Senior Subordinated Note

INDENTURE Between CREDENCE SYSTEMS CORPORATION and THE BANK OF NEW YORK TRUST COMPANY, N.A. As Trustee 3.5% Convertible Senior Subordinated Notes Due 2010

Exhibit 4.1

EXECUTION COPY

INDENTURE

between

CREDENCE SYSTEMS CORPORATION

and

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

3.5% Convertible Senior Subordinated Notes due 2010

 


Dated as of December 20, 2006


TABLE OF CONTENTS

 

     Page

ARTICLE I Definitions

   1

SECTION 1.01. Definitions

   1

SECTION 1.02. Certain Other Definitions

   9

SECTION 1.03. Incorporation by Reference of Trust Indenture Act

   9

SECTION 1.04. Rules of Construction

   10

ARTICLE II The Convertible Notes

   10

SECTION 2.01. Form and Dating

   10

SECTION 2.02. Execution and Authentication

   11

SECTION 2.03. Registrar, Paying Agent and Conversion Agent

   12

SECTION 2.04. Paying Agent To Hold Money in Trust

   13

SECTION 2.05. Holder Lists

   13

SECTION 2.06. Transfer and Exchange

   13

SECTION 2.07. Replacement Convertible Notes

   15

SECTION 2.08. Outstanding Convertible Notes

   16

SECTION 2.09. When Treasury Convertible Notes Disregarded

   16

SECTION 2.10. Temporary Convertible Notes

   17

SECTION 2.11. Cancellation

   17

SECTION 2.12. Defaulted Interest

   18

SECTION 2.13. CUSIP Number

   18

SECTION 2.14. Regulation S

   18

ARTICLE III No Company Option to Redeem

   18

SECTION 3.01. No Company Option to Redeem

   18

ARTICLE IV Covenants

   19

SECTION 4.01. Payment of Convertible Notes

   19

SECTION 4.02. Commission Reports

   19

SECTION 4.03. Compliance Certificate

   19

 

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TABLE OF CONTENTS

 

     Page

SECTION 4.04. Maintenance of Office or Agency

   20

SECTION 4.05. Continued Existence

   20

SECTION 4.06. Repurchase Upon Designated Event

   20

SECTION 4.07. Appointments to Fill Vacancies in Trustee’s Office

   22

SECTION 4.08. Stay, Extension and Usury Laws

   23

SECTION 4.09. Taxes

   23

SECTION 4.10. Investment Company Act

   23

ARTICLE V Successors

   24

SECTION 5.01. When the Company May Merge, Etc

   24

SECTION 5.02. Successor Corporation Substituted

   25

SECTION 5.03. Purchase Option on Change of Control

   25

ARTICLE VI Defaults and Remedies

   25

SECTION 6.01. Events of Default

   25

SECTION 6.02. Acceleration

   27

SECTION 6.03. Other Remedies

   28

SECTION 6.04. Waiver of Past Defaults

   28

SECTION 6.05. Control by Majority

   28

SECTION 6.06. Limitation on Suits

   28

SECTION 6.07. Rights of Holders To Receive Payment

   29

SECTION 6.08. Collection Suit by Trustee

   29

SECTION 6.09. Trustee May File Proofs of Claim

   29

SECTION 6.10. Priorities

   30

SECTION 6.11. Undertaking for Costs

   30

ARTICLE VII The Trustee

   30

SECTION 7.01. Duties of the Trustee

   30

 

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TABLE OF CONTENTS

 

     Page

SECTION 7.02. Rights of the Trustee

   31

SECTION 7.03. Individual Rights of the Trustee

   33

SECTION 7.04. Trustee’s Disclaimer

   33

SECTION 7.05. Notice of Defaults

   34

SECTION 7.06. Reports by the Trustee to Holders

   34

SECTION 7.07. Compensation and Indemnity

   34

SECTION 7.08. Replacement of the Trustee

   35

SECTION 7.09. Successor Trustee by Merger, etc

   36

SECTION 7.10. Eligibility, Disqualification

   37

SECTION 7.11. Preferential Collection of Claims Against Company

   37

ARTICLE VIII Satisfaction and Discharge of Indenture

   37

SECTION 8.01. Discharge of Indenture

   37

SECTION 8.02. Deposited Moneys to be Held in Trust by Trustee

   37

SECTION 8.03. Paying Agent to Repay Moneys Held

   38

SECTION 8.04. Return of Unclaimed Moneys

   38

SECTION 8.05. Reinstatement

   38

ARTICLE IX Amendments

   39

SECTION 9.01. Without the Consent of Holders

   39

SECTION 9.02. With the Consent of Holders

   39

SECTION 9.03. Compliance with the Trust Indenture Act

   41

SECTION 9.04. Revocation and Effect of Consents

   41

SECTION 9.05. Notation on or Exchange of Convertible Notes

   41

SECTION 9.06. Trustee Protected

   42

ARTICLE X General Provisions

   42

SECTION 10.01. Trust Indenture Act Controls

   42

 

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TABLE OF CONTENTS

 

