IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
)
IN RE MICROSTRATEGY INC. ) Civil Action No. 00-473-A
SECURITIES LITIGATION )
)
STIPULATION OF SETTLEMENT
This Stipulation of Settlement, dated as of January 11, 2001 (the
"Stipulation") is submitted pursuant to Rule 23 of the Federal Rules of Civil
Procedure. Subject to the approval of the Court, the Stipulation is entered into
among: Lead Plaintiffs Akiko Minami, Atsukuni Minami and Local 144 Nursing Home
Pension Fund, on behalf of themselves and the Class and Settlement Subclass (as
defined below), defendant MicroStrategy Incorporated ("MicroStrategy"); and
defendants Michael J. Saylor, Sanju K. Bansal, Mark S. Lynch, Stephen S.
Trundle, Ralph S. Terkowitz, and Frank A. Ingari (the "Individual Defendants")
(collectively, the "Settling Defendants"), by and through their respective
counsel.
WHEREAS:
A. The actions listed in Exhibit A (the "actions") were commenced in March
and April 2000, alleging that: (i) the Settling Defendants and MicroStrategy's
auditor, PricewaterhouseCoopers LLP ("PwC") (collectively, the "Defendants")
violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule lOb-S promulgated
thereunder; (ii) several of the Individual Defendants violated Section 20(a) of
the Exchange Act; and (iii) the Individual Defendants are liable under Section
20A of the Exchange Act;
B. By Order dated June 6, 2000, the Court consolidated for all purposes
the actions into this Action pursuant to Rule 42(a) of the Federal Rules of
Civil Procedure;
C. By Order dated June 27, 2000, the Court (i) granted the motion of Akiko
and Atsukuni Minami and Local 144 Nursing Home Pension Fund to be appointed Lead
Plaintiffs, and (ii) designated the law firms Milberg Weiss Bershad Hynes &
Lerach LLP, and Wolf, Haldenstein, Adler, Freeman & Herz LLP as Paintiffs'
Co-Lead Counsel;
D. A Consolidated Amended Class Action Complaint ("Complaint") was filed
on July 7, 2000. The Complaint asserts claims against Defendants based upon,
inter alia, the following allegations:
i) During the Class Period (as defined below), Defendants allegedly
caused MicroStrategy to improperly recognize revenues on software
licensing agreements prior to those contracts being finalized and/or
when they were subject to significant contingencies or yet-to-be
fulfilled obligations by MicroStrategy. Such alleged practices
violated Generally Accepted Accounting Principles and significantly
distorted MicroStrategy's publicly reported financial results and
condition, rendering them materially false and misleading throughout
the Class Period;
ii) These financial reports were included in MicroStrategy's public
filings with the Securities and Exchange Commission and in various
press releases;
iii) PwC actively participated in the alleged fraud by reason of its
preparation and release of false and unqualified audit reports
concerning MicroStrategy's financial statements for its fiscal years
1997, 1998 and 1999 and by its participation in the preparation of
MicroStrategy's publicly misstated quarterly financial reports;
iv) The financial and audit reports allegedly artificially inflated the
market price of MicroStrategy's common stock during the Class
Period;
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v) On March 20, 2000, MicroStrategy disclosed that its financial
statements for 1998 and 1999 had to be restated; that all of
MicroStrategy's previously reported earnings for those two years
were being eliminated; and that those results would, instead,
reflect losses. As a result of these disclosures, MicroStrategy's
common stock dropped from $226 3/4 per share on March 17, 2000 (the
last trading day prior to the revelations) to $86 3/4 per share on
the day the disclosures were made;
vi) Prior to the March 20, 2000 disclosures, the Individual Defendants
sold MicroStrategy common stock at allegedly artificially inflated
prices, receiving aggregate proceeds in excess of $90 million;
E. By Order dated August 10, 2000, as subsequently amended on August 25,
2000, the Court (i) conditionally certified the Action to proceed as a class
action on behalf of all persons or entities who, during the period June 11, 1998
through March 20, 2000, inclusive (the "Class Period"), purchased MicroStrategy
common stock or call options or sold MicroStrategy put options, and who were
allegedly damaged thereby (the "Class"), (ii) conditionally certified a subclass
consisting of all persons or entities who, during the Class Period, purchased
MicroStrategy common stock contemporaneously with the sales of MicroStrategy
common stock by those defendants who traded contemporaneously with Vera
Schwartz, and who were allegedly damaged thereby (the "Certified Subclass"), and
(iii) designated the Lead Plaintiffs and Vera Schwartz and Paul Schweitzer as
the representatives of the Class and Ms. Schwartz as the representative of the
Certified Subclass;
F. By Order dated September 15, 2000, the Court denied the Defendants'
motions to dismiss the Complaint, with the exception that the Court dismissed a
claim that Defendant Frank A. Ingari is liable under Section 20A of the Exchange
Act, leaving Defendant Stephen S. Trundle
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as the sole Defendant against whom such claim remains, and held that, based on
the allegations in the Complaint, a "one-day contemporaneity period" was
"appropriate";
G. Plaintiffs' Co-Lead Counsel have conducted and completed extensive
research, discovery and investigation during the prosecution of the Action,
including: (i) inspection and analysis of hundreds of thousands of pages of
documents produced by Defendants and numerous third parties; (ii) review of
MicroStrategy's public filings, press releases, and other public statements;
(iii) interviews and/or depositions of several MicroStrategy officers and
employees; and (iv) consultation with accounting and damages consultants
retained by Plaintiffs' Co-Lead Counsel;
H. Plaintiffs' Co-Lead Counsel and counsel for the Settling Defendants
have engaged in extensive arms-length settlement negotiations;
I. On October 23, 2000, Plaintiffs' Co-Lead Counsel and counsel for the
Settling Defendants, on behalf of their respective clients, executed a
Memorandum of Understanding containing the material terms of a proposed partial
settlement of this Action;
J. Plaintiffs' Co-Lead Counsel have carefully considered and evaluated the
relevant legal authorities and evidence to support the claims asserted against
the Settling Defendants, the likelihood of prevailing on those claims, the
Settling Defendants' respective abilities to pay any judgment obtained in light
of their current financial condition, and the likely appeals and subsequent
proceedings necessary if the Class and Certified Subclass did prevail against
the Settling Defendants, and have concluded that the settlement set forth herein
is in the best interests of the Class and Certified Subclass;
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K. The Settling Defendants, while affirmatively denying wrongdoing of any
kind whatsoever, or liability to Lead Plaintiffs, the Class or Certified
Subclass, and without conceding any infirmity in the defenses they have asserted
or could assert in the Action, consider it desirable that the Action be settled
on the terms set forth herein in order to avoid further expense and to dispose
of burdensome and protracted litigation.
NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and among the
parties to this Stipulation, through their respective attorneys, subject to
approval of the Court pursuant to Rule 23(e) of the Federal Rules of Civil
Procedure, that the Action be settled as against the Settling Defendants subject
to the following terms and conditions:
I. DEFINITIONS
1. As used herein, the following capitalized terms shall have the
following meanings:
(a) "Action" means In re MicroStrategy Inc. Securities Litigation,
Civil Action No. 00-473-A.
(b) "Authorized Claimant" means a Class Member who files a timely,
valid Proof of Claim.
(c) "Claims Administrator" means Gilardi & Co. LLC, the firm to be
designated and supervised solely by Plaintiffs' Co-Lead Counsel to administer
the Settlement.
(d) "Class" means all persons and entities who, during the period
June 11, 1998 through March 20, 2000, inclusive, purchased MicroStrategy common
stock or call options or sold MicroStrategy put options, and who allegedly were
damaged thereby. Excluded from the Class are Defendants, any person, firm,
trust, corporation or other individual or entity in which
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any Defendant has a controlling interest or which is related to or affiliated
with any of the Defendants, the partners, principals, officers, directors,
employees, affiliates, legal representatives, heirs, predecessors, successors
and assigns of Defendants, and the immediate family members of any such
individual.
(e) "Class Member" means any person or entity included within the
Class, including the Plaintiffs.
(f) "Class Period" means the period of time from June 11, 1998
through March 20, 2000, inclusive.
(g) "Complaint" means the Consolidated Amended Class Action
Complaint filed on or about July 7, 2000.
(h) "Defendants" means MicroStrategy, the Individual Defendants, and
PwC.
(i) "Effective Date" means the date by which all of the following
have occurred: (i) the Settlement has been approved in all material respects by
the Court (unless any such material change has been agreed upon by the Settling
Parties); (ii) an Order and Final Judgment, reflecting the terms of this
Stipulation, has been entered by the Court and not vacated or modified in any
material way upon appeal or otherwise (unless any such material change has been
agreed upon by the Settling Parties); and (iii) either (a) the time to appeal or
otherwise seek review of the Order and Final Judgment has expired without any
appeal having been taken or review sought, or (b) if an appeal is taken or
review sought, the expiration of five days after an appeal or review shall have
been finally determined by the highest court before which appeal or review is
sought which upholds the terms of the Stipulation and/or an Order and Final
Judgment and is not subject to further judicial review.
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(j) "Exchange Act" means the Securities Exchange Act of 1934.
(k) "Excess Amount" means the costs of notice and administration of
the Settlement which exceed the sum of seven hundred and fifty thousand dollars
($750,000).
(l) "Fee and Expense Application" means the application submitted by
Plaintiffs' Counsel seeking attorneys' fees, expenses and costs.
(m) "Fee Award" means the attorneys' fees, expenses and costs,
including the fees of experts and consultants, as may be awarded by the Court to
Plaintiffs' Counsel.
(n) "Final Distribution Order" means an Order of the Court allowing
distribution of the Settlement Consideration.
(o) "Individual Defendants" means Michael J. Saylor, Sanju K.
Bansal, Mark S. Lynch, Stephen S. Trundle, Ralph S. Terkowitz, and Frank A.
Ingari.
(p) "Lead Plaintiffs" means Akiko Minami, Atsukuni Minami, and Local
144 Nursing Home Pension Fund.
(q) "MicroStrategy" means MicroStrategy Incorporated, and any
subsidiary or corporate affiliate thereof.
(r) "Net Settlement Consideration" means the Settlement
Consideration, less the amount of the Fee Award and Court-approved expenses,
taxes, costs of notice and costs of administration.
(s) "Non-Settling Defendant" means PwC.
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(t) "Notice Order" means the order attached hereto as Exhibit C
which provides for notice of the proposed settlement to the Class and Settlement
Subclass, which is incorporated by reference in this Stipulation.
(u) "Notes" means the 7-1/2% Series A Unsecured Notes to be issued
by MicroStrategy in connection with the Settlement. The Notes will be subject
to the terms and conditions as set forth in Exhibit B, which is incorporated by
reference in this Stipulation.
(v) "Order and Final Judgment" means the proposed Order and Final
Judgment in the form attached hereto as Exhibit D, which is incorporated by
reference in this Stipulation.
(w) "Plaintiffs" means the Lead Plaintiffs and all other persons or
entities identified as plaintiffs in the Complaint.
(x) "Plaintiffs' Co-Lead Counsel" means the law firms Milberg Weiss
Bershad Hynes & Lerach LLP, and Wolf Haldenstein Adler Freeman & Herz LLP.
(y) "Plaintiffs' Counsel" means the Plaintiffs' Co-Lead Counsel and
all of the other attorneys representing any of the named Plaintiffs in this
Action.
(z) "Plan of Allocation" means the terms and procedures for
allocating the Net Settlement Consideration among, and distributing the Net
Settlement Consideration to, Authorized Claimants as set forth in the Settlement
Notice, or such other Plan of Allocation as the Court shall approve.
(aa) "Proof of Claim" means the Proof of Claim and Substitute Form
W-9 annexed hereto as Exhibit C-2 which will be mailed to members of the Class
and Settlement Subclass with the Settlement Notice.
(bb) "PwC" means Non-Settling Defendant PricewaterhouseCoopers LLP.
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(cc) "Released Parties" means the Settling Defendants and any
person, firm, company, trust, corporation, or entity in which any Settling
Defendant has a controlling interest, and each of their past, present and future
corporate parents (including intermediate and ultimate parents), subsidiaries,
affiliates, predecessors, successors and assigns, and each of their respective
past, present and future officers, directors, employees, representatives,
agents, solicitors, attorneys, heirs, investment advisors, administrators,
executors, insurers, predecessors, successors and assigns, or any of them,
including any person or entity acting on behalf or at the direction of any of
them. Notwithstanding any of the foregoing, "Released Parties" shall not mean or
include PwC, or any other person or entity other than the Settling Defendants
and their related parties as described in the sentence immediately preceding
this sentence
(dd) "Securities Act" means the Securities Act of 1933.
(ee) "Settled Claims" means any and all claims, rights or causes of
action or liabilities whatsoever, whether based on federal, state, local,
statutory or common law or any other law, rule or regulation, including both
known claims and Unknown Claims, that have been or could have been asserted in
any forum by Plaintiffs or any Class Member (excluding any persons or entities
who timely and properly exclude themselves from the Class and Settlement
Subclass), or any of them, against any of the Released Parties, which arise out
of or relate in any way to the allegations, transactions, facts, matters or
occurrences, representations or omissions involved, set forth, referred to or
that could have been asserted in the Complaint, relating to the purchase of
MicroStrategy common stock or call options or sale of MicroStrategy put options
during the Class Period.
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(ff) "Settled Defendants' Claims" means any and all claims, rights
or causes of action or liabilities whatsoever, whether based on federal, state,
local, statutory or common law or any other law, rule or regulation, including
both known claims and Unknown Claims, that have been or could have been asserted
in the Action or any forum by the Settling Defendants or any of them or the
successors and assigns of any of them against any of the Plaintiffs, Class
Members or Plaintiffs' Counsel, which arise out of or relate in any way to the
institution, maintenance, or prosecution of the Action.
(gg) "Settlement" means the terms and conditions set forth in this
Stipulation.
(hh) "Settlement Consideration" means the Notes, Settlement Shares
and Warrants as described in paragraph 3 below, and the costs of notice and
administration as provided in paragraph 4 below.
(ii) "Settlement Hearing" means a hearing to be held by the Court on
notice to the Class, to consider approval of the Settlement, Plan of Allocation
and the Fee and Expense Application.
(jj) "Settlement Notice" means the Notice of Pendency of Class
Action and Partial Settlement, which is to be mailed to the Class in the form
attached hereto as Exhibit C-1.
(kk) "Settlement Shares" shall mean five hundred fifty thousand
(550,000) shares of MicroStrategy Class A common stock, or such greater number
of shares as may be issued in the Settlement, to be contributed by MicroStrategy
and, directly or indirectly through MicroStrategy, Messrs. Saylor, Bansal and
Lynch, in amounts set out in the October 23, 2000 letter from John K. Villa to
Steven G. Schulman and Daniel W. Krasner. The Settlement Shares will be subject
to the terms and conditions as set forth in Exhibit B.
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(ll) "Settlement Subclass" means all members of the Class who
purchased MicroStrategy common stock contemporaneously with sales of
MicroStrategy common stock by any of the Individual Defendants, that is on one
or more of the following dates: July 26, 27, 28 or 29, 1999, August 16, 17 or
18, 1999, October 21, 22, 25, 26, 27, 28, or 29, 1999, November 1, 18, 19, or
22, 1999, February 28 or 29, 2000 or March 1, 2000. The definition of the
Settlement Subclass represents a modification of the Certified Subclass defined
in the Amended Stipulation and Agreement Regarding Class Certification, entered
into by the Parties on or about August 10, 2000, and subsequently approved by
the Court, as amended, on August 25, 2000. The Settling Parties will request the
Court to certify the Settlement Subclass, as modified from the Court's prior
Order, solely for the purposes of the Settlement contemplated herein. Anyone
excluded from the Class is also excluded from the Settlement Subclass.
(mm) "Settling Defendants" means MicroStrategy and the Individual
Defendants.
(nn) "Settling Defendants' Counsel" means the law firm of Williams &
Connolly LLP.
(oo) "Settling Parties" means the Settling Defendants and the Lead
Plaintiffs.
(pp) "Unknown Claims" means any and all Settled Claims which any
Plaintiff or Class Member does not know or suspect to exist in his, her or its
favor at the time of the release of the Released Parties, and any Settled
Defendants' Claims which any Settling Defendant does not know or suspect to
exist in his, her or its favor, which if known by him, her or it might have
affected his, her or its decision(s) with respect to the Settlement. With
respect to any and all Settled Claims and Settled Defendants' Claims, the
Settling Parties stipulate and agree that the
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Plaintiffs, the Class Members, and the Settling Defendants shall, by operation
of the Order and Final Judgment, have waived any and all provisions, rights and
benefits conferred by any law of any state or territory of the United States, or
principle of common law, which is similar, comparable, or equivalent to Cal Civ.
Code ss. 1542, which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
Lead Plaintiffs and Settling Defendants acknowledge, and members of the Class
and Settlement Subclass by operation of law shall be deemed to have
acknowledged, that the inclusion of "Unknown Claims" in the definition of
Settled Claims and Settled Defendants' Claims was separately bargained for and
was a key element of the Settlement
(qq) "Warrants" means the warrants to be issued by MicroStrategy in
connection with the Settlement. The Warrants will be subject to the terms and
conditions as set forth in Exhibit B.
II TERMS AND CONDITIONS
2. The Settling Parties agree to the following terms and conditions in
full and final disposition of the Action as against the Settling Defendants, and
any and all Settled Claims as against all Released Parties, and any and all
Settled Defendants' Claims.
3. Payment of the Settlement Consideration:
a. The Notes: Pursuant to the Trust Indenture attached hereto as
Exhibit F and being signed concurrently herewith, and in accordance with the
terms and conditions set out in Exhibit B, MicroStrategy shall, after the
Effective Date, and as soon as practicable after entry of the Final Distribution
Order, deliver the Notes as directed by Plaintiffs' Co-Lead Counsel.
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b. The Settlement Shares: In accordance with the terms and
conditions set out in Exhibit B, the Settling Defendants shall, after the
Effective Date, and as soon as practicable after entry of the Final Distribution
Order, deliver the Settlement Shares as directed by Plaintiffs' Co-Lead Counsel.
c. The Warrants: In accordance with the terms and conditions set out
in Exhibit B, MicroStrategy shall execute and deliver to Plaintiffs' Co-Lead
Counsel the Warrant Agreement, annexed hereto as Exhibit E. The Warrant
Agreement shall be effective currently but may hereafter be modified from the
forms annexed hereto to the extent required by the Nasdaq National Market (or
such other market on which the Warrants may be traded), in connection with the
listing of the Warrants or the common shares issuable upon the exercise of the
Warrants, or by the Warrant Agent, as defined in the Warrant Agreement, in
connection with the issuance or the administration of the Warrants. Any such
modification shall be preceded by not less than five (5) business days notice to
Plaintiffs' Co-Lead Counsel The Warrant certificates shall be prepared by
MicroStrategy in such form as may be required by the Nasdaq National Market (or
such other market on which the Warrants may be traded) and by the Warrant Agent.
Such form shall be subject to the approval of Plaintiffs' Co-Lead Counsel, which
shall not be unreasonably withheld. If Plaintiffs' Co-Lead Counsel do not object
in writing within ten (10) days after MicroStrategy has presented them with a
copy of the proposed final form of the Warrant certificate, then Plaintiffs'
Co-Lead Counsel shall be deemed to have approved the form.
d. MicroStrategy or its designees shall, within ten (10) business
days after entry of the Final Distribution Order, and upon receipt from
Plaintiffs' Co-Lead Counsel of a disk
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containing a list of the names, addresses and tax identification numbers of all
Authorized Claimants and Plaintiffs' Counsel (to the extent awarded by the
Court), as well as the number of Settlement Shares, Warrants and the principal
amount of the Promissory Note each such Authorized Claimant and Plaintiffs'
Counsel is entitled to receive, issue Settlement Shares, Warrants and Notes to
Authorized Claimants and Plaintiffs' Counsel in accordance with the terms of
this Stipulation, the provisions set forth in the Final Distribution Order and
the directions of Plaintiffs' Co-Lead Counsel.
e. In the event MicroStrategy and Plaintiffs' Co-Lead Counsel are
unable to agree, after good faith negotiations, on an appropriate adjustment in
the number of shares to be issued to the Class hereunder in the event of any one
or more of the following contingencies occur prior to the distribution of the
Settlement Consideration: (a) MicroStrategy ceases to be a public company; (b)
MicroStrategy Class A common shares cease to be listed on the Nasdaq National
Market, the American Stock Exchange or the New York Stock Exchange; (c) there is
a MicroStrategy recapitalization, corporate merger, acquisition, combination or
other type of reorganization which results in eliminating the Class A common
stock; and/or (d) there is a halt in trading of Class A Common stock during all
or part of the valuation period(s), then Plaintiffs' Co-Lead Counsel and
MicroStrategy shall each appoint one arbitrator. In the event the two
arbitrators are unable to agree on an appropriate adjustment in the number of
shares to be issued to the Class hereunder within two weeks of their
appointment, they shall select a neutral third arbitrator and the three shall
determine, by majority vote, the appropriate adjustment in the number of shares
to be issued to the Class hereunder. The decision of the arbitrators shall be
final
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and binding and not subject to appeal. The cost of the arbitration shall be
borne equally by MicroStrategy and the Settlement Consideration.
f. In addition, in the event of any merger, reorganization, or other
change in control, the contractual rights and obligations created in connection
with this Settlement shall not be diminished or impaired in any way and shall be
assumed by the acquirer or successor as appropriate.
4. MicroStrategy shall pay in cash the costs of notice and administration
of the Settlement up to a maximum of seven hundred and fifty thousand dollars
($750,000) as and when incurred (not including any attorneys' fees or expenses,
which fees and expenses shall be payable from the Notes, Settlement Shares and
Warrants, as may be approved by the Court). For the purposes hereof, the costs
of notice and administration shall include up to $150,000 for the fees of the
trustee under the Trust Indenture up until the Notes are issued. If the costs of
notice and administration of the Settlement exceed seven hundred and fifty
thousand dollars ($750,000), MicroStrategy shall pay such costs as and when
incurred and shall be entitled to a credit equal to the Excess Amount against
the installment of interest on the Notes next due, to be applied against the
Notes then outstanding on a pro rata basis. If the Excess Amount exceeds the
amount of interest next due, MicroStrategy may at its option either reduce the
principal of the balance of the Notes then outstanding on a pro rata basis by
the balance of the Excess Amount not previously applied or apply such amount
against subsequent installments of interest. MicroStrategy shall not be entitled
to any refund or reimbursement of the costs of notice and administration in the
event that the Settlement is not approved, is terminated or does not become
final and effective for any
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reason. The notice and administration shall be performed by the Claims
Administrator. MicroStrategy shall, without charge, (i) provide information
from MicroStrategy's transfer records concerning the identity of members of the
Class and Settlement Subclass and their transactions, and (ii) issue the Notes,
Settlement Shares, and Warrants, as directed by Plaintiffs' Co-Lead Counsel,
and, if applicable, cash or other consideration as provided in Exhibit B hereto.
