder receives such notice. Securities called for
redemption may be converted at any time on and after the date that the
Company gives notice to the Holders of such right until 5:00 p.m., New York
City time, on the second Business Day preceding the corresponding
Redemption Date.
(b) (i) In the event that:
(A) the Company distributes to all holders of its Common Stock rights
or warrants entitling them (for a period expiring within
60 days of the Record Date for such distribution) to subscribe for or purchase
Common Stock at a price per share of Common Stock less than the Sale Price of
the Common Stock on the Business Day immediately preceding the announcement of
such distribution;
(B) the Company distributes to all holders of its Common Stock
cash or other assets, debt securities or rights or warrants to purchase its
securities, including the declaration of any cash dividends, payable quarterly
or otherwise, where the Fair Market Value (as determined by the Board of
Directors) of such distribution per share of Common Stock exceeds 5% of the Sale
Price of the Common Stock on the Business Day immediately preceding the date of
declaration of such distribution; or
(C) a Fundamental Change occurs,
then, in each case, the Securities may be surrendered for conversion at any time
on and after the date that the Company gives notice to the Holders of such
right, which shall be, in the case of (A) or (B), not less than 20 days prior to
the Ex-Dividend Time for such distribution, or, in the case of (C), within 20
days after the occurrence of the Fundamental Change, until 5:00 p.m., New York
City time, on the earlier of the Business Day immediately preceding the
Ex-Dividend Time and the date the Company announces that such distribution will
not take place in the case of (A) or (B), or within 35 Business Days of the
Company's delivery of the notice of the Fundamental Change in the case of (C);
provided, however, that in the case of (A) or (B), a Holder of Securities may
not surrender Securities for conversion if the Holder will otherwise participate
in such distribution without conversion.
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(ii) In addition, in the event that the Company consolidates with or
merges into another corporation, or is a party to a binding
share exchange pursuant to which the Common Stock would be
converted into cash, securities or other property as set forth in Section
12.4, then the Securities may be surrendered for
conversion at any time from and after the date which is 15 calendar days prior
to the date announced by the Company as the anticipated effective time of such
transaction until 15 calendar days after the actual date of such transaction.
Section 12.2. Conversion Procedures; Fractional Shares.
(a) Each Security shall be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of
Common Stock (calculated to the nearest 1/10,000th of a share).
The Conversion Agent shall notify the Company when it receives a
Conversion Notice. The Company shall determine the number of shares of
Common Stock that the Holder that submitted the Conversion Notice is entitled
to receive upon surrender of the Securities covered by that Conversion Notice.
An amount of Common Stock received by the Holder upon conversion of
Securities that is equal in value (using the Sale Price of the Common Stock
on the last Trading Day prior to the day of conversion) to the accrued
and unpaid interest and Additional Amounts, if any, as of the conversion
date of such converted Securities shall be treated as payment of such accrued
and unpaid interest and Additional Amounts, if any. Otherwise, no payment or
adjustment shall be made in respect of dividends or distributions on the
Common Stock issued upon conversion or accrued and unpaid interest or
Additional Amounts, if any, on a
converted Security, except as described in Section 12.9.
The Company will not issue any fraction of a share of Common Stock
in connection with any conversion of Securities. Instead, the Company will,
subject to Section 12.3(h), make a cash payment (calculated to the nearest
cent) equal to such fraction multiplied by the Sale Price of the Common Stock
on the last Trading Day prior to the date of conversion.
Notwithstanding the foregoing, a Security in respect of which a
Holder has delivered a Purchase Notice or a Fundamental Change Purchase Notice
exercising such Holder's right to require the Company to purchase such Security
may be converted only if such Purchase Notice or Fundamental Change Purchase
Notice, as applicable, is withdrawn in accordance with the provisions of
Section 4.2 or Section 5.2, respectively, prior to 5:00 p.m., New York City
time, on the Business Day immediately preceding the applicable Purchase Date
or Fundamental Change Purchase Date, as the case may be.
(b) Before any Holder of a Security shall be entitled to convert the
same into Common Stock, such Holder shall, in the case of
Global Securities, comply with the Applicable Procedures of the Depositary in
effect at that time, and in the case of Certificated Securities, surrender such
Securities, duly endorsed to the Company or in blank (with appropriate transfer
documents if required by the Conversion Agent), at the office of the Conversion
Agent, and shall give written notice to the Company at said office or place in
the form of the Conversion Notice attached to the Security (the "Conversion
Notice") that such Holder elects to convert the same and shall state in writing
therein the principal amount of Securities to be converted and the name or names
(with addresses) in which such Holder wishes the certificate or certificates for
Common Stock to be issued.
Before any such conversion, a Holder also shall pay all funds
required, if any, relating to interest or Additional Amounts, if any, on
the Securities, as provided in Section 12.9, and all taxes or duties, if any,
as provided in Section 12.8.
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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 deliverable upon conversion shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof to
the extent permitted thereby) so surrendered. Subject to the next
succeeding sentence, the Company will, as soon as practicable thereafter,
issue and deliver at said office or place to such Holder of a Security, or
to such Holder's nominee or nominees, certificates for the number of full
shares of Common Stock to which such Holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share to which such Holder
would otherwise be entitled. The Company shall not be required to deliver
certificates for Common Stock while the stock transfer books for such stock or
the security register are duly closed for any purpose, but certificates for
Common Stock shall be issued and delivered as soon as practicable after the
opening of such books or security register.
If Common Stock to be issued upon conversion of a Restricted
Security are to be issued in the name of a Person other than the Holder of
such Restricted Security, such Holder must deliver to the Conversion
Agent a certification in
substantially the form set forth in a Transfer Certificate dated the date of
surrender of such Restricted Security and signed by such Holder, as to
compliance with the restrictions on transfer
applicable to such Restricted Security. The Company shall not be required to
issue Common Stock upon conversion of any such Restricted Security to a
Person other than the Holder if such Restricted Security is not so
accompanied by a properly completed certification, and neither the Company nor
the transfer agent for the Common Stock shall be required to register Common
Stock upon conversion of any such Restricted Security in the name of a
Person other than the Holder if such Restricted Security is not so accompanied
by a properly completed certification.
(c) A Security shall be deemed to have been converted immediately prior to
5:00 p.m., New York City time, on the date of the surrender of such Securities
for conversion as provided above, and the person or persons entitled to receive
the Common Stock issuable upon such conversion shall be treated for all purposes
as the record Holder or Holders of such Common Stock as of 5:00 p.m., New York
City time, on such date.
(d) In case any Certificated Security shall be surrendered for partial
conversion, the Company shall execute and the Trustee shall authenticate and
deliver to or upon the written order of the Holder of the Security so
surrendered, without charge to such Holder (subject to the provisions of Section
12.8), a new Security or Securities in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered
Certificated Securities.
Section 12.3. Adjustment of Conversion Rate.
The Conversion Rate shall be adjusted from time to time as follows:
(a) In case the Company shall, at any time or from time to time while any
of the Securities are outstanding, pay a dividend or
make a distribution in Common Stock to all or substantially all holders of its
outstanding Common Stock, then the Conversion Rate in effect immediately prior
to the close of business on the Record Date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
adjusted so that the Holder of any Security thereafter surrendered for
conversion shall be entitled to receive that number of shares of Common Stock
which it would have owned had such Security been converted immediately prior to
the happening of such event. Such adjustment shall become effective immediately
prior to the opening of business on the day following the Record Date fixed for
such determination. If any dividend or distribution of the type described in
this Section 12.3(a) is declared but not so paid or made, the Conversion Rate
shall again be adjusted to the Conversion Rate which would then be in effect if
such dividend or distribution had not been declared.
(b) In case the Company shall, at any time or from time to time while any of
the Securities are outstanding, subdivide its outstanding shares of Common Stock
into a greater number of Common Stock or combine its outstanding shares of
Common Stock into a smaller number of Common Stock, then the Conversion Rate in
effect immediately prior to the close of business on the day upon which such
subdivision or combination becomes effective shall be adjusted so that the
Holder of any Security thereafter surrendered for conversion shall be entitled
to receive that number of shares of Common Stock which it would have owned had
such Security been converted immediately prior to the happening of such event.
Such adjustment shall become effective immediately prior to the
opening of business on the day following the day upon which such subdivision
or combination becomes effective.
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(c) In case the Company shall, at any time or from time to time while any
of the Securities are outstanding, issue rights or
warrants for a period expiring within 60 days (other than any rights or warrants
referred to in Section 12.3(d)) to all or substantially all holders of its
outstanding Common Stock entitling them to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable or exercisable for Common
Stock), at a price per share of Common Stock (or having a conversion, exchange
or exercise price per share of Common Stock) less than the Sale Price of the
Common Stock on the Business Day immediately preceding the date of announcement
of such issuance (treating the conversion, exchange or exercise price per share
of Common Stock of the securities convertible into Common Stock as equal to (x)
the sum of (i) the price for a unit of the security convertible into or
exchangeable or exercisable for Common Stock and (ii) any additional
consideration initially payable upon the conversion of or exchange or exercise
for such security into Common Stock divided by (y) the number of shares of
Common Stock initially underlying such convertible, exchangeable or exercisable
security), then the Conversion Rate shall be adjusted by multiplying the
Conversion Rate in effect at the opening of business on the date after such date
of announcement by a fraction:
(i) the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date of announcement, plus the total
number of additional shares of
Common Stock so offered for subscription or purchase (or into which the
convertible, exchangeable or exercisable securities so offered are convertible,
exchangeable or exercisable); and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding on the close of business on the date of announcement,
plus the number of shares of Common Stock (or convertible, exchangeable or
exercisable securities) which the aggregate offering price of the total number
of shares of Common Stock (or convertible, exchangeable or exercisable
securities) so offered for subscription or purchase (or the aggregate
conversion, exchange or exercise price of the convertible, exchangeable or
exercisable securities so offered) would purchase at such Sale Price of the
Common Stock.
Such adjustment shall become effective immediately prior to the
opening of business on the day following the Record Date for such determination.
To the extent that shares of Common Stock (or securities convertible,
exchangeable or exercisable into shares of Common Stock) are not delivered
pursuant to such rights or warrants, upon the expiration or termination of
such rights or warrants, the Conversion Rate shall be readjusted to the
Conversion Rate which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of the
delivery of only the number of shares of Common Stock (or securities
convertible, exchangeable or exercisable into shares of Common Stock) actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Rate shall again be adjusted to be the Conversion Rate which would
then be in effect if the Record Date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been fixed.
In determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such Sale
Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such consideration
if other than cash, to be determined by the Board of Directors.
(d) (A) In case the Company shall, at any time or from time to time
while any of the Securities are outstanding, by
dividend or otherwise, distribute to all or substantially all holders of its
outstanding shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation and the shares of Common Stock are not changed or exchanged), shares
of its capital stock, evidences of its Indebtedness or other assets, including
securities, but excluding (i) dividends or distributions of Common Stock
referred to in Section 12.3(a), (ii) any rights or warrants referred to in
Section 12.3(c), (iii) dividends and distributions paid exclusively in cash
referred to in Section 12.3(e) and (iv) dividends and distributions of stock,
securities or other property or assets (including cash) in connection with the
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance to which Section 12.4 applies (such capital
stock, evidence of its indebtedness, other assets or securities being
distributed hereinafter in this Section 12.3(d) called the "distributed
assets"), then, in each such case, subject to paragraphs (D) and (E) of this
Section 12.3(d), the Conversion Rate shall be adjusted by multiplying the
Conversion Rate in effect immediately prior to the close of business on the
Record Date with respect to such distribution by a fraction:
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(i) the numerator of which shall be the Current Market Price; and
(ii) the denominator of which shall be such Current Market Price of the
Common Stock, less the Fair Market Value on such date of
the portion of the distributed assets so distributed applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Record Date) on such date.
Such adjustment shall become effective immediately
prior to the opening of business on the day following the Record
Date for such distribution. In the event that such dividend or distribution
is not so paid or made, the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect if such dividend or distribution
had not been declared.
(B) If the Board of Directors determines the Fair Market Value of any
distribution for purposes of this Section 12.3(d) by
reference to the actual or when issued trading market for any distributed assets
comprising all or part of such distribution, it must in doing so consider the
prices in such market over the same period (the "Reference Period") used in
computing the Current Market Price pursuant to Section 12.3(g) to the extent
possible, unless the Board of Directors determines in good faith that
determining the Fair Market Value during the Reference Period would not be in
the best interest of the Holders.
(C) In the event any such distribution consists of shares of capital stock
of, or similar equity interests in, one or more of
the Company's Subsidiaries (a "Spin-Off"), the Fair Market Value of the
securities to be distributed shall equal the average of the closing sale prices
of such securities on the principal securities market on which such securities
are traded for the five consecutive Trading Days commencing on and including the
sixth Trading Day of those securities after the effectiveness of the Spin-Off,
and the Current Market Price shall be measured for the same period. In the
event, however, that an underwritten initial public offering of the securities
in the Spin-Off occurs simultaneously with the Spin-Off, Fair Market Value of
the securities distributed in the Spin-Off shall mean the initial
public offering price of such securities and the Current Market Price shall mean
the Sale Price for the Common Stock on the same Trading Day.
(D) Rights or warrants distributed by the Company to all holders
of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Equity Interest (either initially or under
certain circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"), (x) are deemed to be transferred
with such Common Stock, (y) are not exercisable and (z) are also issued in
respect of future issuances of Common Stock shall be deemed not to have been
distributed for purposes of this Section 12.3(d) (and no adjustment to the
Conversion Rate under this
Section 12.3(d) will be required) until the occurrence of the
earliest Trigger Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant shall become
exercisable to purchase different distributed assets, evidences of indebtedness
or other assets, or entitle the holder to purchase a different number or amount
of the foregoing or to purchase any of the foregoing at a different purchase
price, then the occurrence of each such event shall be deemed to be the date of
issuance and Record Date with respect to a new right or warrant (and a
termination or expiration of the existing right or warrant without exercise by
the holder thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto, that resulted in
an adjustment to the Conversion Rate under this Section 12.3(d):
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(i) in the case of any such rights or warrants which shall all have been
redeemed or purchased without exercise by any holders
thereof, the Conversion Rate shall be readjusted upon such final redemption or
purchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
Purchase Price received by a holder of Common Stock with respect to such rights
or warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or purchase; and
(ii) in the case of such rights or warrants which shall have expired or
been terminated without exercise, the Conversion Rate
shall be readjusted as if such rights and warrants had never been
issued.
(E) For purposes of this Section 12.3(d) and Sections 12.3(a), 12.3(b) and
12.3(c), any dividend or distribution to which this
Section 12.3(d) is applicable that also includes (x) Common
Stock, (y) a subdivision or combination of Common Stock to which Section
12.3(b) applies or (z) rights or warrants to subscribe
for or purchase Common Stock to which Section 12.3(c) applies (or any
combination thereof), shall be deemed instead to be:
(i) a dividend or distribution of the evidences of indebtedness, assets,
shares of capital stock, rights or warrants, other than
such Common Stock, such subdivision or combination or such rights or warrants to
which Sections 12.3(a), 12.3(b) and 12.3(c) apply, respectively (and any
Conversion Rate adjustment required by this Section 12.3(d) with respect to
such dividend or distribution
shall then be made), immediately followed by
(ii) a dividend or distribution of such Common Stock, such subdivision or
combination or such rights or warrants (and any further Conversion Rate
adjustment required by Sections 12.3(a), 12.3(b) and 12.3(c) with respect to
such dividend or distribution
shall then be made), except:
(A) the Record Date of such dividend or distribution shall be substituted
as (i) "the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution," "Record Date fixed for such determinations" and "Record Date"
within the meaning of Section 12.3(a), (ii) "the day upon which such subdivision
or combination becomes effective" within the meaning of Section 12.3(b), and
(iii) as "the Record Date fixed for the determination of the stockholders
entitled to receive such rights or warrants" and such "Record Date" within the
meaning of Section 12.3(c); and
(B) any reduction or increase in the number of shares of Common
Stock resulting from such subdivision or combination shall be disregarded in
connection with such dividend or distribution.