     Page

SECTION 10.02. Notices

   42

SECTION 10.03. Communication by Holders with Other Holders

   43

SECTION 10.04. Certificate and Opinion as to Conditions Precedent

   43

SECTION 10.05. Statements Required in Certificate or Opinion

   43

SECTION 10.06. Rules by Trustee and Agents

   44

SECTION 10.07. Legal Holidays

   44

SECTION 10.08. No Recourse Against Others

   44

SECTION 10.09. Counterparts

   44

SECTION 10.10. Other Provisions

   45

SECTION 10.11. Governing Law

   45

SECTION 10.12. No Adverse Interpretation of Other Agreements

   45

SECTION 10.13. Successors

   45

SECTION 10.14. Severability

   45

SECTION 10.15. Table of Contents, Headings, etc

   46

ARTICLE XI Subordination and Ranking

   46

SECTION 11.01. Agreement to Subordinate

   46

SECTION 11.02. Liquidation; Dissolution; Bankruptcy

   46

SECTION 11.03. Default on Designated Senior Debt

   46

SECTION 11.04. Acceleration of Convertible Notes

   47

SECTION 11.05. When Distribution Must Be Paid Over

   47

SECTION 11.06. Notice by Company

   48

SECTION 11.07. Subrogation

   48

SECTION 11.08. Relative Rights

   48

SECTION 11.09. Subordination May Not Be Impaired by Company

   49

SECTION 11.10. Distribution or Notice to Representative

   49

 

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TABLE OF CONTENTS

 

     Page

SECTION 11.11. Rights of Trustee and Paying Agent

   49

SECTION 11.12. Authorization to Effect Subordination

   50

SECTION 11.13. Article Applicable to Paying Agents

   50

SECTION 11.14. Senior Debt Entitled to Rely

   50

SECTION 11.15. Permitted Payments

   50

SECTION 11.16. Ranking

   50

ARTICLE XII Conversion of Convertible Notes

   50

SECTION 12.01. Right To Convert

   50

SECTION 12.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends

   56

SECTION 12.03. Cash Payments in Lieu of Fractional Shares

   57

SECTION 12.04. Conversion Price

   58

SECTION 12.05. Adjustment of Conversion Price

   58

SECTION 12.06. Effect of Reclassification, Consolidation, Merger or Sale

   66

SECTION 12.07. Taxes on Shares Issued

   67

SECTION 12.08. Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock

   67

SECTION 12.09. Responsibility of Trustee

   68

SECTION 12.10. Notice to Holders Prior to Certain Actions

   68

SECTION 12.11. Restriction on Common Stock Issuable Upon Conversion

   69

SECTION 12.12. Payment of Cash in Lieu of Common Stock

   70

SECTION 12.13. Automatic Conversion by the Company

   71

 

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Cross-Reference Table*

 

Trust Indenture

Act Section

  

Indenture

Section

310(a)(1)

   7.10

      (a)(2)

   7.10, 10.10

      (a)(3)

   n/a

      (a)(4)

   n/a

      (a)(5)

   n/a

      (b)

   7.08, 7.10

      (c)

   n/a

311(a)

   7.11

      (b)

   7.11

      (c)

   n/a

312(a)

   2.05

      (b)

   10.03

      (c)

   10.03

313(a)

   7.06

      (b)(1)

   n/a

      (b)(2)

   7.06

      (c)

   7.06, 10.02

      (d)

   7.06

314(a)

   4.02, 10.02

      (b)

   n/a

      (c)(1)

   10.04

      (c)(2)

   10.04

      (c)(3)

   n/a

      (d)

   n/a

      (e)

   10.05

      (f)

   n/a

315(a)

   7.01 (b)

      (b)

   7.05, 10.02

 

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Trust Indenture

Act Section

  

Indenture

Section

      (c)

   7.01(a)

      (d)

   7.01(c)

      (e)

   6.11

316(a)(last sentence)

   2.09

      (a)(1)(A)

   6.05

      (a)(1)(B)

   6.04

      (a)(2)

   n/a

      (b)

   6.02

      (c)

   9.04

317(a)(1)

   6.08

      (a)(2)

   6.09

      (b)

   2.04

318(a)

   10.01

      (b)

   n/a

      (c)

   10.01

“n/a” means not applicable.
* This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture.

 

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THIS INDENTURE, dated as of December 20, 2006, is between CREDENCE SYSTEMS CORPORATION, a Delaware corporation (the “Company”), and The Bank of New York Trust Company, N.A., a national banking association, as trustee (the “Trustee”). The Company has duly authorized the creation of its 3.5% Convertible Senior Subordinated Notes due 2010 (the “Convertible Notes”), and to provide therefor the Company and the Trustee have duly authorized the execution and delivery of this Indenture. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the holders from time to time of the Convertible Notes:

ARTICLE I

Definitions

SECTION 1.01. Definitions.

“Additional Convertible Notes” means any Convertible Notes (other than the Initial Convertible Notes) issued under this Indenture in accordance with Section 2.02 hereof, as part of the same series and with the same CUSIP number as the Initial Convertible Notes.

“Affiliate” means, when used with reference to any person, any other person directly or indirectly controlling, controlled by, or under direct or indirect common control of, the referent person. For the purposes of this definition, “control” when used with respect to any specified person means the power to direct or cause the direction of management or policies of the referent person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. The terms “controlling” and “controlled” have meanings correlative of the foregoing.