5. The Settling Parties agree to the entry of the Order and Final
Judgment, annexed hereto as Exhibit D.
6. Upon the Effective Date, by operation of the Order and Final Judgment,
all Class Members (excluding any persons or entities who timely and properly
exclude themselves from the Class and Settlement Subclass) on behalf of
themselves, their heirs, executors, administrators, successors and assigns, and
any persons they represent, shall release and forever discharge, and shall
forever be enjoined from prosecuting, any Settled Claims against any of the
Released Parties.
7. The Order and Final Judgment shall include a bar order pursuant to
which the Court permanently bars and enjoins PwC and any other person or entity
from asserting in this Court, or in any other federal court, or in any state
court or other forum, any action or claim arising out of, based upon or related
to any of the allegations in the Complaint or any other pleadings filed in the
Action, or any claim for contribution or equitable indemnity, by which such
person or entity attempts to recover losses arising out of claims made by Lead
Plaintiffs or any Class Member (excluding any persons or entities who timely and
properly exclude themselves from the Class and Settlement Subclass), against any
of the Settling Defendants or the Released Parties.
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8. Upon the Effective Date of this Settlement, by operation of the Order
and Final Judgment, each of the Settling Defendants, on behalf of themselves and
the Released Parties, shall release and forever discharge, and shall forever be
enjoined from prosecuting, each and every of the Settled Defendants' Claims.
9. As part of the Settlement, all claims against the Settling Defendants
by all Class Members (excluding any persons or entities who timely and properly
exclude themselves from the Class and Settlement Subclass) will be dismissed
with prejudice in the Action pursuant to an appropriate order under Rule 54(b)
of the Federal Rules of Civil Procedure and all Class Members (excluding any
persons or entities who timely and properly exclude themselves from the Class
and Settlement Subclass) shall be deemed to have released such claims and will
be enjoined from any further prosecution thereof.
10. The following are express conditions precedent to the effectiveness of
the Settlement: (i) certification of the Settlement Subclass as defined herein,
to which the Settling Parties hereby stipulate, subject to Court approval; (ii)
approval of the Settlement and entry of an Order and Final Judgment
substantially in the form as annexed hereto as Exhibit D; (iii) the Settlement
becomes final because of the exhaustion of any and all appeals or the time to
appeal from final Court approval; and (iv) the securities constituting the
Settlement Consideration are issued pursuant to Section 3(a)(10) or, in lieu
thereof, there shall be filed an effective registration statement covering the
securities (subject to the provisions of section 4 of Exhibit B), or a no-action
letter will be obtained from the Securities and Exchange Commission covering
such issuance.
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11. MicroStrategy may, at its sole option, terminate the Settlement if
securities (including common stock, calls and puts) representing losses of more
than a dollar amount that was agreed to by the Settling Parties in a separate
letter agreement dated October 23, 2000, opt out of the Class and/or Settlement
Subclass.
12. If the Settlement is terminated, canceled, rejected, or if the
Effective Date otherwise does not and cannot occur:
(a) MicroStrategy shall remain liable to pay any notice and
administration costs incurred prior to the termination, cancellation, rejection
or event that precludes the Effective Date from occurring; and
(b) the Settling Parties shall be deemed to have reverted to their
respective status as of the date and time immediately prior to October 23, 2000
and they shall proceed in all respects as if this Stipulation had not been
executed.
13. As soon as practicable after execution of this Stipulation, the
Settling Parties shall jointly move the Court for entry of a Notice Order in the
form annexed as Exhibit C hereto.
14. If the Settlement is approved by the Court after the Settlement
Hearing, the Settling Parties shall jointly move the Court for entry of an Order
and Final Judgment in the form annexed as Exhibit D hereto.
15. At the Settlement Hearing, Lead Plaintiffs will seek approval of the
Court for a Plan of Allocation for the Net Settlement Consideration to Class
Members. The terms and conditions of the proposed Plan of Allocation shall be
set forth in the Settlement Notice. After all timely claims have been received
and processed Plaintiffs' Co-Lead Counsel shall file a motion to
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distribute the Net Settlement Consideration to the Class Members in accordance
with the Plan of Allocation approved by the Court.
16. a. Plaintiffs' Counsel may submit a Fee and Expense Application for
distribution to them solely from the Settlement Consideration for an award of
attorneys' fees and reimbursement of expenses, including the fees of experts and
consultants incurred in connection with prosecuting the Action. Plaintiffs'
Co-Lead Counsel reserves the right to make additional applications for fees and
expenses incurred in connection with administration of the Settlement, to be
distributed solely from the Settlement Consideration. Plaintiffs' Co-Lead
Counsel shall allocate the Fee Award among other Plaintiffs' Counsel in a manner
in which they in good faith believe reflects the contributions of such
Plaintiffs' Counsel to the prosecution and settlement of the Action.
b. The Fee Award and the amount awarded by the Court for
reimbursement of expenses shall be payable solely from the Settlement
Consideration.
c. The Fee Award shall be paid pari passu from the Settlement
Shares, Notes and Warrants, and shall be paid at the same time, and in the same
proportion, as the Net Settlement Consideration is distributed to the Class and
Settlement Subclass.
17. The procedure for the allowance or disallowance by the Court of any
applications by Plaintiffs' Counsel for attorneys' fees, costs and expenses,
including the fees of experts and consultants to be paid out of the Settlement
Consideration, are distinct from the Settlement set forth in the Stipulation,
and are to be considered by the Court separately from the Court's consideration
of the fairness, reasonableness and adequacy of the Settlement set forth in the
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Stipulation, and any order or proceedings relating to the Fee and Expense
Application, or any appeal from any order relating thereto or reversal or
modification thereof, shall not operate to terminate or cancel the Stipulation,
or affect or delay the finality of the Order and Final Judgment approving the
Stipulation and the Settlement of the Action set forth herein.
18. Plaintiffs' Co-Lead Counsel have retained a Claims Administrator and
may retain such other persons or organizations as may be necessary to review,
assess and process the Proofs of Claim submitted by Class Members. Defendants
shall have no role in or responsibility for review or evaluation of Proofs of
Claim. Promptly upon the Claims Administrator's completion of the processing of
claims, Plaintiffs' Co-Lead Counsel shall file a motion for the Final
Distribution approving the Claims Administrator's administrative determinations
concerning the acceptance and rejection of claims filed by Class Members, and
approving the fees and expenses of the Claims Administrator (which application
shall be separate from the Fee and Expense Application) and, if the Effective
Date has occurred, directing payment of the Net Settlement Consideration to
Authorized Claimants.
19. In order to receive a distribution from the Settlement Consideration,
a Class Member must file a Proof of Claim in the form and manner to be approved
by the Court.
20. Defendants shall have no role in or responsibility for the form,
substance, method or manner of administration or distribution of the Net
Settlement Consideration to Authorized Claimants. Except with respect to the
payment of notice and administration costs as set forth in paragraph 4 above,
neither the Released Parties nor their respective counsel shall have any
responsibility for or liability with respect to the administration or processing
of claims or the allocation of the Settlement Consideration, including, without
limitation, determinations as to the
-20-
validity of Proofs of Claim, the amounts of claims, or distributions of the Net
Settlement Consideration
21. The Settling Parties and their attorneys agree to cooperate fully with
one another in seeking Court approval of this Stipulation.
22. This Stipulation shall be binding upon and inure to the benefit of the
Settling Parties, the Class Members, and the Released Parties, and their
respective heirs, executors, administrators, successors and assigns, and upon
any corporation or other entity into or with which any party hereto may merge or
consolidate. It is not intended, and shall not be construed, to create rights in
or confer benefits on anyone else.
23. Except as provided in the Exhibits to this Stipulation that the law of
MicroStrategy's state of incorporation, Delaware, shall govern the securities to
be issued as the Settlement Consideration, the Settlement shall be governed by
Federal Law, including Rule 23 of the Federal Rules of Civil Procedure, and to
the extent not covered by Federal Law the contractual provisions of this
Stipulation shall be construed in accordance with the laws of the Commonwealth
of Virginia, excluding its choice of law provisions.
24. The Settling Defendants shall take no position on and shall neither
interfere with nor delay the efforts by Plaintiffs to pursue any claims they may
have against any actual or potential party to this Action or any other person or
entity. Nor shall the Settling Defendants materially aid or assist any actual or
potential party to this Action or any other person or entity in their or its
defense of this Action. Notwithstanding anything to the contrary in this
Stipulation or accompanying exhibits, nothing herein shall prevent the Settling
Defendants from defending the rights or protecting the interests of any Released
Party. If the Settlement is approved and
-21-
becomes final, the Settling Defendants shall, at the request of Plaintiffs'
Co-Lead Counsel, be subject to formal discovery and trial testimony in
connection with any remaining claims asserted in this Action as if they were
parties to the continuing Action, such that non-party discovery procedures
against them will not be necessary. Settling Defendants shall not interpose any
objection to providing trial testimony beyond 100 miles from their residence. If
requested by Plaintiffs' Co-Lead Counsel, the Settling Defendants shall further
direct their employees to provide discovery and trial testimony in this Action
as if the employees were parties to the continuing Action. Settling Defendants
shall assist Plaintiffs' Co-Lead Counsel in locating former employees. Settling
Defendants shall not interpose the terms of any confidentiality agreements with
such former employees which might interfere with the former employees' candid
discussions with Plaintiffs' Co-Lead Counsel or their testimony. Settling
Defendants shall relieve former employees from the obligations of any
confidentiality agreements insofar as they would interfere with or obstruct
those employees' discussions with Plaintiffs' Co-Lead Counsel or their
testimony. Any confidential information provided pursuant to this paragraph
shall be subject to the Stipulation and Order Governing Confidential
Information, So Ordered by the Court in this Action on November 6, 2000.
25. Nothing contained in this Stipulation or in other agreements executed
in connection with the Settlement shall be construed as an admission (i) by any
Settling Defendant of any alleged liability, fault or wrongdoing whatsoever of
the Settling Defendants or any of them, or (ii) by any member of the Class or
Settlement Subclass that their claims are without merit or lack validity
26 Subject to MicroStrategy's obligations under the securities laws, the
Settling Parties agree to consult with each other prior to issuing any public
announcement or similar public
-22-
statement concerning the Settlement until the earlier of the filing of the Form
10-K or Form l0-Q following the Effective Date of the Settlement.
27. The waiver by one Settling Party of any breach of this Stipulation by
another Settling Party shall not be deemed a waiver of any other prior or
subsequent breach of this Stipulation.
28. The Settling Parties intend the Settlement to be a final and complete
resolution of all disputes asserted or which could be asserted between
Plaintiffs, the Class Members and the Released Parties with respect to the
Settled Claims and the Settled Defendants' Claims. Accordingly, the Settling
Parties agree not to assert in any forum that the litigation was brought by
Plaintiffs or defended by the Settling Defendants in bad faith or without a
reasonable basis. The Settling Parties shall assert no claims of any violation
of Rule 11 of the Federal Rules of Civil Procedure relating to the prosecution,
defense, or settlement of the Action. The Settling Parties agree that the
Settlement Consideration and the other terms of the Settlement were negotiated
at arm's-length and in good faith, and reflect a settlement that was reached
voluntarily after consultation with experienced legal counsel.
29. All of the exhibits attached hereto are hereby incorporated by
reference as though fully set forth herein. The foregoing, including the
documents referred to in this Stipulation and in the exhibits hereto, constitute
the entire agreement among the parties hereto with respect to the Settlement of
the Action, and may not be modified or amended, except in writing, signed by all
parties hereto, or their successors in interest. No representations or
warranties other than those contained or referenced herein are made to any party
Counsel may sign this Stipulation on behalf of the parties.
-23-
30. This Stipulation shall not be construed more strictly against one
party than another merely by virtue of the fact that it, or any part of it, may
have been prepared by counsel for one of the parties, it being recognized that
it is the result of arm's-length negotiations between the parties and all
parties have contributed substantially and materially to the preparation of this
Stipulation.
31. The Court shall retain jurisdiction with respect to implementation and
enforcement of the terms of the Stipulation.
32. This Stipulation may be executed in counterparts.
MILBERG WEISS BERSHAD HYNES &
LERACH LLP
By: /s/ Melvin I. Weiss
------------------------------
Melvin I. Weiss
Steve G. Shulman
George A. Bauer III
Ariana J. Tadler
One Pennsylvania Plaza
New York, NY 10119
Tel: (212) 594-5900
WOLF HALDENSTEIN ADLER
FREEMAN & HERZ LLP
By: /s/ Daniel Krasner
------------------------------
Daniel Krasner
Fred Taylor Isquith
270 Madison Avenue
New York, NY 10016
Tel: (212) 545-4600
Plaintiffs' Co-Lead Counsel
-24-
WILLLAMS & CONNOLLY LLP By
By: /s/ John K. Villa
------------------------------
Brendan V. Sullivan, Jr.
John K. Villa
Steven M. Farina
725 12th Street, NW.
Washington, D.C. 20005
Tel: (202) 434-5000
Counsel for Defendants
MicroStrategy Incorporated, Michael
J. Saylor, Sanju K. Bansal, Mark S.
Lynch, Stephen S. Trundle, Ralph S.
Terkowitz and Frank A. Ingari
-25-
Exhibit B
Settlement Amount and Payment Method:
1. Notes: From the date of issuance (as defined in section 5 below) five-year,
unsecured promissory Notes (face amounts in $100 multiples) issued by
MicroStrategy having an aggregate principal amount of eighty million five
hundred thousand dollars ($80,500,000) bearing interest from the date of
commencement of the Settlement Hearing at a rate of seven and one-half percent
(7.5%) per annum, payable solely in cash, with interest originally accruing and
compounding annually until six (6) months after the date of issuance of the
first Notes to be issued hereunder and to be paid on that date and, thereafter,
accruing semi-annually and payable semi-annually in arrears. The Notes shall be
issued pursuant to Section 3(a)(10) of the Securities Act and shall not
constitute "restricted securities." In the event that the Notes cannot be issued
pursuant to Section 3(a)(10), MicroStrategy shall take such steps as are
necessary to permit such issuance, or, in lieu thereof, shall file a
registration statement covering the issuance of the Notes or seek a "no action"
letter from the Securities and Exchange Commission covering such issuance. The
Notes may be prepaid at any time, upon thirty (30) days prior written notice, in
whole or in part on a pro rata basis, without premium or penalty, and may be
mandatorily converted at the option of MicroStrategy at any time, upon thirty
(30) days prior written notice, in whole or in part on a pro rata basis, without
premium or penalty except as described herein, into MicroStrategy Class A common
stock. The combination of prepayments, mandatory conversions and purchases in
the open market by MicroStrategy shall not reduce the total original issue by
more than forty percent (40%) unless the entire issue shall be prepaid,
converted and/or purchased by MicroStrategy.
MicroStrategy shall not mandatorily convert the Notes while a petition in
bankruptcy relating to MicroStrategy is pending and not discharged or stayed. If
notice of a mandatory conversion is given during the thirty (30) day period
prior to the filing date of a petition in bankruptcy relating to MicroStrategy,
then the conversion will take place five (5) days after the petition is
discharged or stayed or thirty (30) days after the notice, whichever is later.
If the Notes are converted into shares of Class A common stock, they shall be
converted into such number of shares as would be determined by dividing the
principal and accrued but unpaid interest on the Notes to be converted by an
amount equal to eighty percent (80%) of the dollar weighted average trading
price per share for all round lot transactions in the stock on the Nasdaq
National Market for the ten (10) trading days ending two (2) days prior to the
date of the written notice. MicroStrategy shall not mandatorily convert the
Notes if, during the ten (10) day period used for calculating the conversion
price, MicroStrategy, any member of the MicroStrategy Board of Directors or any
MicroStrategy officer subject to the requirements of Section 16 of the
Securities and Exchange Act of 1934 has purchased shares of Class A common stock
(excluding any issuance of stock to any officer or director of MicroStrategy
pursuant to any MicroStrategy stock option, employee stock purchase or similar
plan or rights plan in effect on the date of the commencement of the Settlement
Hearing or subsequently approved by MicroStrategy's Board of Directors, or any
exercises of options or rights issued under such plans). The Notes will be
subordinated to all present and future (a) secured indebtedness and (b)
unsecured institutional indebtedness evidenced by promissory notes. The Notes
will rank pari passu with all other indebtedness. The Notes will contain only
covenants for timely payment of principal and interest and for maintenance of
MicroStrategy's corporate
-2-
existence. The Notes will be tenderable in lieu of cash on the exercise of the
Warrants provided herein, at a value equal to 133% of the sum of par value plus
interest accrued to the date of the tender but unpaid. The Notes will be issued
pursuant to an indenture with the indenture trustee being a financial
institution mutually satisfactory to MicroStrategy and Plaintiffs' Co-Lead
Counsel. Events of default under the indenture will be a failure to pay
principal or interest when due or a filing of a bankruptcy petition relating to
MicroStrategy that remains undischarged or unstayed for a period of sixty (60)
days. The Notes shall also contain provisions concerning any change of control
or sale of all or substantially all MicroStrategy assets such that any buyer
must assume the Notes and the stock provisions to be translated into the
acquirer's stock.
In the event any Plaintiff would be entitled to a fractional share of a
$100 Note (after adding any increase to the principal amount in lieu of any
fractional Class A share and/or Warrant as provided below) MicroStrategy shall
be entitled, in lieu thereof, at MicroStrategy's option, either to pay cash or
to issue additional shares of Class A common stock valued at the dollar weighted
average trading price per share for all round lot transactions in the stock on
the Nasdaq National Market for the twenty (20) trading days ending two (2) days
prior to the date on which the shares are distributed to the Plaintiff
2. Settlement Shares: Five hundred fifty thousand (550,000) shares of
MicroStrategy Class A common stock to be contributed by MicroStrategy and,
directly or indirectly through MicroStrategy, Michael Saylor, Sanju Bansal and
Mark Lynch. The respective contributions of Messrs. Saylor, Bansal and Lynch
shall be limited to those set out in an October 23, 2000 letter from
MicroStrategy's
-3-
counsel to Settling Defendants' Counsel. The contribution obligations of Messrs.
Saylor, Bansal and Lynch set forth in the letter shall be several, and not joint
and several, obligations and shall have a total value often million dollars
($10,000,000) with the total number of shares to be contributed to be determined
by dividing that ten million dollars ($10,000,000) by the Trading Price (defined
below). All the Settlement Shares shall be issued pursuant to Section 3(a)(10)
of the Securities Act and shall not constitute "restricted securities." In the
event that the Settlement Shares cannot be issued pursuant to Section 3(a)(10),
MicroStrategy shall take such steps as are necessary to permit such issuance,
or, in lieu thereof, shall file a registration statement covering the issuance
of the shares or seek a "no action" letter from the Securities and Exchange
Commission covering such issuance. The Settlement Shares will be valued at the
dollar weighted average trading price per share for all round lot transactions
in the stock on the Nasdaq National Market for the twenty (20) trading days
ending two (2) days prior to the date that the Settlement Hearing commences (the
"Trading Price"). If the Trading Price is less than thirty dollars ($30) per
share, then MicroStrategy will issue such number of Class A common shares which,
when added to the number of shares being contributed by Messrs. Saylor, Bansal
and Lynch and that total is multiplied by the Trading Price, will yield a
product equal to sixteen million five hundred thousand dollars ($16,500,000).
MicroStrategy shall issue and deliver such shares as instructed by Plaintiffs'
Co-Lead Counsel, in whole or in part and from time to time as instructed by
Plaintiffs' Co-Lead Counsel at MicroStrategy's sole expense. To protect against
dilution, the number of shares to be issued will be increased based on a dollar
weighted average anti-dilution formula in the event that MicroStrategy issues or
sells any equity securities or equity linked securities to any person, for a
price
-4-
per Class A common share less than the lesser of thirty dollars ($30) per share
or the Trading Price, provided, however, that there shall be excluded from such
anti-dilution protection (a) any issuance of options or stock to any employee,
officer, director or consultant of MicroStrategy or any of its subsidiaries
pursuant to any MicroStrategy stock option, employee stock purchase or similar
plan or rights plan in effect on the date of the commencement of the Settlement
Hearing or subsequently approved by the MicroStrategy Board of Directors, or any
exercises of options or rights issued under such plans, (b) shares of stock
issuable upon conversion of any shares of Series A Preferred Stock outstanding
on the date of commencement of the Settlement Hearing or any issuance of common
stock in lieu of dividends thereon, (c) shares of stock issuable upon the
conversion of shares of Class B common stock outstanding as of the date of the
commencement of the Settlement Hearing, (d) shares of stock issuable upon the
exercise of any warrants which are outstanding as of the date of the
commencement of the Settlement Hearing, (e) any shares of equity securities
issued as consideration in a merger, combination or other acquisition of any
business or the assets of such a business, (f) any shares of equity securities
issued in connection with any vendor, lease or similar commercial arrangement,
(g) any shares of equity securities issued in connection with any strategic
alliance to the extent that such shares constitute less than 5% (unless a
greater percentage is approved by Plaintiffs' Co-Lead Counsel) of the common
stock of MicroStrategy (including both Class A and Class B shares) issued and
outstanding prior to such issuance. The anti-dilution protection shall apply
only during the period beginning on the date of the commencement of the
Settlement Hearing and ending sixty (60) days
-5-
from the date on which the Court enters an order approving the settlement
described herein.
In the event any Plaintiff would be entitled to a fractional share of
Class A common stock, MicroStrategy shall be entitled to pay cash in lieu of
the fractional share at the lesser of thirty dollars ($30) per share or the
Trading Price or, in lieu thereof, at MicroStrategy's option, to increase the
principal amount of the Notes distributable to the shareholder entitled to the
shares by the same amount.
3. Warrants: Warrants issued by MicroStrategy to purchase one million nine
hundred thousand (1,900,000) shares of MicroStrategy Class A common stock at an
exercise price determined as follows: if the Trading Price is eleven dollars
($11.00) or less, then the exercise price shall be forty dollars ($40.00) per
share; if the Trading Price is twenty-four dollars ($24.00) or more, then the
exercise price shall be fifty dollars ($50) per share; if the Trading Price is
between eleven dollars ($11 00) and twenty-four dollars ($24 00), then the
exercise price shall be increased over forty dollars ($40.00) and up to fifty
dollars ($50.00) in the same proportion as the Trading Price exceeds eleven
dollars ($11.00) up to twenty-four dollars ($24.00). The Warrants shall expire
five years from the date of issuance (as defined in section 5 below). The
Warrants shall be immediately exercisable, immediately separable from the Notes,
and non-redeemable. The Warrants shall be issued pursuant to Section 3(a)(10) of
the Securities Act and shall not constitute "restricted securities." In the
event that the Warrants cannot be issued pursuant to Section 3(a)(10),
MicroStrategy shall take such steps as are necessary to permit such issuance,
or, in lieu thereof, shall file a registration statement covering the issuance
of the Warrants or seek a "no action" letter from the Securities and Exchange
Commission covering such issuance The Warrants shall be exercisable for cash,
-6-
or in lieu thereof, at the option of the holder, in Notes provided herein valued
at one hundred thirty three percent (133%) of the sum of par value plus interest
accrued to the date of the tender but unpaid.