(e) In case the Company shall, at any time or from time to time
while any of the Securities are outstanding, by dividend or
otherwise, distribute to all holders of its outstanding shares of Common Stock,
cash (including any quarterly cash dividends, but excluding any cash that is
distributed upon a reclassification, change, merger, consolidation, statutory
share exchange, combination, sale or conveyance to which Section 12.4 applies or
as part of a distribution referred to in Section 12.3(d)), then, and in each
case, immediately after the close of business on such date, the Conversion Rate
shall be adjusted by multiplying the Conversion Rate in effect immediately prior
to the close of business of such Record Date by a fraction:
(A) the numerator of which shall be equal to the Current Market Price on
such date; and
(B) the denominator of which shall be equal to the Current
51
Market Price on the Record Date, less an amount equal to the quotient of (x) the
aggregate amount of such cash distribution and (y) the number of shares of
Common Stock outstanding on the Record Date.
Such adjustment shall become effective immediately prior to the opening of
business on the day following the Record Date for such distribution. In the
event that such distribution is not so made, the Conversion Rate shall again be
adjusted to be the Conversion Rate which would then be in effect if such
distribution had not been declared.
(f) In case a tender offer or exchange offer made by the Company or any of
its Subsidiaries for all or any portion of the Common
Stock shall expire, then and in each such case, immediately prior to the opening
of business on the day after the date of the last time (the "Expiration Time")
tenders or exchanges could have been made pursuant to such tender offer or
exchange offer, the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the close of business on the date of the Expiration Time by
a fraction:
(A) the numerator of which shall be the sum of (x) the product of (i) the
number of shares of Common Stock outstanding
(excluding any tendered or exchanged shares) at the Expiration Time and (ii) the
Current Market Price of the Common Stock at the Expiration Time, and (y) the
Fair Market Value of the aggregate consideration payable to stockholders based
on acceptance (up to any maximum specified in the terms of the tender offer or
exchange offer) of all shares validly tendered and not withdrawn as of the
Expiration Time; and
(B) the denominator shall be the product of the number of shares
of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time and the Current Market Price of the Common Stock
at the Expiration Time.
Such reduction (if any) shall become effective immediately prior
to the opening of business on the day following the Expiration Time. In the
event that the Company is obligated to purchase shares pursuant to any such
tender offer or exchange offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all or a portion of such
purchases are rescinded, the Conversion Rate shall again be adjusted to be
the Conversion Rate which would then be in effect if such (or such portion of
the) tender offer or exchange offer had not been made. If the application of
this Section 12.3(f) to any tender offer or exchange offer would result in a
decrease in the Conversion Rate, no adjustment shall be made for such tender
offer under this Section 12.3(f).
Pursuant to rights issued under any of the Company's rights plans, if
Holders of the Securities exercising the right of conversion attaching after
the date the rights separate from the underlying Common Stock are not
entitled to receive the rights that would otherwise be attributable to the
Common Stock received upon conversion, the Conversion Rate will be adjusted as
though the rights were being distributed to holders of Common Stock on the
date of such separation. If such an adjustment is made and the rights
are later redeemed, invalidated or terminated, then a corresponding
reversing adjustment will be made to the Conversion Rate on an equitable
basis.
(g) For purposes of this Article XII, the following terms shall have the
meanings indicated:
"Current Market Price" on any date means the average of the daily
Sale Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to such date; provided, however, that if:
(i) the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation)
that requires an adjustment to the Conversion Rate pursuant to Section 12.3(a),
(b), (c), (d), (e), or (f) occurs during such ten consecutive Trading Days, the
Sale Price for each Trading Day prior to the "ex" date for such other event
shall be adjusted by multiplying such Sale Price by the same fraction by which
the Conversion Rate is so required to be adjusted as a result of such other
event;
(ii) the "ex" date for any event (other than the issuance or
distribution requiring such computation) that requires an
52
adjustment to the Conversion Rate pursuant to Section 12.3(a), (b), (c), (d),
(e), or (f) occurs on or after the "ex" date for the issuance or distribution
requiring such computation and prior to the day in question, the Sale Price for
each Trading Day on and after the "ex" date for such other event shall be
adjusted by multiplying such Sale Price by the reciprocal of the fraction by
which the Conversion Rate is so required to be adjusted as a result of such
other event; and
(iii) the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after taking into
account any adjustment required pursuant to clause (1) or (2) of this proviso,
the Sale Price for each Trading Day on or after such "ex" date shall be adjusted
by adding thereto the amount of any cash and the Fair Market Value (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 12.3(d), (e) or (f)) of the
evidences of Indebtedness, shares of capital stock or assets being distributed
applicable to one share of Common
Stock as of the close of business on the day before such "ex" date.
For purposes of any computation under Section 12.3(f), if the "ex" date for
any event (other than the tender offer requiring such computation) that requires
an adjustment to the Conversion Rate pursuant to Section 12.3(a), (b), (c), (d),
(e) or (f) occurs on or after the Expiration Time for the tender or exchange
offer requiring such computation and prior to the day in question, the Sale
Price for each Trading Day on and after the "ex" date for such other event shall
be adjusted by multiplying such Sale Price by the reciprocal of the fraction by
which the Conversion Rate is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date, when used:
(i) with respect to any issuance or distribution, means the first date on
which the Common Stock trade regular way on the relevant exchange or in the
relevant market from which the Sale Price was obtained without the right to
receive such issuance or distribution;
(ii) with respect to any subdivision or combination of Common Stock, means
the first date on which the Common Stock trade regular way on such exchange or
in such market after the time at which such subdivision or combination becomes
effective; and
(iii) with respect to any tender offer or exchange offer,
means the first date on which the Common Stock trade regular way on such
exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Rate are called for pursuant to this Section 12.3, such
adjustments shall be made to the Current
Market Price as may be necessary or appropriate to effectuate the intent of this
Section 12.3 and to avoid unjust or inequitable results as determined in good
faith by the Board of Directors.
"Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's length transaction (as determined by the Board of
Directors, whose determination shall be conclusive).
"Record Date" means, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock have the right
to receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed
for determination of stockholders entitled to receive such cash, securities
or other property (whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(h) The Company shall be entitled to make such additional adjustments in
the Conversion Rate, in addition to those required
by Sections 12.3(a), (b), (c), (d), (e) and (f), as shall be necessary in order
that any dividend or distribution of Common Stock, any subdivision,
reclassification or combination of Common Stock or any issuance of rights or
warrants referred to above shall not be taxable to the holders of Common Stock
for United States Federal income tax purposes.
53
(i) To the extent permitted by applicable law, the Company may, from time to
time, increase the Conversion Rate by any amount for any period of time if such
period is at least 20 days, the increase is irrevocable during the period and
the Board of Directors determines that such increase would be in the best
interest of the Company. Whenever the Conversion Rate is increased pursuant to
the preceding sentence, the Company shall mail to the Trustee and each Holder at
the address of such Holder as it appears in the register of the Securities
maintained by the Registrar, at least 15 days prior to the date the increased
Conversion Rate takes effect, a notice of the increase stating the increased
Conversion Rate and the period during which it will be in effect.
(j) In any case in which this Section 12.3 shall require that any adjustment be
made effective as of or retroactively immediately following a Record Date, the
Company may elect to defer (but only for five Trading Days following the filing
of the notice referred to in Section 12.5) issuing to the Holder of any
Securities converted after such Record Date the Common Stock issuable upon such
conversion over and above the Common Stock issuable upon such conversion on the
basis of the Conversion Rate prior to adjustment; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional Common Stock upon the
occurrence of the event requiring such adjustment. (k) All calculations under
this Section 12.3 shall be made to the nearest cent or one-hundredth of a share,
with one-half cent and 0.005 of a share, respectively, being rounded upward.
Notwithstanding any other provision of this Section 12.3, the Company shall not
be required to make any adjustment of the Conversion Rate unless such adjustment
would require an increase or decrease of at least 1% in the Conversion Rate as
last adjusted. Any lesser adjustment shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least 1% in the Conversion Rate as last adjusted. Any
adjustments under this Section 12.3 shall be made successively whenever an event
requiring such an adjustment occurs.
(l) In the event that at any time, as a result of an adjustment made pursuant
to this Section 12.3, the Holder of any Securities thereafter surrendered for
conversion shall become entitled to receive any shares of stock of the Company
other than Common Stock into which the Securities originally were convertible,
the Conversion Rate of such other shares so receivable upon conversion of any
such Security shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in subparagraphs (a) through (k) of this Section 12.3,
and the provision of Sections 12.1, 12.2 and 12.4 through 12.9 with respect to
the Common Stock shall apply on like or similar terms to any such other shares
and the determination of the Board of Directors as to any such adjustment shall
be conclusive.
(m) No adjustment shall be made pursuant to this Section 12.3 if (i) the effect
thereof would be to reduce the Conversion Price below the par value (if any) of
the Common Stock or (ii) any dividend, distribution or issuance that would
otherwise give rise to an adjustment pursuant to this Section 12.3 is made or
paid to the Holders of the Securities.
Section 12.4. Consolidation or Merger of the Company.
If any of the following events occurs, namely:
(a) any reclassification or change of the outstanding shares of Common
Stock (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination);
(b) any merger, consolidation, statutory share exchange or combination of the
Company with another corporation as a result
of which holders of Common Stock shall be entitled to receive stock, securities
or other property or assets (including cash) with respect to or in exchange for
such Common Stock; or
54
(c) any sale or conveyance of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock;
the Company or the successor or purchasing corporation, as the case may be,
shall execute with the Trustee a supplemental indenture (which shall comply with
the Trust Indenture Act as in force at the date of execution of such
supplemental indenture, if such supplemental indenture is then required to so
comply) providing that such Securities shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) which such Holder would have been entitled to receive upon such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance had such Securities been converted into Common
Stock immediately prior to such reclassification, change, merger, consolidation,
statutory share exchange, combination, sale or conveyance assuming such holder
of Common Stock did not exercise its rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon such merger,
consolidation, statutory share exchange, sale or conveyance (provided, that if
the kind or amount of securities, cash or other property receivable upon such
merger, consolidation, statutory share exchange, sale or conveyance is not the
same for each share of Common Stock in respect of which such rights of election
shall not have been exercised ("Non-Electing Share"), then for the purposes of
this Section 12.4, the kind and amount of securities, cash or other property
receivable upon such merger, consolidation, statutory share exchange, sale or
conveyance for 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
XII. If, in the case of any such reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance, the
stock or other securities and assets receivable thereupon by a holder of Common
Stock includes shares of stock or other securities and assets of a corporation
other than the successor or purchasing corporation, as the case may be, in such
reclassification, change, merger, consolidation, statutory share exchange,
combination, 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 shall reasonably consider necessary by reason of the foregoing.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder, at the address of such Holder as
it appears on the register of the Securities maintained by the Registrar,
within 20 days after execution thereof. Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.
The above provisions of this Section 12.4 shall similarly apply
to successive reclassifications, mergers, consolidations, statutory share
exchanges, combinations, sales and conveyances.
If this Section 12.4 applies to any event or occurrence, Section
12.3 shall not apply.
Section 12.5. Notice of Adjustment.
Whenever an adjustment in the Conversion Rate with
respect to the Securities is required:
(a) the Company shall forthwith place on file with the Trustee and
any Conversion Agent for such securities a certificate of the Treasurer of the
Company, stating the adjusted Conversion Rate determined as provided herein and
setting forth in reasonable
detail such facts as shall be necessary to show the reason for and the manner of
computing such adjustment; and
(b) a notice stating that the Conversion Rate has been adjusted and setting
forth the adjusted Conversion Rate shall forthwith be given by the Company or,
at the Company's request, by the Trustee in the name and at the expense of the
Company, to each Holder in the manner provided in Section 13.2. Any notice so
given shall be conclusively presumed to have been duly given, whether
or not the Holder receives such notice.
55
Section 12.6. Notice in Certain Events.
In case of:
(a) a consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
conveyance to another Person or
entity or group of Persons or entities acting in concert as a
partnership, limited partnership, syndicate or other group (within the meaning
of Rule 13d-3 under the Exchange Act) of all or substantially all of the
property and assets of the Company; or
(b) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(c) any action triggering an adjustment of the Conversion Rate referred to in
clauses (x) or (y) below;
then, in each case, the Company shall cause to be filed with the Trustee and the
Conversion Agent, and shall cause to be given, to
the Holders of the Securities in the manner provided in
Section 13.2, at least 15 days prior to the applicable date hereinafter
specified, a notice stating:
(x) the date on which a record is to be taken for the purpose of
any distribution or grant of rights or warrants triggering an adjustment to the
Conversion Rate pursuant to this Article XII, or, if a record is not to be
taken, the date as of which the holders of record of Common Stock
entitled to such distribution, rights or warrants are to be determined; or
(y) the date on which any reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up
triggering an adjustment to the Conversion Rate pursuant to this Article XII
is expected to become effective, and the date 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, consolidation, merger sale, conveyance,
dissolution, liquidation or winding up.
Failure to give such notice or any defect therein shall not affect
the legality or validity of the proceedings described in clause (a), (b) or (c)
of this Section 12.6.
Section 12.7. Company To Reserve Stock: Registration; Listing.
(a) The Company shall, prior to issuance of any Securities hereunder, and
from time to time as may be necessary, reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of the Securities,
such number of its duly authorized Common Stock as shall from time to time be
sufficient to effect the conversion of all Securities then outstanding into such
Common Stock at any time (assuming that, at the time of the computation of such
number of Common Stock, all such Securities would be held by a single Holder).
The Company covenants that all Common Stock which may be issued upon conversion
of Securities will upon issue be fully paid and nonassessable and free from all
liens and charges and, except as provided in Section 12.8, taxes with respect to
the issue thereof.
(b) If any Common Stock which would be issuable upon conversion of Securities
hereunder require registration with or approval of any governmental authority
before such shares or securities may be issued upon such conversion, the Company
will use its reasonable best efforts to cause such shares or securities to be
duly registered or approved, as the case may be. The Company further covenants
that so long as the Common Stock shall be quoted on the Nasdaq National Market,
the Company will use its reasonable best efforts, if permitted by the rules of
the Nasdaq National Market, to keep so quoted all Common Stock issuable upon
conversion of the Securities, and the Company will use its reasonable best
efforts to list or obtain approval for the quotation of the Common Stock to be
delivered upon conversion of the Securities prior to such delivery upon any
other national securities exchange or quotation system upon which the
outstanding Common Stock is listed or quoted at the time of such delivery.
56
Section 12.8. Taxes on Conversion.
The issue of stock certificates on conversion of Securities shall be
made without charge to the converting Holder for any documentary, stamp or
similar issue or transfer taxes in respect of the issue thereof, and the
Company shall pay any and all documentary, stamp or similar issue or transfer
taxes that may be payable in respect of the issue or delivery of Common
Stock on conversion of Securities pursuant hereto. The Company shall not,
however, be required to pay any such tax which may be payable in respect of
any transfer involved in the issue or delivery of Common Stock or the
portion, if any, of the Securities which are not so converted in a name
other than that in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Company the amount of such tax or has
established to the satisfaction of the Company that such tax has been paid.
Section 12.9. Conversion After Regular Record Date.
Except as provided in the succeeding paragraph, the Holder of such
Securities shall not be entitled to receive any accrued and unpaid interest or
Additional Amounts, if any.
