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Exhibit 4.3
MICHAELS STORES, INC.
9 1/4% Senior Notes Due 2009
INDENTURE
Dated as of July 6, 2001
THE BANK OF NEW YORK,
as Trustee
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CROSS REFERENCE TABLE
<Table>
<Caption>
TIA Indenture
Section Section
310(a)(1)................................................................7.10
(a)(2)................................................................7.10
(a)(3)................................................................N.A.
(a)(4)..................................................................A.
(b)..............................................................7.8; 7.10
(c)...................................................................N.A.
311(a)...................................................................7.11
(b)...................................................................7.11
312(a)....................................................................2.5
(b)..............................................................2.5; 10.3
(c)...................................................................10.3
313(a)...................................................................10.3
(b)(1).................................................................7.6
(b)(2)................................................................N.A.
(c)...................................................................10.2
(d)....................................................................7.6
314(a)........................................................4.2; 4.10; 10.2
(b)...................................................................N.A.
(c)(1)................................................................10.4
(c)(2)................................................................10.4
(c)(3)................................................................N.A.
(d)...................................................................N.A.
(e)...................................................................10.5
(f)...................................................................4.10
315(a)....................................................................7.1
(b).............................................................7.5; 10.2
(c)....................................................................7.1
(d)....................................................................7.1
(e)...................................................................6.11
316(a) (last sentence)...................................................10.6
(a)(1)(A)..............................................................6.5
(a)(1)(B)..............................................................6.4
(a)(2)................................................................N.A.
(b)....................................................................6.7
317(a)(1).................................................................6.8
(a)(2).................................................................6.9
(b)....................................................................2.4
318(a)...................................................................10.1
</Table>
N.A. means Not Applicable.
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Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of the Indenture.
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.................................................. 1
SECTION 1.1 Definitions...................................................................... 1
SECTION 1.2 Other Definitions................................................................19
SECTION 1.3 Incorporation by Reference of Trust Indenture Act................................20
SECTION 1.4 Rules of Construction............................................................20
ARTICLE II THE SECURITIES.............................................................................21
SECTION 2.1 Form and Dating..................................................................21
SECTION 2.2 Execution and Authentication; Title and Terms....................................22
SECTION 2.3 Registrar and Paying Agent.......................................................23
SECTION 2.4 Paying Agent To Hold Money in Trust..............................................23
SECTION 2.5 Securityholder Lists.............................................................24
SECTION 2.6 Transfer and Exchange............................................................24
SECTION 2.7 Replacement Securities...........................................................26
SECTION 2.8 Outstanding Securities...........................................................27
SECTION 2.9 Temporary Securities.............................................................27
SECTION 2.10 Cancellation.....................................................................27
SECTION 2.11 Defaulted Interest...............................................................28
SECTION 2.12 CUSIP Numbers....................................................................28
ARTICLE III REDEMPTION................................................................................28
SECTION 3.1 Notices to Trustee...............................................................28
SECTION 3.2 Selection of Securities To Be Redeemed...........................................28
SECTION 3.3 Notice of Redemption.............................................................29
SECTION 3.4 Effect of Notice of Redemption...................................................30
SECTION 3.5 Deposit of Redemption Price......................................................30
SECTION 3.6 Securities Redeemed in Part......................................................30
ARTICLE IV COVENANTS..................................................................................31
SECTION 4.1 Payment of Securities............................................................31
SECTION 4.2 SEC Reports......................................................................31
SECTION 4.3 Limitation on Indebtedness.......................................................31
SECTION 4.4 Limitation on Restricted Payments................................................34
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TABLE OF CONTENTS
(Continued)
PAGE
SECTION 4.5 Limitation on Restrictions on Distributions from Restricted Subsidiaries.........37
SECTION 4.6 Limitation on Sales of Assets and Subsidiary Stock...............................38
SECTION 4.7 Limitation on Transactions with Affiliates.......................................41
SECTION 4.8 Change of Control................................................................42
SECTION 4.9 Compliance Certificate...........................................................44
SECTION 4.10 Further Instruments and Acts.....................................................44
SECTION 4.11 Limitation on Liens..............................................................44
SECTION 4.12 Limitation on Sale/Leaseback Transactions........................................44
SECTION 4.13 Limitation on Sale of Subsidiary Preferred Stock.................................45
SECTION 4.14 Corporate Existence..............................................................45
SECTION 4.15 Fall Away Event..................................................................45
ARTICLE V SUCCESSOR COMPANY...........................................................................47
SECTION 5.1 When the Company May Merge or Transfer Assets....................................47
ARTICLE VI DEFAULTS AND REMEDIES......................................................................48
SECTION 6.1 Events of Default. An "Event of Default" occurs if:.............................48
SECTION 6.2 Acceleration.....................................................................50
SECTION 6.3 Other Remedies...................................................................50
SECTION 6.4 Waiver of Past Defaults..........................................................50
SECTION 6.5 Control by Majority..............................................................51
SECTION 6.6 Limitation on Suits..............................................................51
SECTION 6.7 Rights of Holders To Receive Payment.............................................51
SECTION 6.8 Collection Suit by Trustee.......................................................52
SECTION 6.9 Trustee May File Proofs of Claim.................................................52
SECTION 6.10 Priorities.......................................................................52
SECTION 6.11 Undertaking for Costs............................................................52
SECTION 6.12 Waiver of Stay or Extension Laws.................................................53
SECTION 6.13 Restoration of Rights and Remedies...............................................53
SECTION 6.14 Rights and Remedies Cumulative...................................................53
SECTION 6.15 Delay or Omission Not Waiver.....................................................53
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TABLE OF CONTENTS
(Continued)
PAGE
SECTION 6.16 Remedies Subject to Applicable Law...............................................54
ARTICLE VII TRUSTEE...................................................................................54
SECTION 7.1 Duties of Trustee................................................................54
SECTION 7.2 Rights of Trustee................................................................55
SECTION 7.3 Individual Rights of Trustee.....................................................56
SECTION 7.4 Trustee's Disclaimer.............................................................56
SECTION 7.5 Notice of Defaults...............................................................56
SECTION 7.6 Reports by Trustee to Holders....................................................57
SECTION 7.7 Compensation and Indemnity.......................................................57
SECTION 7.8 Replacement of Trustee...........................................................58
SECTION 7.9 Successor Trustee by Merger......................................................59
SECTION 7.10 Eligibility; Disqualification....................................................59
SECTION 7.11 Preferential Collection of Claims Against Company................................60
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE.......................................................60
SECTION 8.1 Satisfaction and Discharge of Indenture; Defeasance..............................60
SECTION 8.2 Conditions to Defeasance.........................................................61
SECTION 8.3 Application of Trust Money.......................................................63
SECTION 8.4 Repayment to Company.............................................................63
SECTION 8.5 Indemnity for Government Obligations.............................................63
SECTION 8.6 Reinstatement....................................................................63
ARTICLE IX AMENDMENTS.................................................................................64
SECTION 9.1 Without Consent of Holders.......................................................64
SECTION 9.2 With Consent of Holders..........................................................64
SECTION 9.3 Compliance with Trust Indenture Act..............................................65
SECTION 9.4 Revocation and Effect of Consents and Waivers....................................65
SECTION 9.5 Notation on or Exchange of Securities............................................66
SECTION 9.6 Trustee To Sign Amendments.......................................................66
ARTICLE X MISCELLANEOUS...............................................................................66
SECTION 10.1 Trust Indenture Act Controls.....................................................66
SECTION 10.2 Notices..........................................................................66
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TABLE OF CONTENTS
(Continued)
PAGE
SECTION 10.3 Communication by Holders with Other Holders......................................67
SECTION 10.4 Certificate and Opinion as to Conditions Precedent...............................67
SECTION 10.5 Statements Required in Certificate or Opinion....................................68
SECTION 10.6 Form of Documents Delivered to Trustee...........................................68
SECTION 10.7 Act of Holders...................................................................69
SECTION 10.8 When Securities Disregarded......................................................69
SECTION 10.9 Rules by Trustee, Paying Agent and Registrar.....................................70
SECTION 10.10 Legal Holidays...................................................................70
SECTION 10.11 Governing Law....................................................................70
SECTION 10.12 No Recourse Against Others.......................................................70
SECTION 10.13 Successors.......................................................................70
SECTION 10.14 Multiple Originals...............................................................70
SECTION 10.15 Table of Contents; Headings......................................................71
SECTION 10.16 Severability Clause..............................................................71
SECTION 10.17 Benefits of the Indentures.......................................................71
SECTION 10.18 Independence of Covenants........................................................71
SECTION 10.19 Schedules and Exhibits...........................................................71
SECTION 10.20 Counterparts.....................................................................71
SECTION 10.21 Interest and Charges.............................................................71
</Table>
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INDENTURE dated as of July 6, 2001, between MICHAELS STORES,
INC., a Delaware corporation (the "Company"), and THE BANK OF NEW YORK, a New
York banking corporation (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
9 1/4% Senior Notes due 2009, (the "Series A Securities"), and an issue of
9 1/4% Senior Notes due 2009, that may be exchanged in the Exchange Offer (as
defined below) for the Series A Securities (the "Series B Securities") (the
Series B Securities together with the Series A Securities and the Additional
Securities (as defined below) whether Series A Securities or Series B
Securities, the "Securities"), of substantially the tenor and amount hereinafter
set forth, and to provide therefor the Company has duly authorized the
execution and delivery of this Indenture and the Securities;
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act that are required to be part of and to
govern indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company, and (ii) this
Indenture a valid and legally binding agreement of the Company in accordance
with the terms of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Restricted Subsidiary or (ii) assumed
in connection with the acquisition of assets from such Person, in each case,
other than Indebtedness incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition, as the case
may be. Acquired Indebtedness shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Restricted Subsidiary, as the case may be.
"Additional Assets" means (i) any property or assets (other
than inventory in the ordinary course of business and other than Indebtedness
and Capital Stock) in a Related
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Business; (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the
Company or another Restricted Subsidiary; or (iii) Capital Stock constituting
a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that, in the case of clauses (ii) and (iii),
such Restricted Subsidiary is primarily engaged in a Related Business.
"Additional Securities" means up to $50.0 million aggregate
principal amount of Securities (other than the Initial Securities) issued under
this Indenture in accordance with Sections 2.2 and 3.6 hereof, as part of the
same series as the Initial Securities.
"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 Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Article IV only, "Affiliate" shall also mean any beneficial owner of
shares representing 10% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of the Company or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of property, assets, inventory or Temporary Cash
Investments in the ordinary course of business, (iii) for purposes of Section
4.6 only, a disposition that constitutes a Restricted Payment permitted by
Section 4.4, (iv) a disposition of duplicative or excessive real property where
less than 75% of the consideration received is in the form of cash or Temporary
Cash Investments, which disposition occurs within one year of the acquisition
thereof and (v) any disposition of assets or series of related dispositions with
an aggregate fair market value (as determined in good faith) of less than $5
million.
"Asset Swap" means the exchange by the Company or a Restricted
Subsidiary of a portion of its property, business or assets, for property,
business or assets or Capital Stock of a Person, which all or substantially all
of whose assets are a type used in the business of the Company on the date of
the Indenture or in a Related Business, or a combination of any property,
business or assets or Capital Stock of such a Person and cash or Temporary Cash
Investments.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the
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Securities, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has
been extended); provided, however, that "Attributable Indebtedness" shall not
include any such obligations to the extent they relate to the lease of
stores, warehouses, offices or distribution facilities, including without
limitation, the fixtures appertaining thereto, unless such obligations are
required to be recorded on the Company's balance sheet in accordance with
GAAP.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the product of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Board of Directors" means the Board of Directors or
equivalent governing body of a Person (or the general partner of such Person, as
the case may be) or any committee thereof duly authorized to act on behalf of
such Board or equivalent governing body.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and, which is in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means a day other than a Saturday, Sunday or
other day on which banking institutions in New York State are authorized or
required by law to close.
"Capitalized Lease Obligation" means an obligation that is
required to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Change of Control" means the occurrence of any of the
following events with respect to the Company:
(i) (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Company and (B) the Permitted
Holders "beneficially own" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or
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indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such
other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company
(for the purposes of this clause, such other person shall be
deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other person
"beneficially owns" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, more than 35% of
the voting power of the Voting Stock of such parent
corporation and the Permitted Holders "beneficially own" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, in the aggregate a lesser percentage
of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent
corporation);
(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 by such Board of Directors or whose
nomination for election by the shareholders of the Company was
approved by a vote of 66-2/3% of the directors of the Company
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 the Board of Directors of the Company
then in office;
(iii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all,
or substantially all, the assets of the Company to any Person
or group of Persons (other than to any Wholly Owned Subsidiary
of the Company); or
(iv) the merger or consolidation of the Company with
or into another corporation with the effect that either (A)
immediately after such transaction any person (as defined in
clause (i) above) (other than a Permitted Holder) shall have
become the "beneficial owner" (as defined in clause (i) above)
of securities of the surviving corporation of such merger or
consolidation representing a majority of the voting power of
the Voting Stock of the surviving corporation or (B) the
securities of the Company that are outstanding immediately
prior to such transaction and which represent 100% of the
voting power of the Voting Stock of the Company are changed
into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into
or exchanged for, in addition to any other consideration, (1)
securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the
voting power of the Voting Stock of the surviving corporation
or (2) securities that represent immediately after such
transaction at least a majority of the voting power of the
Voting Stock of the corporation that owns, directly or
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indirectly, 100% of the voting power of the Voting Stock of the
surviving corporation of that transaction.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Price Protection Agreement" means any forward
contract, commodity swap, commodity option or other similar financial
agreement or arrangement relating to, or the value which is dependent upon,
fluctuations in commodity prices.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the
most recent four consecutive fiscal quarters for which financial statements
are available to (ii) Consolidated Interest Expense for such period;
provided, however, that (1) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Asset Disposition, the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly attributable
to the Indebtedness of such Restricted Subsidiary to the extent the Company
and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction causing a calculation to
be made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (4) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged
with or into the Company or any Restricted Subsidiary since the beginning of
such period) shall have made any Asset Disposition or any Investment that
would have required an adjustment pursuant to clause (2) or (3) above if made
by the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest
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Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment occurred on the first day
of such period. For purposes of this definition, whenever pro forma effect is
to be given to an acquisition of assets, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated
with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate
of interest and is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such interest expense, (i)
interest expense attributable to capital leases, (ii) amortization of debt
discount and debt issuance costs, (iii) non-cash interest expense, (iv)
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (v) interest actually
paid by the Company or any such Restricted Subsidiary under any Guarantee of
Indebtedness or other obligation of any other Person, (vi) net costs
associated with Hedging Obligations (including amortization of fees), (vii)
Preferred Stock dividends in respect of all Preferred Stock of the Company
and its Subsidiaries held by Persons other than the Company or a Wholly Owned
Subsidiary and (viii) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such plan
or trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust; provided,
however, that there shall be excluded therefrom any such interest expense of
any Unrestricted Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries in accordance
with GAAP; provided, however, that there shall not be included in such
Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not
a Restricted Subsidiary, except that (A) subject to the limitations
contained in (iv) below the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or
other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's equity in a net
loss of any such Person (other than an Unrestricted Subsidiary) for
such period shall be included in determining such Consolidated Net
Income,
(ii) any net income (loss) of any Person acquired by the
Company or a Restricted Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition,
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(iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly,
to the Company, except that (A) subject to the limitations contained
in (iv) below the Company's equity in the net income of any such
Restricted Subsidiary for such period shall only be included in such
Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary as a
dividend (subject, in the case of a dividend to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net
Income,
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or
its consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed
of in the ordinary course of business and any gain (but not loss)
realized upon the acquisition or disposition of any securities of
any Person,
(v) any extraordinary gain or loss net of taxes (less all fees
and expenses relating thereto),
(vi) the cumulative effect of a change in accounting
principles,
(vii) any gain or loss, net of taxes, realized upon the
termination of any employee pension benefit plan, and
(viii) any net gain arising from the extinguishment, under GAAP,
of any Indebtedness of any Person.