“Agent” means any Registrar, Paying Agent, Conversion Agent or co-registrar.

“Agent Member” means any member of, or participant in, the Depositary.

“Applicable Procedures” means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Global Security to the extent applicable to such transaction and as in effect from time to time.

“Bid Solicitation Agent” means the Person appointed by the Company to act as set forth in the definition of the term “Trading Price” in this Section 1.01.

“Board of Directors” means the Board of Directors of the Company or any authorized committee of the Board of Directors.

“Capital Stock” of any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, but excluding any debt securities convertible into such equity.


“Change of Control” means the occurrence of one or more of the following events: (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of the combined voting power of the then outstanding Voting Stock of the Company, (b) the Company consolidates with or merges into any other corporation, any other corporation merges into the Company, or the Company effects a share exchange, and, in the case of any such transaction, the outstanding Common Stock of the Company is reclassified into or exchanged for any other property or securities, unless the shareholders of the Company immediately before such transaction own, directly or indirectly immediately following such transaction, at least a majority of the combined voting power of the then outstanding Voting Stock of the corporation resulting from such transaction in substantially the same respective proportions as their ownership of the Voting Stock of the Company immediately before such transaction, (c) the Company, or the Company and its subsidiaries taken as a whole, sells, assigns, conveys, transfers or leases all or substantially all assets of the Company, or of the Company and its subsidiaries taken as a whole, as applicable (other than to one or more wholly-owned subsidiaries of the Company), (d) any time the Continuing Directors do not constitute a majority of the Board of Directors of the Company (or, if applicable, a successor corporation to the Company), or (e) the Company undertakes a liquidation, dissolution or winding up; provided, however, that a Change of Control under (a), (b) and (c) above shall not be deemed to have occurred if at least 95% of the consideration (excluding cash payments for fractional shares) in the transaction or transactions constituting the Change of Control consists of shares of common stock that are, or upon issuance will be, traded on the New York Stock Exchange or listed on the Nasdaq Global Select Market.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Subject to the provisions of Section 12.06, however, shares issuable on conversion of Convertible Notes shall include only shares of the class designated as Common Stock of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

 

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“Company” means the party named as such above until a successor replaces it in accordance with Article V and thereafter means the successor. References to the Company shall not include any Subsidiary.

“Consolidated Subsidiary” means, with respect to any person, a Subsidiary which for financial reporting purposes is or, in accordance with GAAP, should be, accounted for by such person as a consolidated subsidiary.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

“Convertible Notes” means the 3.5% Convertible Senior Subordinated Notes due 2010 issued, authenticated and delivered under this Indenture. The Initial Convertible Notes and the Additional Convertible Notes shall be treated as a single class and have the same CUSIP number for purposes of this Indenture.

“Conversion Price” means the initial conversion price specified in the form of Convertible Note in Paragraph 16 of such form, as adjusted in accordance with the provisions of Article XII.

“Conversion Rate” per $1,000 principal amount of Convertible Notes as of any day means the result obtained by dividing (i) $1,000 by (ii) the then applicable Conversion Price, rounded to the nearest ten-thousandth.

“Conversion Reference Period” means:

(i) for Convertible Notes that are converted during the 60 days prior to, but excluding, any Designated Event Payment Date or the Maturity Date of the Convertible Notes, the twenty consecutive Trading Days beginning on the third Trading Day following the relevant Designated Event Payment Date or the Maturity Date; and

(ii) in all other instances, the twenty consecutive Trading Days beginning on the third Trading Day following the date of conversion.

“Conversion Value” means, for each $1,000 principal amount of Convertible Notes, the average of the Daily Conversion Values for each of the twenty consecutive Trading Days of the Conversion Reference Period.

“Corporate Trust Office” means the corporate trust office of the Trustee at which at any particular time the trust created by this Indenture shall have a designated Corporate Trust Office located at 700 South Flower Street, Suite 500, Los Angeles, California 90017, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the holders and the Company, or the

 

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principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the holders and the Company).

“Credit Agreement” means, with respect to the Company, one or more debt facilities or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit not exceeding an aggregate committed availability of $30,000,000 (including all outstanding borrowings thereunder), in each case, as amended, modified, or supplemented from time including any deferrals, renewals, extensions, refinancings or refundings thereof; provided, however, the committed availability of all such facilities after giving effect to such deferral, renewal, extension, refinancing, refunding, amendment, modification or supplement shall not exceed an aggregate committed availability of $30,000,000 (including all outstanding borrowings thereunder); and provided, further, any such facility and the indebtedness thereunder is secured by the assets of the Company.

“Daily Conversion Value” means, with respect to any Trading Day, the product of (1) the applicable Conversion Rate and (2) the Volume Weighted Average Price of the Company’s Common Stock on such Trading Day.

“Daily Share Amount” means, for each Trading Day of the Conversion Reference Period and for each $1,000 principal amount of Convertible Notes surrendered for conversion, a number of shares (but in no event less than zero) equal to (i) the amount of (a) the Volume Weighted Average Price for such Trading Day multiplied by the applicable Conversion Rate, less (b) $1,000; divided by (ii) the Volume Weighted Average Price for such Trading Day multiplied by 20.