If any Securities are surrendered for conversion subsequent to the
close of business on any Regular Record Date but prior to the opening of
business on the corresponding Interest Payment Date, the Holder of such
Securities at the close of business on such Regular Record Date shall
receive the interest and Additional Amounts, if any, payable on such
Securities on such Interest Payment Date notwithstanding the conversion
thereof. Securities surrendered for conversion during the period from the
close of business on any Regular Record Date to the opening of business on the
corresponding Interest Payment Date shall (except in the case of Securities
which have been called for redemption on a Redemption Date within such period)
be accompanied by payment by Holders, for the account of the Company,
in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest and Additional Amounts, if any,
payable on such interest payment date on the Securities being surrendered for
conversion.
Except as provided in Section 12.2(a) and this Section 12.9, no
payment or adjustment shall be made in respect of dividends or distributions
on the Common Stock issued upon conversion or accrued and unpaid interest or
Additional Amounts, if any, on a converted Security.
Section 12.10. Company Determination Final.
Any determination that the Company or the Board of Directors must
make pursuant to this Article XII shall be conclusive if made in good
faith and in accordance with the provisions of this Article, absent manifest
error, and set forth in a Board Resolution.
Section 12.11. Responsibility of Trustee for Conversion Provisions.
The Trustee has no duty to determine when an adjustment under this Article
XII should be made, how it should be made or what it should be. The Trustee
makes no representation as to the validity or value of any securities or
assets issued upon conversion of Securities. The Trustee shall not be
responsible for any failure of the Company to comply with this Article XII.
Each Conversion Agent other than the Company shall have the same protection
under this Section 12.11 as the Trustee.
The rights, privileges, protections, immunities and benefits given to
the Trustee under this Indenture including, without limitation, its rights to
be indemnified, are extended to, and shall be enforceable by, the Trustee
in each of its capacities hereunder, and each Paying Agent or Conversion
Agent acting hereunder.
57
Section 12.12. Unconditional Right of Holders to Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
convert its Security in accordance with this Article XII and to bring an action
against the Company for the enforcement of any such right to convert, and such
rights shall not be impaired or affected without the consent of such Holder.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with the duties
imposed by TIA 318(c), such section of the TIA shall control.
If any provision of this Indenture expressly modifies or excludes any provision
of the TIA that may be so modified or excluded, the Indenture provision so
modifying or excluding such provision of the TIA shall be deemed to apply.
Section 13.2. Notices. Any request, demand, authorization,
notice, waiver, consent or communication shall be in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission (confirmed by guaranteed overnight
courier) to the following facsimile numbers:
if to the Company:
PEGASUS SOLUTIONS, INC. Campbell Centre I
8350 North Central Expressway, Suite 1900
Dallas, Texas 75206
Attention: General Counsel
Facsimile No.: (214) 234-4040
if to the Trustee:
JPMORGAN CHASE BANK
600 Travis, Suite 1150
Houston, Texas 77002
Attention: Institutional Trust Services
Facsimile No.: (713) 577-5200
The Company or the Trustee by notice given to the other in the
manner provided above may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication given to a Holder shall be mailed to
the Holder, by first-class mail, postage prepaid, at the Holder's address as
it appears on the registration books of the Registrar and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
If the Company mails a notice or communication to the Holders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.
58
Section 13.3. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
Section 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied
with; and
(b) an Opinion of Counsel stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion.
Each Officers' Certificate or Opinion of Counsel with respect to
compliance with a covenant or condition provided for
in this Indenture shall include:
(a) a statement that each person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such Officers' Certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of each such person, he has made such
examination or investigation as is necessary to enable such person to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement that, in the opinion of such person, such covenant or condition
has been complied with.
Section 13.6. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 13.7. Rules by Trustee, Paying Agent, Conversion Agent and
Registrar.
The Trustee may make reasonable rules for action by or
a meeting of Holders. The Registrar, the Conversion Agent and
the Paying Agent may make reasonable rules for their functions.
Section 13.8. Legal Holidays.
If any specified date (including a date for giving
notice) is a Legal Holiday, the action shall be taken on the next succeeding day
that is not a Legal Holiday, and, if the action to
be taken on such date is a payment in respect of the Securities,
no interest, if any, shall accrue for the intervening period.
59
Section 13.9. Governing Law; Submission to Jurisdiction; Service of
Process.
This Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York.
The Company submits to the jurisdiction of the courts
of the State of New York and the courts of the United States of
America, in each case located in the Borough of Manhattan, New York, New
York over any suit, action or proceeding arising under or in connection
with this Indenture or the transactions
contemplated hereby or the Securities. The Company waives any objection
that it may have to the venue of any suit, action or proceeding arising under
or in connection with this Indenture or the transactions contemplated hereby
or the Securities in the courts of the State of New York or the courts of
the United States of America, in each case located in the Borough of
Manhattan, New York, New York, or that such suit, action or proceeding
brought in the courts of the State of New York or the courts of the United
States of America, in each case located in the Borough of Manhattan, New York,
New York, was brought in an inconvenient court and agrees not to plead or claim
the same.
The Company agrees that service of all writs, process and summonses
in any suit, action or proceeding arising under or in connection with
this Indenture or the transactions
contemplated thereby or the Securities against the Company in any
court of the State of New York or any United States Federal court, in
each case, sitting in the Borough of Manhattan, New York, New York, may be
made upon CT Corporation System at 111 Eighth Avenue, New York, New York
10011, whom the Company irrevocably appoints as its authorized agent for
service of process. The Company represents and warrants that CT Corporation
System has agreed to act as the Company's agent for service of process. The
Company agrees that such appointment shall be irrevocable until the
irrevocable appointment by the Company of a successor in New York, New York as
its authorized agent for such purpose and the acceptance of such appointment by
such successor. The Company further agrees to take any and all action,
including the filing of any and all documents and instruments that may be
necessary to continue such appointment in full force and effect as aforesaid.
If CT Corporation System shall cease to act as the agent for service of process
for the Company, the Company shall appoint without delay, another such agent
and provide prompt written notice to the Trustee of such appointment.
Section 13.10. No Recourse Against Others.
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture, or in any Security, or because of any
indebtedness evidenced thereby, shall be had against any incorporator, as
such, or against any past, present or future stockholder, officer or
director, as such, of the Company or of any successor, either directly
or through the Company or any successor, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Securities by the Holders and as
part of the consideration for the issue of the Securities.
Section 13.11. 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.
60
Section 13.12. Multiple Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to
prove this Indenture.
IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of
the date first above written.
PEGASUS SOLUTIONS, INC.
By:
Name:
Title:
JPMORGAN CHASE BANK,
As Trustee
By:
Name:
Title:
EXHIBIT A
[FORM OF FACE OF SECURITY]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS
A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME
OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]1
[THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT OF 1933"),
OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER:
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT OF 1933;
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE
SECURITY EVIDENCED HEREBY OR THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT OF 1933, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF 1933 (IF
AVAILABLE), OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
2(D) ABOVE), A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]2
[THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF
A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE
REFERRED
This legend should be included only if the Security is a Global Security.
This legend should be included only if the Security is a Transfer Restricted
Security.
A1
TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO
BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS
AGREEMENT.]2
A2
PEGASUS SOLUTIONS, INC.
3.875% Convertible Senior Notes due 2023
No. ___ CUSIP: _______________
PEGASUS SOLUTIONS, INC., a Delaware corporation (the "Company", which term shall
include any successor corporation under the Indenture referred to on the reverse
hereof) promises to pay to _____________________, or registered assigns, the
principal amount of _______________ Dollars ($_________) [, or such greater or
lesser amount as is indicated in the records of the Trustee and the
Depositary,]3 on July 15, 2023, and to pay interest thereon from July 21, 2003
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, on July 15 and January 15 in each year (each, an "Interest
Payment Date"), commencing on January 15, 2004, at the rate of 3.875% per annum,
until the principal hereof is paid or made available for payment at July 15,
2023 or upon acceleration, or until such date on which the Securities are
converted, redeemed or purchased as provided herein, and at the rate of 3.875%
per annum on any overdue principal and on any overdue installment of interest
and Additional Amounts, if any. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture (as hereinafter defined), be paid to the Person in whose name this
Security (or one or more predecessor Securities) is registered at the close of
business on the regular record date for such interest, which will be the July 1
or January 1, (whether or not a Business Day), as the case may be, next
preceding the corresponding Interest Payment Date (a "Regular Record Date"). Any
such interest and Additional Amounts, if any, not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may be paid (a) to the Person in whose name this Security (or
one or more predecessor Securities) is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Trustee (a "Special Record Date"), notice whereof will be given to Holders
not less than 10 calendar days prior to such Special Record Date, or (b) at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture.
Reference is hereby made to the further provisions of this Security set
forth on the reverse side of this Security,
which further provisions shall for all purposes have the same
effect as if set forth at this place.
This phrase should be included only if the Security is a Global Security.
A3
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.
Dated: PEGASUS SOLUTIONS, INC.
By:
Name:
Title:
A4
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: JPMORGAN CHASE BANK,
as Trustee
By:
Name:
Authorized Signatory
A5
[FORM OF REVERSE OF SECURITY]
3.875% Convertible Senior Notes due 2023
This Security is one of a duly authorized issue of
3.875% Convertible Senior Notes due 2023 (the "Securities") of
PEGASUS SOLUTIONS, INC., a Delaware corporation (including any successor
corporation under the Indenture hereinafter referred to, the "Company"),
issued under an Indenture, dated as of July 21, 2003 (the "Indenture"),
between the Company and JPMORGAN CHASE BANK, as Trustee (the "Trustee").
The terms of the Security include those stated in the Indenture, those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended ("TIA"), and those set forth in this Security. This
Security is subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the
terms of this Security and the terms of the Indenture, the terms of the
Indenture shall control. Capitalized terms used but not defined herein have
the meanings assigned to them in the Indenture referred to below unless
otherwise indicated.
1. Interest.
Interest on the Securities shall be computed on the basis of
a 360-day year of twelve 30-day months.
If this Security is redeemed pursuant to Section 5 of
this Security or the Holder elects to require the Company to
purchase this Security pursuant to Section 6 of this Security, on a date that is
after the Regular Record Date and on or before the corresponding Interest
Payment Date, interest and Additional Amounts, if any, accrued and unpaid
hereon to, but excluding, the applicable Redemption Date or Fundamental Change
Purchase Date will be paid to the same Holder to whom the Company pays the
principal of this Security.
Interest and Additional Amounts, if any, on Securities converted
after the close of business on a Regular Record Date but prior to the
opening of business on the corresponding Interest Payment Date will be
paid to the Holder of the Securities on the Regular Record Date but, upon
conversion, the Holder must pay the Company the interest and Additional
Amounts, if any, which has accrued and will be paid on such Interest
Payment Date. No such payment need be made with respect to
Securities which will be converted after a Regular Record Date and prior to
the corresponding Interest Payment Date after being called for redemption.
Any reference herein to interest accrued or payable as
of any date shall include any Additional Amounts accrued or
payable on such date as provided in the Registration Rights Agreement.
2. Method of Payment.
Payment of the principal of and interest and Additional Amounts,
if any, on the Securities shall be in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts or in
Applicable Stock, as the case may be. The Holder must surrender the
Securities to the Paying Agent to collect payment of principal. Payment of
interest and Additional Amounts, if
any, on Certificated Securities will be made by check mailed to
the address of the Person entitled thereto as such address appears in
the Register and payment of interest and Additional Amounts, if any, on
Certificated Securities in aggregate principal amount in excess of
$5,000,000 will be made by wire transfer in immediately available funds at
the election of such Holder. Notwithstanding the foregoing, so long as the
Securities are registered in the name of a Depositary or its nominee, all
payments with respect to the Securities shall be made by wire transfer of
immediately available funds to the account of the Depositary or its nominee.
3. Paying Agent, Registrar and Conversion Agent.
Initially, JPMorgan Chase Bank will act as Paying Agent and Registrar
and the Company will act as Conversion Agent. The Company may appoint and
change any Paying Agent, Registrar and Conversion Agent without notice,
other than notice to the Trustee; provided that the Company will maintain
at least one Paying Agent in Borough of Manhattan, New York, New York, which
shall initially be an office or agency of the Trustee. The
Company or any of its Subsidiaries or any of their Affiliates may act as Paying
Agent, Registrar or Conversion Agent.
A6
4. Indenture.
The Securities are general unsecured obligations of the Company
limited to up to $90,000,000 aggregate principal amount. The Indenture does not
limit other indebtedness of the Company, secured or unsecured.
5. Redemption at the Option of the Company.
The Securities are redeemable for cash at the option of the Company,
in whole or in part, at any time or from time to
time on, or after July 15, 2008 upon not less than 30 days', nor more than 60
days', notice by mail for a redemption price equal to the principal amount
of those Securities plus accrued and unpaid interest and Additional
Amounts, if any, on those Securities, to, but excluding, the Redemption
Date.
Notice of redemption pursuant to this Section of this Security will
be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to
be redeemed at the Holder's registered address. If cash
sufficient to pay the Redemption Price of all Securities (or portions
thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to 10:00 a.m., New York City time, on
the Redemption Date, then, on such Redemption Date interest ceases to accrue on
such Securities or portions thereof. Securities in denominations larger than
$1,000 of principal amount may be redeemed in part but only in integral
multiples of
$1,000 of principal amount.
6. Purchase by the Company at the Option of the Holder or Upon
a Fundamental Change.
Subject to the terms and conditions of the Indenture, the Company
shall become obligated to purchase, at the option of
the Holder, all or any portion of the Securities held by such Holder on
July 16, 2008, July 16, 2013 and July 16, 2018 in
integral multiples of $1,000 at the Purchase Price in cash. To
exercise such right, a Holder shall deliver to the Paying Agent a Purchase
Notice containing the information set forth in the Indenture, at any time
from the opening of business on the date that is 20 Business Days prior to
the relevant Purchase Date until the close of business on the fifth Business
Day prior to
such Purchase Date, and shall deliver the Securities to the Paying Agent
as set forth in the Indenture.
Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, all or any portion
of the Securities held by such Holder upon a Fundamental Change in integral
multiples of $1,000 at the Fundamental Change Purchase Price in cash. To
exercise such right, a Holder shall deliver to the Paying Agent a
Fundamental Change Purchase Notice containing the information set forth in the
Indenture at any time on or before the 30th Business Day after the date of
the Company's notice of the Fundamental Change (subject to extension to comply
with applicable law), and shall deliver the Securities to the Paying Agent as
set forth in the Indenture.
Holders have the right to withdraw any Purchase Notice or Fundamental
Change Purchase Notice by delivering to the Paying Agent a written notice of
withdrawal in accordance with the provisions of the Indenture.
If cash sufficient to pay the Purchase Price or Fundamental Change
Purchase Price, as the case may be, of all Securities or portions thereof to
be purchased on the Purchase Date or the Fundamental Change Purchase Date, as
the case may be, is deposited with the Paying Agent, at 10:00 a.m., New York
City time, on the Purchase Date or the Fundamental Change Purchase Date, as
the case may be, such Securities will cease to be outstanding and interest
and Additional Amounts, if any, on such Securities will cease to accrue and the
Holder thereof shall have no other rights as such other than the right to
receive the Purchase Price or Fundamental Change Purchase Price upon
surrender of such Security.
A7
7. Conversion.
Subject to and in compliance with the provisions of the Indenture (including,
without limitation, the conditions to conversion of this Security set forth in
Section 12.1 thereof), a Holder is entitled, at such Holder's option, to
convert the Holder's Security (or any portion of the principal amount thereof
that is $1,000 or an integral multiple $1,000), into fully paid and
nonassessable shares of Common Stock at the Conversion Rate in effect on the
date of conversion.
The Company will notify Holders of any event triggering the right to
convert the Securities as specified above in accordance with the Indenture.