"Consolidated Tangible Net Worth" of any Person means, at any
time, for such Person and its Restricted Subsidiaries on a consolidated
basis, an amount computed equal to (a) the consolidated stockholders' equity
of the Person and its Restricted Subsidiaries, minus, (b) all Intangible
Assets of the Person and its Restricted Subsidiaries, in each case as of such
time.
"Credit Agreement" means the Revolving Credit Agreement, dated
as of May 1, 2001, among the Company, Fleet National Bank and the lenders
parties thereto, as it may be amended, extended, renewed, refinanced,
substituted or replaced from time to time (including increases in principal
amount thereof to the extent permitted under the Securities, the addition of
one or more lenders to an existing facility or the replacement or inclusion
of one or more lenders in a new facility) in one or more agreements.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
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"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in
the form of one or more Book-Entry Securities, The Depository Trust Company
("DTC"), its nominees and successors, or another Person designated as
Depositary by the Company, which must be a clearing agency registered under
the Exchange Act.
"Designated Noncash Consideration" means the fair market value
of non-cash consideration received by the Company or any of its Restricted
Subsidiaries in connection with an Asset Disposition that is so designated
pursuant to an Officer's Certificate, setting forth the basis of the
valuation.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable) or upon the happening of
any event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Securities (other than upon a
change of control or sale of assets by the Company in circumstances where the
Holders of the Securities would have similar rights).
"EBITDA" for any period means the sum of Consolidated Net
Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, and (v) all other non-cash items reducing Consolidated Net Income
(excluding any non-cash items to the extent they represent an accrual of, or
reserve for, cash disbursements for any subsequent period), less all non-cash
items increasing such Consolidated Net Income, in each case for such period.
Notwithstanding the foregoing, the income tax expense, depreciation expense
and amortization expense of a Restricted Subsidiary of the Company shall be
included in EBITDA only to the extent (and in the same proportion) that the
net income of such Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be distributable to the Company by such Subsidiary as a
dividend.
"Equity Offering" means an offering for cash of common stock
of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer by the Company of
Series B Securities for Series A Securities to be effected pursuant to
Section 2.1 of the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration
statement under the Securities Act contemplated by Section 2.1 of the
Registration Rights Agreement.
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"Fall Away Event" means the Securities shall have achieved
Investment Grade status and the Company delivers to the Trustee an Officer's
Certificate certifying that the foregoing condition has been satisfied.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary
that is organized and existing under the laws of any country or other
jurisdiction other than the United States of America, any State thereof or
the District of Columbia and substantially all of the assets of which are
located outside the United States of America.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of the Indenture,
including those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" means any guarantor of the Notes.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement, Currency Agreement, or
Commodity Price Protection Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock
of a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication),
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(i) the principal of and premium, if any, in respect
of indebtedness of such Person for borrowed money;
(ii) the principal of and premium, if any, in respect
of obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all obligations of such Person in respect of
letters of credit or other similar instruments (including
reimbursement obligations with respect thereto);
(iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services
(except Trade Payables), which purchase price is due more than
six months after the date of placing such property in service
or taking delivery and title thereto or the completion of such
services;
(v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person;
(vi) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Restricted
Subsidiary, any Preferred Stock (but excluding, in each case,
any accrued dividends);
(vii) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided, however,
that the amount of such Indebtedness shall be the lesser of
(A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such
other Persons;
(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person; and
(ix) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indenture" means this instrument as originally executed
(including all exhibits and schedules thereto) and as it may from time to
time be as amended or supplemented by one or more supplemental indentures
entered into pursuant to the applicable provisions hereof or otherwise in
accordance with the terms hereof.
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"Initial Securities" means the first $200.0 million aggregate principal
amount of the Securities issued under this Indenture on the date hereof, which
may be exchanged under the Exchange Offer for Series B Securities.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown
Inc., Fleet Securities, Inc. and Wells Fargo Brokerage Services, LLC.
"Intangible Assets" means intellectual property, goodwill and other
intangible assets, in each case determined in accordance with GAAP.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued or owned by such Person and all other items that
would be classified as investments on a balance sheet prepared in accordance
with GAAP. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.4, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time that such
Subsidiary is so redesignated a Restricted Subsidiary; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors and evidenced by a resolution of such Board of
Directors certified in an Officers' Certificate to the Trustee.
"Investment Grade" means BBB- or higher by Standard & Poor's Ratings Group
and its successors and Baa3 or higher by Moody's Investors Service, Inc. and its
successors.
"Issue Date" means the date on which any Securities are first issued under
this Indenture.
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"Letter of Credit Facility" means the Master Commercial Letter of Credit
Reimbursement Agreement, dated as of May 1, 2001, among the Company and Fleet
National Bank, as it may be amended, extended, renewed refinanced, substituted,
or replaced from time to time (including increases in principal or notational
amount thereof to the extent permitted under the Securities or the addition of
one or more lenders to an existing facility or the replacement or inclusion of
one or more lenders in a new facility) in one or more agreements.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other non-cash form and
excluding Designated Non-cash Consideration and Asset Swaps except to the extent
they are converted into cash) therefrom, in each case net of (i) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Disposition, (iv) the deduction of
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the assets disposed of in
such Asset Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition and (v) in the case of an Asset Disposition by a
Foreign Restricted Subsidiary, any amount which, as a result of applicable law,
may not be legally paid as a dividend, or distributed or otherwise paid or
repatriated to the Company or its Subsidiaries.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board, any Vice Chairman, the Chief
Executive Officer, the Chief Financial Officer, the President, any Executive
Vice President, any Senior Vice President, the Vice President-Finance (or any
such other officer that performs similar duties), the Secretary or Treasurer of
the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
which is the Chairman of the Board, the Chief Executive Officer, the Chief
Financial Officer, the
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President, any Executive Vice President, any Senior Vice President, or the
Vice President-Finance (or any such other officer that performs similar
duties).
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
Opinions of Counsel required to be delivered under this Indenture may have
qualifications customary for opinions of the type required and counsel
delivering such opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
"Permitted Holders" means Sam Wyly, Charles J. Wyly, Jr., Evan A. Wyly,
trusts established by or for the benefit of any such Persons or any of their
lineal descendants, entities controlled by any such trusts, and their respective
Affiliates.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person which will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practice of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Investment to the extent
the consideration therefore consists of Qualified Capital Stock of the Company;
(ix) advances to vendors in the ordinary course of business in an aggregate
principal amount at any one time outstanding not to exceed $5 million; (x) the
form of payment pursuant to deferred compensation plans for former and current
directors, officers, consultants and employees; and (xi) in addition to items
(i)-(x) above, an amount not to exceed 2.5% of the Company's Consolidated
Tangible Net Worth in the aggregate at any one time outstanding.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for
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contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review and landlords' Liens; (c) Liens for property taxes not yet due or
payable or subject to penalties for non-payment or which are being contested
in good faith by appropriate proceedings; (d) Liens in favor of issuers of
surety bonds or letters of credit issued pursuant to the request of and for
the account of such Person in the ordinary course of its business; (e) minor
survey exceptions, minor encumbrances, easements or reservations of, or rights
of others for, licenses, rights-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
Incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (f) Liens securing
Hedging Obligations so long as the related Indebtedness is, and is permitted
to be under the Indenture, secured by a Lien on the same property securing
such Hedging Obligations; (g) leases and subleases of real property which do
not interfere with the ordinary conduct of the business of the Company or any
of its Restricted Subsidiaries, and which are made on customary and usual
terms applicable to similar properties; (h) Liens existing as of the date of
the Indenture and Liens created by the Indenture; (i) Liens created solely for
the purpose of securing Purchase Money Debt Incurred after the Issue Date;
provided, however, that (A) the aggregate principal amount of Indebtedness
secured by such Liens shall not exceed the lesser of cost or fair market value
of the assets or property so acquired or constructed, (B) the Indebtedness
secured by such Liens shall have otherwise been permitted to be issued under
the Indenture and (C) such Liens shall not encumber any other assets or
property of the Company or any of its Restricted Subsidiaries and shall attach
to such assets or property within 90 days of the construction, acquisition or
improvement of such assets or property; (j) Liens on the assets or property of
a Restricted Subsidiary of the Company existing at the time such Restricted
Subsidiary became a Subsidiary of the Company and not incurred as a result of
(or in connection with or in anticipation of) such Restricted Subsidiary
becoming a Subsidiary of the Company; provided, however, that (A) any such
Lien does not by its terms cover any property or assets after the time such
Restricted Subsidiary becomes a Subsidiary which were not covered immediately
prior to such time, (B) the Incurrence of the Indebtedness secured by such
Lien shall have otherwise been permitted to be Incurred under the Indenture,
and (C) such Liens do not extend to or cover any other property or assets of
the Company or any of its Restricted Subsidiaries; (k) Liens to secure
Capitalized Lease Obligations permitted to be Incurred under this Indenture;
(1) Liens to secure Indebtedness permitted to be Incurred the Indenture which
is recourse solely to the assets securing such Indebtedness; provided that (i)
the fair market value, as determined in good faith, of the assets subject to
such Liens (determined at the time such Liens are granted) does not exceed an
amount equal to 125% of the amount of such Indebtedness and (ii) the aggregate
principal amount outstanding of all Indebtedness secured by such Liens at the
time when such additional Indebtedness is Incurred shall not exceed 5% of the
Company's Consolidated Tangible Net Worth; and (m) Liens extending, renewing
or replacing in whole or in part a Lien permitted by the Indenture; provided,
however, that (A) such Liens do not extend
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beyond the property subject to the existing Lien and improvements and
construction on such property and (B) the Indebtedness secured by the Lien may
not exceed the Indebtedness secured at the time by the existing Lien;
"Person" means any individual, corporation, partnership, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to become
due at the relevant time.
"Prospectus" means the prospectus included in a Registration Statement,
including any preliminary prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including any such prospectus
supplement with respect to the terms of the offering of any portion of the
Series A Securities covered by a Shelf Registration Statement, and by all other
amendments and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference therein.
"Public Market" means any time after (x) the common stock of the Company is
then registered with the SEC pursuant to Section 12(b) or 12(g) of the Exchange
Act and traded either on a national securities exchange or in the National
Association of Securities Dealers Automated Quotation System and (y) at least
20% of the total issued and outstanding Voting Stock of the Company has been
distributed by means of an effective registration statement under the Securities
Act.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the Issue Date or Incurred in
compliance with the Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to (or, to the extent of any
applicable premium in connection with a
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refinancing, greater than) or less than the sum of the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced; provided
further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the
Company other than Indebtedness owed to such Restricted Subsidiary by the
Company, (y) Indebtedness of a non-Guarantor Restricted Subsidiary that
refinances Indebtedness of a Guarantor or (z) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of July 6, 2001 among the Company and the Initial Purchasers.
"Registration Statement" means any registration statement of the Company
which covers any of the Series A Securities or Series B Securities pursuant to
the provisions of the Registration Rights Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the
applicable date.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture the SEC is not existing and performing the duties
now assigned to it under the TIA, then the body performing such duties at such
time.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities" has the meaning set forth in the Recitals.
"Senior Indebtedness" means all Indebtedness of the Company (including,
without limitation, Indebtedness under the Credit Agreement, and fees, costs and
expenses incurred thereunder), including interest thereon, whether outstanding
on the Issue Date or thereafter Incurred, unless in the instrument creating or
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are subordinated in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for federal, state, local or
other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade
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creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness,
Guarantee or obligation of the Company which is subordinate or junior
expressly by its written terms in any respect to any other Indebtedness,
Guarantee or obligation of the Company, including any Subordinated
Obligations, (5) any obligations with respect to any Capital Stock, (6)
Indebtedness which, when Incurred and without respect to any election under
Section 1111(b) of Title II United States Code, is without recourse to the
Company, or (7) any Indebtedness Incurred in violation of this Indenture.
"Shelf Registration Statement" means a "shelf" registration statement of
the Company pursuant to Section 2.2 of the Registration Rights Agreement, which
covers all of the Registrable Securities (as defined in the Registration Rights
Agreement) on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC as of the date of the Indenture.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Securities pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person, or (iii) one or more Subsidiaries of such
Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250,000,000 (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A"
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(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act), (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank or trust company meeting the qualifications described
in clause (ii) above, (iv) investments in commercial paper, maturing not more
than 365 days after the date of acquisition, issued by a Person (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America, any State thereof or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Group, (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc., and (vi)
investments in mutual funds whose investment guidelines restrict such funds'
investments to investments which are substantially similar to those described
in clauses (i)-(v) above.