The number and kind of securities purchasable upon the exercise of each
Warrant and the exercise price will be subject to adjustment in the event of a
stock split or stock dividends on the Class A common stock, reorganizations,
recapitalizations and reclassifications, and extraordinary distributions of
other property to holders of the Class A common stock. Notwithstanding the
foregoing, there shall be no adjustment with respect to any securities issued by
MicroStrategy upon conversion of any shares of Series A Preferred Stock
outstanding on the date of the commencement of the Settlement Hearing or any
issuance of Class A common stock in lieu of dividends on such Series A Preferred
Stock.
In the event any Plaintiff would be entitled to a fractional Warrant,
MicroStrategy shall be entitled to issue cash in lieu of fractional Warrants
with each Warrant valued at $21.0988 for purposes of this calculation, or in
lieu thereof, at MicroStrategy's option, to increase the principal amount of
the Note distributable to the Plaintiff entitled to the Warrants by the same
amount.
4. Registration and Listing Obligations: During the period that any Warrants are
outstanding, MicroStrategy agrees that it will, at its sole cost, use its best
efforts to keep a registration statement relating to the issuance of the Class A
common shares upon exercise of the Warrants effective under the Securities Act;
provided, however, that MicroStrategy shall have the right in its sole
discretion to delay the effectiveness of any registration statement or suspend
offers and sales under any effective registration statement, at any time and for
-7-
any period, if (a) such action is required by applicable law, (b) the
effectiveness of a registration statement or the continuation of offers and
sales under a registration would require MicroStrategy to disclose a material
financing, acquisition or other corporate development and MicroStrategy's Board
of Directors (or where due to the nature of the circumstances, timely
consultation with the Board of Directors is not, in the good faith determination
of the Chairman of the Board, the Chief Executive Officer or the Chief Financial
Officer of MicroStrategy, possible, then such person) shall have determined in
good faith that such disclosure is not in the best interests of MicroStrategy
and its shareholders, or (c) if the Board of Directors shall have determined in
good faith that there is a valid business purpose or reason for such delay or
suspension. This right to delay the effectiveness of any registration statement
or suspend offers and sales under any effective registration statement may only
be invoked for ninety (90) trading days out of any three hundred sixty five
(365) calendar day period.
MicroStrategy will comply with all Blue Sky laws applicable to the
Warrants, Notes and Class A common stock. MicroStrategy will use its best
efforts to effect the listing of the Notes, Warrants and the underlying shares
on the Nasdaq National Market, the American Stock Exchange or the New York Stock
Exchange (or other such principal market as approved by Plaintiffs' Co-Lead
Counsel) commencing on the date of their issuance and will use its best efforts
to maintain such listing during the period that any Notes or Warrants are
outstanding. MicroStrategy shall have no obligation to make a market in the
Notes or the Warrants.
5. Definition of Issuance and Term of Notes and Warrants:
Notwithstanding anything in this Exhibit A to the contrary, there shall be
a single date on which all Notes and Warrants issued as
-8-
Settlement Consideration shall mature or expire, as the case may be. That date
shall be the date that is five (5) years from the date of issuance of the first
Note or Warrant issued as Settlement Consideration. In addition, there shall be
common semi-annual dates on which interest is payable on all Notes issued as
Settlement Consideration. Those semi-annual dates shall be determined on the
basis of the date of issuance of the first Note to be issued hereunder.
MicroStrategy shall issue and deliver the Notes and Warrants as instructed by
Plaintiffs' Co-Lead Counsel, in whole or in part and from time to time as
instructed by Plaintiffs' Co-Lead Counsel, at MicroStrategy's sole expense.
-9-
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is entered into as of
January 11, 2001, by and between MICROSTRATEGY INCORPORATED, a Delaware
corporation (the "Company"), and AMERICAN STOCK TRANSER & TRUST COMPANY, a New
York limited purpose trust company, as Warrant Agent (together with any
successors and assigns, the "Warrant Agent").
Recitals
A. WHEREAS, the Company is a defendant in a class-action lawsuit
(the "Action") pending in the United States District Court for the Eastern
District of Virginia (the "Court"), entitled In re MicroStrategy Incorporated
Securities Litigation, Civil Action No. 00-473-A;
B. WHEREAS, in connection with the Action and as part of the
transactions to be consummated pursuant to the Stipulation of Settlement dated
the date hereof (the "Stipulation"), the Company has agreed to issue Warrants
for the purchase of one million nine hundred thousand (1,900,000) shares of
Class A common stock, par value $0.001 per share, of the Company (each, a
"Warrant"):
C. WHEREAS, the Stipulation contemplates that the Company will enter
into certain agreements, including, without limitation, this Agreement;
D. WHEREAS, the Company desires to issue the Warrants, each of which
entitles the holder thereof to purchase one share of its Class A Common Stock
(each of said shares of Class A Common Stock deliverable upon exercise of the
Warrants, a "Warrant Share"); and
E. WHEREAS, the Company wishes the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act, in connection with the
issuance, division, transfer, exchange and exercise of Warrants.
Agreement
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein and for other good and valuable
consideration, the receipt and adequacy of which hereby are acknowledged, to
implement the terms of the Stipulation, and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants and any
security into which they may be exchanged (the "Holders"), the parties hereto
covenant and agree as follows:
SECTION 1
DEFINITIONS
In this Agreement, the following terms have the meanings specified
or referred to in this Section 1 and shall be equally applicable to both the
singular and plural forms. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified from time to time to the extent
permitted by the applicable provisions thereof and by this Agreement.
"Action" has the meaning specified in Recital A hereof.
"Agreement" has the meaning specified in the introductory paragraph
of this Warrant Agreement.
"Assets" has the meaning specified in Section 9.1(c) hereof.
"Business Day" means a day other than (a) a Saturday or Sunday, (b)
any day on which banking institutions located in the City of New York, New York
are required or authorized by law or by local proclamation to close or (c) any
day on which the New York Stock Exchange is closed.
"Class A Common Stock" shall mean the shares of the Company's Class
A common stock, par value $0.001 per share.
"Class B Common Stock" shall mean the shares of the Company's Class
B common stock, par value $0.001 per share.
"Commercially Reasonable Efforts," when used with respect to any
obligation to be performed or term or provision to be observed hereunder, means
such efforts as a prudent Person seeking the benefits of such performance or
action would make, use, apply or exercise to preserve, protect or advance its
rights or interests; provided that such efforts do not require the Person whose
performance or observance is required hereunder to incur a material financial
cost or a substantial risk of material liability unless such cost or liability
(i) is specifically contained in this Agreement or the Stipulation; (ii) would
customarily be incurred in the course of performance or observance of the
relevant obligation, term or provision, (iii) is caused by or results from the
wrongful act or negligence of the Person whose performance or observance is
required hereunder or (iv) is not excessive or unreasonable in view of the
rights or interests to be preserved, protected or advanced. Such efforts may
include, without limitation, the expenditure of such funds and retention by such
Person of such accountants, attorneys or other experts or advisors as may be
necessary or appropriate to effect the relevant action; the undertaking of any
special audit or internal investigation that may be necessary or appropriate to
effect the relevant action; and the commencement, termination or settlement of
any action, suit or proceeding involving the Person whose performance or
observance is required hereunder to the extent necessary or appropriate to
effect the relevant action.
2
"Common Stock" shall mean the Class A Common Stock and/or the Class
B Common Stock of the Company.
"Court" has the meaning specified in Recital A of this Agreement.
"Current Market Price" has the meaning specified in Section
9.1(d)(i) hereof.
"Effective Date" has the meaning specified in Section 4.1 hereof.
"Exercise Period" has the meaning specified in Section 4.1 hereof.
"Exercise Price" means a price determined in accordance with the
following formula. If the Trading Price (as hereinafter defined) of the Class A
Common Stock is $11 or less, the exercise price shall be $40.00 per share. If
the Trading Price of the Class A Common Stock is $24.00 or more, the exercise
price shall be $50.00 per share. if the Trading Price is between $11.00 and
$24.00, the exercise price shall be the sum of (1) $40.00 and (2) an amount, not
to exceed $10.00, that is the product of 10/13 multiplied by the amount by which
the Trading Price of the Class A Common Stock exceeds $11.00.
"Holders" has the meaning specified in the preamble to this
Agreement.
"Market" means the Nasdaq National Market, or if the Class A Common
Stock is no longer authorized for quotation on such market, such national
securities exchange upon which the Class A Common Stock is listed, or if the
Class A Common Stock is not authorized for quotation on the Nasdaq National
Market or listed on any national securities exchange, the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System, or if not so quoted, as reported by National Quotation Bureau,
Incorporated. or a similar organization.
"NASD" shall mean the National Association of Securities Dealers.
"Number of Shares" has the meaning specified in Section 9.1(d)(ii)
hereof.
"Person" means a natural person, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
limited liability company, limited liability partnership, government or any
agency or political subdivision thereof or any other entity or organization.
"Proceeds" has the meaning specified in Section 9.l(d)(ii) hereof.
"Qualifying Prospectus" means a prospectus contained in a
Registration Statement that satisfies all legal requirements.
"Registration Statement" means a registration statement relating to
the issuance of the Warrant Shares.
3
"Rights" has the meaning specified in Section 9.1(b) hereof.
"SEC" means the United States Securities and Exchange Commission, or
any successor governmental agency or authority thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Stipulation" has the meaning specified in Recital B hereof,
"Subsidiary" has the meaning specified in Section 9.1(c) hereof.
"Trading Price" means the dollar weighted average trading price per
share for all round lot transactions in the Class A Common Stock on the Market
for the twenty (20) trading days ending two (2) days prior to the date that the
settlement hearing in the Action commences.
"Transfer Agent" has the meaning specified in Section 7 hereof.
"Warrant" has the meaning specified in Recital B hereof.
"Warrant Agent" shall mean American Stock Transfer & Trust Company
and any successor hereunder.
"Warrant Certificate" has the meaning ascribed to such term in
Section 2.1 hereof.
"Warrant Register" has the meaning specified in Section 2.2 hereof.
"Warrant Share" has the meaning specified in Recital D hereof.
SECTION 2
FORM OF WARRANT; EXECUTION; REGISTRATION
2.1 Form of Warrant; Execution of Warrants. The certificates
evidencing the Warrants (the "Warrant Certificates") shall be in a form
satisfying the requirements of the Market. The Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board, President or one
of its Vice Presidents. The signature of any such officer on the Warrant
Certificates may be manual or by facsimile. Any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate. Each Warrant Certificate shall be dated the
date it is countersigned by the Warrant Agent pursuant to Section 2.3 hereof
2.2 Registration. The Warrant Certificates shall be numbered and
shall be registered on the books of the Company maintained at the principal
office of the Warrant Agent initially in New York, New York (or such other place
in the continental United States as the Warrant Agent shall from time to time
notify the Company and the Holders in writing) (the
4
"Warrant Register") as they are issued. The Company and the Warrant Agent shall
be entitled to treat the registered owner of any Warrant as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person.
2.3 Countersignature of Warrants. The Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. Warrant Certificates may be countersigned, however, by the
Warrant Agent and may be delivered by the Warrant Agent notwithstanding that the
persons whose manual or facsimile signatures appear thereon as proper officers
of the Company shall have ceased to be such officers at the time of such
countersignature, issuance or delivery. The Warrant Agent shall, upon written
instructions of the Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company, countersign, issue and deliver
Warrant Certificates entitling the Holders thereof to purchase not more than an
aggregate of 1,900,000 Warrant Shares (subject to adjustment pursuant to Section
9 hereof) and shall countersign, issue and deliver Warrant Certificates as
otherwise provided in this Agreement.
SECTION 3
TRANSFER AND EXCHANGE OF WARRANTS
Subject to the terms hereof, the Warrant Agent shall initially
countersign, register in the Warrant Register and deliver Warrants hereunder in
accordance with the written instructions of the Company. Subject to the terms
hereof and the receipt of such documentation as the Warrant Agent may reasonably
require, the Warrant Agent shall thereafter from time to time register the
transfer of any outstanding Warrants upon the Warrant Register upon surrender of
the Warrant Certificate or Certificates evidencing such Warrants duly endorsed
or accompanied (if so required by it) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Warrant Agent, duly executed by
the registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the terms of
this Agreement, each Warrant Certificate may be exchanged for another Warrant
Certificate or Certificates entitling the Holder thereof to purchase a like
aggregate number of Warrant Shares as the Warrant Certificate or Certificates
surrendered then entitles such Holder to purchase. Any Holder desiring to
exchange a Warrant Certificate or Certificates shall make such request in
writing delivered to the Warrant Agent, and shall surrender, duly endorsed or
accompanied (if so required by the Warrant Agent) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Warrant Agent,
the Warrant Certificate or Certificates to be so exchanged. Upon registration of
transfer, the Company shall issue and the Warrant Agent shall countersign and
deliver by certified mail a new Warrant Certificate or Certificates to the
persons entitled thereto.
No service charge shall be made for any exchange or registration of
transfer of a Warrant Certificate or of Warrant Certificates, but the Company
may require payment of a sum sufficient to cover any stamp tax or other tax or
other governmental charge that is imposed in connection with any such exchange
or registration of transfer pursuant to Section 5 hereof.
5
By accepting the initial delivery, transfer or exchange of Warrants,
each Holder shall be deemed to agree to the terms of this Agreement as it may be
in effect from time to time, including any amendments or supplements duly
adopted in accordance with Section 16.3 hereof. A copy of this Agreement may be
obtained by a Holder without cost upon written request to the Company at its
principal office or the Warrant Agent.
SECTION 4
TERM OF WARRANTS; EXERCISE OF WARRANTS;
REGISTRATION OF WARRANT SHARES
4.1 Term of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised, on any Business Day, from
and after the later of the date the Warrants are issued to the initial Holders
and the Effective Date (as defined below) and until 5:00 p.m., New York City
time, on the fifth anniversary of such later date (the "Exercise Period"), to
receive from the Company the number of Warrant Shares which the Holder may at
the time be entitled to receive upon exercise of such Warrants and payment of
the Exercise Price then in effect for such Warrant Shares, and the Warrant
Shares issued to a Holder upon exercise of its Warrants shall be duly
authorized, validly issued, fully paid, nonassessable and shall not have been
issued in violation of or subject to any preemptive rights. Each Warrant not
exercised prior to the expiration of the Exercise Period shall become void, and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of the expiration of the Exercise Period, provided, however, that
if the Exercise Period ends during a suspension pursuant to Section 4.3 hereof,
the Exercise Period shall be extended for an additional period of time equal to
the longer of the period of such suspension during the Exercise Period and
twenty (20) Business Days after the date on which the Warrant Agent sends notice
to the Holders of the expiration of such suspension period. As used herein, the
term "Effective Date" means the first date on which the Company's Registration
Statement is declared effective by the SEC.
4.2 Exercise of Warrants. During the Exercise Period, except as such
may be suspended from time to time as set forth in Section 4.3 hereof, each
Holder may, subject to this Agreement, exercise from time to time some or all of
the Warrants evidenced by its Warrant Certificate(s) by (i) surrendering to the
Company at the principal office of the Warrant Agent such Warrant Certificate(s)
with the form of notice attached thereto duly filled in and signed, which
signature shall be guaranteed by an eligible guarantor institution (a bank,
savings and loan association or credit union with membership in an approved
signature guarantee medallion program) pursuant to Rule l7Ad-15 of the
Securities Exchange Act of 1934, and (ii) paying to the Warrant Agent for the
account of the Company the aggregate Exercise Price for the number of Warrant
Shares in respect of which such Warrants are exercised. Warrants shall be deemed
exercised on the date such Warrant Certificate(s) are surrendered to the Warrant
Agent and tender of payment of the aggregate Exercise Price is made. Payment of
the aggregate Exercise Price shall be made in cash by wire transfer of
immediately available funds to the Warrant Agent for the account of the Company
or by certified or official bank check or checks to order of the Company or by
tender of 7 1/2% Series A Unsecured Notes issued pursuant to the Stipulation
(the "Notes") in such amount and such manner as set forth in Section 12 hereof,
or by any combination thereof or by such other form or method of payment
acceptable to the Warrant Agent.
6
Upon the exercise of any Warrants in accordance with this Agreement,
the Company shall cause the Warrant Agent, on the Company's behalf, to issue and
deliver with all reasonable dispatch, to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants and shall take such other actions or cause the Warrant Agent to
take such other actions at the Company's sole expense as are necessary to
complete the exercise of the Warrants (including, without limitation, payment of
any cash with respect to fractional interests required under Section 10 hereof).
The certificate or certificates representing such Warrant Shares shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
the Warrants are exercised hereunder. Each Warrant Share, when issued upon
exercise of the Warrants, shall be duly authorized, validly issued, fully paid
and non-assessable and will not have been issued in violation of or subject to
any preemptive rights.
In the event that less than all of the Warrants evidenced by a
Warrant Certificate are exercised, the Holder, thereof shall be entitled to
receive a new Warrant Certificate or Certificates as specified by such Holder
evidencing the remaining Warrant or Warrants, and the Warrant Agent is hereby
irrevocably authorized by the Company to countersign, issue and deliver the
required new Warrant Certificate or Certificates evidencing such remaining
Warrant or Warrants pursuant to the provisions of this Section 4.2 hereof and of
Section 3 hereof The Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant Certificates duly executed on behalf to
the Company for such purpose.
Upon delivery of the Warrant Shares issuable upon exercise in
accordance herewith and of any required new Warrant Certificates, the Company
shall direct the Warrant Agent by written order to cancel the Warrant
Certificates surrendered upon exercise. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner permitted by applicable
laws and satisfactory to the Company in accordance with its written instructions
to the Warrant Agent. The Warrant Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently pay to the Company all
amounts received by the Warrant Agent upon exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the Holders
during normal business hours at its office. The Company shall at its sole
expense supply the Warrant Agent from time to time with such numbers of copies
of this Agreement as the Warrant Agent may reasonably request.
4.3 Registration of Warrant Shares; Suspension of Exercise Period.
The Company covenants that, at its sole cost, it will at all times keep
available such number of authorized shares of its Class A Common Stock, free
from all preemptive rights with respect thereto, which will be sufficient to
permit the exercise of the Warrants for the full number of Warrant Shares. The
Company covenants that the Warrant Shares, when issued pursuant to the exercise
of the Warrants, will be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens, and charges with respect to the issuance thereof
The Company covenants that it will use its Commercially Reasonable Efforts to
keep Registration Statement effective
7
under the Securities Act, and will make such number of Qualifying Prospectuses
available to Holders as they shall reasonably request; provided, however, that
no shares of Class A Common Stock shall be issued, and the right to exercise all
Warrants shall be suspended, for all periods during which there is not an
effective a Registration Statement and/or there is not a Qualifying Prospectus
available to Holders. The Company shall promptly notify the Warrant Agent of any
such suspension, and the Warrant Agent shall have no duty, responsibility or
liability in respect of any shares of Class A Common Stock issued or delivered
prior to its receipt of such notice. The Company shall promptly notify the
Warrant Agent of the termination of any such suspension and the Company shall
cause the Warrant Agent to notify the Holders of the termination of such
suspension within twenty (20) business days following notice to the Warrant
Agent by the Company. The Company represents and warrants that the issuance of
the Warrants is exempt from registration pursuant to Section 3(a)(10) of the
Securities Act, the Warrants and the Warrant Shares will be authorized for
quotation on the Market on the Effective Date and, accordingly, the Warrants are
transferable without registration under the Securities Act or state "Blue Sky"
laws. The Company shall file a Registration Statement with the SEC not later
than the commencement of the settlement hearing in the Action as defined above.
SECTION 5
PAYMENT OF TAXES
The Company will pay all documentary stamp and other like taxes, if
any, attributable to the initial issuance and delivery of the Warrants and the
initial issuance and delivery of the Warrant Shares upon the exercise of
Warrants; provided that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer of the Warrants or
involved in the issuance or delivery of any Warrant Shares in a name other than
that of the Holder of the Warrants being exercised, and the Warrant Agent shall
not register any such transfer or issue or deliver any Warrant Certificate(s) or
Warrant Shares unless or until the persons requesting the registration or
issuance shall have paid to the Warrant Agent for the account of the Company the
amount of such tax, if any, or shall have established to the reasonable
satisfaction of the Company that such tax, if any, has been paid.
SECTION 6
MUTILATED OR MISSING WARRANT CERTIFICATES
In the event that any Warrant Certificate shall be mutilated, lost,
stolen or destroyed, the Company shall issue, and at the direction of the
Company by written order the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and an indemnity or bond, if requested
by the Company or the Warrant Agent, also reasonably satisfactory to them. An
applicant for such a substitute Warrant Certificate shall also comply with such
other reasonable procedures as the Company or the Warrant Agent may reasonably
require.
8
SECTION 7
RESERVATION OF WARRANT SHARES
There have been reserved, and the Company shall at all times keep
reserved, out of its authorized Class A Common Stock, free of all preemptive
rights, a number of shares of Class A Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrants. The
transfer agent for the Class A Common Stock and every subsequent or other
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the Warrants (each, a "Transfer Agent") will be and are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with each Transfer Agent. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from the Company
or a Transfer Agent, as the case may be, the certificate for Warrant Shares
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply its Transfer Agent with
duly executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be payable as provided in Section 10
hereof The Company will furnish to its Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each Holder
pursuant to Section 9.3 hereof. The Company will give the Warrant Agent prompt
notice of any change in any Transfer Agent or any change of address of any
Transfer Agent.
Before taking any action which would cause an adjustment pursuant to
Section 9 reducing the Exercise Price, the Company will take any and all
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
SECTION 8
STOCK EXCHANGE LISTINGS
The Company shall use its Commercially Reasonable Efforts (including
requests for waivers) to have the Warrants listed for quotation on the Market,
and shall use its Commercially Reasonable Efforts to maintain such listing or
inclusion. In the event the Warrants do not qualify for such listing or
inclusion, the Company will use its Commercially Reasonable Efforts (including,
requests for waivers) to effect such inclusion or listing whenever the Warrants
qualify therefor. Any such listing and inclusion shall be at the Company's sole
expense. In connection with any such listing or inclusion, the Company shall (i)
cause a CUSIP number to be provided for the Warrants, (ii) if necessary, file
with the SEC a registration statement under the Exchange Act with respect to all
such Warrants and (iii) cause such registration statement to be declared
effective and such effectiveness to be maintained for the term of the Warrants.