“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

“Depositary” means, with respect to any Global Securities, a clearing agency that is registered as such under the Exchange Act and is designated by the Company to act as Depositary for such Global Securities (or any successor securities clearing agency so registered), which shall initially be DTC.

“Designated Event” means the occurrence of a Change of Control or a Termination of Trading.

“Designated Senior Debt” means any particular Senior Debt which has at the time of a payment Event of Default or the giving of a Payment Blockage Notice, as the case may be, an aggregate outstanding principal amount in excess of $5 million, if the instrument creating or evidencing the same or the assumption thereof (or related agreements or documents to which the Company is a party) expressly provides that such Indebtedness shall be “Designated Senior Debt” for purposes of this Indenture (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Senior Debt to exercise the rights of Designated Senior Debt.)

 

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“DTC” means The Depository Trust Company, a New York corporation.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“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 may be approved by a significant segment of the accounting profession of the United States, which are in effect from time to time.

“Global Securities Legend” means the legend labeled as such and that is set forth in Exhibit A hereto.

“Indebtedness” means, with respect to any person, all obligations of such person for borrowed money (including, but not limited to, any indebtedness secured by a security interest, mortgage or other lien on the assets of such person that is (1) given to secure all or part of the purchase price of property subject thereto, whether given to the vendor of such property or to another, or (2) existing on property at the time of acquisition thereof), and any and all deferrals, renewals, extensions, refinancings and refundings of, or amendments, modifications or supplements to, any of the foregoing. For the avoidance of doubt, the following do not constitute indebtedness: (i) any liability for Federal, state, local or other taxes owed or owing by the Company, (ii) trade payables and accrued expenses (including, without limitation, accrued compensation) of the Company, whether for goods, services or materials purchased or provided or otherwise, or (iii) guarantees of obligations of others.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Initial Convertible Notes” means Convertible Notes in an aggregate principal amount of $122,500,000 initially issued under this Indenture.

“Interest Payment Date” means May 15 and November 15 of each year, commencing with May 15, 2007.

“Issue Date” means the date on which Convertible Notes are first issued and authenticated under this Indenture.

“Liquidated Damages” has the meaning specified in paragraph 17 of the form of Convertible Note which is attached as Exhibit A hereto.

 

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“Material Subsidiary” means any Subsidiary of the Company which at the date of determination is a “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X under the Securities Act and the Exchange Act.

“Maturity Date” means May 15, 2010.

“Note Custodian” means the Trustee, as custodian with respect to any Global Security, or any successor entity thereto.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Chief Accounting Officer, any Executive Vice President, Senior Vice President or Vice President (whether or not designated by a number or numbers or word or words before or after the title “Vice President”), the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.

“Officers’ Certificate” means a certificate signed by two Officers, one of whom is the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or the Controller of the Company.

“Opinion of Counsel” means a written opinion from legal counsel who may be an employee of or counsel to the Company except to the extent otherwise indicated in this Indenture.

A “person” means any individual, corporation, partnership, joint venture, trust, estate, unincorporated organization, limited liability company or government or any agency or political subdivision thereof.

“Registration Rights Agreement” means the Registration Rights Agreement relating to the Convertible Notes and Common Stock issuable upon conversion of such Convertible Notes dated December 20, 2006, among the Company and the initial purchasers party thereto, as such agreement may be amended, modified or supplemented from time to time.

“Regular Record Date” means the May 1 or November 1 immediately preceding each Interest Payment Date.

“Representative” means (a) the indenture trustee or other trustee, agent or representative for any Senior Debt or (b) with respect to any Senior Debt that does not have any such trustee, agent or other representative, (i) in the case of such Senior Debt issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Debt, any holder or owner of such Senior Debt acting with the consent of the required persons necessary to bind such holders or owners of such Senior Debt and (ii) in the case of all other such Senior Debt, the holder or owner of such Senior Debt.

 

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“Restricted Common Stock Legend” means the legend labeled as such and that is set forth in Exhibit B hereto.

“Restricted Securities Legend” means the legend labeled as such and that is set forth in Exhibit A hereto.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Senior Debt” means the principal of, premium, if any, and interest on, rent under, and any other amounts payable on or in respect of the Credit Agreement (including, without limitation, any Obligations in respect of such Credit Agreement and any interest accruing after the filing of a petition by or against the Company under any Bankruptcy Law, whether or not allowed as a claim after such filing in any proceeding under such Bankruptcy Law), whether outstanding on the date of this Indenture or thereafter created, incurred or assumed by the Company (including all deferrals, renewals, extensions, refinancings, refunding, amendment, modification or supplement thereof); provided, however, the committed availability (including all outstanding borrowings thereunder) of all such facilities as a result of any such deferral, renewal, extension, refinancing, refunding, amendment, modification or supplement shall not exceed an aggregate committed availability of $30,000,000; and provided, further, any such facility and the indebtedness thereunder is secured by the assets of the Company.

“Shelf Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.

“Subsidiary” means, with respect to any person, (i) 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 such person or one or more of the other subsidiaries of that person (or a combination thereof) and (ii) any partnership (a) the sole general partner or managing general partner of which is such person or a Subsidiary of such person or (b) the only general partners of which are such person or of one or more subsidiaries of such person (or any combination thereof).