"10 7/8% Senior Notes" means the Company's 10 7/8% Senior Notes due 2006.
"TIA" means the Trust Indenture Act of 1939, as amended, or any successor
statute.
"Total Assets" means, as of any date, the Company's total consolidated
assets as of such date, as determined in accordance with GAAP.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in the Indenture until a successor
replaces it pursuant to the applicable provisions of this Indenture and,
thereafter, means the successor.
"Trust Officer" shall mean, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of the
Indenture.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
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"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that (i) either (A) the Subsidiary to be so designated has total consolidated
assets of $1,000 or less or (B) if such Subsidiary has total consolidated assets
greater than $1,000, then such designation would be permitted under Section 4.4
and (ii) the holders of any Indebtedness of such Subsidiary do not have direct
or indirect recourse against the Company or any Restricted Subsidiary of the
Company and neither the Company nor any Restricted Subsidiary of the Company
otherwise has any liability for any payment obligations in respect of such
Indebtedness except as permitted under Section 4.3. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under clause (a) of Section
4.3 and (y) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions. Notwithstanding the foregoing, any
Unrestricted Subsidiary (as determined in accordance with clauses (i) through
(ii) of the first sentence of this definition) may but is not obligated to
provide a Guarantee for the Securities.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.
SECTION 1.2 Other Definitions.
<Table>
<Caption>
Defined in
Term Section
"Affiliate Transaction".................................................4.7
"Bankruptcy Law"........................................................6.1
"covenant defeasance option".........................................8.1(b)
"Custodian".............................................................6.1
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"Event of Default.......................................................6.1
"Global Securities".....................................................2.1
"legal defeasance option"............................................8.1(b)
"Legal Holiday"........................................................10.8
"Notice of Default".....................................................6.1
"Offer"..............................................................4.6(b)
"Offer Amount"....................................................4.6(c)(2)
"Offer Period"....................................................4.6(c)(2)
"Participants"..........................................................2.6
"Paying Agent"..........................................................2.3
"Permitted Indebtedness".............................................4.3(b)
"Purchase Date"...................................................4.6(c)(1)
"Purchase Money Debt"................................................4.3(b)
"Registrar".............................................................2.3
"Restricted Payment".................................................4.4(a)
"Securities Register"...................................................2.3
"Series A Securities"..............................................Recitals
"Series B Securities"..............................................Recitals
"Successor Company".....................................................5.1
</Table>
SECTION 1.3 Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "including" means including without limitation;
(4) words in the singular include the plural and words
in the plural include the singular;
(5) unsecured Indebtedness shall not be deemed to be
subordinate or junior to secured Indebtedness merely
by virtue of its nature as unsecured Indebtedness;
(6) the principal amount of any noninterest bearing or
other discount security at any date shall be the
principal amount thereof that would be shown on a
balance sheet of the issuer dated such date prepared
in accordance with GAAP;
(7) the principal amount of any Preferred Stock shall be
(i) the maximum liquidation value of such Preferred
Stock or (ii) the maximum mandatory redemption or
mandatory repurchase price with respect to such
Preferred Stock, whichever is greater;
(8) all references to $, US$, U.S. dollars, dollars or
United States dollars shall refer to the lawful
currency of the United States; and
(9) all references herein to particular Sections or
Articles refer to this Indenture unless otherwise so
indicated.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
The Series A Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is hereby
incorporated in and expressly made a part of this Indenture. The Series B
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company). Each
Security shall be dated the date of its authentication. The terms of the Series
A Securities and Series B Securities set forth in Exhibits A and B,
respectively, are part of the terms of this Indenture.
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(i) Global Securities. The Securities shall be issued
initially in the form of one or more permanent Global Securities
("Global Securities") in definitive, fully registered form without
interest coupons in substantially the form of Exhibit A or Exhibit B,
as the case may be, which shall be deposited on behalf of the
purchasers of the Securities represented thereby with the Trustee, at
its principal corporate trust office in New York City, as custodian for
the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee in the limited circumstances
hereinafter provided.
(ii) Certificated Securities. Except as provided in
Section 2.6, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated
securities.
SECTION 2.2 Execution and Authentication; Title and Terms.
An Officer of the Company shall sign the Securities for the
Company by manual or facsimile signature. Securities shall be dated the date of
their authentication.
If an officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The aggregate principal amount of Securities which may be
outstanding at any one time under this Indenture is limited to $250.0 million in
principal amount (of which $200.0 million may be Initial Securities and Series B
Securities exchanged therefor, and up to $50.0 million may be issued as
Additional Securities). The Additional Securities may be issued as Series A
Securities (which may be subsequently exchanged for Series B Securities) or
Series B Securities at the option of the Company. The Initial Securities and
Series B Securities exchanged therefor, and any Additional Securities
subsequently issued under this Indenture shall be treated as a single class for
all purposes under this Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase.
The Trustee shall authenticate and make available for delivery
Securities for original issue upon a written order of the Company signed by an
Officer of the Company. Such order shall specify the amount of the Securities to
be authenticated and the date on which the original issue of Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed that amount except as provided in this Section 2.2 or
Section 2.7.
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The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate the Securities, upon the consent of the Company to
such appointment. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"). The Registrar, acting on behalf of and as agent
for the Company, shall keep a register (the "Securities Register") of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. 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 7.7. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.4 Paying Agent To Hold Money in Trust.
On or prior to each due date of the principal and interest on
any Security, the Company shall deposit with the Paying Agent a sum sufficient
to pay such principal and interest 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 Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may, for purpose of
obtaining the satisfaction and discharge of this Indenture or for any other
purpose, require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
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SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee, in writing at least five Business Days before each
interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders; provided that as long as
the Trustee is the Registrar, no such list need be furnished.
SECTION 2.6 Transfer and Exchange.
The Securities shall be issued in registered form and shall be
transferable only upon the surrender of a Security for registration of transfer.
When a Security is presented to the Registrar or a co-registrar with a request
to register a transfer, the Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Registrar shall record in the Securities Register the transfer as
requested if the relevant requirements of the Uniform Commercial Code are met,
and thereupon one or more new Securities in the same aggregate principal amount
shall be issued to the designated assignee or transferee and the old Security
will be returned to the Company. When Securities are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Securities of other denominations, the Registrar shall make the exchange as
requested, in the same manner, if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-registrar's
request. The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section. The Company shall not be required to make and
the Registrar need not register transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed or 15 days before an interest
payment date.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
With respect to Global Securities:
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(1) Each Global Security authenticated under
this Indenture shall be registered in the name of the
Depositary designated for such Global Security or a nominee
thereof and deposited with such Depositary or a nominee
thereof or custodian therefor, and each such Global Security
shall constitute a single Security for all purposes of this
Indenture.
(2) 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. A Global Security is exchangeable for certificated
Securities only if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as a Depositary for
such Global Security or if at any time the Depositary ceases
to be a clearing agency registered under the Exchange Act and
in either case the Company fails to appoint a successor
Depositary within 90 days, (ii) the Company, at its option,
executes and delivers to the Trustee a notice that such Global
Security shall be so transferable, registrable, and
exchangeable, and such transfers shall be registrable or (iii)
there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse
of time or both, would constitute an Event of Default with
respect to the Securities represented by such Global Security.
Any Global Security that is exchangeable for certificated
Securities pursuant to the preceding sentence will be
transferred to, and registered and exchanged for, certificated
Securities in authorized denominations, without legends
applicable to a Global Security, and registered in such names
as the Depositary holding such Global Security may direct.
Subject to the foregoing, a Global Security is not
exchangeable, except for a Global Security of like
denomination to be registered in the name of the Depositary or
its nominee. In the event that a Global Security becomes
exchangeable for certificated Securities, (i) certificated
Securities will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii)
payment of principal, any repurchase price, and interest on
the certificated Securities will be payable, and the transfer
of the certificated Securities will be registrable, at the
office or agency of the Company maintained for such purposes,
and (iii) no service charge will be made for any registration
or transfer or exchange of the certificated Securities,
although the Company may require payment of a sum sufficient
to cover any tax or governmental charge imposed in connection
therewith.
(3) Securities issued in exchange for a Global
Security or any portion thereof shall have an aggregate
principal amount equal to that of such Global Security or
portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the
Depositary shall designate and shall bear the applicable
legends provided for herein. Any Global Security to be
exchanged in whole shall be surrendered by the Depositary to
the Trustee. With respect to any Global Security to be
exchanged in part, either such Global Security shall be so
surrendered for exchange or, if the Trustee is acting as
custodian for the Depositary or its nominee with respect to
such Global Security,
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the principal amount thereof shall be reduced, by an amount
equal to the portion thereof to be so exchanged, by means of
an appropriate adjustment made on the records of the Trustee.
Upon any such surrender or adjustment, the Trustee shall
authenticate and deliver the Security issuable on such
exchange to or upon the order of the Depositary or an
authorized representative thereof.
(4) Every Security authenticated and delivered
upon registration of transfer of, or in exchange for or in
lieu of, a Global Security or any portion mutilated thereof,
whether pursuant to this Section, Section 2.7 or 2.9 or
otherwise, shall be authenticated and delivered in the form
of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary
for such Global Security or a nominee thereof.
Members of, or participants in, the Depositary
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall 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 (which may be
in electronic form or other form acceptable to the Trustee) furnished by the
Depositary or impair, as between the Depositary and its Participants, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
SECTION 2.7 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or
Registrar or if the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the requirements of the Uniform
Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee and the Company. If reasonably requested by the
Trustee and the Company, such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the Company, the
Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an obligation of the Company
under this Indenture.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 2.8 Outstanding Securities.
Securities outstanding at any time are all Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company or an Affiliate of
the Company holds the security.
If a Security is replaced pursuant to Section 2.7, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date or,
pursuant to Section 8.1(a), within 91 days prior thereto, money sufficient to
pay all principal and interest payable on that redemption or maturity date with
respect to the Securities (or portions thereof) to be redeemed or maturing, as
the case may be, then on and after such date such Securities (or portions
thereof) cease to be outstanding and on and after such redemption or maturity
date interest on them ceases to accrue.
SECTION 2.9 Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities and deliver them in exchange
for temporary 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.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment or cancellation and
deliver such canceled Securities to the Company. The Trustee shall from time to
time provide the Company a list of all Securities that have been canceled as
requested by the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
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SECTION 2.11 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, the Company shall pay defaulted interest (plus interest on such
defaulted interest to the extent lawful) in any lawful manner. The Company may
pay the defaulted interest to the persons who are Securityholders on a
subsequent special record date. The Company shall fix or cause to be fixed any
such special record date and payment date to the reasonable satisfaction of the
Trustee and shall promptly mail to each Securityholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.12 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities, they shall notify the Trustee in writing of the
redemption date, the principal amount of Securities to be redeemed and the
paragraph of the Securities pursuant to which the redemption will occur.
The Company shall give each notice to the Trustee provided for
in this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the provisions herein.
SECTION 3.2 Selection of Securities To Be Redeemed.
If fewer than all the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata or by lot or by a
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee considers fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the selection from outstanding Securities
not previously called for redemption. The Trustee may select for redemption
portions of the principal of
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Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole 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
Securities to be redeemed. In the event the Company is required to make an
offer to redeem Securities pursuant to Sections 4.6 or 4.8 and the amount
available for such offer is not evenly divisible by $1,000, the Trustee shall
promptly refund to the Company any remaining funds, which in no event will
exceed $1,000.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a date for
redemption of securities, the Company shall mail a notice of redemption by
first-class mail to the registered address appearing in the Security Register of
each Holder of Securities to be redeemed.
The notice shall identify the Securities (including CUSIP
numbers, if any) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the
redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of
the particular Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment, interest on Securities (or portion
thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed;
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such
notice or printed on the Securities; and
(9) the procedures that a Holder must follow to surrender
the securities to be redeemed.
At the Company's written request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense. In such event, the Company shall provide the Trustee with the
information required by this Section.
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SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price stated in the notice. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued
interest to the redemption date. Such notice if mailed in the manner herein
provided shall be conclusively presumed to have been given, whether or not the
Holder receives such notice. Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice to any other Holder.
If any Security called for redemption shall not be so paid on
the redemption date upon surrender thereof for redemption in accordance with
this Indenture, the principal and premium, if any, shall, until paid, bear
interest from the redemption date at the rate borne by such Security.
SECTION 3.5 Deposit of Redemption Price.
Prior to 11:00 a.m. (New York City time) on the redemption
date, the Company shall deposit with the Trustee or Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest (if any) on
all Securities or portions thereof to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancellation. The Paying Agent shall
promptly mail or deliver to Holders of Securities so redeemed payment in an
amount equal to the redemption price of the Securities purchased from each such
Holder.
SECTION 3.6 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part (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 his attorney duly authorized in writing), the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or Securities of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered, except that if a Global Security is so surrendered,
the Company shall execute, and the Trustee shall authenticate and deliver to the
Depositary for such Global Security, without service charge, a new Global
Security in denomination equal to and in exchange for the unredeemed portion of
the principal of the Global Security so surrendered.
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ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities.
The Company shall promptly pay the principal of and interest
on the Securities on the dates and in the manner provided in the Securities and
in this Indenture. Principal and interest shall be considered paid on the date
due if on such date the Trustee or the Paying Agent holds in accordance with
this Indenture money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.2 SEC Reports.
The Company shall file with the Trustee and provide
Securityholders, as their names appear in the Security Register, within 15 days
after it files them with the SEC, copies of the annual reports and the
information, documents and other reports which it is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that
the Company may not be required to be or remain subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
continue to file with the SEC and provide the Trustee and Securityholders with
the annual reports and the information, documents and other reports which are
specified in Sections 13 and 15(d) of the Exchange Act. The Company also shall
comply with the other provisions of TIA 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 exclusively on Officers' Certificates).
SECTION 4.3 Limitation on Indebtedness.