Assuming that there will be at least 400 Holders of the Warrants, the Company
believes that, on the date of their original issuance, the Warrants will meet
the objective criteria for listing on the Market.
9
SECTION 9
ADJUSTMENT OF EXERCISE PRICE: NUMBER
OF WARRANT SHARES AND SHARES OF CAPITAL STOCK
INTO WHICH WARRANTS ARE EXERCISABLE
The number and kind of securities purchasable upon the exercise of
each Warrant, and the Exercise Price, shall be subject to adjustment from time
to time upon the happening of certain events, as hereinafter described.
9.1 Mechanical Adjustments. The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) Adjustment for Change in Capital Stock. Subject to paragraphs
(e) and (g) below, in case the Company shall (i) pay a dividend on its
outstanding shares of Common Stock in shares of Common Stock or make a
distribution of shares of Common Stock on its outstanding shares of Common
Stock, (ii) make a distribution on its outstanding shares of Common Stock in
shares of its capital stock other than Common Stock, (iii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iv) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (v) issue, by reclassification of its shares of
Common Stock, other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving entity), then the number of Warrant Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted so
that the Holder of each Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which such Holder would
have owned or have been entitled to receive upon the happening of any of the
events described above had such Warrant been exercised in full immediately prior
to the happening of such event or any record date with respect thereto. If a
Holder is entitled to receive shares of two or more classes of capital stock of
the Company pursuant to the foregoing upon exercise of Warrants, the allocation
of the adjusted Exercise Price between such classes of capital stock shall be
determined reasonably and in good faith by the Board of Directors of the
Company. After such allocation, the exercise privilege and the Exercise Price
with respect to each class of capital stock shall thereafter be subject to
adjustment on terms substantially identical to those applicable to Common Stock
in this Section 9. An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the record date for such event or, if none,
immediately after the effective date of such event. Such adjustment shall be
made successively whenever such an event occurs.
(b) Adjustment for Rights Issue. Subject to paragraphs (e) and (g)
below, in case the Company shall issue rights, options or warrants
(collectively, "Rights") to all holders of its outstanding Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a Price
Per Share (as defined in paragraph (d) below) which is lower at the record date
mentioned below than the then Current Market Price (as defined in paragraph (d)
below) per share of Common Stock, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, the numerator of which shall be the
10
number of shares of Common Stock outstanding on the date of issuance of such
Rights plus the additional Number of Shares (as defined in paragraph (d) below)
of Common Stock offered for subscription or purchase in connection with such
Rights and the denominator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such Rights plus the number of
shares which the aggregate Proceeds (as defined in paragraph (d) below) received
or receivable by the Company upon exercise of such Rights would purchase at the
Current Market Price per share of Common Stock at such record date. Such
adjustment shall be made whenever Rights are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive Rights.
(c) Adjustment for Other Distributions. Subject to paragraphs (e)
and (g) below, in case the Company shall distribute to all holders of its shares
of Common Stock (x) evidences of indebtedness or assets (excluding cash
dividends or distributions payable out of the consolidated earnings or surplus
legally available for such dividends or distributions and dividends or
distributions referred to in paragraphs (a) or (b) above) of the Company or any
corporation or other legal entity a majority of the voting equity or equity
interests of which are owned, directly or indirectly, by the Company (a
"Subsidiary"), or (y) shares of capital stock of a Subsidiary (such evidences of
indebtedness, assets and securities as set forth in clauses (x) and (y) above,
collectively, "Assets"), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock on the date of such distribution
and the denominator of which shall be such Current Market Price per share of
Common Stock less the fair value as of such record date as determined reasonably
and in good faith by the Board of Directors of the Company of the portion of the
Assets applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(d) Current Market Price; Price Per Share. For the purpose of any
computation hereunder:
(i) the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for the 20 consecutive trading
days preceding the date of such computation. The closing price for each day
shall be (x) if the Common Stock shall be then authorized for quotation on the
Nasdaq National Market, the closing price on The Nasdaq National Market --
Composite Tape (or any successor composite tape reporting transactions on The
Nasdaq National Market) or, if such a composite tape shall not be in use or
shall not report transactions in the Common Stock, or if the Common Stock shall
be listed on a stock exchange other than The Nasdaq National Market, the last
reported sales price regular way or, in case no such reported sale takes place
on such day, the average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading (which shall be the
national securities exchange on which the greatest number of shares of the
Common Stock have been traded during such 20 consecutive trading days) or (y) if
the Common Stock is not listed or authorized for quotation on the Nasdaq
National Market or a national securities exchange, the average of the
11
closing bid and asked prices of the Common Stock in the over-the-counter market,
the average of the closing bid and asked prices as furnished by two members of
the NASD selected reasonably and in good faith from time to time by the Board of
Directors for that purpose. In the absence of one or more such quotations, the
Current Market Price per share of the Common Stock shall be determined
reasonably and in good faith by the Board of Directors of the Company.
(ii) "Price Per Share" shall be defined and determined according to
the following formula:
P = RJN
where
P = Price Per Share;
R = the "Proceeds" received or receivable by the Company which
(x) in the case of shares of Common Stock, is the total amount
received or receivable by the, Company in consideration for the
issuance and sale of such shares; and (y) in the case of Rights
with respect to shares of Common Stock, is the total amount
received or receivable by the Company in consideration for the
issuance and sale of Rights, plus the minimum aggregate amount
of additional consideration payable to the Company upon
exercise, conversion or exchange thereof; provided that in each
case the proceeds received or receivable by the Company shall
be the net cash proceeds after deducting therefrom any
compensation or expenses paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or
others performing similar services; and
N = the "Number of Shares," which (x) in the case of Common
Stock is the number of shares issued; and (y) in the case of
Rights with respect to shares of Common Stock, is the maximum
number of shares of Common Stock initially issuable upon
exercise, conversion or exchange thereof.
(e) Minimum Adjustment. No adjustment in the number of Warrant
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Warrant Shares purchasable upon the exercise of each Warrant; provided that any
adjustments which by reason of this paragraph (e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a Warrant Share
and the nearest cent.
(f) Adjustment in Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of each Warrant is adjusted as herein
provided, the Exercise Price payable upon exercise of each Warrant immediately
prior to such adjustment shall be adjusted by multiplying such Exercise Price by
a fraction, the numerator of which shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
12
adjustment and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(g) When No Adjustment Required. No adjustment in the number of
Warrant Shares purchasable upon the exercise of each Warrant need be made under
this Section 9.1 in connection with: (i) shares of Common Stock, options,
rights, warrants or other securities issued pursuant to any plan adopted by the
Company or its subsidiaries for the benefit of employees or directors; (ii)
shares of Common Stock, options, rights, warrants or other securities issued
pursuant to any rights issued pursuant to the Company's 1999 Stock Option Plan,
1996 Stock Option Plan, 1997 Stock Option Plan for French Employees,
1999'Directors' Option Plan, and 1998 Employee Stock Purchase Plan, as the same
may be amended or supplemented from time to time or pursuant to any successor
plans adopted by the Company; (iii) sales of Common Stock pursuant to a plan
adopted by the Company for reinvestment of dividends or interest. (iv) any
shares of Common Stock issued by the Company upon conversion of any shares of
its Series A Preferred Stock outstanding on the date hereof or any shares of
Common Stock issued in lieu of dividends on such Series A Preferred Stock, or
(v) any shares of Common Stock, options, rights, warrants or other securities
issued to a strategic investor, vendor, lessor, lender or similar arrangement.
Additionally, no adjustment need be made if the Company issues or distributes to
each Holder of Warrants the shares, rights, options, warrants, evidences of
indebtedness, assets or other securities referred to in those paragraphs which
each Holder of Warrants would have been entitled to receive had the Warrants
been exercised for the number of Warrant Shares for which Warrants are then
exercisable prior to the happening of such event or the record date with respect
thereto. No adjustment in the number of Warrant Shares will be made for a change
in the par value of the shares of Common Stock. If any action or transaction
would require an adjustment of the Exercise Price and the number of Warrant
Shares purchasable upon the exercise of each Warrant pursuant to more than one
paragraph of this Section 9, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
(h) Shares of Common Stock. For all purposes of this Agreement, the
term "shares of Common Stock" shall mean (i) the Class A Common Stock and Class
B Common Stock of the Company at the date of this Agreement or (ii) any other
class of stock resulting from successive changes or reclassification of such
shares consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 9.1, the Holders shall
become entitled to purchase any securities of the Company other than shares of
Class A Common Stock, thereafter the number of such other shares so purchasable
upon exercise of each Warrant and the Exercise Price of such shares shall be
subject to adjustment from time to time in a manner and on terms substantially
identical to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (g) above, and the provisions of this Agreement with
respect to the Warrant Shares shall apply on like terms to any such other
securities.
(i) Expiration of Rights, Etc. Upon the expiration of any Rights or
conversion or exchange or exercise rights, if any thereof shall not have been
exercised, the Exercise Price and the number of Warrant Shares purchasable upon
the exercise of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it would have been had
13
it been originally adjusted (or had the original adjustment not been required,
as the case may be) as if (A) the only shares of Class A Common Stock so issued
were the shares of Class A Common Stock, if any, actually issued or sold upon
the exercise of such Rights or conversion or exchange or exercise rights and (B)
such shares of Class A Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Rights or conversion or exchange or
exercise rights whether or not exercised; provided that no such readjustment
shall have the effect of increasing the Exercise Price or decreasing the number
of Warrant Shares purchasable upon the exercise of each Warrant by an amount in
excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such Rights or conversion or exchange or exercise
rights.
9.2 Voluntary Adjustment by the Company. The Company may, at its
option and at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company.
9.3 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Exercise Price of Warrant
Shares is adjusted as herein provided, the Company shall cause the Warrant Agent
promptly to mail to each Holder, at the sole expense of the Company by first
class mail, postage prepaid, notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of an officer of the Company setting
forth the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth in
reasonable detail the computations by which such adjustment was made. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder requesting an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holder to determine whether any
facts exist which may require any adjustment of the Exercise Price or the number
of Warrant Shares or other stock or property purchasable on exercise of
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment.
9.4 Preservation of Purchase Rights upon Merger or Consolidation, in
case of any consolidation of the Company with or merger of the Company into
another entity, the Company or such successor entity shall execute and deliver
to the Warrant Agent an agreement, which shall be binding on the Holders, that
each Holder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action (after giving effect to any
applicable adjustments under Section 9.1 hereof) to purchase upon exercise of
each Warrant the kind and amount of shares and other securities and property
(including cash) which such Holder would have owned or have been entitled to
receive after the happening of such consolidation or merger had such Warrant
been exercised immediately prior to such action. The Company shall at its sole
expense mail by first class mail, postage prepaid, to each Holder notice of the
execution of any such agreement. Such agreement shall provide for adjustments,
which shall be substantially identical to the adjustments provided for in this
Section 9. In addition, the Company shall not merge or consolidate with or into
any other entity, unless the successor entity
14
(if not the Company) shall expressly assume, by supplemental agreement
reasonably satisfactory in form and substance to the Warrant Agent in its sole
judgment and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company. The provisions of this
Section 9.4 shall similarly apply to successive consolidations or mergers.
9.5 Statement on Warrants. Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same Exercise Price and number and kind of Warrant Shares as are stated in
the Warrants initially issuable pursuant to this Agreement.
9.6 No Impairment. The Company shall not, for the purpose of
avoiding or seeking to avoid the observance or performance of any of the terms
and provisions of this Agreement, amend its Certificate of Incorporation or
engage in any reclassification, reorganization, consolidation, merger,
dissolution, liquidation, issue, sale or exchange of securities or any other
voluntary action, but will at all times in good faith assist in the
implementation of all such terms and provisions and in the taking of all such
actions as may be necessary or appropriate in order to enable the Holders to
realize the benefits of this Agreement and the Warrant Certificate.
SECTION 10
FRACTIONAL INTERESTS
Neither the Company nor the Warrant Agent shall be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be exercised at the same time by the same Holder, the number of full
Warrant Shares which shall be issuable upon such exercise shall be computed on
the basis of the aggregate number of Warrants so exercised. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall pay an amount in cash equal to
the closing price for one share of Class A Common Stock on the date the Warrant
Certificate is presented for exercise (determined in accordance with the second
sentence of Section 9.1(d)(i) hereof), multiplied by such fraction.
SECTION 11
NO RIGHTS AS STOCKHOLDERS, NOTICES TO HOLDERS
Nothing contained in this Agreement or in any of the Warrants shall
be construed as conferring upon the Holders or their transferees the right to
vote or to receive dividends or to consent or to receive notice as stockholders
in respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
In case
15
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of securities or assets (other than cash dividends); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of a substantial portion of the assets of the Company for
which approval of any stockholders of the Company is required, or of any
reclassification or change of Common Stock issuable upon exercise of the
Warrants (other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Holder at its address appearing on the Warrant Register, at
least twenty (20) days prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first class mail, postage prepaid, a written notice stating (i) the date as
of which the Holders of record of shares of Common Stock entitled to receive any
such rights, options, warrants or distribution are to be determined, (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, as well as the date as of
which it is expected that Holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation, or winding up. The failure to give the
notice required by this Section 11 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, winding up or action, or the vote upon any of the foregoing.
SECTION 12
PAYMENTS OF EXERCISE PRICE
All payments required to be made hereunder shall be made in lawful
money of the United States of America and/or in the form of Notes. If a Holder
elects to exercise a Warrant by tendering a Note, the value of such Note for
purposes of the payment of the Exercise Price shall be the principal of and the
accrued and unpaid interest on the Note multiplied by 133%. In accepting payment
in the form of a Note, the Company shall reduce the principal and accrued but
unpaid interest of such Note pro rata when used as payment of the Exercise Price
hereunder. In the event that upon payment of all or part of the Exercise Price
in the form of a Note, the Holder is entitled to the return of a new Note
reflecting the remaining principal balance thereof, the
16
Company shall issue such new Note in a denomination of no less than $100 and in
integral multiples of $100, and will pay any remaining principal amount,
together with accrued and unpaid interest thereon, to the Holder in cash.
SECTION 13
MERGER OR CONSOLIDATION OR
CHANGE OF NAME OF WARRANT AGENT
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporation trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 15 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrant Certificates so countersigned;
and in case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall be fully valid and effective as provided therein and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent may adopt the countersignatures under its
prior name and deliver such Warrant Certificates so countersigned; and in case
at that time any of the Warrant Certificates shall not have been countersigned,
the Warrant Agent may countersign such Warrant Certificates either in its prior
name or in its changed name; and in all such cases such Warrant Certificates
shall be fully valid and effective as provided therein and in this Agreement.
SECTION 14
APPOINTMENT OF WARRANT AGENT
The Company hereby appoints the Warrant Agent to act as agent for
the Company hereunder and in accordance with the terms and conditions hereof,
and the Warrant Agent hereby accepts such appointment.
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the Holders, by their acceptance of the Warrant Certificates, shall
be bound:
14.1 Correctness of Statements. The statements contained herein and
in the Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as described the
17
Warrant Agent or action taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrant Certificates or Warrants except
as herein otherwise provided.
14.2 Breach of Covenants. The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants contained in
this Agreement or in the Warrants to be complied with by the Company.
14.3 Performance of Duties. The Warrant Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents and shall not
be responsible for the misconduct or negligence of any attorney or agent (which
shall not include an employee of the Warrant Agent) appointed with due care.
14.4 Reliance on Counsel. The Warrant Agent may consult at any time
with legal counsel satisfactory to it (who may be counsel for the Company), and
the Warrant Agent shall incur no liability or responsibility to the Company or
to any Holder in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of such
counsel.
14.5 Proof of Action Taken. Whenever in the performance of its
duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a certificate signed by the
Chairman of the Board, the President, a Vice President, the Treasurer or the
Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
14.6 Compensation. The Company agrees to pay the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
performance of its duties under this Agreement, to reimburse the Warrant Agent
for all reasonable expenses, taxes and governmental charges and other charges
of any kind and nature incurred by the Warrant Agent in the performance of its
duties under this Agreement (including but not limited to legal fees and
expenses), and to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and counsel fees, for anything
done or omitted by the Warrant Agent or any of its agents in the performance of
its duties under this Agreement, except as a result of the Warrant Agent's gross
negligence or willful misconduct as determined in a final judgment of a court of
competent jurisdiction and authority. The Company's obligations under this
Section 14.6 and any claim arising hereunder shall survive the resignation or
removal of the Warrant Agent and the termination or discharge of the Company's
obligations under this Agreement.
14.7 Legal Proceeding. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or any one or more
Holders shall furnish the Warrant Agent with reasonable
18
security and indemnity for any costs and expenses which may be incurred or any
liabilities which may arise, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action of
any Holder under this Agreement or under any of the Warrants may be enforced by
the Warrant Agent without the possession of any of the Warrant Certificates or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery of judgment shall be for
the ratable benefit of the Holders, as their respective rights or interests may
appear.
14.8 Other Transactions in Securities of the Company. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or any other securities of the
Company or become pecuniary interested in any transaction in which the Company
may be interested or contract with or lend money to the Company or otherwise act
as fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other Person.
14.9 Liability of Warrant Agent. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own gross negligence or bad faith.
14.10 Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
14.11 Validity of Agreement. The Warrant Agent shall not be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Warrant Agent) or in
respect of the validity or execution of any Warrant Certificate (except its
countersignature thereto) or any Warrant; nor shall the Warrant Agent by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Shares (or other securities) to be
issued pursuant to this Agreement or any Warrant, or as to whether any Warrant
Shares (or other securities) will, when issued, be validly issued, fully paid
and nonassessable, or as to the Exercise Price or the number or amount of
Warrant Shares or other securities or any assets or other property issuable upon
exercise of any Warrant.
14.12 Instructions from Company. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from the Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and shall not
be liable for any action taken or suffered to be taken by it in good faith in
19
accordance with instructions of any such officer or officers, provided such
instructions are not in contravention of this Agreement.
SECTION 15
CHANGE OF WARRANT AGENT
The Warrant Agent may resign and be discharged from its duties under this
Agreement by giving to the Company thirty (30) days' notice in writing. The
Company may remove the Warrant Agent if: (1) the Warrant Agent fails to comply
with the terms of this Agreement; (2) the Warrant Agent is adjudged a bankrupt
or an insolvent or an order for relief is entered with respect to the Warrant
Agent under any Bankruptcy Law; (3) a custodian or public officer takes charge
of the Warrant Agent or its property; or (4) the Warrant Agent becomes incapable
of acting. The Warrant Agent may be removed by like notice to the Warrant Agent
and the Holders from the Company, such notice to specify the date when removal
shall become effective. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or notification in writing of such
resignation or incapacity by the resigning or incapacitated Warrant Agent or by
any Holder (who shall with such notice submit his Warrant Certificate or
Certificates for inspection by the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
such a court, shall be a bank or trust Company, in good standing, incorporated
under the laws of the United States of America or any state thereof and having
at the time of its appointment as Warrant Agent a combined capital and surplus
of at least $100,000,000. After appointment and acceptance of such appointment
in writing, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent any property at the time
held by it hereunder, and shall execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to file any notice
provided for in this Section 15, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, by first class mail, postage prepaid, to each Holder, written notice of
such removal or resignation and the name and address of such successor Warrant
Agent.
SECTION 16
MISCELLANEOUS
16.1 Notices. Any notice pursuant to this Agreement by the Company
or by any Holder to the Warrant Agent, or by the Warrant Agent or by any Holder
to the Company, shall be in writing and shall be delivered in person or by
facsimile transmission, or mailed first class, postage prepaid, (a) to the
Company, at its offices at 8000 Towers Crescent Drive, Vienna, VA 22182, Attn:
General Counsel, Facsimile No: 703-848-8610, or (b) to the Warrant Agent, at its
offices at 59 Maiden Lane, New York, New York 10038, Attention: Executive Vice
President,
20
Facsimile No.: (718) 236-4588. Each party hereto may from time to time change
the address to which notices to it are to be delivered or mailed hereunder by
notice to the other party.
Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders shall be in writing and shall be mailed first
class, postage prepaid, or otherwise delivered, to such Holders at their
respective addresses in the Warrant Register. The initial address of each Holder
shall be as provided by the Company to the Warrant Agent. Any Holder may change
its address by notice to the Company and the Warrant Agent given in accordance
with this Section 16.1.
16.2 Cancellation of Warrants. In the event the Company shall
purchase or otherwise acquire Warrants, the same shall thereupon be delivered to
the Warrant Agent and be cancelled by it and retired. The Warrant Agent shall
cancel any Warrant Certificate surrendered for exchange, substitution, transfer
or exercise in whole or in part.
16.3 Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement, the Warrants and the
Warrant Certificates without approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to comply with
the requirements of any national securities exchange or the Market (including
but not limited to the deletion of Section 9.2), or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and this Agreement. Any other
supplement or amendment to this Agreement may be made with the approval of the
holders of a majority of the then outstanding Warrants; provided, however, that
any such amendment or supplement that (i) increases the Exercise Price; (ii)
decreases the number of shares of Class A Common Stock issuable upon exercise of
a Warrant; or (iii) shortens the period during which the Warrants may be
exercised shall require the consent of each Holder of a Warrant affected
thereby.
16.4 Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of the Company or the Warrant Agent and their respective
successors hereunder.
16.5 Applicable Law. This Agreement, the Warrants, the rights and
obligations of the parties hereto and any claims or disputes relating thereto
shall be governed by and construed in accordance with the laws of Delaware
(excluding the choice of law rules thereof).
16.6 Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company, the Warrant
Agent and the Holders any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent, their respective assigns and the Holders.
16.7 Execution in Counterparts. This Agreement may be executed in
multiple counterparts, which, when taken together, shall constitute an original.
21
16.8 Captions. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
[SIGNATURES APPEAR ON NEXT PAGE]
22
Signatures
IN WITNESS WHEREOF, each of the undersigned have duly caused this
Agreement to be executed on their behalf as of the day and year first above
written.
MICROSTRATEGY INCORPORATED
By: /s/ Lewis H. Ferguson
-----------------------------
Name: Lewis H. Ferguson
---------------------------
Title: Counsel for MicroStrategy
--------------------------
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
-----------------------------
Name: Herbert J. Lemmer
---------------------------
Title: VICE PRESIDENT
--------------------------
23
CUSIP No. _________
THIS WARRANT IS GOVERNED BY AND SUBJECT TO THE TERMS AND CONDITIONS CONTAINED
IN THE WARRANT AGREEMENT (AS DEFINED HEREIN). A COPY OF THE WARRANT AGREEMENT
MAY BE OBTAINED UPON REQUEST FROM MICROSTRATEGY INCORPORATED OR THE WARRANT
AGENT (AS DEFINED HEREIN).