“Termination of Trading” will be deemed to have occurred if the Common Stock (or other common stock into which the Convertible Notes are then convertible) is neither listed for trading on a U.S. national securities exchange nor approved for trading on the Nasdaq Global Select Market.

“TIA” means the Trust Indenture Act of 1939 as in effect on the date of execution of this Indenture, except as provided in Sections 9.03 and 12.06.

“Trading Price” of the Convertible Notes on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of Convertible Notes obtained by the Bid Solicitation Agent for $5,000,000 principal amount

 

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of Convertible Notes at approximately 3:30 p.m., New York City time, on such determination date from three nationally recognized securities dealers the Company selects; provided that if three such bids cannot reasonably be obtained by the Bid Solicitation Agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Bid Solicitation Agent, that one bid shall be used. The Company will provide prompt written notice to the Bid Solicitation Agent identifying the three nationally recognized security dealers selected by the Company. If the Bid Solicitation Agent cannot reasonably obtain at least one bid for $5,000,000 principal amount of Convertible Notes from a nationally recognized securities dealer, or if there is no Bid Solicitation Agent appointed by the Company to obtain such bid, then for purposes of determining whether the condition to conversion of the Securities set forth in Section 12.01(a)(2) has been satisfied, the Trading Price per $1,000 principal amount of Convertible Notes will be deemed to be less than 98% of the product of the Volume Weighted Average Price of the Common Stock and the Conversion Rate per $1,000 principal amount of Convertible Notes.

“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.

“Trust Officer” means, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and having direct responsibility for the administration of this Indenture.

“U.S. Government Obligations” means direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged. In order to have money available on a payment date to pay principal or interest on the Convertible Notes, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer’s option.

“Voting Stock” of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled to vote in the election of directors.

“Volume Weighted Average Price” per share of Common Stock on any Trading Day means such price as displayed on Bloomberg (or any successor service) page “CMOS EQUITY VAP” in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, the Volume Weighted Average Price means the market value per share of Common Stock on such day as determined by a nationally recognized independent investment banking firm retained for this purpose by the Company.

 

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SECTION 1.02. Certain Other Definitions.

 

     Defined
in Section

“Automatic Conversion”

   12.13

“Automatic Conversion Notice”

   12.13

“Automatic Conversion Date”

   12.13

“Bankruptcy Law

   6.01

“Business Day”

   10.07

“Cash Percentage”

   12.12

“Closing Price”

   12.05

“Conversion Agent”

   2.03

“Conversion Right”

   12.13

“Conversion Termination”

   12.13

“Conversion Termination Date”

   12.13

“Conversion Termination Notice”

   12.13

“Conversion Termination Notice Date”

   12.13

“Conversion Termination Trigger Event”

   12.13

“Conversion Trigger Price”

   12.01

“Current Market Price”

   12.05

“Custodian”

   6.01

“Designated Event Date”

   4.06

“Designated Event Offer”

   4.06

“Designated Event Offer Termination Date”

   4.06

“Designated Event Payment”

   4.06

“Designated Event Payment Date”

   4.06

“Distribution Notice”

   12.01

“Event of Default”

   6.01

“Expiration Time”

   12.05

“Fair Market Value”

   12.05

“Global Security”

   2.01

“Interest Make-Whole Payment”

   12.13

“Legal Holiday”

   10.07

“Non-electing Share”

   12.06

“Paying Agent”

   2.03

“Payment Blockage Notice”

   11.03

“Purchased Shares”

   12.05

“Record Date”

   12.05

“Registrar”

   2.03

“Securities”

   12.05

“Trading Day”

   12.05

“Trigger Event”

   12.05

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.

 

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The following TIA terms used in this Indenture have the following meanings:

“Commission” means the Commission;

“indenture securities” means the Convertible Notes;

“indenture security holder” means a holder of a Convertible Note;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Convertible Notes means the Company or any other obligor on the Convertible Notes.

All other terms in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them.

SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) words in the singular include the plural, and in the plural include the singular; and

(5) the male, female and neuter genders include one another.

ARTICLE II

The Convertible Notes

SECTION 2.01. Form and Dating. (a) Global Securities.

The Convertible Notes shall be issued in the form of one or more permanent global securities in definitive, fully registered form without interest coupons with the Global Securities Legend and Restricted Securities Legend, if applicable, set forth in Exhibit A hereto (each, a “Global Security”). Any Global Security shall be deposited on behalf of the purchasers of the Convertible Notes represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary for the accounts of participants in the Depositary (and, in the case of Convertible Notes held in accordance with Regulation S, registered with the Depositary for the accounts of

 

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designated agents holding on behalf of the Euroclear System (“Euroclear”) or Clearstream Banking, societe anonyme (“Clearstream”)), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of a Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to a Global Security deposited with or on behalf of the Depositary.

The Company shall execute and the Trustee shall, in accordance with this Section 2.01(b) and the written order of the Company, authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions or held by the Trustee as custodian for the Depositary pursuant to a FAST Balance Certificate Agreement between the Depositary and the Trustee.

Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “Management Regulations and Instructions to Participants” of Clearstream shall be applicable to interests in any Global Securities that are held by participants through Euroclear or Clearstream. The Trustee shall have no obligation to notify holders of any such procedures or to monitor or enforce compliance with the same.