(a) The Company will not Incur, and will not permit any
Restricted Subsidiary to Incur, any Indebtedness; provided, however, that the
Company, any Guarantor and any Foreign Restricted Subsidiary may Incur
Indebtedness (including Acquired Indebtedness) if on the date thereof the
Consolidated Coverage Ratio would be equal to or greater than 2.5 to 1.0.
(b) Notwithstanding Section 4.3(a), the Company and any
Restricted Subsidiaries (to the extent set forth below) may Incur the following
Indebtedness ("Permitted Indebtedness"):
(i) Indebtedness and letters of credit (with letters
of credit being deemed to have a principal amount equal to the
maximum face amount
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(thereunder) of the Company, Aaron Brothers, Inc. (in the
form of a guarantee of the Company's obligations) as long as
it is a Restricted Subsidiary that is not a Significant
Subsidiary or any Restricted Subsidiary which is a Guarantor
of the Notes under the Credit Agreement, Letter of Credit
Facility and any Refinancing Indebtedness in respect thereof
in an aggregate principal amount outstanding at any time not
to exceed the greater of (x) an amount equal to 50% of the
book value of the inventory of the Company and its
Restricted Subsidiaries as of any date of Incurrence
calculated on a consolidated basis in accordance with GAAP
and (y) $325 million; provided that if Aaron Brothers, Inc.
is at any time a Restricted Subsidiary that is a Significant
Subsidiary and an obligor (including as a guarantor) under
the Credit Agreement, Letter of Credit Facility or
Refinancing Indebtedness in respect thereof, such event will
be deemed to constitute the incurrence of Indebtedness
guaranteed by Aaron Brothers, Inc. under the Credit
Agreement, Letter of Credit Facility or Refinancing
Indebtedness in respect thereof, as the case may be;
(ii) Indebtedness of the Company owing to and held by
any Wholly Owned Subsidiary or Indebtedness of a Restricted
Subsidiary owing to and held by the Company or any Wholly
Owned Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Subsidiary ceasing to
be a Wholly Owned Subsidiary or any subsequent transfer of
any such Indebtedness (except to the Company or a Wholly
Owned Subsidiary) will be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iii) (x) Indebtedness represented by the Securities
and any Guarantees of the Securities by any of the Company's
Subsidiaries in an amount not to exceed the amount
outstanding on the initial Issue Date (y) any Indebtedness
of the Company or any Restricted Subsidiary (other than the
Indebtedness described in Sections 4.3(b)(i)-(ii))
outstanding on the Issue Date, provided that the 10 7/8%
Senior Notes shall only be deemed Permitted Indebtedness
until 60 days after the Issue Date and (z) any Refinancing
Indebtedness Incurred in respect of any Indebtedness
described in this Section 4.3(b)(iii) other than the 10 7/8%
Senior Notes or Section 4.3(a);
(iv) (A) Acquired Indebtedness of the Company or a
Restricted Subsidiary; provided, however, that at the time
such Restricted Subsidiary or assets is acquired by the
Company or a Restricted Subsidiary, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant
to Section 4.3(a) after giving effect to the Incurrence of
such Indebtedness pursuant to this Section 4.3(b)(iv) and
such transaction or series of related transactions and (B)
Refinancing Indebtedness Incurred by a Restricted Subsidiary
in respect of Indebtedness Incurred by such Restricted
Subsidiary pursuant to this Section 4.3(b)(iv);
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(v) Indebtedness (A) in respect of performance
bonds, bankers' acceptances, letters of credit and surety or
appeal bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of its business and which
do not secure other Indebtedness and (B) under Currency
Agreements, Interest Rate Agreements and Commodity Price
Protection Agreements Incurred which, at the time of
Incurrence, is in the ordinary course of business; provided,
however, that, in the case of Currency Agreements, Interest
Rate Agreements and Commodity Price Protection Agreements,
such Currency Agreements, Interest Rate Agreements and
Commodity Price Protection Agreements do not increase the
Indebtedness of the Company outstanding at any time other
than as a result of fluctuations in foreign currency
exchange rates, interest rates or commodity prices or by
reason of fees, indemnities and compensation payable
thereunder;
(vi) Indebtedness (A) represented by Guarantees by
the Company of Indebtedness otherwise permitted to be
Incurred pursuant to this Section 4.3 and (B) represented by
Guarantees by a Restricted Subsidiary of Indebtedness of the
Company or another Restricted Subsidiary otherwise permitted
to be Incurred pursuant to this Section 4.3; provided that,
in the case of clause (B), if a Restricted Subsidiary
Guarantees any such Indebtedness other than any Guarantee by
Aaron Brothers, Inc. of Indebtedness under the Credit
Agreement, Letter of Credit Facility and any Refinancing
Indebtedness in respect thereof, such Restricted Subsidiary
executes and delivers to the Trustee a supplemental
indenture in form satisfactory to the Trustee providing for
the Guarantee on an equal basis of the Securities; provided,
however, if Aaron Brothers , Inc is at any time a Restricted
Subsidiary that is a Significant Subsidiary while it has
Guaranteed the Credit Agreement, Letter of Credit Facility,
or Refinancing Indebtedness in respect thereof, Aaron
Brothers, Inc. shall Guarantee the Securities on an equal
basis as set forth in this clause (vi);
(vii) Indebtedness of the Company or any Restricted
Subsidiary represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each
case Incurred for the purpose of financing or refinancing
all or any part of the purchase price or cost of
construction, repairs, renovation, remodeling, expansion or
other improvement of property, plant and equipment,
including services and equipment supporting such items, used
in the Company's or any Restricted Subsidiary's business or
a Related Business (collectively, "Purchase Money Debt") in
an aggregate principal amount outstanding not to exceed 10%
of Total Assets at the time of any Incurrence thereof;
(viii) Indebtedness of the Company or any Restricted
Subsidiary represented by Capitalized Lease Obligations
Incurred from time to time for point-of-sale equipment and
store systems, including services and equipment supporting
such equipment and systems, with the aggregate capitalized
amount of
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such obligation determined in accordance with GAAP outstanding
at any one time not to exceed $50 million;
(ix) Indebtedness of the Company or any Restricted
Subsidiary Incurred with respect to acquisitions of assets
or a Person or consisting of Guarantees of such
Indebtedness, so long as such Indebtedness was not created
in anticipation of such acquisition and does not exceed, in
the aggregate, $10 million; and
(x) Other Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount
outstanding at any time not to exceed $50 million, of which
no more than $10 million may be borrowed by non-Guarantor
Restricted Subsidiaries.
(c) Notwithstanding the foregoing, the Company shall not
Incur any Indebtedness pursuant to the foregoing Section 4.3(b) if the
proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such new Indebtedness shall be subordinated to
the Securities to at least the same extent as such Subordinated Obligations
being Refinanced. In addition, notwithstanding any other provision of this
Section 4.3, the Company will not, and will not permit any Restricted
Subsidiary to, Incur any Guarantee of Indebtedness of any Unrestricted
Subsidiary.
(d) Notwithstanding the foregoing, any Guarantee by a
Restricted Subsidiary of the Securities may be released (i) upon the sale,
transfer or other disposition of all of the Capital Stock of such Restricted
Subsidiary held by the Company or any Subsidiary to a Person other than the
Company or a Subsidiary, (ii) if such Restricted Subsidiary no longer
guarantees any Indebtedness of the Company or has outstanding any Indebtedness
which it would not be able to incur without guaranteeing the Securities
pursuant to Section 4.3(b) if such Indebtedness was incurred on the date of
such release, or (iii) if such Subsidiary is designated an Unrestricted
Subsidiary in compliance with Section 4.4.
(e) For purposes of determining compliance with the
foregoing covenant, (i) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described above, the
Company may classify or later reclassify such item of Indebtedness or any
portion thereof and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (ii) an item of Indebtedness may
be divided and classified in more than one of the types of Indebtedness
described above.
SECTION 4.4 Limitation on Restricted Payments.
(a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation
involving the Company), except (1) dividends or distributions payable solely
in its Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase such Capital Stock and (2) dividends or
distributions payable to the Company or another Restricted
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Subsidiary (and, if such Restricted Subsidiary making such dividend or
distribution is not wholly owned, to its other shareholders on a pro rata
basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company held by Persons other than the Company or another
Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment any Subordinated Obligations
(other than (A) the purchase, repurchase or other acquisition of Subordinated
Obligations in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
such purchase, repurchase or acquisition or (B) the repayment, redemption or
retirement for value of the Company's obligations owed to 5931, Inc. or 5931
Business Trust or successors thereto so long as it remains a Wholly Owned
Subsidiary) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement, Investment or payment being herein
referred to as a "Restricted Payment") if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default or Event of Default will have occurred and
be continuing (or would result therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.3(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Board of Directors of the
Company, whose determination will be evidenced by a resolution of
such Board of Directors certified in an Officers' Certificate to the
Trustee) declared or made subsequent to the Issue Date would exceed
the sum of:
(A) 50% of the Consolidated Net Income with respect
to the period (treated as one accounting period) from the end of the
most recent fiscal quarter ending prior to the Issue Date to the end
of the most recent fiscal quarter for which financial statements are
available to the Trustee (or, in case such Consolidated Net Income
will be a deficit, minus 100% of such deficit) plus $100 million;
(B) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary);
(C) the amount by which Indebtedness of the Company
is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Restricted Subsidiary) subsequent to the
Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash or other property distributed by
the Company upon such conversion or exchange);
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(D) in the case of designation of an Unrestricted
Subsidiary as a Restricted Subsidiary (as long as the designation of
such Subsidiary as an Unrestricted Subsidiary was deemed a Restricted
Payment) the value (as provided in the definition of "Investment") of
the Company's interest in such Subsidiary provided that such amount
shall not in any case exceed the aggregate amount of the Restricted
Payments deemed made at the time or after the Subsidiary was
designated as an Unrestricted Subsidiary; and
(E) in the case of the disposition, return, dividend
or repayment of any Investment constituting a Restricted Payment made
after the date of the Indenture an amount (to the extent not included
in Consolidated Net Income) equal to the lesser of payments made to
the Company or a Restricted Subsidiary with respect to such
Investment and the initial amount of such Investment, in either case,
less the cost of disposition of such Investment and net of taxes (to
the extent not reflected in Consolidated Net Income).
(b) The provisions of Section 4.4(a) will not prohibit:
(i) any purchase, redemption, defeasance or other
acquisition of Capital Stock of the Company or Subordinated
Obligations made by exchange for, or out of the Net Cash
Proceeds of the substantially concurrent sale of, Capital
Stock of the Company (other than Disqualified Stock and
other than Capital Stock issued or sold to a Subsidiary);
provided, however, that (A) such purchase, redemption,
defeasance or other acquisition will be excluded in the
calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale will be excluded from
Section 4.4(a)(3)(B);
(ii) any purchase, redemption, defeasance or other
acquisition of Subordinated Obligations made by exchange
for, or out of the net proceeds of the substantially
concurrent sale of, Subordinated Obligations of the Company;
provided, however, that (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the
Subordinated Obligations being so redeemed, purchased,
defeased, acquired or retired for value (plus the amount of
any premium required to be paid under the terms of the
instrument governing the Subordinated Obligations being so
redeemed, purchased, defeased, acquired or retired), (B)
such new Indebtedness is subordinated to the Securities at
least to the same extent as such Subordinated Obligations so
redeemed, purchased, exchanged, defeased, acquired or
retired for value, (C) such new Indebtedness has a final
scheduled maturity date later than the final scheduled
maturity date of the Securities and (D) such new
Indebtedness has an Average Life equal to or greater than
the Average Life of the Securities; provided further,
however, that such purchase, redemption, defeasance or other
acquisition will be excluded in the calculation of the
amount of Restricted Payments;
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(iii) any purchase, redemption, defeasance or other
acquisition of Subordinated Obligations (1) from Net
Available Cash to the extent permitted by Section 4.6;
provided, however, that such purchase or redemption will be
excluded in the calculation of the amount of Restricted
Payments, or (2) pursuant to an offer to purchase which is
then required to be made upon a change of control of the
Company pursuant to the terms of the instrument governing
such Subordinated Obligation; provided, however, that such
purchase will be included in the calculation of the amount
of Restricted Payments;
(iv) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such
dividend would have complied with this Section 4.4;
provided, however, that the amount of such dividend will be
included in the calculation of the amount of Restricted
Payments; or
(v) repurchase, acquisitions or retirements of
shares of Capital Stock of the Company deemed to occur upon
the exercise of stock options or similar rights issued under
employee benefit plans of the Company if such shares
represent all or a portion of the exercise price or are
surrendered in connection with satisfying any federal or
state income tax obligation or are repurchased or acquired
to fulfill obligations of the Company or any Restricted
Subsidiary under employee compensation or other benefit
arrangements entered into or provided for in the ordinary
course of business; provided that cash payments pursuant to
this Section 4.4(b)(v) shall not exceed $2 million in any
fiscal year.
SECTION 4.5 Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Company, (ii)
make any Investments in the Company or (iii) transfer any of its property or
assets to the Company or any Restricted Subsidiary, except:
(1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement in effect on or prior
to the date on which such Restricted Subsidiary was acquired by the
Company or a Restricted Subsidiary (other than encumbrances or
restrictions Incurred in connection with, or in contemplation of, the
transaction or series of related transactions pursuant to
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which such Restricted Subsidiary became a Subsidiary or was acquired by
the Company or a Restricted Subsidiary) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this Section 4.5 or
contained in any amendment, waiver, modification or renewal of an
agreement referred to in clause (1) or (2) of this Section 4.5;
provided, however, that the encumbrances and restrictions contained
in any such refinancing agreement or amendment, waiver, modification
or renewal are no less favorable to the Securityholders than the
encumbrances and restrictions contained in such agreements as
determined in good faith by the Company;
(4) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a
lease, license or similar contract, (B) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on,
any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by the Indenture, (C) arising or agreed to
in the ordinary course of business and that does not individually or
in the aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to the
Company or such Restricted Subsidiary or (D) contained in security
agreements securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restrictions restrict the transfer of the
property subject to such security agreements;
(5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition; and
(6) encumbrances or restrictions contained in any financing
agreement of a Foreign Restricted Subsidiary or arising or existing
by reason of applicable law, including any legal limitations
restricting the ability of Foreign Restricted Subsidiaries to pay as
dividends or distribute or otherwise pay or repatriate funds to the
Company or its Subsidiaries.