Warrant to Purchase Class A Common Stock of
MicroStrategy Incorporated
Void after __________ __, 200_ [5 years from date of issue]
This Warrant (the "Warrant") is issued to _________________________,
or his, her or its registered assigns (the "holder") by MicroStrategy
Incorporated, a Delaware corporation (the "Company"), on ___________________,
2001 (the "Warrant Issue Date"). This Warrant is issued pursuant to that certain
Warrant Agreement dated as of January 11, 2001 (the "Warrant Agreement"),
between the Company and American Stock Transfer & Trust Company, a New York
limited purpose trust company, as Warrant Agent (together with any successors
and assigns, the "Warrant Agent") and in furtherance of that certain Stipulation
of Settlement in settlement of a class-action lawsuit (the "Action") pending in
the United States District Court for the Eastern District of Virginia, entitled
In re MicroStrategy Incorporated Securities Litigation, Civil Action No.
00-473-A (the "Stipulation").
All capitalized terms not defined herein shall have the meanings
ascribed to them in the Warrant Agreement.
1. Purchase Shares. Subject to the terms and conditions hereinafter
set forth, the holder is entitled, upon surrender of this Warrant to the Warrant
Agent (or at such other place as the Company shall notify the holder hereof in
writing), to purchase from the Company up to _____________________________
(____________) fully paid and nonassessable shares of the Company's Class A
common stock, par value $0.001 per share, as constituted on the Warrant Issue
Date (the "Common Stock"). The number of shares of Common Stock issuable
pursuant to this Section 1 (the "Warrant Shares") shall be subject to adjustment
pursuant to Section 9 of the Warrant Agreement.
2. Exercise Price. The purchase price for the Warrant Shares shall
be $_____ per share, as adjusted from time to time pursuant to Sections 9.1(f)
and 9.2 of the Warrant Agreement (the "Exercise Price"). All payments required
to be made hereunder shall be made in lawful money of the United States of
America and/or in the form of 7 1/2% Series A Unsecured Notes due five (5) years
from date of initial issuance of the 7 1/2% Series A Unsecured Notes unless
extended pursuant to Section 4.1 of the Warrant Agreement (the "Notes"). To the
extent a holder validly elects to exercise a Warrant by tendering a Note, the
value of such Note for purposes of the payment of the Exercise Price shall be
the principal of and the accrued and unpaid interest on the Note tendered to the
date of tender multiplied by l33%.
3. Exercise Period. This Warrant shall be exercisable, in whole or
in part, on any Business Day, from and after the later of ___________ __, 2001
and the Effective Date and until 5:00 p.m., New York City time, on the fifth
anniversary of such later date (the "Exercise Period").
4. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by: (a) the surrender of the Warrant, together with a duly executed
copy of the form of Notice of Election attached hereto, to the Warrant Agent at
its principal offices; and (b) the payment to the Warrant Agent for the account
of the Company in the manner provided for and in an amount equal to the
aggregate Exercise Price as set forth in Section 2 herein for the number of
Warrant Shares being purchased.
5. Certificates for Warrant Shares. Upon the exercise of the
purchase rights evidenced by this Warrant, one or more certificates for the
number of Warrant Shares so purchased shall be issued as soon as practicable
thereafter (with appropriate restrictive legends, if applicable), and in any
event within thirty (30) days of the delivery of the Notice of Election. In case
the holder shall exercise this Warrant with respect to less than all of the
Warrant Shares that may be purchased under this Warrant, the Company shall
execute a new warrant in the form of this Warrant for the balance of such
Warrant Shares and deliver such new warrant to the holder of this Warrant.
6. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
7. No Shareholder Rights. Prior to exercise of this Warrant, the
holder shall not be entitled to any rights of a shareholder with respect to the
Warrant Shares, including (without limitation) the right to vote such Warrant
Shares, receive dividends or other distributions thereon, exercise preemptive
rights or be notified of shareholder meetings, and such holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company. However, nothing in this Section 7 shall limit the right of the
holder to be provided the notices required under the Warrant Agreement.
8. Transfers of Warrant. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights (but only with
all related obligations) hereunder are transferable in whole or in part by the
holder. The transfer shall be recorded on the books of the Company upon (i) the
surrender of this Warrant, properly endorsed, or as otherwise provided for in
Section 3 of the Warrant Agreement to the Warrant Agent at its principal
offices, and (ii) the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer. In the event of a partial
transfer, the Company shall issue to the holders one or more appropriate new
warrants.
9. Successors and Assigns. The terms and provisions of this Warrant
and the Warrant Agreement shall inure to the benefit of, and be binding upon,
the Company and the holders hereof and their respective successors and assigns.
10. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holder. Any waiver or amendment effected
in accordance with this Section shall be binding upon each holder of any Warrant
Shares purchased under this Warrant at the time outstanding (including
securities into which such Warrant Shares have been converted), each future
holder of all such Warrant Shares, and the Company.
11. Notices. All notices required under this Warrant shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication
2
was successfully sent to the applicable number if sent by facsimile; (iii) one
(1) business day after being sent, when sent by professional overnight courier
service, or (iv) five (5) days after posting when sent by registered or
certified mail. Notices to the Company shall be sent to the principal office of
the Company (or at such other place as the Company shall notify the holder
hereof in writing). Notices to the holder shall be sent to the address of the
holder on the books of the Company (or at such other place as the holder shall
notify the Company hereof in writing). Notices to the Warrant Agent shall be
sent to: American Stock Transfer & Trust Company, 59 Maiden Lane, New York, New
York 10038, Attn: Executive Vice President, facsimile (718) 236-4588 or such
other address as the Warrant Agent shall indicate in a notice to the Company and
the holder.
12. Captions. The section and subsection headings of this Warrant
are inserted for convenience only and shall not constitute a part of this
Warrant in construing or interpreting any provision hereof.
13. Governing Law. This Warrant shall be governed by the laws of
Delaware (excluding the choice of law rules thereof).
14. Warrant Agreement. This Warrant is governed by and subject to
the terms and conditions contained in the Warrant Agreement. In the event of a
conflict between the provisions of the Warrant Agreement and this Warrant, the
provisions of the Warrant Agreement shall govern. A copy of the Warrant
Agreement may be obtained at no cost upon request from the Company at its
principal office or from the Warrant Agent.
IN WITNESS WHEREOF, the Company and the Warrant Agent have caused
this Warrant to be executed by officers thereunto duly authorized.
MICROSTRATEGY INCORPORATED
_____________________________
Name: _______________________
Title: ______________________
AMERICAN STOCK TRANSFER & TRUST
COMPANY
_____________________________
Name: _______________________
Title: ______________________
3
MICROSTRATEGY INCORPORATED
WARRANT NOTICE OF EXERCISE
To: AMERICAN STOCK TRANSFER & TRUST COMPANY
59 Maiden Lane
New York, New York 10038
Attn: Executive Vice President
Facsimile (718) 236-4588
(a) The undersigned hereby elects to purchase ___________________ shares
of Class A Common Stock of MicroStrategy Incorporated (the "Company"), pursuant
to the terms of the attached Warrant and the Warrant Agreement referenced
therein. To the extent the undersigned is not exercising this Warrant in full,
please reissue and return to the undersigned a new warrant to purchase the
remaining number of shares of Class A Common Stock.
(b) Payment of the Exercise Price per share required under such
Warrant accompanies this notice in the form of [mark as applicable]:
_____ Cash in the amount of __________________ by means of
_____ wire transfer of immediately available funds to the Warrant
Agent for the account of the Company, or
_____ certified or official bank check or checks to the order of the
Company;
or:
_____ Tender of 7 1/2% Series A Unsecured Notes in the amount of
_______________. To the extent that the 7 1/2% Series A Unsecured
Notes tendered to pay the warrant exercise price exceeds the warrant
exercise price, a new 7 1/2% Series A Unsecured Note for the balance
shall be issued to the Holder and any fractional amount not evenly
divisible by $100 shall at the Company's option either be paid in
cash or in additional shares of Class A Common Stock rounded up to
the next whole number of shares.
________________________________________________
By:_____________________________________________ [NAME]
Taxpayer I.D. No. or Soc. Sec. No: _______________________
Address: _____________________________________________
__________________________________________________
Date:__________________
Name in which shares should be registered:
__________________________________________________
Taxpayer I.D. No. or Soc. Sec. No.________________
Address: _________________________________________
__________________________________________________
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule l7Ad-15
of the Securities Exchange Act of 1934.
Signature Guaranteed by:
__________________________________________________
__________________________________________________
MICROSTRATEGY INCORPORATED
WARRANT TRANSFER
To: AMERICAN STOCK TRANSFER & TRUST COMPANY
59 Maiden Lane
New York, New York 10038
Attn: Executive Vice President
Facsimile: (718) 236-4588
For value received, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________ the right to
purchase __________________________ (________) shares of Series A Common Stock,
par value $0.00l per share, of MicroStrategy Incorporated (the "Corporation")
pursuant to the attached Warrant and does hereby irrevocably constitute and
appoint ___________ attorney to transfer the Warrant, or such portion as is
transferred hereby, on the books of the Corporation with full power of
substitution in the premises. The undersigned requests said attorney to issue to
the transferee a Warrant certificate evidencing such transfer and to issue to
the undersigned a new Warrant evidencing the right to purchase Series A Common
Stock for the balance not so transferred, if any.
Signature: _________________________________________
By:_________________________________________ [NAME]
Taxpayer I.D. No. or Soc. Sec. No: _________________
Address: _________________________________________
______________________________________________
Date:__________________
Name in which new Warrant(s) should be registered:
Right to Purchase No. of Shares of Series A Common Stock: __________________
Name: _________________________________________________
Taxpayer I.D. No. or Soc. Sec. No: _________________________
Address: ________________________________________________
______________________________________________
______________________________________________
The balance of the attached Warrant not so transferred shall be returned to the
transferor in the form of a new Warrant reflecting such reduced amount.
Signatures must be guaranteed by an eligible guarantor institution (a
bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program) pursuant to Rule l7Ad-15
of the Securities Exchange Act of 1934.
Signature Guaranteed by:
______________________________________________
______________________________________________
- --------------------------------------------------------------------------------
MICROSTRATEGY INCORPORATED,
Issuer,
and
AMERICAN STOCK TRANSFER & TRUST COMANY
Trustee
INDENTURE
Dated as of January 11, 2001
$80,500.000 as adjusted pursuant to the Stipulation of Settlement
defined herein
7 1/2% Series A Unsecured Notes
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; TRUST INDENTURE ACT ................................ 1
SECTION 1.01. DEFINITIONS ................................................ 1
SECTION 1.02. OTHER DEFINITIONS .......................................... 5
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT .......... 5
SECTION 1.04. RULES OF CONSTRUCTION ...................................... 6
ARTICLE II THE NOTES ...................................................... 6
SECTION 2.01. FORM AND DATING ............................................ 6
SECTION 2.02. EXECUTION AND AUTHENTICATION ............................... 8
SECTION 2.03. REGISTRAR AND PAYING AGENT ................................. 8
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST ........................ 9
SECTION 2.05. HOLDER LISTS ............................................... 9
SECTION 2.06. TRANSFER AND EXCHANGE ...................................... 9
SECTION 2.07. REPLACEMENT NOTES .......................................... 10
SECTION 2.08. OUTSTANDING NOTES .......................................... 10
SECTION 2.09. TREASURY NOTES ............................................. 10
SECTION 2.10. TEMPORARY NOTES ............................................ 11
SECTION 2.11. CANCELLATION ............................................... 11
SECTION 2.12. ADDITIONAL REDUCTION IN PRINCIPAL AMOUNT OF AND
INTEREST ON THE NOTES .................................................... 11
SECTION 2.13. DEFAULTED INTEREST ......................................... 11
SECTION 2.14. CUSIP NUMBERS .............................................. 12
ARTICLE III REDEMPTION .................................................... 12
SECTION 3.01. REDEMPTION ................................................. 12
SECTION 3.02. NOTICES TO TRUSTEE ......................................... 12
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED .......................... 12
SECTION 3.04. NOTICE TO HOLDERS OF REDEMPTION ............................ 13
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION ............................. 14
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE ................................ 14
SECTION 3.07. NOTES REDEEMED IN PART ..................................... 14
SECTION 3.08. PAYMENT OF INTEREST FOLLOWING NOTICE OF REDEMPTION ......... 14
ARTICLE IV MANDATORY CONVERSION ........................................... 14
SECTION 4.01. MANDATORY CONVERSION ....................................... 14
SECTION 4.02. NOTICES TO TRUSTEE ......................................... 14
SECTION 4.03. SELECTION OF NOTES TO BE CONVERTED ......................... 15
SECTION 4.04. NOTICE TO HOLDERS OF CONVERSION ............................ 15
SECTION 4.05. EFFECT OF NOTICE OF CONVERSION ............................. 16
SECTION 4.06. DEPOSIT OF CONVERSION SHARES AND MONEY ..................... 16
SECTION 4.07. NOTES CONVERTED IN PART .................................... 16
SECTION 4.08. FRACTIONAL SHARES .......................................... 17
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SECTION 4.09. TAXES ON CONVERSION ........................................ 17
SECTION 4.10. COMPANY TO PROVIDE STOCK ................................... 17
SECTION 4.11. PAYMENT OF INTEREST AND DIVIDENDS FOLLOWING NOTICE OF
CONVERSION ............................................................... 17
ARTICLE V COVENANTS ....................................................... 18
SECTION 5.01. PAYMENT OF NOTES ........................................... 18
SECTION 5.02. COMPLIANCE CERTIFICATE ..................................... 18
SECTION 5.03 REPORTS ..................................................... 19
SECTION 5.04. CORPORATE EXISTENCE ........................................ 19
SECTION 5.05. OBLIGATION TO REDEEM/CONVERT ............................... 19
SECTION 5.06. RESTRICTIONS ON CONVERSION ................................. 19
ARTICLE VI SUBORDINATION .................................................. 20
SECTION 6.01. AGREEMENT TO SUBORDINATE AND RANKING ....................... 20
SECTION 6.02. NO PAYMENT ON NOTES IF SENIOR DEBT IN DEFAULT .............. 20
SECTION 6.03. DISTRIBUTION ON ACCELERATION OF NOTES; DISSOLUTION AND
REORGANIZATION; SUBROGATION OF NOTES ..................................... 21
SECTION 6.04. RELIANCE BY SENIOR DEBT ON SUBORDINATION PROVISIONS ........ 24
SECTION 6.05. NO WAIVER OF SUBORDINATION PROVISIONS ...................... 24
SECTION 6.06. TRUSTEE'S RELATION TO SENIOR DEBT .......................... 25
SECTION 6.07. OTHER PROVISIONS SUBJECT HERETO ............................ 25
ARTICLE VII SUCCESSORS .................................................... 26
SECTION 7.01. LIMITATION ON MERGER, SALE OR CONSOLIDATION ................ 26
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED .......................... 26
ARTICLE VIII DEFAULTS AND REMEDIES ........................................ 27
SECTION 8.01. EVENTS OF DEFAULT .......................................... 27
SECTION 8.02. ACCELERATION ............................................... 28
SECTION 8.03. OTHER REMEDIES ............................................. 28
SECTION 8.04. WAIVER OF PAST DEFAULTS .................................... 28
SECTION 8.05. CONTROL BY MAJORITY ........................................ 29
SECTION 8.06. LIMITATION ON SUITS ........................................ 29
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT ....................... 29
SECTION 8.08. COLLECTION SUIT BY TRUSTEE ................................. 29
SECTION 8.09. TRUSTEE MAY FILE PROOFS OF CLAIM............................ 30
SECTION 8.10. PRIORITIES ................................................. 30
SECTION 8.11. UNDERTAKING FOR COSTS ...................................... 30
ARTICLE IX TRUSTEE ........................................................ 31
SECTION 9.01. DUTIES OF TRUSTEE .......................................... 31
SECTION 9.02. RIGHTS OF TRUSTEE .......................................... 31
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE ............................... 32
SECTION 9.04. TRUSTEE'S DISCLAIMER ....................................... 32
SECTION 9.05. NOTICE OF DEFAULTS ......................................... 32
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS .............................. 32
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SECTION 9.07. COMPENSATION AND INDEMNITY ................................. 33
SECTION 9.08. REPLACEMENT OF TRUSTEE ..................................... 34
SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC. .......................... 35
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION .............................. 35
SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY .......... 35
ARTICLE X DISCHARGE OF INDENTURE .......................................... 35
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS ...................... 35
SECTION 10.02. REPAYMENT TO COMPANY ...................................... 35
ARTICLE XI AMENDMENTS, SUPPLEMENTS AND WAIVERS ............................ 36
SECTION 11.01. WITHOUT CONSENT OF HOLDERS ................................ 36
SECTION 11.02. WITH CONSENT OF HOLDERS ................................... 36
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT ....................... 37
SECTION 11.04. REVOCATION AND EFFECT OF CONSENTS ......................... 37
SECTION 11.05. NOTATION ON OR EXCHANGE OF NOTES .......................... 38
SECTION 11.06. TRUSTEE PROTECTED ......................................... 38
ARTICLE XII MISCELLANEOUS ................................................. 38
SECTION 12.01. TRUST INDENTURE ACT CONTROLS .............................. 38
SECTION 12.02. NOTICES ................................................... 38
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS ............... 39
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT ........ 39
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION ............. 39
SECTION 12.06. RULES BY TRUSTEE AND AGENTS ............................... 39
SECTION 12.07. LEGAL HOLIDAYS ............................................ 40
SECTION 12.08. NO RECOURSE AGAINST OTHERS ................................ 40
SECTION 12.09. COUNTERPARTS AND FACSIMILE SIGNATURES ..................... 40
SECTION 12.10. VARIABLE PROVISIONS ....................................... 40
SECTION 12.11. GOVERNING LAW, SUBMISSION TO JURISDICTION ................. 41
SECTION 12.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS ............. 42
SECTION 12.13. SUCCESSORS ................................................ 42
SECTION 12.14. SEVERABILITY .............................................. 42
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC. ......................... 42
Exhibit
Exhibit A. Form of Note ................................................... Al
-iii-
INDENTURE, dated as of January 11, 2001, between MicroStrategy
Incorporated, a Delaware corporation with a principal place of business at
8000 Towers Crescent Drive, Suite 1400, Vienna, Virginia 22182 (the
"COMPANY"), and American Stock Transfer & Trust Company, a New York
limited purpose trust company with a principal place of business at 59
Maiden Lane, New York, New York 10038, as trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined in Section
1.01 hereof) of the Company's 7 1/2% Series A Unsecured Notes due five
years after the Initial Issuance Date of the Notes (the "NOTES"):
ARTICLE I
DEFINITIONS; TRUST INDENTURE ACT
SECTION 1.01. DEFINITIONS.
"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 purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent, Presenting Agent or
Conversion Agent.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a duly authorized resolution of the Board
of Directors.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents, however designated, of corporate stock,
including, without limitation, partnership interests.
"COMMON STOCK" means the Class A common stock, par value $0.001 per
share, of the Company as the same exists at the date of the execution of
this Indenture or as such stock may be constituted from time to time.
"COMPANY" means the party named as such above until a successor
replaces it in accordance with Article VII and thereafter means the
successor.
1
"DEFAULT" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means Senior Debt in which the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Senior Debt shall be "Designated Senior Debt" for the
purposes of the Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign
currency futures or options, exchange rate collar agreements, exchange
rate insurance and other agreements or arrangements, or combination
thereof, the principal purpose of which is to provide protection against
fluctuations in currency exchange rates. An Exchange Rate Contract may
also include an Interest Rate Agreement.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as approved by a significant segment
of the accounting profession, which are in effect from time to time.
"GUARANTEE" means a guarantee, other than by endorsement of
negotiable instruments for collection in the ordinary course of business,
direct or indirect, in any manner, including, without limitation, letters
of credit and reimbursement agreements in respect thereof, of all or any
part of any Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the register
referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, or reimbursement agreements in respect thereof, or representing
the balance deferred and unpaid of the purchase price of any property
(which purchase price is due more than six months after the placing into
service or delivery of such property) including pursuant to capital leases
and sale-and-leaseback transactions, or representing any hedging
obligations under an Exchange Rate Contract or an Interest Rate Agreement,
except any such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness, other
than obligations under an Exchange Rate Contract or an Interest Rate
Agreement, would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of items which would be included within
this definition if incurred directly by such Person. The amount of any
Indebtedness outstanding as of any date shall be the accreted value
thereof, in the case of any Indebtedness issued with original issue
discount. Indebtedness shall not include liabilities for taxes of any
kind.
"INDENTURE" means this Indenture, as amended from time to time.
2
"INITIAL ISSUANCE DATE" shall be the date of the first issuance of a
7 1/2% Series A Unsecured Note.
"INITIAL RECIPIENTS" means those Persons initially receiving Notes
pursuant to the Stipulation of Settlement.
"INTEREST ACCRUAL COMMENCEMENT DATE" shall be the date of the
commencement of the Settlement Hearing in respect of a class-action
lawsuit in the United Stated District Court for the Eastern District of
Virginia, entitled In re MicroStrategy Incorporated Securities Litigation,
Civil Action No. 00-473-A.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement or other similar agreement the principal purpose of which
is to protect the party indicated therein against fluctuations in interest
rates.
"ISSUANCE DATE" means the date on which the Notes are first
authenticated and issued.
"MARKET" means the Nasdaq National Market, or if the Common Stock is
no longer authorized for quotation on such market, such national
securities exchange upon which the Common Stock is listed, or if the
Common Stock is not authorized for quotation on the Nasdaq National Market
or listed on any national securities exchange, the over-the-counter market
as reported by the National Association of Securities Dealers Automated
Quotation System, or if not so quoted, as reported by National Quotation
Bureau, Incorporated, or a similar organization.
"NOTES" has the meaning set forth in the preamble hereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"OFFICER" means the Chairman or Vice Chairman of the Board, the
President, any Vice President, the Treasurer, the Secretary, any Assistant
Treasurer or any Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate of the Company signed by
two Officers, one of whom must be the Chairman of the Board, the
President, the Treasurer or a Vice President of the Company.
"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.
"PERSON" means any natural person, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, limited liability
3
company, limited liability partnership, government or any agency or
political subdivision thereof or any other entity or organization.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means the principal of, interest on and other amounts
due on: (i) secured Indebtedness of the Company, whether outstanding on
the date hereof or thereafter created, incurred, assumed or guaranteed by
the Company; and (ii) unsecured institutional Indebtedness of the Company
evidenced by one or more promissory notes, whether outstanding on the date
hereof or thereafter created, incurred, assumed or guaranteed by the
Company: unless, in the instrument creating or evidencing or pursuant to
which Indebtedness under (i) or (ii) is outstanding, it is expressly
provided that such Indebtedness is not senior in right of payment to the
Notes.