A Security in respect of which a Holder has delivered a Purchase Notice or
Fundamental Change Purchase Notice, as the case may be, exercising the right
of such Holder to require the Company to purchase such Security may be
converted only if such Purchase Notice or Fundamental Change Purchase
Notice is
withdrawn in accordance with the terms of the Indenture.
The initial Conversion Rate is 49.6808 shares of Common Stock per $1,000
principal amount of this Security, subject to adjustment in certain events
described in the Indenture. This reflects an initial Conversion Price of
$20.13.
To surrender a Security for conversion, a Holder must, in the case of
Global Securities, comply with the Applicable Procedures of the Depositary in
effect at that time, and in the case of Certificated Securities, (1)
surrender the Security to the Conversion Agent, (2) complete and
manually sign the
conversion notice below (or complete and manually sign a facsimile of
such notice) and deliver such notice to the Conversion Agent, (3) if
required by the Conversion Agent, furnish appropriate endorsements and
transfer documents and (4) pay all funds required, if any, relating to
interest or Additional Amounts, if any, and any transfer or similar tax or
duty, if required.
No fractional share of Common Stock shall be issued upon
conversion of any Security. Instead, the Company shall pay a cash adjustment
as provided in the Indenture.
No payment or adjustment will be made for accrued and unpaid
interest and Additional Amounts, if any, or dividends on the Common Stock,
except as provided in the Indenture.
If the Company (i) is a party to a consolidation, merger or
binding share exchange (ii) reclassifies the Common Stock or (iii) conveys,
transfers or leases its properties and assets substantially as an entirety to
any Person, the right to convert a Security into shares of Common Stock may
be changed into a right to convert it into securities, cash or other assets of
the Company or such other Person, in each case in accordance with the
Indenture.
8. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 of principal amount and integral multiples of
$1,000. A Holder may transfer 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 transfer or exchange any Securities selected for redemption (except,
in the case of a Security to be redeemed in part, the portion of the Security
not to be redeemed) or any Securities in respect of which a Purchase Notice
or Fundamental Change Purchase Notice has been given and not withdrawn
(except, in the case of a Security to be purchased in part, the portion of the
Security not to be purchased) or any Securities for a period of 15 days
before the mailing of a notice of redemption of Securities to be redeemed.
9. Persons Deemed Owners.
The registered Holder of this Security may be treated as the owner
of this Security for all purposes.
A8
10. Unclaimed Money or Securities.
The Trustee and the Paying Agent shall return to the Company upon
written request any cash or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
subject to applicable unclaimed property law. After return to the Company,
Holders entitled to the money or securities must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person.
11. Amendment; Waiver.
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended with the
written consent or affirmative vote of the Holders of at least a majority in
aggregate principal amount of the outstanding Securities and (ii) certain
Defaults may be waived with the
written consent or affirmative vote of the Holders of a majority in aggregate
principal amount of the outstanding Securities.
Without the consent of any Holder, the Company and the
Trustee may amend the Indenture or the Securities to (i) add to the covenants
of the Company for the benefit of the Holders of Securities, (ii) surrender
any right or power conferred upon the Company in the Indenture, (iii) provide
for conversion rights of Holders of Securities if any reclassification or
change of the Company's Common Stock or any consolidation, merger or sale
of all or substantially all of the Company's assets occurs, (iv) provide
for the assumption of the Company's obligations to the Holders of Securities
in the case of a merger, consolidation, conveyance, transfer, sale, lease or
other disposition pursuant to Article VII of the Indenture, (v) increase
the Conversion Rate; provided, however, that such increase in the
Conversion Rate shall not adversely affect the interest of the Holders of
Securities (after taking into account tax and other consequences of such
increase), (vi) comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA, (vii) make any
changes or modifications necessary in connection with the registration of the
Securities under the Securities Act as contemplated in the Registration
Rights Agreement; provided, however, that such action pursuant to this clause
does not, in the good faith opinion of the Board of Directors of the
Company (as evidenced by a Board Resolution) and the Trustee, adversely affect
the interests of the Holders of Securities in any material respect, (viii)
cure any ambiguity, correct or supplement any provision in the Indenture which
may be inconsistent with any other provision therein or which is
otherwise defective, or to make any other provisions with respect to matters
or questions arising under the Indenture which the Company may deem necessary
or desirable and which shall not be inconsistent with the provisions of the
Indenture; provided, however, that such action pursuant to this clause does
not, in the good faith opinion of the Board of Directors of the Company (as
evidenced by a Board Resolution) and the Trustee, adversely affect the
interests of the Holders of Securities in any material respect, (ix) to evidence
the succession of another Person to the Company or any other obligor upon
the Securities, and the assumption by any such successor of the covenants of
the Company or such obligor herein and in the Securities, in each case in
compliance with the provisions of the Indenture, (x) to evidence and provide
the acceptance of the appointment of a successor trustee thereunder and (xi)
add or modify any other provisions in the Indenture with respect to matters
or questions arising thereunder which the Company and the Trustee may deem
necessary or desirable and which will not adversely affect the interests of the
Holders of Securities.
12. Defaults and Remedies.
If any Event of Default other than as a result of
certain events of bankruptcy, insolvency or reorganization of the Company or
its Subsidiaries occurs and is continuing, the principal of all the
Securities may be declared due and payable in the manner and with the effect
provided in the Indenture. If an Event of Default occurs as a result of
certain events of bankruptcy, insolvency or reorganization of the Company or
its Subsidiaries, the principal of all the Securities shall become due and
payable immediately without any declaration or other act on the part of the
Trustee or any Holder, all as and to the extent provided in the Indenture.
13. Trustee Dealings with the Company.
Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise
deal with the Company or its Affiliates with the same rights it would have if
it were not Trustee.
A9
14. Calculations in Respect of Securities.
The Company or its agents will be responsible for making
all calculations called for under the Securities
including, but not limited to, determination of the Market Price and Sale
Price of the Applicable Stock, the number of shares of Applicable Stock and/or
the amount of cash issuable or payable upon conversion and the amounts of
interest and Additional Amounts, if any, on the Securities. Any
calculations made in good faith and without manifest error will be final and
binding on Holders of the Securities. The Company or its agents will be
required to deliver to the Trustee a schedule of its calculations and the
Trustee will be entitled to conclusively rely upon the accuracy of such
calculations without independent verification.
15. No Recourse Against Others.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture, or in this Security, or because of any
indebtedness evidenced thereby, shall be had against any incorporator, as
such, or against any past, present or future stockholder, officer or
director, as such, of the Company or of any successor, either directly
or through the Company or any successor, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Securities by the Holders and as
part of the consideration for the issue of the Securities.
16. Authentication.
This Security shall not be valid until an authorized signatory
of the Trustee signs, manually or by facsimile, the Trustee's Certificate of
Authentication on the other side of this Security.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
18. INDENTURE TO CONTROL; GOVERNING LAW.
IN THE CASE OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS
SECURITY AND THE INDENTURE, THE PROVISIONS OF THE INDENTURE SHALL CONTROL. THE
INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture which has in it the text of this
Security in larger type. Requests may be made to:
PEGASUS SOLUTIONS, INC. Campbell Centre I
8350 North Central Expressway, Suite 1900 Dallas, Texas 75206
Attention: General Counsel Facsimile No.: (214) 234-4040
19. Registration Rights.
The Holders of the Securities are entitled to the benefits of a
Registration Rights Agreement, dated as of July 21, 2003, between the Company
and Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and Thomas Weisel
A10
Partners LLC, including the receipt of Additional Amounts upon a registration
default (as defined in such agreement).
A11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
_____________________________________________________________
(Insert assignee's soc. sec. or tax ID no.)
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Your Signature(s):
Date: _______________________ _____________________________________ _______
(Sign exactly as your name(s) appears on the
other side of this Security)
Signature Guaranteed
________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
By:___________________________
Authorized Signatory
A12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to Article
IV (Purchase at the Option of Holders on Specific Dates) or Article V (Purchase
at the Option of Holders Upon a Fundamental Change) of the Indenture, check the
box: Article IV Article V .
If this Security is to be purchased by the Company pursuant to Article IV of the
Indenture, check the box for the applicable Purchase Date: July 16, 2008 July
16, 2013 July 16, 2018 .
If you wish to have a portion of this Security purchased by the Company pursuant
to Article IV or Article V of the Indenture, as applicable, state the amount (in
Principal Amount at Issuance): $ ______________.
If certificated, the certificate numbers of the Securities to be delivered for
purchase are: .
Any purchase of Securities pursuant hereto shall be pursuant to the terms and
conditions specified in the Indenture.
Your Signature(s):
Date: _______________________ ____________________________________________
(Sign exactly as your name(s) appears on the
other side of this Security)
Signature Guaranteed
________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
By:_____________________________
Authorized Signatory
A13
CONVERSION NOTICE
To convert this Security into Common Stock of the Company, check the box .
To convert only part of this Security, state the principal amount to be
converted (which must be $1,000 or an integral multiple of $1,000):
..
Please check one:
I certify that neither I nor any other Person shall become a 10%
Stockholder upon satisfaction by the Company of the Conversion Obligation
underlying this Conversion Notice in Common Stock.
I do not certify that neither I nor any other Person shall become a 10%
Stockholder upon satisfaction by the Company of the Conversion Obligation
underlying this Conversion Notice in Common Stock.
"10% Stockholder" means a Person that owns, directly or indirectly, applying the
provisions of Section 958(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or by attribution, applying the provisions of Section 958(b) of
the Code, 10% or more of the outstanding shares of Common Stock.
If you want the stock certificate made out in another person's name fill in the
form below:
(Insert the other person's soc. sec. or tax ID no.)
(Print or type the other person's name, address and zip code)
Your Signature(s):
Date: _______________________ ____________________________________________
(Sign exactly as your name(s) appears on the
other side of this Security)
Signature Guaranteed
________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
By:_____________________________
Authorized Signatory
A14
TRANSFER CERTIFICATE
Re: 3.875% Convertible Senior Notes due 2023
(the "Securities") of Pegasus Solutions, Inc. (the "Company")
This certificate relates to $_______ principal amount of Securities owned
in (check applicable box)
book-entry definitive form by ______________ (the "Transferor").
The Transferor has requested a Registrar or the Trustee to exchange or
register the transfer of such Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with transfer
restrictions relating to the Securities as provided in Sections 2.6 and 2.12 of
the Indenture dated July 21, 2003 between the Company and JPMorgan Chase Bank,
as Trustee (the "Indenture"), and the transfer of such Security is being made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act") (check applicable box) or the transfer
or exchange, as the case may be, of such Security does not require registration
under the Securities Act because (check applicable box):
Such Security is being transferred to the Company or a Subsidiary; or
Such Security is being transferred to a Qualified Institutional Buyer in
compliance with Rule 144A under the Securities Act; or
Such Security is being transferred pursuant to and in compliance with an
exemption from the registration requirements under the Securities Act in
accordance with Rule 144 (or any successor thereto) ("Rule 144") under the
Securities Act; or
Such Security is being transferred pursuant to an effective registration
statement under the Securities Act; or
Such Security is being acquired for the Transferor's own account, without
transfer.
The Transferor acknowledges and agrees that, if the transferee will hold
any such Securities in the form of beneficial interests in a Global Security
which is a "restricted security" within the meaning of Rule 144 under the
Securities Act, then such transfer can only be made pursuant to Rule 144A under
the Securities Act and such transferee must be a "qualified institutional buyer"
(as defined in Rule 144A).
Date: __________________________________________
Signature(s) of Transferor
(If the registered owner is a corporation, partnership or fiduciary, the title
of the person signing on behalf of such registered owner must be stated.)
Signature Guaranteed
This certificate should only be included if this Security is a Transfer
Restricted Security.
A15
Participant in a Recognized Signature
Guarantee Medallion Program
By:_____________________________
Authorized Signatory
A16
EXHIBIT B
[FORM OF CERTIFICATE TO BE DELIVERED BY
TRANSFEREE IN CONNECTION WITH TRANSFERS
TO INSTITUTIONAL ACCREDITED INVESTORS]
[DATE]
JPMorgan Chase Bank, as Trustee
4 New York Plaza, 15th Floor
New York, New York 10004
Attention: Institutional Trust Services
American Stock Transfer & Trust Company, as Transfer Agent
Re: Pegasus Solutions, Inc.
Ladies and Gentlemen:
In connection with the undersigned's proposed purchase of $____________
aggregate principal amount of 3.875% Convertible Senior Notes due 2023 (the
"Notes") of Pegasus Solutions, Inc. (the "Company") or _____________ shares of
Common Stock of the Company issued upon conversion of the Notes, par value $.01
per share (the "Common Stock," and together with the Notes, the "Securities"),
the undersigned confirms, represents and warrants that:
(1) The undersigned is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Institutional Accredited Investor").
(2) (A) Any purchase of the Securities by the undersigned will be for the
undersigned's own account or for the account of one or more other Institutional
Accredited Investors or as fiduciary for the account of one or more trusts, each
of which is an "accredited investor" within the meaning of Rule 501(a)(7) under
the Securities Act and for each of which the undersigned exercises sole
investment discretion or (B) the undersigned is a "bank", within the meaning of
Section 3(a)(2) of the Securities Act, or a "savings and loan association" or
other institution described in Section 3(a)(5)(A) of the Securities Act that is
acquiring the Securities as fiduciary for the account of one or more
institutions for which the undersigned exercises sold investment discretion.
(3) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of its investment in the Securities, and the undersigned and any accounts
for which it is acting is each able to bear the economic risk of its or their
investment.
(4) The undersigned has been given an opportunity to ask questions and
receive answers concerning the terms and conditions of the Securities and to
obtain any additional information which the Company possesses or can acquire
without reasonable effort or expense that is necessary to verify the accuracy of
the information furnished.
(5) The undersigned is not acquiring the Securities with a view to
distribution thereof or with any present intention of offering or selling any
Securities, except as permitted below; provided that the disposition of the
undersigned's property and the property of any accounts for which the
undersigned is acting as fiduciary will remain at all times within the
undersigned's control.
(6) The undersigned understands that the Securities have not been registered
under the Securities Act or any applicable state securities laws.
(7) The undersigned agrees, on its own behalf and on behalf of each account
for which the undersigned acquires any Securities, that if in the future the
undersigned decides to resell or otherwise transfer such Securities within two
years after the original issuance of the Notes, such Securities may be resold or
otherwise transferred only:
B1
(A) to the Company or any subsidiary thereof;
(B) with respect to Notes only, to a person which is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
compliance with Rule 144A under the Securities Act;
(C) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available);
(D) pursuant to an exemption from registration under the Securities Act to
an Institutional Accredited Investor that prior to such transfer, furnishes to
you (and the Trustee or the Transfer Agent, as the case may be) a signed letter
substantially in the form of this letter, a transfer certificate substantially
in the form provided in the Indenture and an opinion of counsel; or
(E) pursuant to a registration statement which has been declared effective
under the Securities Act and continues to be effective at the time of such
transfer.
The undersigned further agrees to provide to any person purchasing any of the
Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
(8) The undersigned understands that, on any proposed resale of any
Securities, the undersigned will be required to furnish to the Trustee or the
Transfer Agent, as the case may be, and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. The
undersigned further understands that the Securities purchased by the undersigned
will be certificated securities and will bear a legend to the foregoing effect.
Each of the Company, the Trustee or the Transfer Agent, as the case may be,
and the initial purchasers of the Securities are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
By:
Name:
Title:
Address:
B2
EXHIBIT C
[FORM OF RESTRICTIVE LEGEND FOR
COMMON STOCK ISSUED UPON CONVERSION]
THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT OF 1933"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT OF 1933 OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR");
(2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THE SECURITY UPON THE CONVERSION OF WHICH THE SHARES OF COMMON STOCK EVIDENCED
HEREBY WERE ISSUED, RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF
1933 (IF AVAILABLE), (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 (IF AVAILABLE) TO ANY INSTITUTIONAL ACCREDITED INVESTOR
THAT PRIOR TO SUCH TRANSFER, FURNISHES TO AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS TRANSFER AGENT (OR ANY SUCCESSOR TRANSFER AGENT, AS APPLICABLE),
CERTIFICATIONS AND OPINION OF COUNSEL REQUIRED BY THE COMPANY OR TRANSFER AGENT
OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT OF 1933 AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME
OF SUCH TRANSFER; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(B)
OR 2(D) ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JULY 21, 2003
BY AND BETWEEN
PEGASUS SOLUTIONS, INC.