SECTION 4.6 Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value, as determined in good
faith by the Board of Directors of the Company (including as to the value of
all non-cash consideration), of the shares and assets subject to such Asset
Disposition, (ii) at least 75% of the consideration thereof received by the
Company or such Restricted Subsidiary (other than Asset Swaps) is in the form
of cash or Temporary Cash Investments and (iii) an amount
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equal to 100% of the Net Available Cash from such Asset Disposition is applied
by the Company or such Restricted Subsidiary, as the case may be (A) FIRST, to
the extent the Company or any Restricted Subsidiary, as the case may be,
elects (or is required by the terms of any Senior Indebtedness), to prepay,
repay or purchase Senior Indebtedness or Indebtedness (other than Disqualified
Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed
to the Company or an Affiliate of the Company) within 180 days from the later
of the date of such Asset Disposition or the receipt of such Net Available
Cash; (B) SECOND, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the Company or such
Restricted Subsidiary, as the case may be, elects, to the investment by the
Company or any Restricted Subsidiary in Additional Assets within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (C) THIRD, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to make an
Offer (as defined below) to purchase Securities pursuant to and subject to the
conditions set forth in Section 4.6(b) within 45 days after the date that is
one year from the receipt of such Net Available Cash; and (D) FOURTH, to the
extent of the balance of such Net Available Cash after application in
accordance with clauses (A), (B) and (C), to (x) the acquisition by the
Company or any Wholly Owned Subsidiary of Additional Assets, (y) the
prepayment, repayment, purchase or other acquisition of Indebtedness of the
Company (other than Indebtedness owed to an Affiliate of the Company and other
than Disqualified Stock of the Company) or Indebtedness of any Restricted
Subsidiary (other than Indebtedness owed to the Company or an Affiliate of the
Company) or (z) to general corporate purposes (other than to the payment of
dividends or distributions in respect of, or repurchases of, Capital Stock),
in each case within 45 days after the later of one year from the receipt of
such Net Available Cash and the date the Offer described in paragraph (b)
below is consummated; provided, however, that in connection with any
prepayment, repayment, purchase or other acquisition of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company or such Restricted Subsidiary
will, to the extent such Indebtedness is not revolving Indebtedness, retire
such Indebtedness and, except as to Indebtedness described in Section
4.3(b)(i), will cause any related loan commitment or availability (if any) to
be permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased.
For the purposes of this Section 4.6, the following are deemed
to be cash: (x) the assumption by the transferee of Indebtedness of the Company
(other than Disqualified Stock of the Company) or any Restricted Subsidiary and
the release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition, (y) any Designated
Noncash Consideration received by the Company or any of its Restricted
Subsidiaries in the Asset Sale and (z) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
The aggregate fair market value of the Designated Noncash
Consideration, taken together with the fair market value at the time of receipt
of all other Designated Noncash Consideration then held by the Company or any
Restricted Subsidiary, may not exceed 5% of the Company's Consolidated Tangible
Net Worth, at the time of the receipt of the Designated
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Noncash Consideration (with fair market value being measured at the time
received and without giving effect to subsequent changes in value).
With respect to an Asset Swap constituting an Asset
Disposition, the Company or any Restricted Subsidiary shall be required to
receive in cash (as such term is deemed to be defined for purposes of this
paragraph (a)) or Temporary Cash Investments in an amount equal to 75% of the
proceeds of the Asset Disposition which do not consist of in-kind assets
acquired with the Asset Swap.
(b) In the event of an Asset Disposition that requires the
purchase of Securities pursuant to Section 4.6(a)(iii)(C), the Company will be
required to purchase Securities tendered pursuant to an offer by the Company
for the Securities (the "Offer") at a purchase price of 100% of their
principal amount plus accrued interest to the date of purchase in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in Section 4.6(c). If the aggregate purchase price of Securities
tendered pursuant to the offer is less than the Net Available Cash allotted to
the purchase of the Securities, the Company will apply the remaining Net
Available Cash in accordance with Section 4.6(a)(iii)(D) above. The Company
and its Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance herewith except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this Section exceeds $10,000,000. The Company shall not be
required to make an Offer for Securities pursuant to this Section if the Net
Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B)) is less than $15,000,000 for any particular
Asset Disposition (which lesser amounts shall be carried forward for purposes
of determining whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 30 days after
the Company becomes obligated to make an Offer, the Company shall be obligated
to deliver to the Trustee and send, by first-class mail to each Holder, at the
address appearing in the Security Register, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in
whole or in part (subject to prorationing as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of
principal amount, at the applicable purchase price. The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of
such notice (the "Purchase Date") and shall contain (i) the most recently
filed Annual Report on Form 10-K (including audited consolidated financial
statements) of the Company, the most recent subsequently filed Quarterly
Report on Form 10-Q of the Company and any Current Report on Form 8-K of any
the Company filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (iii) if material, appropriate pro forma financial
information and all instructions and materials necessary to tender Securities
pursuant to the Offer, together with the information contained in clause (3).
(2) Not later than the date upon which written
notice of an Offer is delivered to the Trustee as provided below, the
Company shall deliver to the Trustee an Officers' Certificate as to
(i) the amount of the Offer (the "Offer Amount"), (ii) the
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allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.6(a). Upon the
expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation
the Securities or portions thereof which have been properly tendered
to and are to be accepted by the Company. Not later than 11:00 a.m.
(New York City time) on the Purchase Date, the Company shall
irrevocably deposit with the Trustee or with a paying agent (or, if
the Company is acting as Paying Agent, segregate and hold in trust)
an amount in cash sufficient to pay the Offer Amount for all
Securities properly tendered to and accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver payment to each
tendering Holder in the amount of the purchase price.
(3) Holders electing to have a Security purchased
will be required to surrender the Security, together with all
necessary endorsements and other appropriate materials duly
completed, to the Company at the address specified in the notice at
least three Business Days prior to the Purchase Date. Holders will be
entitled to withdraw their election in whole or in part if the
Trustee or the Company receives not later than one Business Day prior
to the Purchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security
(which shall be $1,000 or an integral multiple thereof) which was
delivered for purchase by the Holder, the aggregate principal amount
of such Security (if any) that remains subject to the original notice
of the offer and that has been or will be delivered for purchase by
the Company and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the
Offer Period the aggregate principal amount of Securities surrendered
by Holders exceeds the Offer Amount, the Company shall select the
Securities to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only securities
in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
(4) A Security shall be deemed to have been accepted
for purchase at the time the Trustee, directly or through an agent,
mails or delivers payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant
to this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.7 Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into any agreement or
conduct any transaction or series of related
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transactions (including the purchase, sale, lease or exchange of any property,
or rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless (i) the terms of such transaction or agreement are no
less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate; and (ii) in
the event such Affiliate Transaction involves an aggregate amount in excess of
$5,000,000, the terms of such transaction or agreement shall have been
approved by a majority of the members of the Board of Directors having no
personal stake in such Affiliate Transaction (and such majority determines
that such Affiliate Transaction satisfies the criteria in clause (i) above).
(b) The foregoing provisions of Section 4.7(a) shall not
apply to (i) any Restricted Payment permitted to be made pursuant to Section
4.4, (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors or the payment of fees and indemnities to directors of the Company
and its Restricted Subsidiaries in the ordinary course of business, (iii)
loans or advances to employees in the ordinary course of business, (iv) any
transaction between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (v) transactions pursuant to written agreements in
existence on the Issue Date, (vi) repurchases, acquisitions or retirements of
shares of Capital Stock of the Company deemed to occur upon the exercise of
stock options or similar rights issued under employee benefit plans of the
Company if such shares represent all or a portion of the exercise price or are
surrendered in connection with satisfying any federal or state income tax
obligation or repurchased or acquired to fulfill obligations of the Company or
any Restricted Subsidiary under employee compensation or other benefit
arrangements entered into or provided for in the ordinary course of business;
provided that cash payments pursuant to this clause (vi) shall not exceed $2
million in any fiscal year, or (vii) any transaction between the Company or
any Wholly Owned Subsidiary, on the one hand, and a Restricted Subsidiary, on
the other hand, in the ordinary course of business on terms that are customary
in the industry or consistent with past practice.
SECTION 4.8 Change of Control.
(a) Upon a Change of Control, each Holder shall have the
right to require that the Company repurchase all or any part of such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date), in accordance with
the terms contemplated in Section 4.8(b).
(b) Within 30 days following any Change of Control, or at
the Company's option, prior to any Change of Control but after the public
announcement thereof, the Company shall mail a notice to each Holder with a
copy to the Trustee stating:
(1) that a Change of Control has or may have
occurred and that such Holder has the right to require the
Company to purchase such Holder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof,
plus
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accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of Holders of record on a
record date to receive interest on the relevant interest
payment date);
(2) the circumstances and relevant facts and pro
forma financial information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier
than the consummation of the Change of Control and no
earlier than 30 days nor later than 60 days from the date
such notice is mailed);
(4) that the Change of Control offer is conditioned
on the Change of Control occurring if the notice is mailed
prior to the Change of Control; and
(5) the instructions determined by the Company,
consistent with this Section, that a Holder must follow in
order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, together with all necessary endorsements
and other appropriate materials duly completed, to the Company at the address
specified in the notice at least three Business Days prior to the purchase
date. Holders will be entitled to withdraw their election if the Trustee or
the Company receives not later than one Business Day prior to the purchase
date, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security which was delivered for purchase by the
Holder as to which such notice of withdrawal is being submitted and a
statement that such Holder is withdrawing his election to have such Security
purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered to the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable,
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Securities
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section by virtue
thereof.
(f) Notwithstanding the occurrence of a Change of Control,
the Company shall not be obligated (i) to repurchase the Securities or make
the offer described above upon a Change of Control if the Company has
irrevocably elected to redeem all the Securities in accordance with Article
Three; provided that the Company does not default in its redemption
obligations pursuant to such election or (ii) to make a Change of Control
offer upon a Change of Control if a third party makes the Change of Control
offer in the manner, at the times and otherwise in compliance with the
requirements described in the Indenture applicable to a Change
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of Control offer made by the Company and purchases all Securities validly
tendered and not withdrawn under such Change of Control offer.
SECTION 4.9 Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after
the end of each fiscal year of the Company an Officers' Certificate, one of the
signers of which shall be the principal executive, financial or accounting
officer of the Company, stating that in the course of the performance by the
signers of their duties as officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA 314(a)(4).
SECTION 4.10 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
purpose of this Indenture.
SECTION 4.11 Limitation on Liens.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or permit to exist any Lien on any
of its property or assets (including Capital Stock), whether owned on the Issue
Date or thereafter acquired, securing any obligation other than Permitted Liens,
unless contemporaneously therewith effective provision is made to secure the
Securities equally and ratably with (or on a senior basis to, in the case of
Subordinated Obligations) such obligation for so long as such obligation is so
secured.
SECTION 4.12 Limitation on Sale/Leaseback Transactions.
The Company will not, and will not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any
property unless (i) the Company or such Restricted Subsidiary would be entitled
to (A) Incur Indebtedness in an amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction pursuant to Section 4.3 and (B)
create a Lien, if any, on such property securing such Attributable Indebtedness
without equally and ratably securing the Securities pursuant to Section 4.11,
(ii) the Net Cash Proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair value (as determined in good faith and certified in an Officer's
Certificate to the Trustee) of such property and (iii) the transfer of such
property is permitted by, and the Company or such Restricted Subsidiary applies
the proceeds of such transaction in compliance with, Section 4.6.
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SECTION 4.13 Limitation on Sale of Subsidiary Preferred Stock.
The Company (i) will not, and will not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Preferred Stock of any Restricted Subsidiary to any Person (other than to
the Company or a Wholly Owned Subsidiary), unless (a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital Stock of such Restricted
Subsidiary (or, in the case of a non-wholly owned Restricted Subsidiary, all of
the Capital Stock held by the Company or its Restricted Subsidiary) and (b) the
Net Cash Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the terms of Section 4.6 and (ii)
will not permit any Restricted Subsidiary to issue any of its Preferred Stock to
any Person other than to the Company or a Wholly Owned Subsidiary.
SECTION 4.14 Corporate Existence
Subject to Article V, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence and related rights and franchises (charter and statutory)
of the Company.
SECTION 4.15 Fall Away Event.
(a) In the event of the occurrence of a Fall Away Event,
the covenants and provisions described above under Sections 4.3, 4.4, 4.5,
4.6, 4.7, 4.8 and 4.13 shall each no longer be in effect for the remaining
term of the Securities, subject to the next paragraph; provided that after a
Fall Away Event, so long as the Securities retain an Investment Grade status
the Company will be subject to the following covenant without any further
action of the Company or the Trustee:
From and after the occurrence of a Fall Away Event the
non-Guarantor Subsidiaries of the Company (other than Foreign Restricted
Subsidiaries, and except that Aaron Brothers, Inc. may guarantee the Credit
Agreement, Letter of Credit Facility or Refinancing Indebtedness, so long as
it is not a Significant Subsidiary) may not guarantee Indebtedness of the
Company or otherwise incur Indebtedness other than Indebtedness of the types
described under clauses (ii), (iii)(x) and (iii)(y) of Section 4.3 as in
effect on the date of the occurrence of the Fall Away Event, with respect to
Indebtedness outstanding on the date of the occurrence of the Fall Away
Event, clause (iii)(z) of Section 4.3 as in effect on the date of the
occurrence of the Fall Away Event, with respect to Indebtedness outstanding
on the date of the occurrence of the Fall Away Event, clause (iv) of Section
4.3 (except that the proviso contained therein shall not be applicable);
clauses (v), (vii) and (viii) of Section 4.3 and Indebtedness in an aggregate
principal amount not to exceed 5% of the Company's Consolidated Tangible Net
Worth at any one time outstanding. Any guarantee by a Subsidiary may be
released at the option of the Company (a) upon the sale, transfer or other
disposition of all of the Capital Stock of such Subsidiary held by the
Company or any Subsidiary to a Person other than the Company or a Subsidiary
or (b) if such Subsidiary no longer guarantees any Indebtedness of the
Company or has any Indebtedness outstanding which it would not be able to
incur without guaranteeing the Securities pursuant to this covenant if such
Indebtedness was incurred on the date of the release.