"STIPULATION OF SETTLEMENT" means that certain Stipulation of
Settlement, dated as of January 11,2001, entered into among Akiko and
Atsukuni Minami and Local 144 Nursing Home Pension Fund on behalf of the
Class (as such term is defined in the Stipulation of Settlement), the
Company as defendant, and defendants Michael J. Saylor, Sanju K. Bansal,
Mark S. Lynch, Stephen S. Trundle, Ralph S. Terkowitz, and Frank A.
Ingari, by and through their respective counsel, and filed in the United
States District Court for the Eastern District of Virginia (Alexandria
Division).
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of
Capital Stock 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 any
Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUST OFFICER" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture
and thereafter means the successor.
"WHOLLY-OWNED SUBSIDIARY" of any specified Person means a Subsidiary
of such Person all of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the
time be owned by such Person or by one or more Wholly-Owned Subsidiaries
of such Person or a combination thereof.
4
SECTION 1.02. OTHER DEFINITIONS.
DEFINED
TERM IN SECTION
"BANKRUPTCY LAW" .................................................. 8.01
"CHANGE OF CONTROL"................................................ 7.01
"CONVERSION AGENT"................................................. 2.03
"CUSTODIAN" ....................................................... 8.01
"DESIGNATED SENIOR DEBT DEFAULT" .................................. 6.02
"EVENT OF DEFAULT" ................................................ 8.01
"EXCESS AMOUNT".................................................... 2.12
"INTEREST PAYMENT DATE" ........................................... 2.01(b)
"LEGAL HOLIDAY" ................................................... 12.07
"PAYING AGENT" .................................................... 2.03
"PAYMENT BLOCKAGE NOTICE" ......................................... 6.02
"PAYMENT BLOCKAGE PERIOD" ......................................... 6.02
"PRESENTING AGENT" ................................................ 2.03
"REGISTRAR" ....................................................... 2.03
"SENIOR DEBT DEFAULT" ............................................. 6.02
"SETTLEMENT COSTS" ................................................ 2.12
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
and
"OBLIGOR" on the Notes means the Company or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
5
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP consistently applied;
(c) "OR" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from lime to time; and
(g) a reference to "$" or U.S. Dollars is to United States dollars.
ARTICLE II
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) GENERAL.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, which is hereby
incorporated by reference and expressly made a part of this Indenture,
with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture. The Notes 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 and, if such notation, legend or endorsement
would have any material effect on the rights of the Holders, to Co-Lead
Counsel for the Holders (as defined in the Stipulation of Settlement)).
The Company shall furnish any such legend not contained in Exhibit A to
the Trustee in writing. Each Note shall be dated the date of its
authentication. The Notes shall be in registered form without coupons in
denominations of $100 and integral multiples thereof. The terms and
provisions of the Notes set forth in Exhibit A are part of this Indenture
and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be
controlling.
6
(b) NOTES.
The Notes are being issued by the Company pursuant to the
Stipulation of Settlement. The Notes are exempt from registration by
virtue of an exemption pursuant to Section 3(a)(I0) of the Securities Act.
In the event that such exemption from registration is not available under
the Securities Act, the Company shall take such steps as are necessary
either to cause the registration of the Notes under the Securities Act or
to obtain relief from the registration requirements of the Securities Act
by obtaining a "no action" letter from the SEC.
The Notes shall be issued to the Initial Recipients on the Issuance
Date in the form of certificated Notes in definitive, fully registered
form without interest coupons in the form set forth in Exhibit A hereto,
each of which Notes shall be registered in the name of the appropriate
Initial Recipient or its nominee, duly executed by the Company and
authenticated by the Trustee as hereinafter provided.
The aggregate principal amount of the Notes which may be
authenticated and delivered under this Indenture is limited to eighty
million five hundred thousand dollars and no cents ($80,500,000), except
that, pursuant to the Stipulation of Settlement, such amount may be
increased, at the Company's option, to account for the issuance of Notes
in lieu of fractional shares of Common Stock or warrants to purchase
fractional shares of Common Stock, and except for Notes authenticated and
delivered pursuant to Section 2.07 hereof in exchange for, or in lieu of,
other Notes previously authenticated and delivered under this Indenture.
The Notes shall be known as the "7 1/2% Series A Unsecured Notes" of
the Company. The Notes shall mature on the date which is five (5) years
from the Initial Issuance Date. The principal amount of the Notes shall
bear interest at a rate of seven and one half percent (7 1/2%) per annum
from the Interest Accrual Commencement Date until maturity. The Company
shall pay interest semiannually commencing six (6) months after the
Initial Issuance Date of the Notes until maturity, or if any such day is
not a Business Day, on the next succeeding Business Day, beginning on the
date which is six (6) months after the date of issuance of the Notes (each
an "INTEREST PAYMENT DATE"). Principal of the Notes shall be due at
maturity. Interest on the Notes will accrue and compound annually from the
Interest Accrual Commencement Date until the Initial Issuance Date and
thereafter will accrue semiannually. The Company shall pay interest
(including post-petition interest in any proceeding under Bankruptcy Law)
on overdue principal from time to time at the same rate per annum on the
Notes then in effect; it shall pay interest (including post-petition
interest in any proceeding under Bankruptcy Law) on overdue installments
of interest (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360 day year consisting of 12 months of 30 days
each.
The principal and interest shall be payable as provided in the form
of the Notes attached hereto as Exhibit A. The Notes shall be redeemable
at the option of the Company at any time, in whole or in part, subject to
the conditions provided in Article III hereof. The Notes shall be
convertible at the option of the Company at any time, in whole or in part,
as
7
provided in Article IV hereof. The Notes shall be subordinated in right of
payment and in right of remedies to Senior Debt of the Company as provided
in Article VI hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the signature of an
authorized officer of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate one or more Notes for original issue up to an
aggregate principal amount stated in Section 2.01(b) hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders,
the Company or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in New York, New York an office or agency
where the Notes may be presented for registration of transfer or for
exchange, payment or conversion (collectively, the "PRESENTING AGENT"),
which Presenting Agent may, but need not, be the Trustee. The Company
initially designates American Stock Transfer & Trust Company to act as
Presenting Agent. The Trustee is initially appointed to act as Note
registrar to maintain a register of transfers of the Notes (the
"REGISTRAR") and to act as paying agent with respect to the Notes ("PAYING
AGENT") and to act as agent for conversion of the Notes ("CONVERSION
AGENT"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more co-Registrars,
one or more additional Paying Agents and one or more additional Conversion
Agents in such other locations as it shall determine. The term "Registrar"
includes any co-Registrar, the term "Paying Agent" includes any additional
Paying Agent and the term "Conversion Agent" includes any additional
conversion agent. The Company may change any Paying Agent, Registrar,
Presenting Agent or Conversion Agent without prior notice to any Holder.
The Company shall notify the Trustee of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar, Paying Agent, Presenting Agent or Conversion
Agent, the Trustee shall act as such. The Company or any of its Affiliates
may act as Paying Agent, Registrar, Presenting Agent or Conversion Agent.
8
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for
the payment of principal or interest on the Notes, and will notify the
Trustee of any default by the Company in making any such payment. While
any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee and to account for any money disbursed
by it. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon such payment over to the Trustee, the
Paying Agent (if other than the Company or an Affiliate of the Company)
shall have no further liability for the money. If the Company or an
Affiliate of the Company acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by
it as Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or 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 Holders.
SECTION 2.06. TRANSFER AND EXCHANGE.
Whenever Notes are presented to the Registrar or a co-Registrar with
a request to register a transfer or to exchange them for an equal
principal amount of Notes of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfers and exchanges,
the Company shall issue and the Trustee shall authenticate Notes at the
Registrar's request. No service charge shall be made to a Holder for any
registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer tax or similar
governmental charge payable upon exchanges pursuant to Sections 2.10,
3.07, 4.07 or 11.05 hereof).
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note for a period beginning at the opening of
business 15 days before the day of any selection of Notes to be redeemed
under Section 3.01 hereof or to be converted under Section 4.01 hereof and
ending at the close of business on the day of selection, or (ii) to
register the transfer, or exchange, of any Note so selected for redemption
or conversion in whole or in part, except the unredeemed or unconverted
portion of any Note being redeemed or converted in part.
Notwithstanding anything contained herein to the contrary, neither
the Trustee nor the Registrar shall be responsible for ascertaining
whether any purchase or transfer complies with the registration provisions
of or exemptions from the Securities Act or any applicable state
securities laws.
9
Any transfer or exchange of a Note in certificated form shall be
accompanied by surrender of the certificated Note, endorsed or accompanied
by an instrument of transfer acceptable to the Registrar, executed by the
Holder or an attorney in fact acting on its behalf.
SECTION 2.07. REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken or if such Note is mutilated and is
surrendered to the Trustee, the Company shall issue and the Trustee shall
authenticate a replacement Note if the Trustee's and the Company's
requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the
judgment of both to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Note
is replaced. The Company may charge for its expenses in replacing a Note.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, or is about to be purchased
by the Company pursuant to Article III hereof, the Company in its
discretion may, instead of issuing a new Note, pay or purchase such Note,
as the case may be.
Every replacement Note shall be in exchange for, or in lieu of,
other Notes previously issued and shall be entitled to all of the benefits
of this Indenture equally and proportionately with all other Notes duly
issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07
hereof, it ceases to be outstanding.
If the principal amount of any Note is considered paid under Section
5.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
Except as set forth in Section 2.09 hereof, a Note does not cease to
be outstanding because the Company or an Affiliate of the Company holds
the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company or an Affiliate of the Company shall be considered as
though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so
owned shall be so disregarded.
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SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive
Notes but may have variations that the Company considers appropriate
for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes. Holders of temporary Notes shall be
entitled to all of the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Presenting Agent, Registrar, Paying Agent and Conversion
Agent shall forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange, payment, redemption or conversion. The
Trustee shall promptly cancel all Notes surrendered for registration of
transfer, exchange, payment, redemption, conversion, replacement or
cancellation and shall dispose of canceled Notes as the Company directs.
The Company may not issue new Notes to replace Notes that it has paid or
that have been delivered to the Trustee for cancellation.
SECTION 2.12. ADDITIONAL REDUCTION IN PRINCIPAL AMOUNT OF AND INTEREST ON THE
NOTES.
Pursuant to the Stipulation of Settlement, the Company is obligated
to pay all costs of notice and administration of all transactions
contemplated by the Stipulation of Settlement (exclusive of any attorneys'
fees and expenses, the "SETTLEMENT COSTS"). If the Settlement Costs exceed
$750,000, then the Company shall pay such excess (the "EXCESS AMOUNT") as
and when incurred but shall be entitled to a credit equal to the Excess
Amount against the installment of interest on the Notes next due, to be
applied against the Notes then outstanding on a pro rata basis. If the
Excess Amount exceeds the total amount of interest due on the Notes on the
next subsequent interest payment date, the Company may, in its sole
discretion, either reduce the principal amount of the Notes then
outstanding on a pro rata basis by the balance of the Excess Amount not
previously applied or apply such amount against subsequent installments of
interest, provided, however, that no Note shall be reduced to an amount
not divisible by $100. The Company shall not be entitled to any refund or
reimbursement of the costs of notice and administration in the event that
the Settlement is not approved, terminated, or does not become final and
effective for any reason. The Company shall notify the Trustee in writing
of the reduction of interest due on and/or principal amount of the Notes
and will supply the Trustee with such documentation of Settlement Costs as
the Trustee may reasonably request. The Company shall promptly thereafter
provide notice, or cause the Trustee to provide notice, to the Holders of
the reduction in interest payable on or principal amount of the Notes.
SECTION 2.13. DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it
shall pay such defaulted interest plus any interest payable on the
defaulted interest, in any lawful manner. It may pay such defaulted
interest, plus any such interest payable on it, to the Persons who are
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Holders on a subsequent special record date. The Company shall fix any
such record date and payment date, provided that no such record date shall
be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before any such record date, the Company shall
mail to Holders a notice that states the special record date, the related
payment date and amount of such interest to be paid.
SECTION 2.14. CUSIP NUMBERS.
The Company in issuing the Notes shall use "CUSIP" numbers if then
generally in use, and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption or conversion and other notices as a convenience to
Holders of Notes; provided, that any such notice may state that no
representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption or
conversion and that reliance may be placed only on the other
identification numbers printed on the Notes, and any redemption or
conversion 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 3.01. REDEMPTION.
Subject to Sections 5.05 and 5.06 hereof, the Company, in its sole
discretion, may redeem all or any of the Notes, in whole or in part,
selected in accordance with the provisions of Section 3.03 hereof, at any
time upon thirty (30) days written notice to the record Holders thereof,
without premium or penalty, at a redemption price payable solely in cash
equal to the principal of and (except if the redemption date shall be an
Interest Payment Date) any accrued but unpaid interest on the Notes
through but excluding the redemption date. Any redemption pursuant to this
Section 3.01 shall be made pursuant to the provisions of Sections 3.02
through 3.07 hereof
SECTION 3.02. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the redemption
provisions of Section 3.01 hereof, it shall notify the Trustee in writing
of the redemption date and the accrued interest on and principal amount of
Notes to be redeemed. The Company shall give the notice provided for in
this Section 3.02 at least 45 days before the redemption date, unless a
shorter notice period shall be satisfactory to the Trustee. The Company
may not give notice of any redemption if the Company has defaulted in
payment of interest and the default is continuing.
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time,
selection of Notes shall be made by the Trustee on a pro rata basis
considering all of the Notes outstanding on the redemption date, provided
that no partial redemption shall leave a balance that is not evenly
divisible by $100. The Trustee shall make the selection not more that five
(5) Business Days
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after it receives the notice described in Section 3.02 hereof from the
Notes outstanding not previously called for redemption or conversion.
Notes and portions of Notes selected shall be in amounts of $100 or
integral multiples of $100. Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be called for redemption.
SECTION 3.04. NOTICE TO HOLDERS OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date
which date shall also be at least 5 days after notice to the Trustee
pursuant to Section 3.02, the Company shall mail or cause the Trustee to
mail, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address. The notice shall
identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price together with accrued interest separately
stated on the portion of the Notes to be redeemed to the date of
redemption;
(c) if any Note is to be redeemed in part only (but not in any
amount not divisible by $100), the portion of the principal amount thereof
redeemed, and that, after the redemption date, upon surrender of such
Note, a new Note in principal amount equal to the unredeemed portion
thereof shall be issued in the name of the Holder thereof upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest, if
any;
(f) that interest on Notes called for redemption ceases to accrue on
and after the redemption date;
(g) the paragraph of the Notes pursuant to which the Notes called
for redemption are being redeemed; and
(h) the "CUSIP" number of the Notes to be redeemed.
At the Company's request, the Trustee shall give notice of
redemption in the Company's name and at the Company's expense; provided
that the Company shall have delivered to the Trustee, at least 30 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in
such notice, as provided in the preceding paragraph.
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3.05. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.04
hereof, Notes called for redemption become due and payable on the
redemption date at the price set forth in the Note. A notice of redemption
may not be conditional.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.
On or before 1:00 p.m. (Eastern Standard Time) on the redemption
date, the Company shall deposit with the Paying Agent money (in
immediately available funds) sufficient to pay the redemption price of and
(except if the redemption date shall be an Interest Payment Date) accrued
interest on all Notes to be redeemed on that date. The Paying Agent shall
return to the Company any money not required or used for that purpose.
SECTION 3.07. NOTES REDEEMED IN PART.
Subject to Sections 5.05 and 5.06 hereof, upon surrender of a Note
that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal
in principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.08. PAYMENT OF INTEREST FOLLOWING NOTICE OF REDEMPTION.
Interest shall not accrue and no payment for interest shall be made
on any Note or portion thereof called for redemption pursuant to this
Article III with respect to the period following the date of redemption.
In the case of any Note surrendered for redemption after the close of
business on any record date for the payment of an installment of interest
but before the opening of business on the next succeeding Interest Payment
Date, such Note, when surrendered for redemption, must be accompanied by
payment in an amount equal to the interest payable on such Interest
Payment Date on the principal amount of the Note so converted. Accrued
interest shall be paid on such Interest Payment Date to the holder of the
Note on such record date. If less than all of the Notes are to be redeemed
at any time, the foregoing provision shall apply only to the portion so
redeemed and interest shall accrue and be paid on the balance of the Notes
in accordance with the provisions of Article II.
ARTICLE IV
MANDATORY CONVERSION
SECTION 4.01. MANDATORY CONVERSION.
Subject to Sections 5.05 and 5.06 hereof, the Company, in its sole
discretion, may cause the Holders to convert all or any of the Notes, in
whole or in part, selected in accordance with the provisions of Section
4.03 hereof, at any time upon thirty (30) days written notice to the
record Holders thereof, without premium or penalty, into shares of Common
Stock. The number of shares of Common Stock into which the Notes, or any
parts thereof, shall be converted shall be such number of shares of Common
Stock as may be
14
obtained by dividing the principal of and (except if the redemption date
is an Interest Payment Date) any accrued but unpaid interest (through but
excluding the conversion date) on the Notes to be converted by an amount
equal to eighty percent (80%) of the dollar-weighted average trading price
per share for all round lot transactions in the Common Stock on the Market
for the ten (10) trading days ending two (2) days prior to the date of the
written notice to the Trustee and issuance of a press release by the
Company describing the redemption. Any conversion pursuant to this Section
4.01 shall be made pursuant to the provisions of Sections 4.02 through
4.07 hereof.
SECTION 4.02. NOTICES TO TRUSTEE.
If the Company elects to convert any of the Notes pursuant to the
mandatory conversion provisions of Section 4.01 hereof, it shall notify
the Trustee in writing of the conversion date and the accrued interest on
and principal amount of Notes to be converted. The Company shall give the
notice provided for in this Section 4.02 at least 45 days before the
conversion date, unless a shorter notice period shall be satisfactory to
the Trustee. The Company may not give notice of any conversion if the
Company has defaulted in payment of interest and the default is
continuing.
SECTION 4.03. SELECTION OF NOTES TO BE CONVERTED.
If less than all of the Notes are to be converted at any time,
selection of Notes shall be made by the Trustee on a pro rata basis
considering all of the Notes outstanding on the redemption date provided
that no partial conversion shall leave a balance that is not evenly
divisible by $100. The Trustee shall make the selection not more that five
(5) Business Days after it receives the notice described in Section 4.02
hereof from the Notes outstanding not previously called for redemption or
conversion. Notes and portions of Notes selected shall be in amounts of
$100 or integral multiples of $100. Provisions of this Indenture that
apply to Notes called for conversion also apply to portions of Notes
called for conversion. The Trustee shall notify the Company promptly of
the Notes or portions of Notes to be called for conversion.
SECTION 4.04. NOTICE TO HOLDERS OF CONVERSION.
At least 30 days but not more than 60 days before a conversion date
which date shall also be at least 5 days after the notice to the Trustee
pursuant to Section 4.02, the Company shall mail or cause the Trustee to
mail, by first class mail, a notice of conversion to each Holder whose
Notes are to be converted at its registered address. The notice shall
identify the Notes to be converted and shall state:
(a) the conversion date;
(b) the conversion ratio which shall specify in reasonable detail
the methodology used to determine the conversion ratio, including the
stock price, the discount rate and the trading dates used to calculate the
conversion ratio;
(c) if any Note is to be converted in part only, the portion of the
principal amount thereof converted, and that, after the conversion date,
upon surrender of such Note, a new
15
Note in principal amount equal to the unconverted portion thereof shall be
issued in the name of the Holder thereof upon cancellation of the original
Note;
(d) the name and address of the Conversion Agent;
(e) that Notes called for conversion must be surrendered to the
Conversion Agent to collect the shares of Common Stock which shall be
based on the principal amount of the Notes to be converted together with
interest accrued to the conversion date and cash in lieu of fractional
shares, if any;
(f) that interest on Notes called for conversion ceases to accrue on
and after the conversion date;
(g) the paragraph of the Notes pursuant to which the Notes called
for conversion are being converted; and
(h) the "CUSIP" number of the Notes to be converted.
At the Company's request, the Trustee shall give notice of
conversion in the Company's name and at the Company's expense; provided
that the Company shall have delivered to the Trustee, at least 30 days
prior to the conversion date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in
such notice, as provided in the preceding paragraph.
SECTION 4.05. EFFECT OF NOTICE OF CONVERSION.
Once notice of conversion is mailed in accordance with Section 4.04
hereof, Notes called for conversion shall be deemed convened into the
requisite number of shares of Common Stock on the conversion date at the
conversion ratio set forth in the Note. A notice of conversion may not be
conditional.
SECTION 4.06. DEPOSIT OF CONVERSION SHARES AND MONEY.
On or before 1:00 p.m. (Eastern Standard Time) on the conversion
date, the Company shall deposit with the Conversion Agent certificates for
the number of whole shares of Common Stock issuable upon the conversion
and money (in immediately available funds) sufficient to pay for any
fractional shares determined pursuant to Section 4.08 hereof sufficient to
convert all Notes to be converted and to acquire all fractional shares to
be acquired on that date. The Conversion Agent shall return to the Company
any shares and/or money not required or used for such purposes.
SECTION 4.07. NOTES CONVERTED IN PART.
Subject to Sections 5.05 and 5.06 hereof, upon surrender of a Note
that is converted in part, the Company shall issue and the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal
in principal amount to the unconverted portion of the Note surrendered.
16
SECTION 4.08. FRACTIONAL SHARES.
The Company will not issue fractional shares of Common Stock upon
conversion of a Note. In lieu thereof, the Company will pay either an
amount in cash calculated by multiplying the fractional share times the
per share price based upon the dollar-weighted average trading price per
share for all round lot transactions in the Common Stock on the Market for
the ten (10) trading days ending two (2) days prior to the date of notice
to the Trustee pursuant to Section 4.01 or issue additional shares of
Common Stock rounded up to the next whole number of shares, or a
combination of the two.
SECTION 4.09. TAXES ON CONVERSION.
The issuance of certificates for shares of Common Stock upon the
conversion of any Note shall be made without charge to the converting
Holder for such certificates or for any tax in respect of the issuance of
such certificates, and such certificates shall be issued in the respective
names of, or in such names as may be directed by, the Holder or Holders of
the converted Note; provided, however, that in the event that certificates
for shares of Common Stock are to be issued in a name other than the name
of the Holder of the Note converted, such Note, when surrendered for
conversion, shall be accompanied by an instrument of transfer, in form
satisfactory to the Company, duly executed by the registered Holder
thereof or his duly authorized attorney; and provided further, however,
that the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder of the converted
Note, and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid or is not applicable.
SECTION 4.10. COMPANY TO PROVIDE STOCK.
The Company shall at all times, after the giving of a notice of
conversion pursuant to Section 4.04 hereof, reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common
Stock, solely for the purpose of issuance upon conversion of Notes as
herein provided with respect to such notice of conversion, a sufficient
number of shares of Common Stock to permit the conversion of all
outstanding Notes subject to such notice of conversion for shares of
Common Stock. All shares of Common Stock which may be issued upon
conversion of the Notes shall be duly authorized, validly issued, fully
paid and nonassessable when so issued.