AS ISSUER
AND
BEAR, STEARNS & CO. INC.
J.P. MORGAN SECURITIES INC.
THOMAS WEISEL PARTNERS LLC
AS INITIAL PURCHASERS
3.875% CONVERTIBLE SENIOR NOTES DUE 2023
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of July 21,
2003, by and between PEGASUS SOLUTIONS, INC., a
Delaware corporation (the "Company") and BEAR, STEARNS & CO. INC., J.P.
MORGAN SECURITIES INC. and THOMAS WEISEL PARTNERS LLC (the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase Agreement,
dated as of July 15, 2003 (the "Purchase Agreement"), by and between the
Company and the Initial Purchasers, which provides for the sale by the Company
to the Initial Purchasers of $75,000,000 aggregate principal amount of the
Company's 3.875% Convertible Senior Notes Due 2023 (the "Firm Notes") plus up
to an additional $15,000,000 aggregate principal amount of the same that the
Initial Purchasers may subsequently elect to purchase pursuant to the terms of
the Purchase Agreement (the "Additional Notes" and, together with the Firm
Notes, the "Notes"). The
Notes are convertible into shares (the "Conversion Shares") of Common Stock
of the Company, par value $0.01 per share (the "Common Stock").
The Notes are being issued pursuant to an
indenture dated as of the date hereof (the "Indenture") between the Company
and insert JPMorgan Chase Bank, as New York state banking organization, as
Trustee. In connection with the sale of the Notes, the Company has prepared
a preliminary offering memorandum dated July 14, 2003 and an offering
memorandum dated July 15, 2003 (the "Offering Memorandum"), each setting
forth among other things, information regarding the Company, the Notes and the
Conversion Shares.
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and any subsequent holder or holders of the Notes or Conversion
Shares. The execution and delivery of this Agreement is a
condition to the Initial Purchasers'
obligation to purchase the Firm Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
Additional Amounts: See Section 3(a) hereof.
Additional Notes: See the second introductory paragraph hereto.
Agreement: See the first introductory paragraph hereto.
Amount of Registrable Securities: (a) With respect to Notes constituting
Registrable Securities, the aggregate principal amount of all such Notes
outstanding, (b) with respect to Conversion Shares constituting
Registrable Securities, the aggregate number of such Conversion Shares
outstanding multiplied by the Conversion Price (as defined in the Indenture)
in effect at the time of computing the Amount of Registrable Securities or, if
no such Notes are then outstanding, the last Conversion Price that was in
effect under the Indenture when any such Notes were last outstanding, and (c)
with respect to combinations thereof, the sum of (a) and (b) for the relevant
Registrable Securities.
Blue Sky Application: As defined in Section 6(i) hereof.
Blue Sky Laws: State securities or "blue sky" laws.
Business Day: Any day that is not a Saturday, Sunday or a day on which banking
institutions in New York are authorized or required by law to be closed.
Closing Date: July 21, 2003.
Common Stock: See the second introductory paragraph hereto.
Company: See the first introductory paragraph hereto.
Control: With respect to a Person, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ability to exercise voting power, by
contract or otherwise.
Conversion Shares: See the second introductory paragraph hereto. Damages
Payment Date: See Section 3(c) hereof.
Depositary: The Depository Trust Company until a successor is appointed by
the Company.
Effectiveness Date: The 180th day after the Closing Date.
Effectiveness Period: See Section 2(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Filing Date: The 90th day after the Closing Date.
Firm Notes: See the second introductory paragraph hereto.
Holder: Any holder, beneficial or otherwise, of Registrable Securities.
Indemnified Holder: See Section 6 hereof.
Indemnified Person: See Section 6 hereof. Indemnifying Person: See Section 6
hereof.
Indenture: See the second introductory paragraph hereto.
Initial Purchasers: See the first introductory paragraph hereto. Initial Shelf
Registration: See Section 2(a) hereof.
Initial Shelf Registration Statement: See Section 2(a) hereof.
Inspectors: See Section 4(n) hereof.
Late Notice Holder. See Section 2(d) hereof.
NASD: See Section 4(q) hereof.
Notes: See the second introductory paragraph hereto.
Notice and Questionnaire: A written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company dated July 15, 2003 relating to the Notes.
Notice Holder: Any Holder that has delivered a Notice and Questionnaire
to the Company on or prior to the Questionnaire Deadline.
Person: An individual, partnership, corporation, limited liability
company, unincorporated association, trust or joint venture, or a
governmental agency or political subdivision thereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented
by any prospectus supplement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Purchase Agreement: See the second introductory paragraph
hereto.
QIU: See Section 4(q) hereof.
Questionnaire Deadline: See Section 2(d) hereof.
Records: See Section 4(n) hereof.
Registrable Securities: All Notes and all Conversion Shares upon original
issuance thereof and at all times subsequent thereto, and any securities
into or for which Common Stock has been converted, and any security issued
with respect thereto upon any stock dividend, split or similar event, until (A)
the earliest to occur of (i) a Registration Statement covering such Notes
and Conversion Shares having been declared effective by the SEC and such
Notes and Conversion Shares having been disposed of in accordance with such
effective Registration Statement, (ii) such Notes and Conversion Shares having
been sold in compliance with Rule 144 and (iii) such Notes and any Conversion
Shares ceasing to be outstanding and (B) as a result of the event
or
circumstance described in any of the foregoing clauses (i) through
(iii), the legends with respect to transfer restrictions required under the
Indenture are removed or removable in
accordance with the terms of the Indenture or such legend, as the case may be.
Registration Default: See Section 3(a) hereof.
Registration Statement: Any registration statement of the
Company filed with the SEC pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective
amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Shelf Registration: See Section 2(b) hereof.
Shelf Registration Statement: See Section 2(b) hereof. Subsequent Shelf
Registration: See Section 2(b) hereof. Suspension Period: See Section 3(b)
hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Trustee: The Trustee under the Indenture.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. Shelf Registration.
(a) Shelf Registration. The Company shall file with the SEC a
Registration Statement (the "Initial Shelf Registration
Statement") for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities held by Notice
Holders (the "Initial Shelf Registration") on or prior to the Filing Date;
provided, that subject to Section 2(d) hereof, the Initial Shelf Registration
shall cover all of the Registrable Securities of Late Notice Holders. The
Initial Shelf Registration shall be on Form S-3 or another appropriate form
permitting registration of such Registrable Securities for resale by Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings (subject to Section 8 hereof)). The Company shall
not permit any securities other than Registrable Securities to be included in
the Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
The Company shall use its reasonable best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such Initial Shelf Registration is filed and, in any
event, on or prior to the Effectiveness Date and to keep such Initial
Shelf Registration continuously effective under the Securities Act until the
earlier of when (i) all the Registrable Securities are registered under the
Shelf Registration (as defined below) and have been disposed of in the manner
set forth and as contemplated therein, (ii) certain transfer restrictions on
the Registrable Securities are terminated as a result of the application of
Rule 144(k), (iii) all the Registrable Securities have been resold pursuant to
Rule 144 under the Securities Act and (iv) all the Registrable
Securities cease to be outstanding (the "Effectiveness Period"). At the time
the Initial Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder shall be named as a selling securityholder in the
Initial Shelf Registration Statement and the related Prospectus in such a
manner as to permit such Holder to deliver such Prospectus to purchasers of
Registrable Securities in accordance with applicable law.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Company shall use its reasonable best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Initial Shelf Registration or any Subsequent Shelf
Registration, as the case may be, in a manner to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use its reasonable best efforts to
cause the Subsequent Shelf Registration to be declared effective under the
Securities Act as soon as practicable after such filing and to keep such
Registration Statement continuously effective for a period equal to the number
of days in the Effectiveness Period. As used herein the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent Shelf
Registration and the term "Shelf Registration Statement" means any Registration
Statement filed in connection with a Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly supplement and
amend the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of the majority in Amount of Registrable Securities covered by such
Registration Statement or by any underwriter of such Registrable Securities.
(d) Holder Procedures. No Holder of Registrable Securities may include any of
its Registrable Securities in the Shelf Registration Statement pursuant to this
Agreement unless such Holder mails via first-class registered mail or transfers
via courier or hand delivery that confirms delivery, a properly completed Notice
and Questionnaire to the Company on or prior to the earlier of (i) the 20th
Business Day after the completion of the transfer of Registrable Securities to
the transferee (in the case of a Holder that is a transferee of Registrable
Securities) and (ii) the second Business Day before the effectiveness of the
Shelf Registration Statement) (the "Questionnaire Deadline") and such other
information as the Company may reasonably request for use in connection with the
Shelf Registration Statement or Prospectus or in any application to be filed
with or under state securities laws. In connection with all requests for
information from Holders of Registrable Securities with respect to inclusion of
Registrable Securities in the Shelf Registration Statement, the Company shall
notify such Holders of the requirements set forth in the preceding sentence.
The Company agrees and undertakes that (i) it shall notify each Holder of the
date of the expected effectiveness of the Shelf Registration Statement no
earlier than 60 Business Days and no later than 20 Business Days prior to such
date of expected effectiveness, with such notice to each Holder at the address
set forth on the register of securities maintained by the registrar of the Notes
or the records of the transfer agent of the Conversion Shares at such time, and
(ii) upon the request of any Holder, prior to the third Business Day before the
effectiveness of the Shelf Registration Statement, the Company shall distribute
a Notice and Questionnaire to such Holder at the address set forth in such
request. Holders that do not complete the Notice and Questionnaire and deliver
it to the Company within the time periods stated above shall not be named as
selling securityholders in the Prospectus included in the Shelf Registration
Statement and therefore shall not be permitted to sell Registrable Securities
pursuant to the Shelf Registration Statement. Notwithstanding the foregoing,
upon request from a Holder that did not return a Notice and Questionnaire on a
timely basis, (i) the Company shall distribute a Notice and Questionnaire to
such Holder at the address set forth in the request and (ii) upon receipt of a
properly completed Notice and Questionnaire from such Holder (a "Late Notice
Holder"), the Company shall use its reasonable best efforts to name such Holder
as a selling securityholder by means of a pre- or post-effective amendment or,
if permitted by the SEC, by means of a Prospectus supplement to the Shelf
Registration Statement. Each Holder as to which the Shelf Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make information previously
furnished to the Company by such Holder not materially misleading.
From and after the date the Initial Shelf Registration
Statement is declared effective, each Holder of Registrable Securities wishing
to sell Registrable Securities pursuant to a Shelf Registration Statement and
related Prospectus agrees to deliver notice of a proposed sale (substantially in
the form attached as Exhibit 1 to the Notice and Questionnaire) to the Company
at least three Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. Each such notice shall be
effective for five Business Days. Subject to the foregoing provisions of this
Section 2, the Company shall, within five Business Days of receiving a completed
notice and any additional information the Company reasonably requests, file any
amendments to the Shelf Registration Statement or Prospectus supplement as are
necessary to permit Holders to deliver a Prospectus to purchasers of
Registrable Securities, subject to the Company's right to suspend the use of
such Prospectus as provided for in Section (3)(b) hereof.
3. Additional Amounts.
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Securities will suffer damages if the Company fails to fulfill its
obligations under Section 2 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
agrees to pay additional amounts on the Registrable Securities ("Additional
Amounts") under the circumstances and to the extent set forth below (each of
which shall be given independent effect; each a "Registration Default"):
(i) if the Initial Shelf Registration is not filed on or prior to the
Filing Date, then commencing on the day after the Filing
Date, Additional Amounts shall accrue on the Registrable
Securities at a rate of 0.25% per annum on the Amount of Registrable Securities;
(ii) if the Initial Shelf Registration is not declared effective by the SEC on
or prior to the Effectiveness Date or the Conversion Shares are not approved for
quotation on the Nasdaq National Market on or prior to the Effectiveness Date,
then commencing on the day after the Effectiveness Date, Additional Amounts
shall accrue on the Registrable Securities at a rate of 0.50% per annum on the
Amount of Registrable Securities; and
(iii) if a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective or fails to usuable in connection
with the Registrable Securities at any time during the Effectiveness Period
(other than as permitted under Section 3(b)), then Additional Amounts shall
accrue on the Registrable Securities at a rate of 0.50% per annum on the Amount
of Registrable Securities;
provided, however, that Additional Amounts on the Registrable Securities may not
accrue under more than one of the foregoing clauses (i), (ii) or (iii) at any
one time or at any time after the Effectiveness Period; provided, further,
however, that (1) upon the filing of the Shelf Registration as required
hereunder (in the case of clause (a)(i) of this Section 3), (2) upon the
effectiveness of the Shelf Registration and the approval of the Conversion
Shares for quotation on the Nasdaq National Market as required hereunder (in the
case of clause (a)(ii) of this
Section 3) or (3) upon the effectiveness of a Shelf Registration which had
ceased to remain effective (in the case of clause (a)(iii) of this Section 3),
Additional Amounts on the Registrable Securities as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue. It
is understood and agreed that, notwithstanding any provision to the contrary, so
long as any Registrable Security is then covered by an effective Shelf
Registration Statement and the Conversion Shares are approved for quotation on
the Nasdaq National Market, no Additional Amounts shall accrue on such
Registrable Security.
The Additional Amounts set forth in this clause (a) shall be the exclusive
monetary remedy available to the Holders of Registrable Securities for any
Registration Default.
(b) Notwithstanding paragraph (a) of this Section 3, the Company shall be
permitted to suspend the effectiveness of a Shelf Registration for up to 30
consecutive days (a "Suspension
Period") in any 90-day period without being required to pay Additional Amounts;
provided that in the case of suspension of the effectiveness of a Shelf
Registration due to an acquisition, divestiture, disposition or probable
acquisition, divestiture,
disposition or financing, recapitalization, business combination or other
similar transaction, the Company may extend the Suspension Period by up to an
additional 15 days without being required to pay Additional Amounts. The
aggregate duration of any Suspension Periods shall not, without incurring any
obligation to pay Additional Amounts, exceed 60 days in any 360-day period.
(c) So long as Notes remain outstanding, the Company shall notify the Trustee
within two Business Days after each and every date on which an event occurs in
respect of which Additional Amounts is required to be paid. Any amounts of
Additional Amounts due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of this
Section 3 will be payable in cash semi-annually on each July 15 and January 15
(each a "Damages Payment Date"), commencing with the first such date occurring
after any such Additional Amounts commences to accrue, to Holders to whom
regular interest is payable on such Damages Payment Date with respect to Notes
that are Registrable Securities and to Persons that are registered Holders on
the July 1 or January 1 preceding such Damages Payment Date with respect to
Conversion Shares that are Registrable Securities; provided that any Additional
Amounts accrued with respect to any Registrable Securities or portion thereof
called for redemption on a redemption date or converted into Common Stock on a
conversion date prior to the Damages Payment Date shall, in any such event, be
paid instead to the Holder who submitted such Note or portion thereof for
redemption or conversion on the applicable redemption date or conversion date,
as the case may be, on such date (or promptly following the conversion date, in
the case of conversions). The amount of Additional Amounts for Registrable
Securities will be determined by multiplying the rate of Additional Amounts by
the Amount of Registrable Securities outstanding on the Damages Payment Date
following such Registration Default in the case of the first such payment of
Additional Amounts with respect to a Registration Default and thereafter at the
next succeeding Damages Payment Date until the earlier of the cure of such
Registration Default or the termination of the Effectiveness Period.