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(b) If, at any time, after the occurrence of a Fall Away
Event, the Company fails to maintain Investment Grade status or a Default or
Event of Default has occurred and is continuing, then Sections 4.3, 4.4, 4.5,
4.6. 4.7, 4.8 and 4.13 will be immediately reinstated and be applicable to
the Company and its Restricted Subsidiaries and the covenant set forth in
Section 4.15 shall be terminated although any actions taken during the
pendency of the Fall Away Event shall not be deemed a Default or Event of
Default under the Indenture whether or not they would have been permitted or
prohibited if the provisions of Section 4.15(a) had not become applicable.
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ARTICLE V
SUCCESSOR COMPANY
SECTION 5.1 When the Company May Merge or Transfer Assets.
Except as otherwise provided in Section 4.13, the Company
will not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") will be a corporation organized and existing under
the laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company (if not the Company)
will expressly assume, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Restricted Subsidiary as a result of such
transaction as having been Incurred by the Successor Company or such
Restricted Subsidiary at the time of such transaction), no Default or
Event of Default will have occurred and be continuing;
(iii) immediately after giving effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of
Indebtedness under Section 4.3(a); and
(iv) the Company will have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The Successor Company will succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture, but the predecessor Company in the case of a lease of all its
assets or a conveyance, transfer or lease of substantially all its assets
will not be released from the obligation to pay the principal of and interest
on the Securities.
Notwithstanding the foregoing clauses (ii) and (iii), any
Wholly Owned Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and the Company will not be
required to take any action under clause (iv) in connection therewith.
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ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, and such default continues
for a period of 30 days;
(2) the Company (i) defaults in the payment of the
principal or premium, if any, of any Security when the same becomes due and
payable at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities;
(3) the Company fails to comply with Section 4.6, 4.8 or
5.1;
(4) the Company fails to comply with any of its agreements
in the Securities or this Indenture (other than those referred to in (1), (2)
or (3) above) and such failure continues for 60 days after the notice
specified below;
(5) the Company or any Significant Subsidiary of the
Company fails to pay any Indebtedness within any applicable grace period
after final maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10,000,000 or its foreign
currency equivalent at the time (the "cross acceleration provision");
(6) the Company or any Significant Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case in which it is the debtor;
(C) files a petition on answer or consent
seeking reorganization or relief under Bankruptcy law;
(D) consents to the filing of a petition or
the appointment of, or taking possession by, a Custodian of it
or for any substantial part of its property;
(E) makes a general assignment for the benefit
of its creditors; or takes any comparable action under any
foreign laws relating to insolvency; or
(F) admits in writing its inability to pay its
debts generally as they become due.
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(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary of the Company in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary of the Company or for any
substantial part of the property of the Company or
Significant Subsidiary; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary of the Company; (or
any similar relief is granted under any foreign laws) and
the order or decree remains unstayed and in effect for 60
days; or
(8) any final, non-appealable judgment or decree for the
payment of money in excess of $10,000,000 or its foreign currency equivalent
at the time is entered against the Company or any Significant Subsidiary of
the Company and either:
(A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree; or
(B) such judgment or decree remains unpaid and
outstanding for a period of 60 days following such judgment
and is not discharged, waived or stayed (the "judgment
default provision").
The foregoing will constitute Events of Default whatever
the reason for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States
Bankruptcy Code of 1978, as amended, or any similar federal or state law or
foreign law relating to bankruptcy, insolvency, receivership, winding up,
liquidation, reorganization or other law for the relief of debtors or any
amendment to, succession to or change in any such law. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (4) or (5) is not an Event of
Default until the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities notify the Company of the
Default and the Company does not cure such Default within the time specified
after receipt of such notice. Such notice must specify the Default, demand
that it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice in the form of an Officers'
Certificate of any Event of Default under clause
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(5) and (8) and any event which with the giving of notice or the lapse of
time would become an Event of Default under clause (4), its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default
specified in Section 6.1(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the outstanding Securities by notice to
the Company and the Trustee, may declare the principal of and accrued
interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable
immediately. If an Event of Default specified in section 6.1(6) or (7) with
respect to the Company occurs and is continuing, the principal of and accrued
interest on all the Securities shall ipso facto 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 outstanding Securities by notice to the Trustee 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 principal or interest that has become due
solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy to collect the payment of principal
of or interest 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 it does not
possess any of the Securities or does not produce any of them in the
proceeding. Any such proceeding instituted by the Trustee may be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of
which such judgment has been recovered. A delay or omission by the Trustee or
any Securityholder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are, to the extent permitted by law,
cumulative.
SECTION 6.4 Waiver of Past Defaults.
The Holders of a majority in aggregate principal amount of
the Securities then outstanding by notice to the Trustee may waive any past
or existing Default and its consequences except (i) a Default in the payment
of the principal of or interest on a Security or (ii) a Default in respect of
a provision that under Section 9.2 cannot be amended without the consent of
each Securityholder affected. When a Default is waived, it is deemed cured,
and any Event of Default
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arising therefrom shall be deemed to have been cured, but no such waiver
shall extend to any subsequent or other Default or impair any consequent
right.
SECTION 6.5 Control by Majority.
The Holders of a majority in aggregate principal amount of
the Securities then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or 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, subject to Section 7.1, that the Trustee determines is unduly prejudicial
to the rights of other Securityholders or would involve the Trustee in
personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be
entitled to indemnification from the Securityholders satisfactory to it in
its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal
amount of the Securities then outstanding make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity reasonably satisfactory to it against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount
of the Securities then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice
the rights of another Securityholder or to obtain a preference or priority
over another Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on the
Securities held by such Holder, on or after the respective due dates
expressed in the Securities, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
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SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount
then due and owing (together with interest on any unpaid interest to the
extent lawful) and the amounts provided for in Section 7.7.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of
the Trustee and the Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its property and, unless prohibited
by law or applicable regulations, may vote on behalf of the Holders in any
election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money or property pursuant to
this Article 6, it shall pay out the money or property in the following
order, subject to applicable law:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to the Company. The Trustee may, upon prior written
notice to the Company, fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11 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
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discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys fees 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
does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.7 or a suit by Holders of more than 10% in aggregate principal
amount of the outstanding Securities.
SECTION 6.12 Waiver of Stay or Extension Laws.
The Company (to the extent it may lawfully do so) shall not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 6.13 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, any other obligor on the Securities, the Trustee and the Holders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all
rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 6.14 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 6.15 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
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SECTION 6.16 Remedies Subject to Applicable Law.
All rights, remedies and powers provided by this Article VI
may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law in the premises, and all the
provisions of this Indenture are intended to be subject to all applicable
mandatory provisions of law which may be controlling in the premises and to
be limited to the extent necessary so that they will not render this
Indenture invalid, unenforceable or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
ARTICLE VII
TRUSTEE
SECTION 7.1 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 their exercise as a
prudent Person would exercise or use under the circumstances in the conduct
of such Persons own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(2) in the absence of bad faith or willful misconduct
on its part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, in the case of any such certificates
or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they substantially conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
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(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
to believe that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
SECTION 7.2 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, appraisal, bond, debenture, note,
coupon, security or other paper or document (whether in its original or
facsimile form) unless requested in writing to do so by the Holders of not
less than a majority in aggregate principal amount of the Securities then
outstanding; PROVIDED that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses
of every such investigation so requested by the Holders of not less than a
majority in aggregate principal amount of the Securities outstanding shall be
paid by the Company or, if paid by the Trustee or any predecessor Trustee,
shall be repaid by the Company upon demand; PROVIDED, FURTHER, the Trustee in
its discretion may make such further inquiry or investigation into such facts
or matters as it may deem 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 expense of the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation;
and
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers; provided, however, that the Trustee's conduct
does not constitute willful misconduct, bad faith or negligence.
(e) The Trustee may consult with counsel of its selection,
and the advice or opinion of counsel with respect to legal matters relating
to this Indenture and the Securities shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such 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 or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company or its respective Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or in any document issued in connection with the
sale of the Securities or in the Securities except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that
the statements made by it in any Statement of Eligibility and Qualification
on Form T-1 to be supplied to the Company will be true and accurate subject
to the qualifications set forth therein.
SECTION 7.5 Notice of Defaults.
If a Default occurs and is continuing and if it is known to
a Trust Officer the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within the earlier of 90 days after it occurs or 30
days after it is known by a Trust Officer or written notice of it is received
by a Trust Officer or the Trustee. Except in the case of a Default in payment
of principal of, premium, if any, or interest on any Security (including
payments pursuant to the mandatory redemption provisions of such Security, if
any), the Trustee may withhold the notice
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if and so long as a committee of its Trust Officers in good faith determines
that withholding the notice is in the interests of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
As promptly as practicable after each May 15 beginning with
the May 15 following the date of this Indenture, and in any event prior to
July 15 in each year, the Trustee shall mail to each Securityholder a brief
report dated as of May 15 that complies with TIA 313(a). The Trustee also
shall comply with TIA 313(b). The Trustee shall promptly deliver to the
Company a copy of any report it delivers to Holders pursuant to Section 7.6.
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any)
on which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of
any delisting thereof.
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its services as the Company and the Trustee shall from time
to time agree in writing. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all out-of-pocket expenses incurred or
made by it, including costs of collection, in addition to such compensation
for its services, except any such expense, disbursement or advance as shall
be determined by a court of competent jurisdiction to have been caused by its
own negligence, willful misconduct or bad faith. Such expenses shall include
the reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Trustee shall provide
the Company reasonable notice of any expenditure not in the ordinary course
of business; provided that prior approval by the Company of any such
expenditure shall not be a requirement for the making of such expenditure nor
for reimbursement by the Company thereof. The Company shall fully indemnify
each of the Trustee and any predecessor Trustees against any and all loss,
damage, claim, liability or expense (including attorneys' fees and expenses)
(other than taxes applicable to the Trustee's compensation hereunder)
incurred by it in connection with the acceptance or administration of this
trust and the performance of its duties hereunder. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel, which counsel must be reasonably acceptable to the
Company and the Company will pay the reasonable fees and expenses of such
counsel
The Company need not reimburse any expense or indemnify
against any loss, liability or expense determined by a court of competent
jurisdiction to have been caused by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith. To secure the Company's payment
obligations in this Section, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee other
than money or property held in trust to pay principal of and interest on
particular Securities.
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The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.1(6) or (7)
with respect to the Company, the expenses are intended to constitute expenses
of administration under the Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying the
Company in writing no later than 20 Business Days prior to the date of the
proposed resignation. The Holders of a majority in principal amount of the
Securities then outstanding, may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee (but in no event later then
15 business days after such removal by Holders), or if the Trustee resigns or
a vacancy exists in the office of Trustee for any reason (the Trustee in such
event being referred to herein as the retiring Trustee), the Company shall
promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Securityholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject
to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or any
Holder who has been a bona fide Holder for at least six months may, on behalf
of all other Holders, petition at the expense of the Company any court of
competent jurisdiction for the appointment of a successor Trustee.
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The Trustee may be removed at any time for any cause or for
no cause by an act of the Holders of not less than a majority in aggregate
principal amount of the outstanding Securities, delivered to the Trustee and
to the Company.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee.
SECTION 7.9 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 or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor
Trustee, provided that such corporation shall be eligible under this Article
Seven and TIA Section 3.10(a).
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts
created by this Indenture any of the Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Securities
or in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of
TIA 310(a). The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA 310(b); provided, however, that
there shall be excluded from the operation of TIA 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA 310(b)(1) are met.
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SECTION 7.11 Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA 311(a), excluding any
creditor relationship listed in TIA 311(b). A Trustee who has resigned or
been removed shall be subject to TIA 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Satisfaction and Discharge of Indenture;
Defeasance.
(a) This Indenture shall be discharged and shall cease to
be of further effect (except as to surviving rights of registration of
transfer or exchange of the Securities as expressly provided for herein) as
to all outstanding Securities hereunder, and the Trustee, upon order of the
Company and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(b) either
(1) all the Securities theretofore authenticated and
delivered (other than (i) lost, stolen or destroyed Securities
which have been replaced as provided in Section 2.7 or
thereafter repaid or (ii) all Securities for whose payment
money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust as provided in Sections
2.4 and 8.4) have been delivered to the Trustee for
cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable,
(ii) will become due and payable at their Stated Maturity
within 91 days or (iii) are to be called for redemption within
91 days under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company;
(c) the Company or any other Person has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust
an amount in United States dollars sufficient to pay and discharge the entire
Indebtedness on the Securities not theretofore delivered to the Trustee for
cancellation, including the principal of, premium, if any, and accrued
interest on, such Securities at such maturity, Stated Maturity or redemption
date; and
(d) the Company or any other Person has paid or caused to
be paid all other sums payable hereunder by the Company.
Notwithstanding the satisfaction and discharge hereof, the
obligations of the Company to the Trustee under Section 7.7 and, if United
States dollars shall have been deposited
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with the Trustee pursuant to subclause (2) of subsection (b) of this Section
8.1, the obligations of the Trustee under Sections 8.3 and 8.4 shall survive
such satisfaction and discharge.
The Company may request the Trustee to acknowledge the
discharge upon delivery to the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of such Indenture have
been complied with.
(e) Subject to Sections 8.1(f) and 8.2, the Company at any
time may terminate (i) all of its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12 and 4.13 and the
operation of Sections 6.1(4), 6.1(5), 6.1(6) (but only with respect to a
Significant Subsidiary), 6.1(7) (but only with respect to a Significant
Subsidiary), 6.1(8) and 5.1(ii), 5.1(iii) or 5.1(iv) ("covenant defeasance
option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, payment of
the Securities may not be accelerated because of an Event of Default
specified in Section 6.1(4), 6.1(5), 6.1(6) (but only with respect to a
Significant Subsidiary), 6.1(7) (but only with respect to a Significant
Subsidiary), 6.1(8) or because of the failure of the Company to comply with
Sections 5.1(ii), 5.1(iii) and 5.1(iv).
(f) Notwithstanding Sections 8.1(a) and (e) above, the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5
and 8.6 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5 shall
survive.