SECTION 4.11. PAYMENT OF INTEREST AND DIVIDENDS FOLLOWING NOTICE OF CONVERSION.
Interest shall not accrue and no payment for interest shall be made
on any Note or portion thereof called for conversion pursuant to this
Article IV with respect to the period following the date of conversion. In
the case of any Note surrendered for conversion after the close of
business on any record date for the payment of an installment of interest
but before the opening of business on the next succeeding Interest Payment
Date, such Note, when surrendered for conversion, must be accompanied by
payment in an amount equal to the
17
interest payable on such Interest Payment Date on the principal amount of
the Note so convened. Accrued interest shall be paid on such Interest
Payment Date to the bolder of the Note on such record date. If less than
all of the Notes are to be converted at any time, the foregoing provision
shall apply only to the portion so converted and interest shall accrue and
be paid on the balance of the Notes in accordance with the provisions of
Article II. Interest that accrues from the last Interest Payment Date to a
date of conversion preceding a record date shall only be paid on the date
of conversion in the form of Common Stock or cash in lieu of Common Stock
in accordance with the provisions of this Article IV and Holders of Shares
of Common Stock issued upon conversion will not be entitled to receive any
dividends payable to holders of shares of Common Stock as of any record
date before the close of business on the conversion date.
ARTICLE V
COVENANTS
SECTION 5.01. PAYMENT OF NOTES.
The Company shall pay the principal of, and interest on, the Notes
on the dates and in the manner provided in the Notes. Principal and
interest shall be considered paid on the date due if the Paying Agent
(other than the Company or an Affiliate of the Company) holds on that date
money designated for and sufficient to pay all principal and interest then
due. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i)
overdue principal at the rate borne by the Notes, compounded semiannually;
and (ii) overdue installments of interest (without regard to any
applicable grace period) at the same rate, compounded semiannually.
SECTION 5.02. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during
the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under, and complied with
the covenants and conditions contained in, this Indenture, and further
stating, as to each such Officer signing such certificate, that to the
best of his knowledge [he Company has kept, observed, performed and
fulfilled each and every covenant, and complied with the covenants and
conditions contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions
hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge) and that to the best of his knowledge no event has occurred and
remains in existence by reason of which payments on account of the
principal or of interest, if any, on the Notes are prohibited. One of the
Officers signing such Officers' Certificate shall be either the Company's
principal executive officer, principal financial officer or principal
accounting officer.
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The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee forthwith upon becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or
Event of Default.
SECTION 5.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall file with the SEC and
furnish to the Trustee and to the Holders of Notes, all quarterly and
annual financial information required to be contained in a filing with the
SEC on Forms l0-Q and 10-K, including a "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants, in each case, as required by the rules
and regulations of the SEC as in effect on the Issuance Date. The Trustee
shall be under no obligation or duty to review such reports, such delivery
to it being for the purpose of having the same on file with the Trustee
and available for examination.
SECTION 5.04. CORPORATE EXISTENCE.
Subject to Article VII hereof, to the extent permitted by law the
Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence.
SECTION 5.05. OBLIGATION TO REDEEM, CONVERT OR REPURCHASE.
The Company shall not reduce the outstanding principal amount of the
Notes below sixty percent (60%) of the original outstanding principal
amount of such Notes, unless it shall, without penalty or premium, redeem
or cause the conversion into Common Stock of the entire remaining
outstanding principal amount of the Notes pursuant to Article III or IV
hereof.
SECTION 5.06. RESTRICTIONS ON CONVERSION OR REDEMPTION.
The provisions of Articles III or IV or anything else in this
Indenture to the contrary notwithstanding, the Company shall not convert
or redeem any Notes while a petition in bankruptcy relating to the Company
is pending and is not discharged or stayed. If notice of conversion or
redemption is given during the thirty (30) day period prior to the filing
date of a petition in bankruptcy relating to the Company, then conversion
or redemption as the case may be shall take place five (5) days after such
petition is discharged or stayed or thirty (30) days after the notice of
conversion, whichever is later. Furthermore, the Company shall not convert
any Notes if, during the ten (10) trading day period used for calculating
the conversion ratio as set forth in Section 4.01 hereof, the Company, any
member of the Board of Directors or any officer of the Company subject to
the requirements of Section 16 of the Exchange Act purchased shares of
Common Stock (excluding any issuance of Common Stock to any director or
officer of the Company pursuant to any Company stock option, employee
stock purchase or similar plan or rights plan in effect on the date hereof
or subsequently approved by the Board of Directors, or any exercise of
options or rights issued under such plans).
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ARTICLE VI
SUBORDINATION
SECTION 6.01. AGREEMENT TO SUBORDINATE AND RANKING.
The Company, for itself and its successors, and each Holder, by its
acceptance of Notes, agree that the indebtedness represented by, and the
payment of the principal of or interest on or any other amounts due on,
the Notes is subordinated in right of payment, to the extent and in the
manner stated in this Article VI, to the prior payment in full of all
existing and future Senior Debt. The Notes shall rank pari passu with, and
shall not be senior in right of payment to, such other Indebtedness of the
Company whether outstanding on the date of this Indenture or hereafter
created, incurred, issued or guaranteed by the Company.
SECTION 6.02. NO PAYMENT ON NOTES IF SENIOR DEBT IN DEFAULT.
Anything in this Indenture to the contrary notwithstanding, no
payment on account of principal of or redemption of, interest on, or other
amounts due on the Notes, and no redemption, conversion, purchase, or
other acquisition of the Notes, shall be made by or on behalf of the
Company (i) unless full payment of amounts then due for principal and
interest and of all other amounts then due on all Senior Debt has been
made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, (ii) if, at the time of such payment,
redemption, conversion, purchase or other acquisition, or immediately
after giving effect thereto, there shall exist under any Senior Debt, or
any agreement pursuant to which any Senior Debt is issued, any default,
which default shall have resulted in the full amount of such Senior Debt
being declared due and payable (any such event, a "SENIOR DEBT DEFAULT"),
or (iii) if, at the time of such payment, redemption, conversion, purchase
or other acquisition, the Trustee shall have received written notice from
any of the holders of Designated Senior Debt or such holder's
representative (a "PAYMENT BLOCKAGE NOTICE") that there exists under such
Designated Senior Debt, or any agreement pursuant to which such Designated
Senior Debt is issued, any default, permitting the holders thereof to
declare any amounts of such Designated Senior Debt due and payable (any
such event, a "DESIGNATED SENIOR DEBT DEFAULT"), but only for the period
(the "PAYMENT BLOCKAGE PERIOD") commencing on the date of receipt by the
Trustee of the Payment Blockage Notice and ending (unless earlier
terminated by notice given to the Trustee by the holders of such
Designated Senior Debt) on the earlier of (a) the date on which such
Designated Senior Debt Default shall have been cured or waived or (b) 90
days from the receipt of the Payment Blockage Notice, unless the holders
of the Designated Senior Debt that provided the Payment Blockage Notice
have so accelerated the Designated Senior Debt. Upon termination of the
Payment Blockage Period, subject to Section 6.03 hereof, payments on
account of regularly scheduled principal of or interest on the Notes which
are then due and payable or which had been blocked and redemptions,
conversions, purchases or other acquisitions may be made by or on behalf
of the Company. Notwithstanding anything herein to the contrary, (a) only
one Payment Blockage Notice may be given during any period of 360
consecutive days with respect to the same Designated Senior Debt Default
or any other Designated Senior Debt Defaults on the same issue of
Designated Senior Debt existing or continuing at the time of such notice
unless such Designated Senior Debt Default or such other Designated Senior
Debt Defaults have been cured or waived for a period of not less than
20
90 consecutive days and (b) no new Payment Blockage Period may be
commenced by the holder or holders of the same issue of Designated Senior
Debt or their representative or representatives during any period of 360
consecutive days unless all Designated Senior Debt Defaults which were the
subject of the immediately preceding Payment Blockage Notice have been
cured or waived.
In the event that, notwithstanding the provisions of this Section
6.02, payments are made by or on behalf of the Company in contravention of
the provisions of this Section 6.02, such payments shall be held by the
Trustee or any Paying Agent, as applicable, in trust for the benefit of,
and shall be paid over to and delivered to, the holders of Senior Debt or
their representative or the trustee under the indenture or other agreement
(if any), pursuant to which any instruments evidencing any Senior Debt may
have been issued (as to which the Trustee shall be entitled to request and
rely upon written certification from such holders of Senior Debt or
related trustees) for application to the payment of all Senior Debt
ratably according to the aggregate amounts remaining unpaid to the extent
necessary to pay all Senior Debt in full in cash in accordance with the
terms of such Senior Debt, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Debt.
The Company shall give prompt written notice to the Trustee and any
Paying Agent of any Senior Debt Default or Designated Senior Debt Default.
This Section 6.02 shall not be construed or interpreted to mean that
a failure to pay principal or interest on the Notes when due does not
constitute a Default under the Notes despite the fact that such principal
or interest may not be paid on the Notes pursuant to the terms of this
Section 6.02.
SECTION 6.03. DISTRIBUTION ON ACCELERATION OF NOTES; DISSOLUTION AND
REORGANIZATION; SUBROGATION OF NOTES.
(a) If the Notes are declared due and payable because of the
occurrence of an Event of Default, the Company or the Trustee shall give
prompt written notice to the holders of all Senior Debt or to the
trustee(s) for such Senior Debt (in each case to the extent known to the
Trustee) of such acceleration. The Company may not pay the principal of or
interest on or any other amounts due on the Notes until five days after
such holders or trustee(s) of Senior Debt receive such notice and,
thereafter, the Company may pay the principal of or interest on or any
other amounts due on the Notes only if the provisions of this Article VI
permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the
Notes because of an Event of Default or (ii) any distribution of assets of
the Company upon any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of
creditors or any other dissolution, winding up, liquidation or
reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest
thereon and any other amounts due thereon before the Holders are
entitled to receive payment on account of the principal of or
interest on or any other amounts due on the Notes:
21
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee would be entitled except for the
provisions of this Article VI, shall be paid by the liquidating
trustee or agent or other Person making such a payment or
distribution, directly to the holders of Senior Debt (or their
representatives(s) or trustee(s) acting on their behalf), ratably
according to the aggregate amounts remaining unpaid on account of
the principal of or interest on and other amounts due on the Senior
Debt held or represented by each, to the extent necessary to make
payment in full in cash of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the
holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, shall be
received by the Trustee or the Holders before all Senior Debt is
paid in full in cash, such payment or distribution shall be held in
trust for the benefit of, and be paid over to the holders of the
Senior Debt remaining unpaid (or their representatives) or
trustee(s) acting on their behalf, ratably as aforesaid, for
application to the payment of such Senior Debt until all such Senior
Debt shall have been paid in full in cash, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Debt. Subject to the payment in full in cash of all Senior Debt, the
Holders shall be subrogated to the rights of the holders of Senior
Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt to the
extent of the payments or distributions made to the holders of such
Senior Debt pursuant to the provisions of this Article VI until the
principal of and interest on the Notes shall be paid in full and,
for purposes of such subrogation, no such payments or distributions
to the holders of Senior Debt of cash, property or securities which
otherwise would have been payable or distributable to Holders shall,
as between the Company, its creditors other than the holders of
Senior Debt, and the Holders, be deemed to be a payment by the
Company to or on account of the Senior Debt, it being understood
that the provisions of this Article VI are, and are intended solely
for the purpose of, defining the relative rights of the Holders, on
the one hand, and the holders of Senior Debt, on the other hand.
Nothing contained in this Article VI or elsewhere in this Indenture
or in the Notes is intended to or shall (i) impair, as between the Company
and its creditors other than the holders of Senior Debt, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders
the principal of and interest on the Notes as and when the same shall
become due and payable in accordance with the terms of the Notes, or, (ii)
affect the relative rights of the Holders and creditors of the Company
other than holders of Senior Debt or, as between the Company and the
Trustee, the obligations of the Company to the Trustee, or (iii) prevent
the Trustee or the Holders from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to
the rights, if any, under this Article VI of the holders of Senior Debt in
respect of cash, property and securities of the Company received upon the
exercise of any such remedy.
22
Upon distribution of assets of the Company referred to in this
Article VI, the Trustee, subject to the provisions of Section 9.01 hereof,
and the Holders shall be entitled to rely upon a certificate of the
liquidating trustee or agent or other Person making any distribution to
the Trustee or to the Holders for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article VI, unless the Trustee
reasonably believes or should believe that such information is not correct
or accurate.
(c) The provisions of this Article VI shall not be applicable to any
cash, properties or securities received by the Trustee or by any Holder
when received as a holder of Senior Debt and nothing in Section 9.11
hereof or elsewhere in this Indenture shall deprive the Trustee or such
Holder of any of its rights as such holder.
(d) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any
payment of money to or by the Trustee in respect of the Notes pursuant to
the provisions of this Article VI. The Trustee, subject to the provisions
of Section 9.01 hereof, shall be entitled to assume that no such fact
exists unless the Company or any holder of Senior Debt or any trustee
therefor has given such notice to the Trustee. Notwithstanding the
provisions of this Article VI or any other provisions of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any
fact which would prohibit the making of any payment of monies to or by the
Trustee in respect of the Notes pursuant to the provisions in this Article
VI, unless, and until, the Trustee shall have received written notice
thereof from the Company or any holder or holders of Senior Debt or from
any trustee therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of Section 9.01 hereof,
shall be entitled in all respects to assume that no such facts exist;
provided that if on a date not less than two (2) Business Days immediately
preceding the date upon which by the terms hereof any such monies may
become payable for any purpose (including, without limitation, the
principal of or interest on any Note), the Trustee shall not have received
with respect to such monies the notice provided for in this Section
6.03(d), then anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received, and shall
not be affected by any notice to the contrary which may be received by it
on or after such prior date.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Debt (or a trustee on behalf of such holder) to establish that such notice
has been given by a holder of Senior Debt (or a trustee on behalf of any
such holder or holders). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any
Person as a holder of Senior Debt to participate in any payment or
distribution pursuant to this Article VI, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee
as to the amount of Senior Debt held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article
VI, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of
such Person to receive such payment; nor shall the Trustee be charged with
knowledge of the curing or
23
waiving of any default of the character specified in Section 6.02 hereof
or that any event or any condition preventing any payment in respect of
the Notes shall have ceased to exist, unless and until the Trustee shall
have received an Officers' Certificate to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee
shall also apply to any Paying Agent for the Company.
SECTION 6.04. RELIANCE BY SENIOR DEBT ON SUBORDINATION PROVISIONS.
Each Holder of any Note by his acceptance thereof acknowledges and
agrees that the foregoing subordination provisions are, and are intended
to be, an inducement and a consideration for each holder of any Senior
Debt, whether such Senior Debt was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to
hold, such Senior Debt, and such holder of Senior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Debt, and no
amendment or modification of the provisions contained in this Article VI
shall diminish the rights of such holders of Senior Debt unless such
holders have expressly agreed thereto in writing. Notice of any default in
the payment of any Senior Debt, except as expressly stated in this Article
VI, and notice of acceptance of the provisions hereof are hereby expressly
waived. Except as otherwise expressly provided herein, no waiver,
forbearance or release by any holder of Senior Debt under such Senior Debt
or under this Article VI shall constitute a release of any of the
obligations or liabilities of the Trustee or Holders of the Notes provided
in this Article VI.
SECTION 6.05. NO WAIVER OF SUBORDINATION PROVISIONS.
Except as otherwise expressly provided herein, no right of any
present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to
time, without the consent of, or notice to, the Trustee or the Holders of
the Notes, without incurring responsibility to the Holders of the Notes
and without impairing or releasing the subordination provided in this
Article VI or the obligations hereunder of the Holders of the Notes to the
holders of Senior Debt, do any one or more of the following: (i) change
the manner, place or terms of payment of, or renew or alter, Senior Debt
(including, without limitation, changing the principal amount of, interest
rate on, or maturity date of, such Senior Debt), or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same
or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise dispose of any property pledged, mortgaged
or otherwise securing Senior Debt; (iii) release any Person liable in any
manner for the collection of Senior Debt; and (iv) exercise or refrain
from exercising any rights against the Company or any other Person.
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SECTION 6.06. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article VI in respect of any Senior Debt at any
time held by it, to the same extent as any holder of Senior Debt, and
nothing in Section 9.11 hereof or elsewhere in this Indenture shall
deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligation, as are
specifically set forth in this Article VI, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not owe any
fiduciary duty to the holders of Senior Debt but shall have only such
obligations to such holders as are expressly set forth in this Article VI;
and in no event shall the Trustee be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of the
Notes or to the Company (or any other Person) amounts to which such
holders of Senior Debt would be entitled under this Article VI.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article VI
and appoints the Trustee his attorney-in-fact for any and all such
purposes, including, in the event of any dissolution, winding up or
liquidation or reorganization under any applicable bankruptcy law of the
Company (whether in bankruptcy, insolvency or receivership proceedings or
otherwise), the timely filing of a claim for the unpaid balance of such
Holder's Notes in the form required in such proceedings and the causing of
such claim to be approved. If the Trustee does not file a claim or proof
of debt in the form required in such proceedings prior to 30 days before
the expiration of the time to file such claims or proofs, then any Holder
or holders of Senior Debt or their representative or representatives shall
have the right to demand, sue for, collect, receive and receipt for the
payments and distributions in respect of the Notes which are required to
be paid or delivered to the holders of Senior Debt as provided in this
Article VI and to file and prove all claims therefore and to take all such
other action in the name of the holders or otherwise, as such holders of
Senior Debt or representative thereof may determine to be necessary or
appropriate for the enforcement of the provisions of this Article VI.
SECTION 6.07. OTHER PROVISIONS SUBJECT HERETO.
Except as expressly stated in this Article VI, notwithstanding
anything contained in this Indenture to the contrary, all the provisions
of this Indenture and the Notes are subject to the provisions of this
Article VI. However, nothing in this Article VI shall apply to or
adversely affect the claims of, or payment, to, the Trustee pursuant to
Section 9.07 hereof. Notwithstanding the foregoing, the failure to make a
payment on account of principal of or interest on the Notes by reason of
any provision of this Article VI shall not be construed as preventing the
occurrence of an Event of Default under Section 8.01 hereof
25
ARTICLE VII
SUCCESSORS
SECTION 7.01. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
The Company may not, directly or indirectly, consolidate with or
merge with or into, or sell, lease or otherwise dispose of all or
substantially all of its assets, on a consolidated basis, whether in a
single transaction or a series of related transactions, to another person
or group of affiliated persons, other than to its Wholly-Owned
Subsidiaries, unless:
(a) either: (i) in the case of a merger or consolidation, the
Company is the surviving entity; or (ii) the resulting, surviving or
transferee entity is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the Company's obligations in
connection with the Notes and the Indenture; and
(b) no Default or Event of Default shall exist immediately before or
after giving effect on a pro forma basis to such transaction.
Upon any permitted consolidation or merger or any permitted sale,
lease or other disposition of all or substantially all of the assets of
the Company in accordance with the foregoing (a "CHANGE OF CONTROL"), the
successor corporation formed by such consolidation or into which the
Company is merged or to which such sale, lease or other disposition is
made, shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect
as if such successor corporation had been named therein in the same manner
as the Company is named, but such a transaction will not release the
Company from its obligations under the Indenture and the Notes.
For purposes of the foregoing, the transfer, by lease, assignment,
sale or otherwise, of all or substantially all of the properties and
assets of one or more Subsidiaries, which properties and assets, if held
by the Company instead of such Subsidiary, would constitute all or
substantially all of the Company's properties and assets, shall be deemed
to be the transfer of all or substantially all of the Company's properties
and assets. This Section 7.01 will not apply to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the
Company and any of its Wholly-Owned Subsidiaries
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any Change of Control, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company herein.
26
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest on any Note when
the same becomes due and payable;
(b) the Company defaults in the payment of the principal of any Note
when the same becomes due and payable at maturity, upon redemption or
mandatory conversion, or otherwise;
(c) the Company fails to observe or perform any covenant or
agreement contained in Section 5.01, 5.04, 5.05, 5.06 and 7.01 hereof;
(d) the Company fails to observe or perform any other covenant or
agreement contained in this Indenture or the Notes, required by it to be
performed and the failure continues for a period of 60 days after notice
from the Trustee to the Company or from the Holders of at least
thirty-five percent (35%) in principal amount of the then outstanding
Notes to the Company and the Trustee stating that such notice is a "Notice
of Default";
(e) the Company, pursuant to or within the meaning of any Bankruptcy
Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it
in an involuntary case in which it is the debtor;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally is unable to pay its debts as the same become
due; or
(f) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company in an involuntary case
which order remains unstayed or unwithdrawn for 60 days;
(ii) appoints a Custodian of the Company or for all or
substantially all of its property which order is not stayed or
withdrawn within 60 days; and
(iii) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days.
(g) there shall exist under any Senior Debt, or any agreement
pursuant to which any Senior Debt is issued, any default which (i) shall
remain uncured after the expiration of any
27
applicable notice or cure period and (ii) shall have caused such Senior Debt to
become due and payable.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors or the protection
of creditors. The term "CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
SECTION 8.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (e) or (f) of Section 8.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least thirty-five
percent (35%) in principal amount of the then outstanding Notes by notice
to the Company and the Trustee, may declare all the Notes to be due and
payable. Upon such declaration, the principal of, and interest on the
Notes shall be due and payable immediately. If an Event of Default
specified in clause (e) or (f) of Section 8.01 hereof occurs, such an
amount shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then
outstanding Notes by notice to the Trustee may rescind an acceleration and
its consequences (i) if the recession would not conflict with any judgment
or decree of a court of competent jurisdiction and (ii) if all existing
Events of Default have been cured or waived except nonpayment of principal
or interest on the Notes that has become due solely because of the
acceleration of the Notes.
SECTION 8.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or
interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
SECTION 8.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of all of the
Holders of the Notes waive an existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the
payment of the principal of or interest on any Note. Any such waiver of an
existing Default or Event of Default and its consequences may be made
subject to such conditions as may be requested by the Holders of a
majority in principal amount of the then outstanding Notes by notice to
the Trustee and agreed upon by the Trustee in its sole and absolute
discretion. When a Default or Event of Default is waived, it is cured and
ceases; provided, however, that no such waiver shall extend to any
subsequent or other Default or impair any right consequent
28
thereon and any such waivers shall be subject to the provisions of Section
11.02 hereof; provided, further, that a conditional waiver shall be
effective only in accordance with its conditions.
SECTION 8.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, is unduly prejudicial
to the rights of other Holders, or would involve the Trustee in personal
liability.
SECTION 8.06. LIMITATION ON SUITS.