(d) The Trustee shall be entitled, on behalf of Holders of Notes, to seek any
available remedy for the enforcement of this Agreement, including for the
payment of any Additional Amounts. All obligations of the Company set forth in
this Section 3 that are outstanding with respect to any Registrable Security at
the time such security ceases to be a Registrable Security shall survive until
such time as all such obligations with respect to such Registrable Security
shall have been satisfied in full. The parties hereto agree that the Additional
Amounts provided for in this section constitutes a reasonable estimate of the
damages that may be incurred by Holders of Registrable Securities by reason of
the failure of the Shelf Registration Statement to be filed or declared
effective or available for effecting resales of Registrable Securities in
accordance with the provisions hereof.
4. Registration Procedures.
In connection with the filing of any Registration Statement pursuant to
Section 2 hereof, the Company shall effect such registrations to permit
the resale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and
in connection with any Registration Statement filed by the Company hereunder
the Company shall during the Effectiveness Period (unless a different period is
specified):
(a) Prepare and file with the SEC prior to the Filing Date, a Registration
Statement or Registration Statements as prescribed
by Section 2 hereof, and use its reasonable best efforts to cause each such
Registration Statement to become effective and remain
effective as provided herein; provided, however, that before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall furnish to and afford the Initial Purchasers, their counsel
and the managing underwriters, if any, a reasonable opportunity to review copies
of all such documents proposed to be filed (in each case, where possible, at
least five Business Days prior to such filing, or such later date as is
reasonable under the circumstances), and shall incorporate into such filings
such comments and changes as may be reasonably requested by such persons. The
provisions of this paragraph (a) shall not apply to the filing by the Company of
annual, quarterly or current reports, or proxy statements or schedules under the
Exchange Act.
(b) Prepare and file with the SEC such amendments and post-effective amendments
to each Shelf Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period
except, with respect to any Registration Statement, to the extent a substitute
Registration Statement has been filed and declared effective under the
Securities Act; cause the related Prospectus to be supplemented by any
prospectus supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented. The Company shall be deemed not to have used its
reasonable best efforts to keep a Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Securities covered thereby that are Notice
Holders not being able to sell such Registrable Securities during that period
unless such action is required by applicable law or unless the Company complies
with this Agreement, including, without limitation, the provisions of Sections
2(b) and 4(k) hereof.
(c) Notify the selling Holders of Registrable Securities, their counsel and the
managing underwriters, if any, promptly (but in any event within two Business
Days) and, confirm such notice in writing, (i) when a Prospectus or any
prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Company, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
Prospectus or the initiation of any proceedings for that purpose, (iii) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in a Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference that requires the making of any changes in or amendments or
supplements to a Registration Statement, Prospectus or documents so that, in the
case of a Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of a Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in
the light of the circumstances under which they were made, not misleading and
(iv) of the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use its reasonable best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus and, if any such order is
issued, to use its reasonable best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If reasonably requested by the managing underwriter or underwriters, if
any, or the Holders of the majority in Amount of Registrable Securities being
sold in connection with an underwritten offering (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters, if any, such Holders or counsel for any of
them reasonably determine is necessary to be included therein, (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as reasonably practicable after the Company has received notification of
such determination of the matters to be incorporated in such prospectus
supplement or post-effective amendment and (iii) supplement or make amendment to
such Registration Statement in connection with the actions contemplated by
clauses (i), (ii) or (iii).
(f) Furnish to each selling Holder of Registrable Securities, a single counsel
to such Holders (chosen in accordance with Section 5(b)) and each underwriter,
if any, at the sole expense of the Company, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) Deliver to each selling Holder of Registrable Securities, a single counsel
to such Holders (chosen in accordance with Section 5(b)) and the underwriters,
if any, at the sole expense of the Company, as many copies of the Prospectus
(including each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 4, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Securities and
the underwriters or agents, if any, and dealers, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to use its
reasonable best efforts to register or qualify, to the extent required by
applicable law, and to cooperate with the selling Holders of Registrable
Securities, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities or offer and sale under the Blue Sky Laws of such jurisdictions
within the United States as any selling Holder, or the managing underwriter or
underwriters, if any, reasonably request; provided, however, that where
Registrable Securities are offered other than through an underwritten offering,
the Company agrees to cause the Company's counsel to perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 4(h); keep each such registration or qualification (or
exemption therefrom) effective during the period (not to exceed the
Effectiveness Period) such Registration Statement is required to be kept
effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not be
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any
jurisdiction where it is not then so subject.
(i) Cooperate with the selling Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing shares of Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with the Depository; and enable such
shares of Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Subject to the second proviso of Section 4(h) hereof, use its reasonable
best efforts to cause the Registrable Securities covered by any Shelf
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Securities, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals.
(k) Upon the occurrence of any event contemplated by paragraph 4(c)(ii),
4(c)(iii) or 4(c)(iv) hereof, as promptly as practicable prepare and (subject to
Section 4(a) hereof) file with the SEC, at the sole expense of the Company, a
supplement or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, any such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement relating to
the Registrable Securities, (i) provide the Trustee with certificates for the
Registrable Securities in a form eligible for deposit with the Depository and
(ii) provide required CUSIP numbers for the Registrable Securities.
(m) In connection with any underwritten offering of Registrable Securities
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of securities similar to the Registrable
Securities and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities and, in such
connection, (i) make such representations and warranties to, covenants with, and
provide for indemnification of, the underwriters with respect to the business of
the Company and its subsidiaries (including any acquired business, properties or
entity, if applicable) and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in underwritten
offerings of securities similar to the Registrable Securities and confirm the
same in writing by furnishing officers' certificates if and when requested or
otherwise; (ii) obtain the written opinion of counsel to the Company and written
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings of
securities similar to the Registrable Securities and such other matters as may
be reasonably requested by the managing underwriter or underwriters; and (iii)
obtain "cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by reference
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings of
securities similar to the Registrable Securities and such other matters as
reasonably requested by the managing underwriter or underwriters as permitted by
the Statement on Auditing Standards No. 72. The above shall be done as and to
the extent required by such underwriting agreement.
(n) Make available for inspection by one or more representatives of the selling
Holders (designated in writing by the Holders of the majority in Amount of
Registrable Securities proposed to be sold), any underwriter participating in
any such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Holder, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours at such time or times as shall be mutually convenient
for the Company and the Inspectors as a group, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its subsidiaries to
supply all information reasonably requested by any such Inspector in connection
with such Registration Statement; provided, however, that the Company shall have
no obligation to deliver information to any Inspector pursuant to this Section
4(n) unless such Inspector shall have executed and delivered a confidentiality
agreement in a form reasonably acceptable to the Company relating to such
information.
(o) Provide (i) the Holders of the Registrable Securities to be included in
such Registration Statement and a single counsel to such Holders (chosen in
accordance with Section 5(b)), (ii) the underwriters (which term, for purposes
of this Registration Rights Agreement, shall include a Person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act), if any,
thereof, (iii) the sales or placement agent, if any, thereof, and (iv) one
counsel for such underwriters or agents (which counsel shall be reasonably
satisfactory to the Company), reasonable opportunity to participate in the
preparation of such Registration Statement, each prospectus included therein or
filed with the SEC, and each amendment or supplement thereto.
(p) Comply with all applicable rules and regulations of the SEC and make
generally available to its securityholders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or reasonable best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the effective
date
of a Registration Statement, which statements shall cover said 12-month periods.
(q) Cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"), including, if the Conduct Rules of
the NASD or any successor thereto as amended from time to time so require,
engaging a "qualified independent underwriter" ("QIU") as contemplated therein
and making Records available to such QIU as though it were a participating
underwriter for the purposes of Section 4(n) and otherwise applying the
provisions of this Agreement to such QIU (including indemnification) as though
it were a participating underwriter.
(r) Cause the Indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the Trustee and the
Holders of the Registrable Securities to effect such changes to the Indenture as
may be required for the Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause the
Trustee to execute, all documents as may be required to effect such changes and
all other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner.
(s) Comply fully with the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner, if required by the Securities Act or as
reasonably requested by the Initial Purchasers or by the Trustee on behalf of
the Holders of the Registrable Securities covered by such Shelf Registration
Statement; and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by the Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in the Shelf Registration
Statement or supplement to the Prospectus.
(t) Cause all Registrable Securities covered by the Shelf Registration
Statement to be listed or quoted, as the case may be, on each securities
exchange or automated quotation system on which securities issued by the Company
of the same series are then listed or quoted.
(u) Provide promptly to each Holder upon written request each document filed
with the Commission pursuant to the requirements of Section 13 and Section 15 of
the Exchange Act after the effective date of the Shelf Registration Statement,
unless such documents are available from EDGAR.
(v) Use its reasonable best efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon actual receipt of any notice from the
Company of the happening of any event of the kind described in Section 4(c)(ii),
4(c)(iii) or 4(c)(iv) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(k) hereof, or until it is
advised in writing by the Company that the use of the applicable Prospectus
may be resumed, and has received copies of
any amendments or supplements thereto.
5. Registration Expenses.
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering and (B) fees and expenses of
compliance with Blue Sky Laws (including, without limitation, reasonable fees
and disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as provided in
Section 4(h) hereof), (ii) printing expenses, including, without limitation,
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with the Depository and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of the majority in Amount of Registrable Securities included
in any Registration Statement, (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and, subject to Section
5(b) below, the Holders of Registrable Securities, (v) fees and disbursements of
all independent certified public accountants referred to in Section 4(m)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (vi)
Securities Act liability insurance, if the Company desires such insurance, (vii)
fees and expenses of all other Persons retained by the Company, (viii) internal
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees of the Company performing legal or accounting
duties), (ix) the expense of any annual audit, (x) the fees and expenses,
including applicable and filing fees, incurred in connection with listing (or
authorizing for quotation) the Common Stock on a national securities exchange or
automated quotation system pursuant to the requirements hereof, (xi) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements and any other
documents necessary for the Company to comply with this Agreement, and (xii)
fees and disbursements of the Trustee and reasonable fees and disbursements of
its counsel and of the registrar and transfer agent for the Common Stock.
Notwithstanding anything in this Agreement to the contrary, (i) each Holder
shall pay all underwriting discounts and brokerage commissions with respect to
any Registrable Securities sold by it and the fees and disbursements of any
counsel retained by such Holder and (ii) each underwriter, sales or placement
agent shall bear the fees and disbursements of any counsel retained by such
underwriter, sales or placement agent.
(b) The counsel, if any, to the Holders in connection with the Shelf
Registration Statement shall be chosen by the Holders of a majority in Amount of
Registrable Securities to be included in such Registration Statement.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each of the
Initial Purchasers, (ii) each Holder, (iii) each Person,
if any, who controls (within the meaning of either Section 15 of the Securities
Act or Section 20(a) of the Exchange Act) any of the foregoing (any of the
Persons referred to in this clause (iii) being hereinafter referred to as a
"controlling person"), and (iv) the respective officers, directors, partners,
employees,
representatives and agents of the Initial Purchasers, the Holders (including
predecessor Holders) or any controlling person (any person referred to in clause
(i), (ii), (iii) or (iv) may hereinafter be referred to as an "Indemnified
Holder"), from and against any and all losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to reasonable
attorneys' fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any investigation or litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation) (collectively, "Losses"), joint or several, to which
they or any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact
contained in (A) any Registration Statement or Prospectus or (B) any blue sky
application or other document, or
any amendment or supplement thereto, prepared or executed by the Company (or
written information furnished by or on behalf of the Company expressly for use
in such blue sky application or other document or amendment or supplement) filed
in any jurisdiction specifically for the purpose of qualifying any or all of the
Registrable Securities under the securities law of any state or other
jurisdiction (such application or document being hereinafter called a "Blue Sky
Application"); or
(ii) the omission or alleged omission to state in any Shelf Registration
Statement any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
the omission or alleged omission to state in any Prospectus any material
fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
except insofar as such Losses arise out of or are based on any untrue
statement or omission or alleged untrue statement or
omission made in the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto or any related preliminary prospectus,
in reliance upon and in conformity with information relating to any Holder
furnished to the Company in
writing by or on behalf of any such Holder expressly for use therein;
provided, that with respect to any untrue statement or
omission from, if amended or supplemented, any preliminary Prospectus,
the indemnification provisions of this Section 6(a) shall not inure to the
benefit of any Indemnified Holder to the extent that the sale to any Person
to which a Loss of such Indemnified Holder relates was a sale of
Registrable Securities by such Indemnified Holder and such Loss results from
the fact that (A) there was not sent or given, at or prior to the written
confirmation of such sale of the Registrable Securities to such Person, a
copy of the final Prospectus (excluding any documents incorporated by reference
therein) together with any correcting amendments or supplements and the
Company had previously
furnished copies thereof in sufficient quantities to such
Indemnified Holder and (B) such Loss results from an untrue statement or
omission of a material fact contained in the preliminary Prospectus
that was (1) identified to such
Indemnified Holder at or prior to the furnishing to such Indemnified
Holder of the corrected Prospectus (as amended or
supplemented) and (2) corrected in the final Prospectus (as amended or
supplemented) and the final Prospectus (as amended or
supplemented) does not contain any other untrue statement or
omission or alleged untrue statement or omission of a material
fact that caused such Loss. The Company shall notify each Indemnified
Holder promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves the
Company or such Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless (i) the Company, (ii) each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, and (iii) the officers, directors, partners,
employees, representatives and agents of the Company or any such controlling
person, from and against any and all Losses whatsoever as incurred (including
but not limited to attorneys' fees and any and all expenses whatsoever incurred
in investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Shelf Registration
Statement or Prospectus or any amendment or supplement thereto or any Blue Sky
Application; or
(ii) the omission or the alleged omission to state in the Shelf
Registration Statement any material fact required to be stated therein or
necessary to make the statements therein not misleading, or the omission or
alleged omission to state in the Prospectus any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading,
in each case to the extent but only to the extent such Losses arise out of
or are based on any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to a
Holder furnished to the Company in writing by such Holder expressly for use
in any Registration Statement or Prospectus.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the
Person or Persons against whom such indemnity may be sought (each an
"Indemnifying Person") in writing of the commencement thereof; but the failure
so to notify the Indemnifying Person shall not relieve it from liability which
it may have had under this Section 6 to the extent that the Indemnifying Person
otherwise learned of such action or the Indemnifying Person is not materially
prejudiced by such failure. Such Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel satisfactory to the Indemnified Person
to represent the Indemnified Person and any others entitled to indemnification
pursuant to this Section 6 that the Indemnifying Person may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding, provided, however, that counsel to the Indemnifying Person shall not
(except with written consent of the Indemnified Person) also be counsel to the
Indemnified Person. Notwithstanding the foregoing, in any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Person in connection with the defense of such action, (ii) the
Indemnifying Person shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, (iii) the Indemnifying Person does not diligently defend the action
after assumption of the defense, or (iv) the Indemnified Person shall have
reasonably concluded that there may be defenses available to it or all
Indemnified Persons which are different from or additional to those available to
one or all Indemnified Persons (in which case the Indemnifying Person shall not
have the right to direct the defense of such action on behalf of the Indemnified
Person), in any of which events such fees and expenses of counsel (to the extent
reasonable) shall be borne by the Indemnifying Person. It is understood that an
Indemnifying Person shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Indemnified Holders shall be
designated in writing by the Holders of the majority in Amount of Registrable
Securities, and any such separate firm for the Company, its directors,
respective officers and such control Persons of the Company shall be designated
in writing by the Company. No Indemnifying Person shall, without the prior
written consent of the Indemnified Person, effect any settlement or compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action), unless (x) such
settlement, compromise or judgment (i) includes an unconditional release of the
Indemnified Person from all liability arising out of such claim, investigation,
action or proceeding and (ii) does not include a statement as to or an admission
of fault, culpability or any failure to act, by or on behalf of the Indemnified
Person, and (y) the Indemnifying Person confirms in writing its indemnification
obligations hereunder with respect to such settlement, compromise or judgment.