SECTION 8.2 Conditions to Defeasance.
The Company may exercise its legal defeasance option or its
covenant defeasance option only if:
(1) the Company irrevocably deposits or causes to be
deposited in trust (the "defeasance trust") with the Trustee U.S. dollars or
U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide
cash at such times and in such amounts as will be sufficient to pay principal
and interest when due on all outstanding Securities (except Securities
replaced pursuant to Section 2.7) to maturity or redemption, as the case may
be;
(2) the Company delivers to the Trustee a certificate from
a nationally recognized firm of independent accountants or other Person
acceptable to the Trustee expressing their opinion that the payments of
principal and interest when due and without reinvestment on the deposited
U.S. Government Obligations plus any deposited money without investment will
provide cash at such times and in such amounts as will be sufficient to pay
principal and interest
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when due on all outstanding Securities (except Securities replaced pursuant
to Section 2.7) to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the
91-day period no Default specified in Section 6.1(6) or (7) with respect to
the Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any
other material agreement binding on the Company or any Restricted Subsidiary;
(5) the Company delivers to the Trustee an opinion of
Counsel to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an opinion of Counsel stating that (i)
the Company have received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred;
(7) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Securityholders will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit and covenant
defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as contemplated
by this Article 8 have been complied with.
Opinions of Counsel required to be delivered under this
Section may have qualifications customary for opinions of the type required
and counsel delivering such Opinions of Counsel may rely on certificates of
the Company or government or other officials customary for opinions of the
type required, including certificates certifying as to matters of fact.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of Securities at
a future date in accordance with Article 3.
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SECTION 8.3 Application of Trust Money.
The Trustee shall hold in trust U.S. dollars or U.S.
Government Obligations deposited with it pursuant to this Article 8. It shall
apply the deposited U.S. dollars and the money from U.S. Government
Obligations either directly or through the Paying Agent (including the
Company acting as its own Paying Agent as the Trustee may determine) and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 8.4 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent in
trust for the payment of the principal of, premium, if any, or interest on
any Security and remaining unclaimed for two years after such principal and
premium, if any, or interest has become due and payable shall promptly be
paid to the Company upon written request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, PROVIDED, HOWEVER, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the NEW YORK TIMES and THE WALL STREET
JOURNAL (national edition), and mail to each such Holder, notice that such
money remains unclaimed.
SECTION 8.5 Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against deposited
U.S. Government Obligations or the principal and interest received on such
U.S. Government Obligations other than any such tax, fee or other charge
which by law is for the account of the Holders of the defeased Securities;
provided that the Trustee shall be entitled to charge any such reasonable
tax, fee or other charge to such Holder's account.
SECTION 8.6 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S.
dollars or U.S. Government Obligations in accordance with this Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 8 until such time as the Trustee or Paying
Agent is permitted to apply all such U.S. dollars or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, (a)
if the Company has made any payment of interest on or principal of any
Securities following the reinstatement of their obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to
receive such payment from U.S. dollars or U.S. Government Obligations held by
the Trustee or Paying Agent and (b) unless otherwise required by any legal
proceeding or any order or judgment of any court or governmental authority,
the Trustee or Paying Agent shall return all such money and U.S. Government
Obligations to the Company
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promptly after receiving a written request therefor at any time, if such
reinstatement of the Company's obligations has occurred and continues to be
in effect.
ARTICLE IX
AMENDMENTS
SECTION 9.1 Without Consent of Holders.
The Company and the Trustee may amend this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition
to or in place of certificated Securities; provided, however, that
the uncertificated Securities are issued in registered form for
purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are as described in Section 163(f)(2)(B) of
the Code;
(4) to add Guarantees with respect to the Securities;
(5) to secure the Securities;
(6) to add to the covenants of the Company for the benefit
of the Holders or to surrender any right or power herein conferred
upon the Company;
(7) to make any change that does not adversely affect the
rights of any Securityholder; or
(8) to comply with any requirements of the SEC in
connection with qualifying this Indenture under the TIA.
After an amendment under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this section.
SECTION 9.2 With Consent of Holders.
The Company and the Trustee may amend this Indenture or the
Securities without notice to any Securityholder but with the written consent
of the Holders of at least a majority in principal amount of the Securities
then outstanding. However, without the consent of each Securityholder
affected, an amendment may not:
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(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity
of any Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article 3;
(5) make any Security payable in money other than that
stated in the Security;
(6) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities; or
(7) make any change in Section 6.4 or 6.7 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders
under this Section 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 becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of that Security
or portion of the Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent or waiver is not made on
the Security. After an amendment or waiver becomes effective, it shall bind
every Securityholder.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders entitled to
give their consent or take any other action described above or required or
permitted to be taken pursuant to this Indenture. If a record date is fixed,
then notwithstanding the immediately preceding paragraph, those Persons who
were Securityholders at such record date (or their duly designated proxies),
and only those Persons,
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shall be entitled to give such consent or to revoke any consent previously
given or to take any such action, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective
for more than 120 days after such record date.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security regarding the
changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determine, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity of such amendment.
SECTION 9.6 Trustee To Sign Amendments.
The Trustee shall sign any amendment authorized pursuant to
this Article 9 if the amendment does not affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but
need not sign it. In signing such amendment the Trustee shall be entitled to
receive indemnity reasonably satisfactory to it and to receive, and (subject
to Section 7.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment complies
with the provisions of Article 9 of this Indenture.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.
If any provision hereof limits, qualifies or conflicts with
any provision of the TIA or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the TIA, then the
provision or requirement of the TIA shall control. If any provision of this
Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or to be excluded, as the case may be.
SECTION 10.2 Notices.
Any notice or communication shall be in writing and
delivered in person, by overnight courier or facsimile (if to the Company,
with receipt confirmed by an Officer) or mailed by first-class mail addressed
as follows:
if to the Company:
Michaels Stores, Inc.
8000 Bent Branch Drive
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Irving, TX 75063
Attention: General Counsel
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed or sent by overnight
courier or facsimile to a Securityholder shall be sent to the Securityholder
at the Securityholder's address as it appears on the registration books of
the Registrar and shall be sufficiently given if so sent within the time
prescribed.
Failure to send a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency with
respect to other Securityholders. If a notice or communication is sent in the
manner provided above, it is duly given, whether or not the addressee
receives it.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice.
SECTION 10.3 Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA 312 (b)
with other Securityholders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA 312 (c) .
SECTION 10.4 Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the
Trustee to take or refrain from taking any action under this Indenture, each
the Company and any other obligor on the Securities (if applicable) shall
furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture (including any covenant compliance which constitutes
a condition precedent) relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.
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SECTION 10.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with
a covenant or condition provided for in this Indenture shall include:
(1) a statement that each individual signing such
certificate or individual or firm signing such opinion has read such
covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual
or such firm, he or it has made such examination or investigation as is
necessary to enable him or it to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such individual or such firm, such covenant or condition has been
complied with.
SECTION 10.6 Form of Documents Delivered to Trustee
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion
of, only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate of an officer of the Company, or other
obligor on the Securities may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous. Any
such certificate or opinion may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer
or officers of the Company, or other obligor on the Securities stating that
the information with respect to such factual matters is in the possession of
the Company, or other obligor on the Securities, unless such officer or
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Any certificate or opinion of an officer of the Company, or
other obligor on the Securities may be based, insofar as it relates to
accounting matters, upon a certificate or opinion of, or representations by,
an accountant or firm of accountants in the employ of the Company, unless
such officer knows, or in the exercise of reasonable care should know, that
the certificate
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or opinion or representations with respect to the accounting matters upon
which his certificate or opinion may be based are erroneous. Any certificate
or opinion of any independent firm of public accountants filed with the
Trustee shall contain a statement that such firm is independent with respect
to the Company.
Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 10.7 Act 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. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and conclusive in favor
of the Trustee and the Company, if made in the manner provided in this
Section 10.7.
(b) The ownership of Securities shall be proved by the
Securities Register.
(c) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(d) For purposes of this Indenture, any action by the
Holders which may be taken in writing may be taken by electronic means or as
otherwise reasonably acceptable to the Trustee.
SECTION 10.8 When Securities Disregarded.
In determining whether the Holders of the required
principal amount of Securities have concurred in any direction, waiver or
consent, Securities owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall
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be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 10.9 Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a
meeting of Securityholders. The Trustee shall provide the Company reasonable
notice of such rules; provided that neither prior notice to the Company of
such rules nor prior approval by the Company of such rules shall be a
requirement for their effectiveness. The Registrar and the Paying Agent may
make reasonable rules for their functions.
SECTION 10.10 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York. If
a payment date, redemption date, maturity or stated maturity of any Security
is a Legal Holiday, payment shall be made on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
If a regular record date is a Legal Holiday, the record date shall not be
affected.
SECTION 10.11 Governing Law.
This Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflict of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
SECTION 10.12 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Securities.
SECTION 10.13 Successors.
All agreements of the Company in this Indenture and the
Securities shall bind the Company's successors and assigns, whether so
expressed or not. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 10.14 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.
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SECTION 10.15 Table of Contents; Headings.
The table of contents, cross-reference sheet and headings
of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.
SECTION 10.16 Severability 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 10.17 Benefits of the Indentures.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person (other than the parties hereto and their
successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 10.18 Independence of Covenants.
All covenants and agreements in this Indenture shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists. For purposes of clarity only, it is
hereby agreed that the covenants that fall away during a Fall Away Event
cannot result in a Default or Event of Default during the continuance of a
Fall Away Event.
SECTION 10.19 Schedules and Exhibits.
All schedule and exhibits attached hereto are by this
reference made a part hereof with the same effect as if herein set forth in
full.
SECTION 10.20 Counterparts.
This Indenture may be executed in any number of
counterparts, each of which shall be deemed an original; but all such
counterparts shall together constitute but one and the same instrument.
SECTION 10.21 Interest and Charges.
It is the intention of the Trustee, the Holders and the
Company to comply with applicable usury laws (now or hereafter enacted);
accordingly, notwithstanding any provision to the contrary in this Indenture,
the Securities or any other document related hereto or thereto, in no event
shall this Indenture, any Securities or any such other document require the
payment or permit the collection of interest in excess of the maximum amount
permitted by applicable law.
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If from any circumstance whatsoever, fulfillment of any provision of this
Indenture, any Securities or any such documents shall involve exceeding the
limit of validity prescribed by applicable law for the collection or charging
of interest, then the obligation to be fulfilled shall be reduced
automatically to the limit of such validity. If from any circumstance
whatsoever, the Trustee or any Holder ever receives, collects or applies any
amount as interest or deemed to be interest by applicable law under this
Indenture, the Securities or any other document pertaining hereto or thereto
that would exceed the highest rate of interest permitted by applicable law,
the amount that would be excessive interest shall be applied to the reduction
of the principal amount owing on the Securities, and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of
principal of the Securities, such excess shall be refunded to the Company. In
determining whether or not the any amount paid or payable, under any specific
contingency, exceeds the highest rate permitted by applicable law, the
Company, the Trustee and the Holders shall, to the maximum extent permitted
by applicable law, (a) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (b) exclude voluntary prepayments and
the effect thereof, (c) amortize, prorate, allocate and spread the total
amount of interest throughout the entire contemplated term of the Securities
so that the interest thereon does not exceed the maximum amount permitted by
applicable law, and (d) allocate interest between portions of the
indebtedness evidenced by the Securities, to the end that no such portion
shall bear interest at a rate greater than that permitted by applicable law.
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IN WITNESS WHEREOF, the parties have caused this Indenture
to be duly executed as of the date first written above.
MICHAELS STORES, INC.
By: /s/ BRYAN M. DECORDOVA
---------------------------------------
Name: Bryan M. DeCordova
Title: Executive Vice President-Chief
Financial Officer
THE BANK OF NEW YORK, as Trustee
By: /s/ REMO J. REALE
---------------------------------------
Name: /s/ Remo J. Reale
Title: Vice President
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EXHIBIT A
FACE OF SECURITY
[Unless and until (i) an Initial Security is sold under an
effective Registration Statement or (ii) an Initial Security is exchanged for a
Series B Security in connection with an effective Registration Statement, in
such case pursuant to the Registration Rights Agreement, than such Initial
Security shall bear the legend set forth in the following paragraph.]
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A")), (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF
THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) ONLY
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED
STATES, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM AND (II) IN THE FOREGOING CASE, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY BE
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED
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REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON
THE REVERSE HEREOF.
No. ____ $______________
9 1/4% Senior Notes Due 2009
CUSIP No. 594087 AE 8
MICHAELS STORES, INC., a Delaware corporation, promises to pay
to _____________, or registered assigns, the principal sum of ____________
United States dollars on _____________, 2009.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the
other side of this Security.
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MICHAELS STORES, INC.
By:________________________________________
Name:__________________________________
Title:_________________________________
Dated: _____________, 200_
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK, as
Trustee, certifies that
this is one of the Securities
referred to in the within-mentioned
Indenture.
By:___________________________________
Authorized Signatory
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REVERSE OF SECURITY
9 1/4% Senior Notes Due 2009
1. Interest
MICHAELS STORES, INC., a Delaware corporation (such entity,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will
pay interest semiannually on January 1 and July 1 of each year commencing
January 1, 2002. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
July 6, 2001. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at
the rate borne by the Securities plus 1% per annum, and it shall pay interest
on overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities
at the close of business on the December 15 or June 15 next preceding the
interest payment date even if Securities are canceled after the record date
and on or before the interest payment date. Holders must surrender Securities
to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest by check payable in such money and may
mail an interest check to a Holder's registered address. All payments of
principal of, premium, if any, and interest on the Securities will be made by
the Company in immediately available funds.
3. Registration Rights
The Holder of this Series A Security is entitled to the
benefits of the Registration Rights Agreement among the Company and the
Initial Purchasers, dated July 6, 2001, pursuant to which, subject to the
terms and conditions thereof, the Company is obligated to consummate the
Exchange Offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 9 1/4% Senior Notes due 2009 (herein
called the "Series B Securities") in like principal amount as provided
therein. In addition, the Company has agreed to file a Shelf Registration
Statement in the event that the Exchange Offer is not consummated within 165
days of the date of original issue of the Securities or under certain other
circumstances. The Series A Securities and the Series B Securities, and
Additional Securities, if issued, are together referred to as the
"Securities." The Series A Securities rank PARI PASSU in right of payment
with the Series B Securities.