(c) Definitive Securities. Except as provided in Section 2.10, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Convertible Notes in definitive form. If applicable, certificated Convertible Notes in definitive form will bear the Restricted Securities Legend set forth on Exhibit A unless removed in accordance with Section 2.06(b).

SECTION 2.02. Execution and Authentication. One Officer shall sign the Convertible Notes for the Company by manual or facsimile signature.

 

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If an Officer whose signature is on a Convertible Note no longer holds that office at the time the Convertible Note is authenticated, the Convertible Note shall nevertheless be valid.

A Convertible Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Convertible Note has been authenticated under this Indenture.

Upon a written order of the Company signed by an Officer of the Company, the Trustee shall authenticate Initial Convertible Notes upon the execution of this Indenture for original issue in an aggregate principal amount of $122,500,000. The aggregate principal amount of Initial Convertible Notes outstanding at any time may not exceed that amount except as provided in Section 2.07. The Company may, from time to time after the execution of this Indenture, execute and deliver to the Trustee for authentication Additional Convertible Notes of an aggregate principal amount, and the Trustee shall thereupon authenticate and deliver said Additional Convertible Notes to or upon the written order of the Company in accordance with Section 2.4 of this Indenture, without any further action by the Company hereunder; provided however that the Company may issue Additional Convertible Notes only if: (1) such Additional Convertible Notes and Initial Convertible Notes are treated as part of the same issue of debt instruments for purposes of U.S. federal income tax laws; (2) such Additional Convertible Notes shall have the same CUSIP number as the Initial Convertible Notes, and (3) the Trustee receives an Officers’ Certificate and an Opinion of Counsel to the effect that such issuance of Additional Convertible Notes complies with the provisions of this Indenture, including each provision of this paragraph.

The Convertible Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 or any integral multiple thereof.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Convertible Notes. An authenticating agent may authenticate Convertible 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 right as an Agent to deal with the Company or an Affiliate of the Company.

SECTION 2.03. Registrar, Paying Agent and Conversion Agent. The Company shall maintain or cause to be maintained in The City of New York, New York an office or agency: (i) where securities may be presented for registration of transfer or for exchange (“Registrar”); (ii) where Convertible Notes may be presented for payment (“Paying Agent”); (iii) where Convertible Notes may be presented for conversion (the “Conversion Agent”); and (iv) where notices and demands to or upon the Company in respect of Convertible Notes and this Indenture may be served by the holders of the Convertible Notes. The Registrar shall keep a Register (“Register”) of the Convertible 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

 

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agents. 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, Conversion Agent or co-registrar without prior notice. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture and shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or coregistrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company or any of its subsidiaries may act as Paying Agent, Registrar, Conversion Agent or coregistrar, except that for purposes of Article VIII and Section 4.06, neither the Company nor any of its subsidiaries shall act as Paying Agent. If the Company fails to appoint or maintain another entity as Registrar, or Paying Agent or Conversion Agent, the Trustee shall act as such, and the Trustee shall initially act as such.

SECTION 2.04. Paying Agent To Hold Money in Trust. The Company shall require each Paying Agent (other than the Trustee, who hereby so agrees), to agree in writing that the Paying Agent will hold in trust for the benefit of holders of the Convertible Notes or the Trustee all money held by the Paying Agent for the payment of principal, interest or Liquidated Damages on the Convertible Notes, and will notify the Trustee of any default by the Company in respect of 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. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary of the Company) shall have no further liability for the money. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the holders of the Convertible Notes 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 of Convertible Notes and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date, and as the Trustee may request in writing within 15 days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in order to enable it to timely provide any notice to be provided by it hereunder), a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of holders of Convertible Notes.

SECTION 2.06. Transfer and Exchange. (a) When Convertible 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 Convertible 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 Convertible Notes at the Registrar’s request, bearing registration numbers not contemporaneously outstanding. 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 and the Registrar may require payment of a sum sufficient to cover any transfer tax or other governmental charge payable upon exchanges pursuant to Sections 2.10, 4.06, 9.05 or 12.02.

 

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The Company or the Registrar shall not be required (i) to register the transfer of any Convertible Notes surrendered for repurchase pursuant to Section 4.06 or (ii) to register the transfer of any Convertible Notes surrendered for conversion.

All Convertible Notes issued upon any transfer or exchange of Convertible Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Convertible Notes surrendered upon such registration of transfer or exchange.

(b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Sections 2.01(b) and 2.10; provided, however, that beneficial interests in a Global Security may only be transferred to persons who take delivery thereof in the form of a beneficial interest in the Global Security in accordance with the transfer restrictions set forth, to the extent applicable, in the Restricted Securities Legend.

Except for transfers or exchanges made in accordance with Section 2.10, transfers of a Global Security shall be limited to transfers of such Global Security in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor’s nominee.