(d) If the indemnification provided for in clauses (a), (b) and (c) of this
Section 6 is insufficient in respect of any Losses referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Person on the one hand, and the Indemnified Person on the other
hand, pursuant to the Purchase Agreement or from the offering of the Registrable
Securities pursuant to any Shelf Registration or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Person on the one hand,
and the Indemnified Person on the other, in connection with the statements or
omissions that resulted in such Losses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand,
and any Indemnified Holder on the other, shall be deemed to be in the same
proportion as the total proceeds from the initial offering and sale of Notes
(net of discounts but before deducting expenses) received by the Company bear to
the total net proceeds received by such Indemnified Holder from sales of
Registrable Securities giving rise to such obligations. The relative fault of
the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or such Indemnified Holder and the parties' intent, relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Company and each of the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined by
pro rata allocation (even if the Initial Purchasers or the Holders were treated
as one entity) or by any other method of allocation that does not take account
of the equitable considerations referred to in clause (d) immediately above.
Notwithstanding the provisions of clause (d) above and this clause (e), in no
event shall any Holder be required to contribute any amount in excess of the
amount by which the net proceeds received by such Holder from the sale of the
Registrable Securities pursuant to a Shelf Registration Statement exceeds the
amount of 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 Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 6, (A) each Person, if any, who controls any of the Initial Purchasers
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and (B) the respective officers, directors, partners, employees,
representatives and agents of any of the Initial Purchasers or any controlling
person shall have the same rights to contribution as any of the Initial
Purchasers, and (1) each Person, if any, who controls any Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and (2) the officers, directors, partners, employees, representatives and agents
of the Company or any controlling person shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions set forth in this clause (e). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under clause (d) immediately above and
this clause (e), notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under clause (d) immediately above and this clause (e) or
otherwise except to the extent the contributing party did not otherwise learn of
such action, suit or proceeding or the contributing party is materially
prejudiced by such failure. No party shall be liable for contribution with
respect to any action or claim settled without its prior written consent,
provided that such written consent was not unreasonably withheld. The Initial
Purchasers' obligations to contribute pursuant to clause (d) immediately above
and this clause (e) are several in proportion to the respective principal amount
of the Notes purchased by each of the Initial Purchasers hereunder and not
joint.
(f) The remedies provided for in this Section 6 are not exclusive and shall not
limit any rights or remedies that may otherwise be available to any Indemnified
Person at law or in equity.
(g) The indemnity and contribution agreements contained in this Section 6 shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Holder or
any Person controlling any Holder or by or on behalf of the Company, its
officers or directors or any other Person controlling any of the
Company and (iii) acceptance of and payment for any of the Registrable
Securities.
7. Rules 144 and 144A.
The Company covenants that, until the termination of the Effectiveness
Period, it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder in a timely manner in accordance with the requirements of
the Securities Act and the Exchange Act and, for so long as any
Registrable Securities remain outstanding, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder or
beneficial owner of Registrable Securities, make available such information
necessary to permit sales pursuant to Rule 144A under the Securities Act.
The Company further covenants that, until the termination of the
Effectiveness Period, it will use its reasonable best efforts to take such
further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144(k) and Rule
144A under the Securities Act, as such rules may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the SEC.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations.
If any of the Registrable Securities covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will
be selected by the Holders of the majority in Amount of Registrable Securities
to be included in such offering and will be reasonably acceptable to
the Company.
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company will not enter into
any agreement with respect to any of its securities that
will grant to any Person piggyback registration rights with respect to any
Registration Statement.
(b) Adjustments Affecting Registrable Securities. The Company shall not,
directly or indirectly, take any action with respect to the Registrable
Securities as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the
Company and the Holders of not less than the majority in Amount of Registrable
Securities; provided, however, that Section 6 and this Section 9(c) may not be
amended, modified or supplemented without the prior written consent of the
Company and each Holder (including, in the case of an amendment, modification or
supplement of Section 6, any Person who was a Holder of Registrable Securities
disposed of pursuant to any Registration Statement). Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority in Amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(1) if to a Holder, at the most current address of such Holder set
forth on the records of the registrar under the Indenture, in
the case of Holders of Notes, and the stock ledger of the
Company, in the case of Holders of Common Stock.
(2) if to the Initial Purchasers:
c/o Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, NY 10179
Facsimile No.: (212) 272-3092
Attention: Convertible Capital Markets
with copies to:
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300 Dallas, TX 75201
Facsimile No.: (214) 746-7777
Attention: W. Stuart Ogg, Esq.
(3) if to the Company, at the addresses as follows:
Pegasus Solutions, Inc
8350 North Central Expressway
Campbell Center One, Suite 1900
Dallas, TX 75206
Facsimile No.: (214) 234-4040
Attention: Ric Floyd, Esq.
with copies to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, TX 75201
Facsimile No.: (214) 756-8659
Attention: Whit Roberts, Esq.
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; one Business Day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each
of the parties hereto, including the Holders; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and except
to the extent such successor or assign holds Registrable Securities.
(f) Purchases and Sales of Notes. The Company shall not, and shall use its
reasonable best efforts to cause its affiliates (as defined in Rule 405 under
the Securities Act) within its Control not to, resell or otherwise transfer any
Notes acquired by the Company or such affiliates, except pursuant to an
effective registration statement under the Securities Act or an exemption
therefrom.
(g) Counterparts. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS
SITTING IN MANHATTAN, NEW YORK CITY, THE STATE OF NEW YORK, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby, and the parties hereto shall use its 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 being intended that all of the rights and privileges
of the parties shall be enforceable to the fullest extent permitted by law.
(k) Securities Held by the Company or Its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(l) Third Party Beneficiaries. Holders of Registrable Securities are intended
third party beneficiaries of this Agreement and this Agreement may be enforced
by such Persons.
(m) Entire Agreement. This Agreement, together with the Purchase Agreement and
the Indenture, is intended by the parties as a final and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein and any and all prior oral or written
agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchasers on
the one hand, and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PEGASUS SOLUTIONS, INC.
By:_______________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By:________________________________
Name:
Title:
J.P. MORGAN SECURITIES INC.
By:_______________________________
Name:
Title:
THOMAS WEISEL PARTNERS LLC
By:________________________________
Name:
Title:
Exhibit 10.27
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 19th day of May, 2003 (the
"Effective Date"), by and between Pegasus Solutions, Inc., a Delaware
corporation (the "Company") and Robert J. Boles, Jr. (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is essential and in the best interest of the Company and its
stockholders to enter into this Agreement to retain the services of the
Executive and to ensure his continued dedication and efforts; and
WHEREAS, in order to induce the Executive to enter into and continue
employment by the Company, the Company desires to provide the Executive with
certain benefits during the term of his employment and, in the event his
employment is terminated, to provide the Executive with the benefits and
payments described herein.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. EMPLOYMENT TERM.
The "Employment Term" shall commence on the Effective Date and shall expire
on the fourth anniversary of the Effective Date provided that such term will be
automatically renewed and extended indefinitely after the fourth anniversary of
the Effective Date until terminated as provided herein, in the event Executive
remains in the employ of the Company after the fourth anniversary of the
Effective Date.
2. EMPLOYMENT.
(a) Subject to the provisions of Section 7 hereof, the Company agrees to
continue to employ the Executive and the Executive agrees to remain in the
employ of the Company during the Employment Term. During the Employment Term,
the Executive shall be employed as the Executive Vice President, Marketing and
Sales of the Company. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by persons situated in a similar executive capacity. Executive
shall also promote, by entertainment or otherwise, the business of the Company.
(b) During the Employment Term, excluding periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during usual business hours to the business and
affairs of the Company to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder. The Executive may (1) serve on corporate,
civil or charitable boards or committees, (2) manage personal investments and
(3) deliver lectures and teach at educational institutions, so long as such
activities do not constitute a conflict of interest, create issues of
independence significantly interfere with the performance of the Executive's
responsibilities hereunder.
3. COMPENSATION.
(a) Base Salary. Beginning on the Effective Date, the Company agrees to pay
or cause to be paid to the Executive an annual base salary as mutually agreed,
and as may be increased from time to time by the Compensation Committee of the
Board (hereinafter referred to as the "Base Salary"). Such Base Salary shall be
payable in accordance with the Company's customary practices applicable to its
executives.
(b) Annual Bonus. In addition to Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Term, an annual
discretionary bonus (the "Annual Bonus") in accordance with the terms and
conditions of the bonus plan approved by the Compensation Committee. Any actual
payment or award under such Annual Bonus plan, and the size of any payment or
award, will be in accordance with the terms of the plan. Each such Annual Bonus
shall be paid no later than the end of the third (3rd) month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus as may be
permitted by the Company's Executive Deferred Compensation Plan.
Notwithstanding the above, (1) Executive shall be entitled to a bonus for the
period beginning with the Effective Date and ending on the first anniversary of
the Effective Date based upon the attainment of the goals and objectives set
forth in the First Year Bonus Plan (as hereinafter defined) and (2) for the
period beginning the first anniversary of the Effective Date and ending December
31, 2004, Executive shall be entitled to 62% of the Annual Bonus earned pursuant
to the Annual Bonus for fiscal year 2004. The First Year Annual Bonus Plan is
the bonus plan applicable to Executive for the period beginning on the Effective
Date and ending on the first anniversary of the Effective Date.
4. EMPLOYEE BENEFITS.
During the Employment Term and beginning on the Effective Date, the
Executive shall be entitled to participate in all employee benefit plans,
practices and programs maintained by the Company and made available to employees
generally, including, without limitation, all pension, retirement, profit
sharing, savings, medical, hospitalization, disability, dental, life or travel
accident insurance benefit plans. Unless otherwise provided herein, the
compensation and benefits under, and the Executive's participation in, such
plans, practices and programs shall be on the same basis and terms as are
applicable to employees of the Company generally, but in no event on a basis
less favorable in terms of benefit levels and coverage than offered to other
similarly situated executives of the Company. The Company may reduce benefit
levels if such changes are part of broad-based changes in the Company's benefit
programs offered generally to all employees. Notwithstanding the foregoing,
except as otherwise set forth herein, nothing herein shall obligate the Company
to adopt such plans, practices or programs.
5. EXECUTIVE BENEFITS.
(a) Executive shall be entitled to participate in the Company's
Executive Deferred Compensation Plan, as approved and adopted by the Company's
Board of Directors September 10, 2002 (the "Executive Deferred Compensation
Plan") and all supplemental medical or life insurance or other bonus or
incentive compensation plans applicable to executives of the Company; provided,
however, the grant of a stock option or other form of stock compensation in any
year is not guaranteed and will be dependent on the Board's evaluation of the
Executive's performance. Unless otherwise provided herein, the compensation and
benefits under, and the Executive's participation in, such plans shall be on the
same basis and terms as other similarly situated executives of the Company. No
additional compensation provided under any of such plans shall be deemed to
modify or otherwise affect the terms of this Agreement or any of the Executive's
entitlements hereunder. Notwithstanding the foregoing, except as otherwise set
forth herein, nothing herein shall obligate the Company to adopt such plans,
practices or programs.
(b) Supplemental Executive Retirement Plan. The Executive shall be entitled
to participate in the Company's Supplemental Executive Retirement Plan, as
amended and approved by the Company's Board of Directors September 10, 2002, and
as hereafter amended provided that Executive has agreed in writing to such
amendment.
(c) Stock Plans. Executive shall be entitled to participate in the
Company's stock incentive plans, employee stock purchase plans and such other
stock-related plans as may be applicable to executives of the Company.
(d) Fringe Benefits and Perquisites. During the Employment Term, the
Executive shall be entitled to all fringe benefits and perquisites generally
made available by the Company to its executives. Executive shall be entitled
to participate in the Executive Benefits and Perquisite Plan approved and
adopted by the Company's Board of Directors September 10, 2002 and as hereafter
amended provided that Executive has agreed in writing to such amendment.
(e) Expenses. The Executive shall be entitled to receive reimbursement of
all expenses reasonably incurred in connection with the performance of
Executive's duties hereunder or for promoting, pursuing or otherwise furthering
the business or interests of the Company in accordance with the accounting
procedures and expense reimbursement policies of the Company as it shall adopt
from time to time.
(f) Relocation and Temporary Commute. Executive agrees that he and his
immediate family will relocate to the Dallas, Texas metropolitan area no later
than August 2005. Prior to August 2005 Executive shall commute to Dallas, Texas
and the Company will provide the following, each of which shall be reimbursed by
the Company through August 2005:
(1) A furnished apartment with maid service, and
(2) Reimbursement of reasonable and necessary transportation expenses,
including airfare and car rental costs.
(g) Moving Expenses. The Company will pay for the benefit of
Executive the following relocation related expenses:
(1) Two house hunting trips with family, not to exceed five days per trip;
(2) Movement of customary and usual household goods, including the
transportation of up to two (2) automobiles (the move must be completed by
August 2005 to be eligible for this payment);
(3) Payment of realtor fees of up to six percent (6%) of the gross sales
price of your primary residence in Florida (the sale must be closed by August
2006 to be eligible for this payment);
(4) Payment of up to two (2) discount points on the mortgage loan you obtain
to purchase a home in the Dallas area (the closing of the purchase must occur by
August 2006 to be eligible for this payment);
(5) Tax gross-up on relocation expenses and any applicable US federal
withholding taxes; and
(6) One month's base salary to cover incidental expenses such
as, utility hookups, deposits, etc. (this allowance will be paid upon the
completion of your relocation).
6. VACATION AND SICK LEAVE.
During the Employment Term, at such reasonable times as the Board shall in
its discretion permit, the Executive shall be entitled without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, provided that:
(a) The Executive shall be entitled to annual vacation in accordance with
the policies, if any, as periodically established by the Board.
(b) The Executive shall be entitled to sick leave (without loss of pay) in
accordance with the Company's policies, if any, in effect from time to time.
7. TERMINATION.
During the Employment Term, the Executive's employment hereunder may be
terminated under the following circumstances:
(a) Cause. The Company may terminate the Executive's employment for
"Cause". A termination of employment is for "Cause" if the Executive:
(1) has been convicted of or plead guilty or no contest to a felony; or
(2) intentionally engaged in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise or from which Executive
derives an improper material personal benefit; provided, however, that no
termination of the Executive's employment shall be for Cause as set forth in
this clause (2) until:
(i) there shall have been delivered to the Executive a copy of a written
notice setting forth that the Executive was guilty of the conduct set forth in
this clause (2) and specifying the particulars thereof in reasonable detail; and
(ii) the Executive shall have been provided an opportunity to be heard by
the Board (with the assistance of the Executive's counsel if the Executive so
desires). No act, nor failure to act, on the Executive's part shall be
considered "intentional" unless Executive has acted, or failed to act, with an
absence of good faith and without a reasonable belief that Executive's action or
failure to act was in the best interest of the Company.
(3) commits gross malfeasance or intentionally fails to perform the duties
of the Executive's position; provided, however, the Company shall first notify
the Executive in writing stating with reasonable specificity the action or
inaction of the Executive which forms the basis for such notice and the
Executive fails to cure such malfeasance or failure within ten (10) days of the
date of such notice; or
(4) violates any valid non-competition or non-disclosure agreement or the
Company's insider trading policy, if any.
Notwithstanding anything contained in this Agreement to the contrary, no failure
to perform by the Executive after a Notice of Termination (as hereinafter
defined) is given by the Executive shall constitute Cause for purposes of this
Agreement.
(b) Disability. The Company may terminate the Executive's employment after
having established the Executive's Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity which impairs the Executive's
ability to substantially perform Executive's material duties under this
Agreement which continues for a period of at least ninety (90) consecutive days.