In the event that (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 75th calendar day
following the date of original issue of the
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Series A Securities, (b) the Exchange Offer Registration Statement has not
been declared effective on or prior to the 135th calendar day following the
date of original issue of the Series A Securities, (c) the Exchange Offer is
not consummated on or prior to the 165th calendar day following the date of
original issue of the Series A Securities, (d) a Shelf Registration Statement
required to be filed is not declared effective on or prior to the 165th day
after the date of original issue of the Series A Securities, or (e) the Shelf
Registration Statement is declared effective but shall thereafter become
unusable for more than 30 consecutive days (each such event referred to in
clauses (a) through (e) above, a "Registration Default"), the interest rate
borne by the Series A Securities shall be increased by one-quarter of one
percent per annum upon the occurrence of any Registration Default, which rate
(as increased as aforesaid) will increase by an additional one-quarter of one
percent each 90-day period that such additional interest continues to accrue
under any such circumstance, provided that the aggregate maximum increase in
the interest rate will in no event exceed one percent (1%) per annum.
Following the earlier of (a) the cure of all Registration Defaults or (b) the
Securities become freely tradeable without registration under the Securities
Act of 1933 the accrual of additional interest with respect to that
particular Registration Default will cease and the interest rate will revert
to the original rate.
4. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
5. Indenture
The Company issued the Securities under an Indenture dated
as of July 6, 2001 (the "Indenture"), by and between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended, or any successor statute (the "TIA"). Terms defined in
the Indenture and not defined herein have the meanings ascribed thereto in
the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms. Any conflict between this Note and the Indenture will be
governed by the Indenture.
The Securities are general unsecured obligations of the
Company limited (except as otherwise provided in the Indenture) in aggregate
principal amount to $250.0 million (of which $200.0 million may be Initial
Securities and Series B Securities exchanged therefor, and up to $50.0
million may be issued as Additional Securities) issued under and subject to
the terms of the Indenture. The Indenture imposes certain limitations on the
Incurrence of Indebtedness by the Company and its Restricted Subsidiaries,
the existence of liens, the payment of dividends on, and redemption of, the
Capital Stock of the Company and its Subsidiaries and the redemption of
certain subordinated obligations of the Company and its Subsidiaries,
restricted payments, the sale or transfer of assets and Subsidiary stock, the
issuance or sale of Preferred Stock of Restricted Subsidiaries, sale and
leaseback transactions, the investments of the Company and its Restricted
Subsidiaries, consolidations, mergers and transfers of all or substantially
all the assets
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of the Company, and transactions with Affiliates. In addition, the Indenture
limits the ability of the Company and certain of its Subsidiaries to restrict
distributions and dividends from Subsidiaries.
6. Optional Redemption
Except as set forth in the next paragraph, the Securities
may not be redeemed prior to July 1, 2005. On and after that date, the
Company may redeem as provided in, and subject to the terms of, the Indenture
the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the 12-month period beginning July 1,
<Table>
<Caption>
Period Percentage
2005......................................104.625%
2006......................................102.313%
2007 and thereafter.......................100.000%
</Table>
In addition, at any time and from time to time prior to
July 1, 2004, the Company may redeem in the aggregate up to 35% of the
aggregate principal amount of the Securities with the proceeds of one or more
Equity Offerings so long as there is a Public Market at the time of such
redemption at a redemption price (expressed as a percentage of principal
amount) of 109.25% plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in,
and subject to the terms of, the Indenture; provided, however, that at least
65% of the initial aggregate principal amount of the Securities must remain
outstanding after each such redemption.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on
the redemption date is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Securities (or such portions thereof)
called for redemption. If a notice or communication is sent in the manner
provided in the Indenture, it is duly given, whether or not the addressee
receives it. Failure to send a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
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In addition, in the event of certain Asset Dispositions,
the Company will be required to make an offer to purchase Securities at a
purchase price of 100% of their principal amount plus accrued interest to the
date of purchase (subject to the rights of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) as
provided in, and subject to the terms of, the Indenture.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will
have the right to require the Company to repurchase all or any part of the
Securities of such Holder at a repurchase price in cash equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole 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 or
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture, including any transfer tax or other similar governmental
charge payable in connection therewith. The Registrar need not register the
transfer of 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 for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as
the owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with the Trustee U.S. dollars or U.S.
Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
A-7
<Page>
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture,
(i) the Indenture or the Securities may be amended with the written consent
of the Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities, or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to make any change
that does not adversely affect the rights of any Securityholder or to comply
with any request of the SEC in connection with qualifying the Indenture under
the TIA.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default
for 30 days in payment of interest on the Securities; (ii) default in payment
of principal on the Securities at maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required; (iii) failure by the
Company to comply with other agreements in the Indenture or the Securities,
in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company and any Significant Subsidiary
if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain
events of bankruptcy or insolvency with respect to the Company and its
Significant Subsidiaries; and (vi) certain judgments or decrees for the
payment of money is in excess of $10 million.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Securities
then outstanding may declare all the Securities to be due and payable.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of a majority
in principal amount of the Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Securityholders notice
of any continuing Default (except a Default in payment of principal or
interest) if it determines that withholding notice is in the interest of the
Holders.
A-8
<Page>
15. 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 any of its Affiliates and
may otherwise deal with the Company or any of its Affiliates with the same
rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of
the Company or the Trustee shall not have any liability for any obligations
of the Company under the Securities or the Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
17. Governing Law
The Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflict of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
18. Authentication
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and have directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as
printed on the Securities or as contained in any notice of redemption, and
reliance may be placed only on the other identification numbers placed
thereon.
A-9
<Page>
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture
which has in it the text of this Security in larger type. Requests may be
made as follows:
Michaels Stores, Inc.
8000 Bent Branch Drive
Irving, TX 75063
Attention: General Counsel
A-10
<Page>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
----------------------------------
(Print or type assignee's name,
address and zip code)
----------------------------------
(Insert assignee's soc. sec. or
tax I.D. No.)
and irrevocably appoint ______________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Date: Your Signature:
------------------ ----------------------------------
(Sign exactly as your name appears on the other
side of the Security)
Signature Guarantee:
------------------------------
(Signature must be guaranteed)
A-11
<Page>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box: |_|
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.6 or 4.8 of the Indenture, state
the amount: $
Date: Your Signature:
------------------ ----------------------------------
(Sign exactly as your name appears on the other
side of the Security)
Signature Guarantee:
------------------------------
(Signature must be guaranteed)
A-12
<Page>
EXHIBIT B
FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON
THE REVERSE HEREOF.
No. ____ $______________
9 1/4% Senior Notes Due 2009
CUSIP No. 594087 AF 5
MICHAELS STORES, INC., a Delaware corporation, promises
to pay to _________________, or registered assigns, the principal sum of
________________ United States dollars on _________________, 2009.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the
other side of this Security.
B-1
<Page>
MICHAELS STORES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated: , 200
------------- --
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the within-mentioned
Indenture.
By:
-------------------------------------
Authorized Signatory
B-2
<Page>
REVERSE OF SECURITY
9 1/4% Senior Notes Due 2009
1. Interest
MICHAELS STORES, INC., a Delaware corporation (such entity,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Company will
pay interest semiannually on January 1 and July 1 of each year commencing
January 1, 2002. Interest on the Securities will accrue from the most recent
date to which interest has been paid (which shall include any interest paid
on any Series A Securities (defined below) which was exchanged for this
Series B Security) or, if no interest has been paid, from July 6, 2001.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities
at the close of business on the December 15 or June 15 next preceding the
interest payment date even if Securities are canceled after the record date
and on or before the interest payment date. Holders must surrender Securities
to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest by check payable in such money and may
mail an interest check to a Holder's registered address. All payments of
principal of, premium, if any, and interest on the Securities will be made by
the Company in immediately available funds.
3. PARI PASSU With Series A Security
[Only include if security is issued pursuant to the Exchange
Offer described below.] [The Series B Security was issued pursuant to an
Exchange Offer pursuant to which this Security was exchanged for 9 1/4% Senior
Notes due 2009 (herein called the "Series A Securities") in like principal
amount as provided therein.] The Series A Securities and the Series B
Securities, and Additional Securities, if issued, are together referred to as
the "Securities." The Series A Securities rank PARI PASSU in right of payment
with the Series B Securities.
Any interest or other payments owing on the Series A Security
at the time of the consummation of the Exchange Offer shall be paid with respect
to the Series B Security issued in exchange therefor unless all such interest
and other payments are paid in full in connection with the Exchange Offer.
B-3
<Page>
4. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
5. Indenture
The Company issued the Securities under an Indenture dated
as of July 6, 2001 (the "Indenture"), by and between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended, or any successor statute (the "TIA"). Terms defined in
the Indenture and not defined herein have the meanings ascribed thereto in
the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
those terms. Any conflict between this Note and the Indenture will be
governed by the Indenture.
The Securities are general unsecured obligations of the
Company limited (except as otherwise provided in the Indenture) in aggregate
principal amount to $250.0 million (of which $200.0 million may be Initial
Securities and Series B Securities exchanged therefor, and up to $50.0
million may be issued as Additional Securities) issued under and subject to
the terms of the Indenture. The Indenture imposes certain limitations on the
Incurrence of Indebtedness by the Company and its Restricted Subsidiaries,
the existence of liens, the payment of dividends on, and redemption of, the
Capital Stock of the Company and its Subsidiaries and the redemption of
certain subordinated obligations of the Company and its Subsidiaries,
restricted payments, the sale or transfer of assets and Subsidiary stock, the
issuance or sale of Preferred Stock of Restricted Subsidiaries, sale and
leaseback transactions, the investments of the Company and its Restricted
Subsidiaries, consolidations, mergers and transfers of all or substantially
all the assets of the Company, and transactions with Affiliates. In addition,
the Indenture limits the ability of the Company and certain of its
Subsidiaries to restrict distributions and dividends from Subsidiaries.
6. Optional Redemption
Except as set forth in the next paragraph, the Securities
may not be redeemed prior to July 1, 2005. On and after that date, the
Company may redeem as provided in, and subject to the terms of, the Indenture
the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount),
plus accrued interest to the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the related
interest payment date):
B-4
<Page>
if redeemed during the 12-month period beginning July 1,
<Table>
<Caption>
Period Percentage
2005.......................................104.625%
2006.......................................102.313%
2007 and thereafter........................100.000%
</Table>
In addition, at any time and from time to time prior to
July 1, 2004, the Company may redeem in the aggregate up to 35% of the
aggregate principal amount of the Securities with the proceeds of one or more
Equity Offerings so long as there is a Public Market at the time of such
redemption at a redemption price (expressed as a percentage of principal
amount) of 109.25% plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in,
and subject to the terms of, the Indenture; provided, however, that at least
65% of the initial aggregate principal amount of the Securities must remain
outstanding after each such redemption.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on
the redemption date is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Securities (or such portions thereof)
called for redemption. If a notice or communication is sent in the manner
provided in the Indenture, it is duly given, whether or not the addressee
receives it. Failure to send a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
In addition, in the event of certain Asset Dispositions,
the Company will be required to make an offer to purchase Securities at a
purchase price of 100% of their principal amount plus accrued interest to the
date of purchase (subject to the rights of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date) as
provided in, and subject to the terms of, the Indenture.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will
have the right to require the Company to repurchase all or any part of the
Securities of such Holder at a repurchase price in cash equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
B-5
<Page>
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole 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 or
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture, including any transfer tax or other similar governmental
charge payable in connection therewith. The Registrar need not register the
transfer of 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 for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as
the owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with the Trustee U.S. dollars or U.S.
Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture,
(i) the Indenture or the Securities may be amended with the written consent
of the Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Securityholder, the Company and
the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities, or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to make any change
that does not adversely affect the rights of any Securityholder or to comply
with any request of the SEC in connection with qualifying the Indenture under
the TIA.
B-6
<Page>
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default
for 30 days in payment of interest on the Securities; (ii) default in payment
of principal on the Securities at maturity, upon redemption pursuant to
paragraphs 5 or 6 above, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required; (iii) failure by the
Company to comply with other agreements in the Indenture or the Securities,
in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Indebtedness of the Company and any Significant Subsidiary
if the amount accelerated (or so unpaid) exceeds $10 million; (v) certain
events of bankruptcy or insolvency with respect to the Company and its
Significant Subsidiaries; and (vi) certain judgments or decrees for the
payment of money is in excess of $10 million.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the Securities
then outstanding may declare all the Securities to be due and payable.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of a majority
in principal amount of the Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Securityholders notice
of any continuing Default (except a Default in payment of principal or
interest) if it determines that withholding notice is in the interest of the
Holders.
15. 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 any of its Affiliates and
may otherwise deal with the Company or any of its Affiliates with the same
rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of
the Company or the Trustee shall not have any liability for any obligations
of the Company under the Securities or the Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
B-7
<Page>
17. Governing Law
The Indenture and the Securities shall be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflict of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
18. Authentication
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually signs the
certificate of authentication on the other side of this Security.
19. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
20. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee
on Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and have directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as
printed on the Securities or as contained in any notice of redemption, and
reliance may be placed only on the other identification numbers placed
thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture
which has in it the text of this Security in larger type. Requests may be
made as follows:
Michaels Stores, Inc.
8000 Bent Branch Drive
Irving, TX 75063
Attention: General Counsel
B-8
<Page>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
----------------------------------
(Print or type assignee's name,
address and zip code)
----------------------------------
(Insert assignee's soc. sec. or
tax I.D. No.)
and irrevocably appoint ______________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Date: Your Signature:
------------------- ---------------------------------
(Sign exactly as your name appears on the other
side of the Security)
Signature Guarantee:
---------------------------------
(Signature must be guaranteed)
B-9
<Page>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box: |_|
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.6 or 4.8 of the Indenture, state
the amount: $
Date: Your Signature:
------------------- ---------------------------------
(Sign exactly as your name appears on the other
side of the Security)
Signature Guarantee:
---------------------------------
(Signature must be guaranteed)
B-10