In the event that a Global Security is exchanged for Convertible Notes in definitive form pursuant to Section 2.10 prior to the effectiveness of a Shelf Registration Statement with respect to such Convertible Notes, such exchange may occur, and such Convertible Notes may be further exchanged or transferred, only upon receipt by the Registrar of (1) such Global Security or such Convertible Notes in definitive form, duly endorsed as provided herein, as applicable, (2) instructions from the holder directing the Trustee to authenticate and deliver one or more Convertible Notes in definitive form of the same aggregate principal amount as the Global Security or the Convertible Notes in definitive form (or portion thereof), as applicable, to be transferred, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Convertible Notes in definitive form to be so issued and appropriate delivery instructions, and (3) such certifications or other information and, in the case of transfers pursuant to Rule 144 under the Securities Act, legal opinions as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act (including the certification requirements intended to ensure that such transfers comply with Rule 144A or Regulation S under the Securities Act, as the case may be), and upon compliance with such other procedures as may from time to time be adopted by the Company and the Registrar.

 

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(c) Except in connection with a Shelf Registration Statement contemplated by and in accordance with the terms of the Registration Rights Agreement, if Convertible Notes are issued upon the registration of transfer, exchange or replacement of Convertible Notes bearing a Restricted Securities Legend, or if a request is made to remove such a Restrictive Securities Legend on Convertible Notes, the Convertible Notes so issued shall bear the Restricted Securities Legend, or a Restricted Securities Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which, in the case of a transfer made pursuant to Rule 144 under the Securities Act, may include an opinion of counsel given in accordance with the laws in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities Act or that such Convertible Notes are not “restricted” within the meaning of Rule 144 under the Securities Act. Upon provision to the Company of such satisfactory evidence, the Trustee, at the written direction of the Company, shall authenticate and deliver Convertible Notes that do not bear the legend. The Company shall not otherwise be entitled to require the delivery of a legal opinion in connection with any transfer or exchange of Securities.

(d) Neither the Trustee nor any Agent shall have any responsibility for any actions taken or not taken by the Depositary.

(e) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Convertible Notes (including any transfers between or among the Depositary’s participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation as is expressly required by, and to do so if and when expressly required by, the terms of this Indenture and to examine the same to determine substantial compliance as to form with the express requirements hereof.

(f) The restrictions on transfer set forth above in this Section 2.06 shall not apply to any Additional Convertible Notes issued pursuant to Section 2.02 that are not required to bear the Restricted Securities Legend.

SECTION 2.07. Replacement Convertible Notes. If the holder of a Convertible Note claims that its Convertible Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Convertible Note if the Trustee’s and the Company’s requirements are met. If required by the Trustee or the Company as a condition of receiving a replacement Convertible Note, the holder of a Convertible Note must provide a certificate of loss and an indemnity or an indemnity bond sufficient, in the judgment of both the Company and the Trustee, to fully protect the Company, the Trustee, any Agent and any authenticating agent from any loss, liability, cost or expense which any of them may suffer or incur if the Convertible Note is replaced. The Company and the Trustee may charge the relevant holder for their expenses in replacing any Convertible Note.

 

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The Trustee or any authenticating agent may authenticate any such substituted Convertible Note, and deliver the same upon the receipt of such security or indemnity as the Trustee, the Company and, if applicable, such authenticating agent may require. Upon the issuance of any substituted Convertible Note, the Company and the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Convertible Note which has matured or is about to mature, or has been submitted for repurchase pursuant to Section 4.06 or is about to be converted into Common Stock pursuant to Article XII, shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Convertible Note, pay or authorize the payment of or convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Convertible Note), as the case may be, if the applicant for such payment or conversion shall furnish to the Company, to the Trustee and, if applicable, to the authenticating agent such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and, in case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any paying agent or conversion agent of the destruction, loss or theft of such Convertible Note and of the ownership thereof.

Every replacement Convertible Note is an additional obligation of the Company and shall be entitled to all the benefits provided under this Indenture equally and proportionately with all other Convertible Notes duly issued, authenticated and delivered hereunder.

SECTION 2.08. Outstanding Convertible Notes. The Convertible Notes outstanding at any time are all the Convertible Notes properly authenticated by the Trustee except for those canceled by the Trustee, those delivered to it for cancellation, and those described in this Section 2.08 as not outstanding.

If a Convertible Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Convertible Note is held by a bona fide purchaser.

If Convertible Notes are considered paid under Section 4.01 or converted under Article XII, they cease to be outstanding, and interest (and Liquidated Damages, if any) on them ceases to accrue.

Subject to Section 2.09 hereof, a Convertible Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Convertible Note.

SECTION 2.09. When Treasury Convertible Notes Disregarded. In determining whether the holders of the required principal amount of Convertible Notes have concurred in any direction, waiver or consent, Convertible 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 Convertible Notes which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded.

 

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SECTION 2.10. Temporary Convertible Notes. (a) Until definitive Convertible Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Convertible Notes. Temporary Convertible Notes shall be substantially in the form of definitive Convertible Notes but may have variations that the Company considers appropriate for temporary Convertible Notes and shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Convertible Notes in exchange for temporary Convertible Notes.

(b) A Global Security deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of certificated Convertible Notes in definitive form only if such transfer complies with Section 2.06 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a “clearing agency” registered under the Exchange Act and in either case a successor Depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing.

(c) Any Global Security or interest thereon that is transferable to the beneficial owners thereof in the form of certificated Convertible Notes in definitive form shall, if held by the Depositary, be surrendered by the Depositary to the Trustee, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Convertible Notes of authorized denominations in the form of certificated Convertible Notes in definitive form. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any Convertible Notes in the form of certificated Convertible Notes in definitive form delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.06(c), bear the Restricted Securities Legend set forth in Exhibit A hereto.