Subject to the provisions of Section 8.07 hereof, a Holder may
pursue a remedy with respect to this Indenture or the Notes only if:
(a) the Holder gives to the Trustee notice of a continuing Event of
Default;
(b) the Holders of at least thirty-five percent (35%) in principal
amount of the then outstanding Notes make a request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense:
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, and interest on the
Note, on or after the respective due dates and in accordance with the
terms set forth in the Note, 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 the Holder.
SECTION 8.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 8.01(a) or (b), hereof
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 of principal and interest remaining unpaid on the Notes and
interest on overdue principal and interest and such further amount as
shall be
29
sufficient to cover the costs and, to the extent lawful, expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 8.09. 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 Holders allowed in any judicial proceedings relative
to the Company, its creditors or its property. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 8.10. PRIORITIES.
Subject to the provisions of Article VI hereof, if the Trustee
collects any money pursuant to this Article VIII, it shall pay out the
money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
Second: to the holders of Senior Debt, if and to the extent required
by Article VI;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively, and
Fourth: to the Holders for any other payments pursuant to the terms
of this Indenture; and
Fifth: to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders made pursuant to this Section 8.10.
SECTION 8.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in
the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 8.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 8.07 hereof,
or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
30
ARTICLE IX
TRUSTEE
SECTION 9.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in
this Indenture and no others and (ii) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform on their face 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: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable
for any error of judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining the pertinent
facts and (iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 8.05 hereof
(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 9.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power (including, without limitation, as requested or directed by a
Holder) unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 9.02. 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 the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsections (c) through (f) (and subsection (a) or (b) if
the Trustee does not act as Paying Agent) of Section 8.01, unless either
(1) a Trust Officer of the Trustee assigned to its corporate trust
department shall have actual knowledge thereof, or (2) the Trustee shall
have received written notice thereof in accordance with Section 12.02
hereof from the Company or any Holder.
(f) The grant of any permissive rights, power or authority hereunder
to the Trustee shall not be construed to be a duty.
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 9.10 and 9.11 hereof
SECTION 9.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Company in the Indenture or any
statement in the Notes other than its authentication.
SECTION 9.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 30 days after the Trustee becomes aware
of such Default or Event of Default. Except in the case of a Default or
Event of Default in payment of principal or interest on any Note, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Holders.
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 12.10, the
Trustee shall mail to Holders a brief report dated as of such reporting
date that complies with TIA Section 313(a) if and to the extent required
by such Section 313(a). The Trustee also shall comply with TIA Section
313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA Section 313(c).
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A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed.
The Company shall notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 9.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder as to which the Company and the
Trustee shall from time to time mutually 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 reasonable disbursements, expenses and advances incurred or made
by it. Such disbursements and expenses may include the reasonable
disbursements, compensation and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any claims, demands,
expenses (including but not limited to reasonable compensation, fees,
disbursements and expenses of the Trustee's agents and counsel), losses,
damages or liabilities incurred by it, except as set forth in the next
paragraph, arising out of, related to, or in connection with the
acceptance or administration of this trust and its rights or duties
hereunder, including the reasonable costs and expenses, and the costs and
expenses of enforcing this Indenture (including this Section 9.07) against
the Company and of defending itself against any claim (whether asserted by
the Company, or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim for which it
may seek indemnity. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and
the Company shall pay the reasonable fees, disbursements and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through the Trustee's negligence
or willful misconduct.
To secure the Company's payment obligations in this Section 9.07,
the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee, except money or property held in trust
to pay principal and interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after
an Event of Default specified in Section 8.01(e) or (f) hereof occurs,
the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
All amounts owing to the Trustee under this Section 9.07 shall be
payable by the Company in United States dollars.
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SECTION 9.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor
Trustee's acceptance of appointment as provided in this Section
9.08.
The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the
Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof,
unless the Trustee's duty to resign is stayed as provided in TIA
Section 310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company
or any Person that has been a bona fide Holder of a Note for at least six
(6) months may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any
Holder who has been a bona fide Holder of a Note for at least six months
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of 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 Holders. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 9.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 9.08 hereof, the Company's
obligations under Section 9.07 hereof shall continue for the benefit of
the retiring trustee with respect to expenses and liabilities incurred by
it prior to such replacement.
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SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business (including the
administration of this Indenture) to, another corporation, the successor
corporation without any further act shall be the successor Trustee.
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall always
have a combined capital and surplus as stated in Section 12.10 hereof. The
Trustee is subject to TIA Section 310(b).
SECTION 9.11. PREFERENTIAL COLLECTION OF CLANS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE X
DISCHARGE OF INDENTURE
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 9.07 and 10.02 hereof shall survive)
when all outstanding Notes theretofore authenticated and issued have been
delivered to the Trustee for cancellation and the Company has paid all
sums payable hereunder. In the event that any payment made under the
Indenture is avoided under any bankruptcy or reorganization law following
termination of the Indenture, the Indenture shall be revived as if the
challenged amount had never been paid.
SECTION 10.02 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such
payment shall have become due (subject to the requirements of any
abandoned property laws that may be applicable); provided, however, that
the Company shall have first caused notice of such payment to the Company
to be mailed to each Holder entitled thereto no less than 30 days prior to
such payment. After payment to the Company, the Trustee and the Paying
Agent shall have no further liability with respect to such money and
Holders entitled to the money must look to the Company for payment as
general creditors unless any applicable abandoned property law designates
another Person.
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ARTICLE XI
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture
or the Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 7.01 hereof;
(c) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(d) to make any change that provides additional rights or benefits
to the Holders of the Notes;
(e) to make any change that does not adversely affect the interests
hereunder of any Holder; or
(f) to qualify the Indenture under the TIA or to comply with the
requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA.
SECTION 11.02. WITH CONSENT OF HOLDERS.
Subject to Section 8.07 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Notes with the written consent
of the Holders of at least a majority in principal amount of the then
outstanding Notes. Subject to Sections 8.04 and 8.07 hereof, the Holders
of a majority in principal amount of the Notes then outstanding may also
waive compliance in a particular instance by the Company with any
provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment, supplement or waiver under this
Section 11.02 may not:
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions of Section 7 of the Notes in a manner adverse to
the Holders;
(c) reduce the rate of or change the time for payment or accrual of
interest on any Note;
(d) waive a continuing default or Event of Default in the payment of
the principal of or interest on any Note, except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration;
(e) make any Note payable in money other than that stated in the
Note:
36
(f) make any change in Section 8.04 or 8.07 hereof;
(g) waive a redemption payment with respect to any Note;
(h) modify Article V or VI in a manner adverse to the Holders of
Notes; and
(i) make any change in the foregoing amendment and waiver provisions
of this Article XI.
To secure a consent of the Holders under this Section 11.02, it
shall not be necessary for the Holders to approve the particular form of
any proposed amendment, supplement or waiver, but it shall be sufficient
if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 11.02
becomes effective, the Company shall mail to Holders a notice briefly
describing the amendment or waiver.
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in
a supplemental indenture that complies with the TIA as then in effect.
SECTION 11.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment. supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder
and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the
consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to his Note or portion of a Note if the
Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of
the requisite principal amount of Notes have consented to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent
to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after
such record date. No consent shall be valid or effective for more than 90
days after such record date unless consents from Holders of the principal
amount of Notes required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day
period.
After an amendment, supplement or waiver becomes effective it shall
bind every Holder, unless it is of the type described in any of clauses
(a) through (i) of Section 11.02 hereof. In such case, the amendment or
waiver shall bind each Holder who has consented to it and every subsequent
Holder that evidences the same debt as the consenting Holder's Note.
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SECTION 11.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for
all Notes may issue and the Trustee shall authenticate new Notes that
reflect the amendment or waiver.
Failure to make such notation on a Note or to issue a new Note as
aforesaid shall not affect the validity and effect of such amendment or
waiver.
SECTION 11.06. TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee may, but need not, sign any supplemental indenture that adversely
affects its rights, obligations or protections. Upon request by the
Company to sign any amendment or supplement, the Trustee shall be entitled
to request and receive from the Company, and to rely upon, an Opinion of
Counsel and Officer's Certificate to the effect that such supplement or
amendment is authorized or permitted under this Article XI.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be incorporated into this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this
Indenture limits, qualifies, or conflicts with another provision which is
required (or would be so required) to be incorporated in this Indenture by
the TIA, the incorporated provision shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in Person or mailed by
first class mail to the other's address stated in Section 12.10 hereof.
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 to a Holder shall be mailed by first
class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
38
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as
required by the Indenture, then such method of notification as shall be
made with the approval of the Trustee shall constitute a sufficient
mailing of such notice.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 3 12(b) with other
Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee upon the Trustee's request:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant
to Section 5.03) shall include:
(a) a statement that the Person signing such certificate or
rendering such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting
of, Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
39
SECTION 12.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of Delaware are not required to be open. If a
payment date is a Legal Holiday, payment may be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If any other operative date for purposes of
this Indenture shall occur on a Legal Holiday then for all purposes the
next succeeding day that is not a Legal Holiday shall be such operative
date.
SECTION 12.08. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, incorporator or shareholder of the
Company, as such, shall not have any liability for any Obligations of the
Company under the Notes or this Indenture or for any claim based on, in
respect of or by reason of such Obligations or their creation. Each Holder
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
SECTION 12.09. COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 12.10. VARIABLE PROVISIONS.
The first certificate pursuant to Section 5.03 hereof shall be for
the fiscal year ended on December 31 of the year of the Initial Issuance
Date or such other date as may be required under the Trust Indenture Act.
The reporting date for Section 9.06 hereof is May 1st of each year.
The first reporting date shall be the first day of May of the year
following the year in which the Notes are first issued.
The Trustee shall always have a combined capital and surplus of at
least $10,000,000 as set forth in its most recent published annual report
of condition and any Successor Trustee shall have a combined capital and
surplus of at least $100,000,000.
The Company's address is:
MICROSTRATEGY INCORPORATED
8000 Towers Crescent Drive
Vienna, Virginia 22182
Attention: General Counsel
Facsimile No. (703) 848-8610
40
With a copy to:
Williams & Connolly
725 Twelfth Street, N.W.
Washington, D.C. 20005
Attn: John K. Villa, Esq.
Facsimile No. (202) 434-5029
The Trustee's address is:
if by mail:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attention: Executive Vice President
if by delivery or overnight courier:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attention: Executive Vice President
SECTION 12.11. GOVERNING LAW, SUBMISSION TO JURISDICTION.
THE INTERNAL LAWS OF THE STATE OF DELAWARE SHALL GOVERN THIS
INDENTURE AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF
To the extent permitted by applicable law, the Company irrevocably
submits to the nonexclusive jurisdiction of the United States District
Court for the Eastern District of Virginia in any suit or proceeding based
on or arising under this Indenture and the Notes and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in
any such court. The Company irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Company hereby irrevocably designates and appoints CT Corporation System
as the authorized agent of the Company upon whom process may be served in
any such suit or proceeding (the "PROCESS AGENT'), it being understood
that the designation and appointment of the Process Agent as such
authorized agent shall become effective immediately without any further
action on the part of the Company. The Company represents to the Trustee
that it has notified the Process Agent of such designation and appointment
and that the Process Agent has accepted the same. The Company hereby
irrevocably authorizes and directs the Process Agent to accept such
service. The Company further agrees that service of process upon the
Process Agent shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein
shall affect the right of the Trustee or any Holder to serve process in
any other manner permitted by law. In the event that CT Corporation System
ceases to be
41
the Process Agent, the Company agrees that it will take any and all
action, including the execution and filing of any and all such documents
and instruments as may be necessary to validly designate and appoint an
alternate agent as Process Agent, and to maintain such designation and
appointment in full force and effect so long as the Company has any
outstanding obligations under this Indenture or the Notes, on terms that
are reasonably acceptable to the Trustee. To the extent that the Company
has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service of notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise)
with respect to itself or its property, the Company hereby irrevocably
waives such immunity in respect of its obligations hereunder and
thereunder, to the extent permitted by law.
SECTION 12.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or an Affiliate. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 12.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 12.14. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no
way modify or restrict any of the terms or provisions hereof.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
42
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
MICROSTRATEGY INCORPORATED,
as Issuer
By: /s/ [Illegible]
------------------------------------
Name: counsel for
Title: MicroStrategy, Incorporated
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Trustee
By: /s/ Herbert J. Lemmer
------------------------------------
Name: HERBERT J. LEMMER
Title: VICE PRESIDENT
43
EXHIBIT A
(Face of Security)
7 1/2% SERIES A UNSECURED NOTE
Due five (5) years from date of first issuance of any 7 1/2% Series
A Unsecured Note
Cusip No. _____________
Note No. _____________ $_____________
MICROSTRATEGY INCORPORATED
promises to pay to the order of ________________________________________________
or registered assigns, the principal sum of _________________________ Dollars on
_____________
Interest Payment Dates: ______________________ and ____________________
commencing _______________________________________________________
Record Dates: ______________________ and ____________________
Authenticated: Dated: ___________________
____________________, MICROSTRATEGY INCORPORATED
as Trustee
By:______________________________ By:_____________________________________
Authorized Officer Officer of the Company
Attest: ________________________________
Officer of the Company
(SEAL)
A-1
(Back of Security)
7 1/2% SERIES A UNSECURED NOTE
Due five (5) years from date of first issuance of any 7 1/2% Series
A Unsecured Note
Capitalized terms used herein shall have the meanings ascribed to them in
that certain Indenture dated as of January 11, 2001 (the "Indenture") between
MicroStrategy Incorporated, a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company, a New York limited purpose trust company (the
"Trustee") unless otherwise indicated.
1. Interest and Principal. The Company promises to pay interest on the principal
amount of this 7 1/2% Series A Unsecured Note due five (5) years from date of
first issuance of any 7 1/2% Series A Unsecured Note (the "Note") at a rate of
seven and one half percent (7 1/2%) per annum from the date of the commencement
of the Settlement Hearing in respect of a class-action lawsuit in the United
States District Court for the Eastern District of Virginia, entitled In re
MicroStrategy Incorporated Securities Litigation, Civil Action No. 00-473-A (the
"Interest Accrual Commencement Date") until maturity. The Company will pay
interest semiannually commencing after the date of issuance of the Note on dates
that shall be common for all 7 1/2% Series A Unsecured Notes and shall be the
date that is six (6) months after the issuance of the first 7 1/2% Series A
Unsecured Notes until maturity (each an "Interest Payment Date"), or if any such
day is not a Business Day, on the next succeeding Business Day. Principal of the
Notes will be due at maturity. Interest on the Notes will accrue and compound
annually from the Interest Accrual Commencement Date until the date of issuance
and thereafter will accrue semiannually. The Company shall pay interest
(including post-petition interest in any proceeding under Bankruptcy Law) on
overdue principal from time to time at the same rate per annum on the Notes then
in effect; it shall pay interest (including post-petition interest in any
proceeding under Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace periods) from time to time at the same rate to
the extent lawful. Interest will be computed on the basis of a 360 day year of
12 months of 30 days each.
2. Method of Payment. The Company will pay interest on the Notes by check or
wire transfer (pursuant to wire instructions provided by the Holder no later
than 30 days prior to the applicable Interest Payment Date) to the Persons who
are registered Holders of Notes at the close of business on the record date next
preceding the Interest Payment Date. The Notes will be payable both as to
principal and interest at the office of the Paying Agent maintained for such
purpose within the City and State of New York. Interest shall not accrue and no
payment for interest shall be made on this Note if called for Redemption or
Mandatory Conversion pursuant to Section 5 or 6 of the Note with respect to any
period following the date of redemption or conversion. In the case of any Note
surrendered for redemption or conversion after the close of business on any
record date for the payment of an installment of interest but before the opening
of business on the next succeeding Interest Payment Date, such Note when
surrendered for conversion, must be accompanied by payment in an amount equal to
the interest payable on such Interest Payment Date on the principal amount of
the Note so redeemed or converted. Accrued interest shall be paid on such
Interest Payment Date to the holder of this Note on such record date. If less
than all of this Note is to be converted at any time, the preceding provisions
shall apply only to the
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portion so converted and interest shall accrue and be paid on the balance of
this Note in accordance with the provisions of Article II of the Indenture.
3. Presenting Agent, Paving Agent, Conversion Agent and Registrar. Initially,
the Trustee will act as Presenting Agent, Paying Agent, Conversion Agent and
Registrar. The Company may change any Presenting Agent, Paying Agent, Conversion
Agent or Registrar without notice to any Holder. The Company or any of its
subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under the Indenture. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of such terms. The
Notes are limited to eighty million five hundred thousand dollars and no cents
($80,500,000) in aggregate principal amount, except that, pursuant to the
Stipulation of Settlement, such amount may be increased, at the Company's
option, to account for the issuance of Notes in lieu of fractional shares of
Common Stock or Warrants (as defined below) to purchase fractional shares of
Common Stock.
5. Redemption. The Company, in its sole discretion, may redeem all or any of the
Notes, in whole or in part, pro rata, at any time, without premium or penalty,
at a redemption price payable solely in cash equal to the principal of and any
accrued but unpaid interest on the Notes in accordance with Article III of the
Indenture.
6. Mandatory Conversion. The Company, in its sole discretion, may cause the
Holder to convert all or any of the Notes, in whole or in part, pro rata,
without premium or penalty, into shares of Common Stock in accordance with
Article IV of the Indenture, provided, however, that nothing contained herein
shall be construed as conferring upon the Holders any rights whatsoever as
stockholders of the Company prior to such conversion. The number of shares of
Common Stock into which the Notes, or any part thereof, shall be converted shall
be such number of shares of Common Stock as may be obtained by dividing the
principal and any accrued but unpaid interest thereon to be converted by an
amount equal to eighty percent (80%) of the dollar-weighted average trading
price per share for all round lot transactions in the Common Stock on the Market
for the ten (10) trading days ending two (2) days prior to the date of the
written notice to the Trustee and issuance of a press release by the Company
describing the conversion. In the event of any such conversion, the Company
shall pay the holder cash in lieu of any fractional shares (valued in the same
manner as the shares actually issued) and shall pay, at the Company's option, in
lieu of any Note that would otherwise be reissued in an amount not evenly
divisible by $100, either cash or additional shares of Common Stock rounded up
to the next whole number of shares, or a combination of the two.
7. Possible Reduction in Principal Amount of and Interest on the Notes. Pursuant
to the Stipulation of Settlement dated January 11, 2001, the Company is
obligated to pay all costs of notice and administration of all transactions
contemplated by the Stipulation of Settlement (exclusive of any attorneys' fees
and expenses, the "Settlement Costs"). If the Settlement Costs exceed $750,000,
then the Company shall pay such excess (the "Excess Amount") as and when
incurred but shall be entitled to a credit equal to the Excess Amount against
the installment of
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interest on the Notes next due, to be applied against the Notes then outstanding
on a pro rata basis. If the Excess Amount exceeds the total amount of interest
then due on the Notes, the Company may, in its sole discretion, either apply
such remaining Excess Amount against subsequent installments of interest on the
next subsequent interest payment date or reduce the principal amount of the
Notes outstanding on a pro raw basis by the balance of the Excess Amount not
previously applied, provided however, that this Note may not be reduced to an
amount not divisible by $100.
S. Obligation to Redeem/Convert. The Company shall not reduce the outstanding
principal amount of the Notes below sixty percent (60%) of their original
outstanding principal amount, unless it shall redeem or convert into Class A
Common Stock, without penalty or premium, the entire remaining outstanding
principal amount of the Notes pursuant to Section 5 or Section 6 hereof.
9. Change in Control. In the event of a Change in Control of the Company (as
defined in Article VII of the Indenture), the resulting, surviving or transferee
entity shall expressly assume all of the Company's obligations in connection
with the Notes and the Indenture.
10. Denominations, Transfer. Exchange. The Notes are exempt from registration by
virtue of an exemption pursuant to Section 3(a)(I0) of the Securities Act of
1933, as amended (the "Securities Act"). In the event that such exemption from
registration is not available under the Securities Act, the Company shall take
such steps as are necessary either to cause the registration of the Notes under
the Securities Act or to obtain relief from the registration requirements of the
Securities Act by obtaining a "no action" letter from the U.S. Securities and
Exchange Commission (the "SEC"). The Notes shall be in registered form without
coupons in denominations of $100 and integral multiples of $100. The transfer of
Notes may be registered and Notes may be exchanged as provided in the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part.
11. Persons Deemed Owners. The registered Holder of a Note may be treated as its
owner for all purposes.
12. Amendments and Waivers. Without the consent of any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency; to provide for uncertificated Notes in
addition to or in place of certificated Notes; to make any change that would
provide any additional rights or benefits to the Holders or that does not
adversely affect the rights under the Indenture of any Holder; or to comply with
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA.
13. Defaults and Remedies. Events of Default are described in the Indenture and
include default in payment when due of principal of and interest on the Notes.
If an Event of Default occurs and
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is continuing, the Trustee or the holders of at least thirty-five percent (35%)
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately, except that in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
shall become due and payable immediately without further action or notice.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power.
14. No Recourse Against Others. A director, officer, employee, incorporator or
stockholder of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. Use of Notes to Exercise Warrants. Under the Stipulation of Settlement, the
Company has issued certain warrants (the "Warrants") to purchase shares of
Common Stock. Pursuant to that certain Warrant Agreement between the Company and
American Stock Transfer & Trust Company, which governs the terms of the
Warrants, this Note may be used to pay the exercise price payable upon exercise
of Warrants (the "Exercise Price"). If a Holder elects to exercise a Warrant by
tendering this Note, the value of this Note for purposes of the payment of the
Exercise Price shall be the principal of and the accrued but unpaid interest on
the Note multiplied by 133%. In accepting payment in the form of a Note, the
Company shall reduce the principal and accrued but unpaid interest of this Note
pro rata when used as payment of the Exercise Price. In the event that upon
payment of all or part of the Exercise Price with this Note, the Holder is
entitled to the return of a new Note reflecting the remaining principal balance
hereof, the Company shall issue such new Note in a denomination of no less than
$100 and in integral multiples of $100, and will pay any remaining principal
amount, together with accrued and unpaid interest thereon, to the Holder in
cash.
17. Abbreviations. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
18. Subordination. This Note is subordinated to certain other indebtedness of
the Company as described more fully in the Indenture.
19. Governing Law. The internal laws of the State of Delaware shall govern this
Note without regard to its provisions of conflicts of laws.
The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture. Requests may be made to the Trustee at the following
address:
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American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
_____________________________________________
________________________________________________________________________________
_____________________________________________
________________________________________________________________________________
_____________________________________________
(Print or type assignee's name. address and zip code)
and irrevocably appoint _____________________________________________________ to
transfer this Note 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 face of this Note)
Signature Guarantee.
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule l7Ad-15 of the
Securities Exchange Act of 1934.
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