The Executive shall be entitled to the compensation and benefits provided for
under this Agreement for any period during the Employment Term and prior to the
Termination Date (as hereinafter defined) resulting from the Executive being
unable to work due to a physical or mental infirmity and as otherwise provided
in this Agreement in connection with Disability. Notwithstanding anything
contained in this Agreement to the contrary, until the Termination Date (as
hereinafter defined) specified in a Notice of Termination (relating to the
Executive's Disability, in the event the Executive is no longer under a
Disability, the Executive will be entitled to return to Executive's position
with the Company as set forth in this Agreement in which event no Disability of
the Executive will be deemed to have occurred.
(c) Good Reason.
(1) The Executive may terminate his employment for "Good Reason". For
purposes of this Agreement, "Good Reason" shall mean the occurrence of any of
the events or conditions described in subsections (i) through (vi) hereof:
(i) If the Executive shall cease to be employed in the capacity as set forth
in Section 2(a) above or upon the assignment to the Executive of any material
duties or responsibilities which are inconsistent with Executive's position or
responsibilities; or any removal of the Executive from or failure to reappoint
or reelect Executive to any such offices or positions, except during a period of
Disability or in connection with the termination of Executive's employment for
Disability, Cause, as a result of his death, or by the Executive other than for
Good Reason;
(ii) A Change of Control as hereinafter defined;
(iii) Any material breach by the Company of any provision of this Agreement;
provided, however, the Executive shall first notify the Company in writing
stating with reasonable specificity the breach by the Company and the Company
fails to cure such breach within ten (10) days of the date of such notice;
(iv) Any purported termination of the Executive's employment for Cause by
the Company which is found by a court of competent jurisdiction or an arbitrator
not to comply with the terms of Section 7(a); or
(v) The failure of the Company to obtain an agreement, reasonably
satisfactory to the Executive, from any successor or assign of the Company to
assume and agree to perform this Agreement, as contemplated in Section 12
hereof.
(2) The Executive's right to terminate Executive's employment pursuant to
this Section 7(c) shall not be affected by Executive's incapacity due to
physical or mental illness.
(d) Voluntary Termination. Upon thirty (30) days prior written notice,
either the Executive or the Company may voluntarily terminate the Executive's
employment hereunder at any time; provided, however, in the event of any such
termination by the Company, the Company shall pay to the Executive the amounts
set forth in Section 8(d) hereof.
8. COMPENSATION UPON TERMINATION.
Upon termination of the Executive's employment during the Employment Term,
the Executive shall be entitled to the following benefits:
(a) If the Executive's employment with the Company shall be terminated by
the Company for Cause or by the Executive other than for Good Reason, the
Company shall pay the Executive all amounts earned and accrued through the
Termination Date but not paid as of the Termination Date, including:
(1) the Base Salary,
(2) an amount equal to the Pro Rata Bonus. The "Pro Rata Bonus" is an
amount equal to the maximum bonus amount the Executive would have been entitled
to in the fiscal year of the Termination Date multiplied by a fraction, the
numerator of which is the number of days in such fiscal year through the
Termination Date and the denominator of which is 365,
(3) reimbursement for reasonable and necessary expenses incurred by the
Executive on behalf of the Company during the period ending on the Termination
Date,
(4) vacation pay, and
(5) sick leave (collectively, "Accrued Compensation").
(b) If the Executive's employment with the Company shall be terminated by
the Company for Disability, the Company shall pay the Executive all amounts
earned or accrued through the Termination Date but not paid as of the
Termination Date, including the Accrued Compensation. In addition, the
Executive shall be entitled to the following:
(1) the Base Salary and all other benefits customarily received for a period
of one (1) year from the Termination Date resulting from such Disability,
(2) an amount equal to the Pro Rata Bonus.
(3) payments as more specifically provided by the Supplemental Executive
Retirement Plan and the Executive Deferred Compensation Plan, and
(4) one (1) additional year of vesting from the Termination Date of all
stock option and restricted stock grants not then expired or terminated.
(c) If the Executive's employment with the Company shall be terminated by
reason of the Executive's death, the Company shall pay the Executive all amounts
earned or accrued through the Termination Date but not paid as of the
Termination Date, including the Accrued Compensation. In addition, the Company
shall pay to the Executive's beneficiaries the following:
(1) the Base Salary and all other benefits customarily received for a period
of one (1) year from the date of such death,
(2) an amount equal to the Pro Rata Bonus,
(3) payments as more specifically provided by the Supplemental Executive
Retirement Plan and the Executive Deferred Compensation Plan, and
(4) one (1) additional year of vesting from the Termination Date of all
stock option and restricted stock grants not then expired or terminated.
(d) If the Executive's employment with the Company shall be terminated by
the Company voluntarily, without Cause or by the Executive for Good Reason, the
Company shall pay to the Executive the following:
(1) all Accrued Compensation and a Pro Rata Bonus,
(2) the Company shall continue to pay the Executive as severance pay and in
lieu of any further compensation (except as otherwise provided herein) a monthly
payment for a period of twelve (12) months following the Termination Date (the
"Termination Payment Period") equal to the sum of (A) the Executive's monthly
Base Salary in effect for the month immediately preceding the Termination Date
and (B) one twelfth (1/12) of the Bonus. Not withstanding the immediately
preceding sentence, in the event Executive shall remain in the employ of the
Company for a period exceeding eighteen (18) months after the Effective Date,
the Termination Payment Period shall be twenty-four (24) months following the
Termination Date. The "Bonus" is an amount equal to the maximum bonus amount
the Executive would have been entitled to in the fiscal year of the Termination
Date.
(3) during the twelve (12) month period immediately following the Termination
Date (the "Continuation Period"), the Company shall at its expense continue on
behalf of the Executive and Executive's dependents and beneficiaries the
Executive Benefit and Perquisites Plan (except life and disability insurance, if
any, will not be continued and "bridged" healthcare benefits will not be
provided unless Executive has satisfied the requirement for "retirement" as
defined in the plan) and the medical, dental and hospitalization benefits
provided (A) to the Executive immediately prior to the Notice of Termination or
(B) to other similarly situated executives who continue in the employ of the
Company during the Continuation Period. Notwithstanding the immediately
preceding sentence, the coverage, benefits and perquisites (including
deductibles and costs) provided in this Section 8(d)(3) during the Continuation
Period shall be no less favorable to the Executive and Executive's dependents
and beneficiaries, than the coverages, benefits and perquisites in effect as of
the Termination Date. The Company's obligation hereunder with respect to the
foregoing coverages, benefits and perquisites shall terminate in the event the
Executive obtains any such benefits (regardless of level and scope of coverage)
pursuant to a subsequent employer's benefit plans. This Section 8(d)(3) shall
not be interpreted as to limit any benefits to which the Executive, Executive's
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits,
(4) any outstanding stock options (including restricted stock and granted
performance shares or units) granted to the Executive under any stock option
plans or under any other incentive plan or arrangement shall, as of the
Termination Date, be vested for one (1) additional year, and
(5) the Company shall reimburse Executive the costs of any outplacement
services incurred by Executive, up to a maximum amount of Fifteen Thousand
Dollars ($15,000.00).
(e) The amounts provided for in Sections 8(a), 8(b)(2), 8(c)(2) and 8(d)(1)
shall be paid within thirty (30) days after the Executive's Termination Date.
Expenses incurred by Executive under Section 8(d)(5) shall be paid within thirty
(30) days of receipt by the Company of a claim for reimbursement submitted by
the Executive.
(f) The Executive hereby acknowledges that full payment and/or performance
by the Company of its obligations as set forth in Sections 8(a), (b), (c) or (d)
hereof shall be in lieu of any other remedy or cause of action the Executive may
have, either at law or in equity, as a result of the termination of the
Executive's employment pursuant to such sections.
9. DEFINITIONS.
(a) Notice of Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which indicates the specific
termination provision in this Agreement, if any, relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. Any
purported termination by the Company or by the Executive shall be communicated
by written Notice of Termination to the other. For purposes of this Agreement,
no such purported termination of employment shall be effective without such
Notice of Termination.
(b) Termination Date. For purposes of this Agreement, "Termination Date"
shall mean, in the case of the Executive's death, his date of death, or in all
other cases, the date specified in the Notice of Termination subject to the
following:
(1) If the Executive's employment is terminated by the Company for Cause, the
date of the Notice of Termination,
(2) If the Executive's employment is terminated by the Company due to
Disability, the date specified in the Notice of Termination shall be at least
thirty (30) days from the date the Notice of Termination is given to the
Executive, provided that the Executive shall not have returned to the full-time
performance of Executive's duties during such period of at least thirty (30)
days, and
(3) If the Executive's employment is terminated for Good Reason, the date
specified in the Notice of Termination shall be not more than thirty (30) days
from the date the Notice of Termination is given to the Company.
(c) Change of Control. For purposes of this Agreement, a "Change of
Control" shall mean any of the following events:
(1) An acquisition of any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used for purposes of Section
12(d) or 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than any parent, subsidiary or affiliate of the Company (provided
such parent, subsidiary or affiliate was not created to facilitate an
acquisition transaction) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than fifty percent (50%) of the combined voting power of the Company's
then outstanding Voting Securities; provided, however, in determining whether a
Change of Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change of Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan (or a trust forming a
part thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity securities
or equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary") or (ii) the Company or its
Subsidiaries,
(2) The individuals who, as of the date of this Agreement is approved by the
Board, are members of the Board (the "Incumbent Board") cease for any reason to
constitute at least one half (1/2) of the members of the Board; provided,
however, that if the election, or nomination for election of any new director
was approved by a vote of the members of the Board as provided by the Company's
Bylaws, such new director shall, for purposes of this Agreement, be considered
as a member of the Incumbent Board; provided, however, that no individual shall
be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest, or
(3) A complete liquidation or dissolution of the Company, or the sale or other
disposition of all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary or a parent in a Non-Control
Acquisition).
10. EXCISE TAX PAYMENTS.
In the event of a determination that a portion of any payment or benefit to
the Executive or for his benefit payable or distributable pursuant to the terms
of this Agreement is or will be deemed to be an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code") (a "Payment" or "Payments"), the Company shall be
responsible for the payment of any excise or similar tax assessed in connection
therewith.
11. NONCOMPETITION.
(a) Except with the prior written consent of the Company authorized by a
resolution adopted by the Board, for the period beginning upon the date hereof
and ending on (i) in the event of the termination of the Executive's employment
by the Executive for Good Reason pursuant to Section 7(c) or by the Company
pursuant to Section 7(d) hereof and the Executive is receiving payments from the
Company pursuant to Section 8(d) hereof, the date on which the last such payment
is received; or (ii) in the event of the voluntary termination of the
Executive's employment by the Executive pursuant to Section 7(d) hereof or
termination by the Company for Cause, the date which is nine (9) months from the
Termination Date; Executive shall not directly or indirectly as owner, partner,
joint venturer, stockholder, employee, broker, agent, principal, trustee,
corporate officer, director, licensor, or in any capacity whatsoever engage in,
become substantially financially interested in, employed by or have any
connection with, any business engaged principally in the processing of
electronic hotel reservations or travel agent commissions or providing hotel
property system services or providing hotel representation or marketing services
in any country where the Company or any of its subsidiaries is then engaged in
such business; provided, however, that Executive may own any securities of any
corporation which is engaged in such business and is publicly traded stock or
securities of such corporation.
(b) Executive agrees that for a period of one (1) year following termination
of employment with the Company, Executive will not solicit or in any manner
encourage employees of the Company, its subsidiaries or parent to leave its
employ.
(c) In case one or more of the terms contained in subsections (a) or (b) of
this Section 11 shall for any reason become invalid, illegal, or unenforceable,
such invalidity, illegality or unenforceability shall not affect any other terms
herein, but such terms shall be deemed deleted and such deletion shall not
affect the validity of the other terms of this section. In addition, if any one
or more of the terms contained in subsections (a) or (b) of this Section 11
shall for any reason be held to be excessively broad with regard to time,
duration, geographic scope or activity that term shall be construed in a manner
to enable it to be enforced to the extent compatible with applicable law.
12. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its successors and assigns and the Company shall require any
successor or assign to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession or assignment had taken place. The term "Company"
as used herein shall include such successors and assigns. The term "successors
and assigns" as used herein shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
13. FEES AND EXPENSES.
The Company shall pay all legal fees and related expenses (including the
costs of experts, evidence and counsel) incurred by the Executive as a result of
the breach or default by the Company of the terms hereof.
14. NOTICE.
For purposes of this Agreement, notice and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent by certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the Board with
a copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
(3rd) business day after the mailing thereof, except that notice of change of
address shall be effective only upon receipt.
15. NON-EXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its subsidiaries and for which the
Executive may qualify, nor shall anything herein limit or reduce such rights as
the Executive may have under any other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company or any of
its subsidiaries shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.
16. SETTLEMENT OF CLAIMS.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off
(except against amounts actually owed by the Executive to the Company as
evidenced by promissory notes, loan agreements and similar documents executed by
the Executive), counterclaim, defense, recoupment or other right which the
Company may have against the Executive or others.
17. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by the
Executive and the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas without giving effect to the
conflict of law principles thereof. Subject to Section 21 of this Agreement,
any action brought by any party to this Agreement shall be brought and
maintained in a court of competent jurisdiction in Dallas County, Texas.
19. SEVERABILITY.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provisions hereof shall not affect the
validity or enforceability of the other provisions hereof.
20. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes all prior agreements, if any, understandings and arrangements,
oral or written, between the parties hereto with respect to the subject matter
hereof.
21. ARBITRATION.
Any dispute or controversy arising out of or relating to this Agreement
shall be determined and settled by arbitration in the City of Dallas, Texas, in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association then in effect, and judgement upon the award rendered by
the arbitrator may be entered in any court of competent jurisdiction. Such
arbitrator shall have no power to modify any of the provisions of this
Agreement, and his or her jurisdiction is limited accordingly. A party
requesting arbitration hereunder shall give ten (10) days' written notice to the
other party to request such arbitration. Unless the arbitrator decides
otherwise, the successful party in any such arbitration shall be entitled to
reasonable attorneys' fees and costs associated with such arbitration. If the
parties hereto cannot agree upon an arbitrator, then one shall be appointed by
the governing office of the American Arbitration Association. Any arbitrator so
appointed shall have extensive experience in a profession connected with the
subject matter of the dispute. Whenever any action is required to be taken
under this Agreement within a specified period of time and the taking of such
action is materially affected by a matter submitted to arbitration, such period
shall automatically be extended by the number of days plus ten (10) that are
taken for the determination of that matter by the arbitrator.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its Chairman of the Board or Chairman of the Compensation Committee and the
Executive has executed this Agreement as of the date and year first above
written.
PEGASUS SOLUTIONS, INC. EXECUTIVE:
By: _____________________________ By:___________________________________
Robert J. Boles, Jr.
Print: _____________________________
Title: _____________________________
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John F. Davis, III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Pegasus Solutions,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ JOHN F. DAVIS, III _
- -------------------------------------------
John F. Davis, III
Chairman, Chief Executive Officer and President
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Susan K. Cole, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Pegasus Solutions,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ SUSAN K. COLE _
- -------------------------------------
Susan K. Cole
Executive Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pegasus Solutions, Inc. ("the
Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof ("the Report"), I, John F.
Davis, III, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
August 14, 2003 /s/ JOHN F. DAVIS, III
----------------------
John F. Davis, III,
Chairman, Chief
Executive Officer and President
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pegasus Solutions, Inc. ("the
Company") on Form 10-Q for the period ending June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof ("the Report"), I, Susan
K. Cole, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
August 14, 2003 /s/ SUSAN K. COLE
-----------------------
Susan K. Cole,
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)