(d) Prior to any transfer pursuant to Section 2.10(b), the registered holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Convertible Notes.

SECTION 2.11. Cancellation. The Company at any time may deliver Convertible Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Convertible Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else may cancel Convertible Notes surrendered for registration of transfer, exchange, payment, replacement, conversion, repurchase or cancellation. Upon written instructions of the Company, the Trustee shall cancel and dispose of such canceled Convertible Notes in accordance with its procedures, in

 

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effect as of the date of such cancellation, for the disposition of cancelled securities and, after such disposition, shall deliver a certificate of disposition to the Company. The Company may not issue new Convertible Notes to replace Convertible Notes that it has paid or repurchased or that have been delivered to the Trustee for cancellation or that any holder has (i) converted pursuant to Article XII hereof or (ii) submitted for repurchase pursuant to Section 4.06 hereof (unless revoked).

SECTION 2.12. Defaulted Interest. If the Company fails to make a payment of interest on the Convertible Notes, it shall pay such defaulted interest plus, to the extent lawful, any interest payable on the defaulted interest. It may pay such defaulted interest, plus any such interest payable on it, to the persons who are holders of Convertible Notes on a subsequent special record date. The Company shall fix any such record date and payment date. At least 15 days before any such record date, the Company shall mail to holders of the Convertible Notes a notice that states the record date, payment date and amount of such interest to be paid.

SECTION 2.13. CUSIP Number. The Company in issuing the Convertible Notes may use a “CUSIP” number, and if so, such CUSIP number shall be included in notices of repurchase or exchange as a convenience to holders of Convertible Notes; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Convertible Notes and that reliance may be placed only on the other identification numbers printed on the Convertible Notes. The Company will promptly notify the Trustee of any change in the CUSIP number.

SECTION 2.14. Regulation S. The Company agrees that it will refuse to register any transfer of Convertible Notes or any shares of Common Stock issued upon conversion of Convertible Notes that is not made in accordance with the provisions of Regulation S under the Securities Act, pursuant to a registration statement which has been declared effective under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act; provided, however, that the provisions of this Section 2.14 shall not be applicable to any Convertible Notes which do not bear a Restricted Securities Legend or to any shares of Common Stock evidenced by certificates which do not bear a Restricted Common Stock Legend.

ARTICLE III

No Company Option to Redeem

SECTION 3.01. No Company Option to Redeem. The Company shall have no right to redeem the Convertible Notes.

 

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ARTICLE IV

Covenants

SECTION 4.01. Payment of Convertible Notes. The Company shall pay the principal of and interest (and Liquidated Damages, if any) on the Convertible Notes on the dates and in the manner provided in the Convertible Notes. Principal, interest, Liquidated Damages and the Designated Event Payment shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company or a Subsidiary of the Company) holds as of 10:00 a.m., New York City time, on that date immediately available funds designated for and sufficient to pay all principal, interest (and Liquidated Damages, if any) or the Designated Event Payment then due; provided, however, that money held by the Agent for the benefit of holders of Senior Debt pursuant to the provisions of Article XI or the payment of which to the holders of the Convertible Notes is prohibited by Article XI shall not be considered to be designated for the payment of any principal of or interest (or Liquidated Damages, if any) on the Convertible Notes within the meaning of this Section 4.01.

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 Convertible Notes, compounded semiannually; and (ii) overdue installments of interest (without regard to any applicable grace period) at the same rate, compounded semiannually.

SECTION 4.02. Commission Reports. The Company shall comply with Section 314(a) of the TIA. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

SECTION 4.03. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company, an Officers’ Certificate 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 fully performed its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company is not in default in the performance or observance of any of the terms and conditions hereof (or, if any Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge) and, that to the best of his or her knowledge, no event has occurred and remains in existence by reason of which payments on account of the principal of or interest (or Liquidated Damages, if any) on the Convertible Notes are prohibited.

 

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The Company shall, so long as any of the Convertible 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 and what action the Company is taking or proposes to take with respect thereto.

SECTION 4.04. Maintenance of Office or Agency. The Company shall maintain or cause to be maintained the office or agency required under Section 2.03. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not maintained by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, presentations, surrenders, notices and demands with respect to the Convertible Notes may be made or served at the Corporate Trust Office of the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Convertible Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designation.

SECTION 4.05. Continued Existence. Subject to Article V, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

SECTION 4.06. Repurchase Upon Designated Event. Following a Designated Event (the date of each such occurrence being the “Designated Event Date”), the Company shall notify the holders of Convertible Notes in writing of such occurrence and shall make an offer (the “Designated Event Offer”) to repurchase all Convertible Notes then outstanding at a repurchase price in cash (the “Designated Event Payment”) equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to, but excluding, the Designated Event Payment Date (as defined below).

Notice of a Designated Event shall be mailed by or at the direction of the Company to the holders of Convertible Notes as shown on the Register of such holders maintained by the Registrar not more than 20 days after the applicable Designated Event Date at the addresses as shown on the Register of holders maintained by the Registrar, with a copy to the Trustee and the Paying Agent. The Designated Event Offer shall remain open until a specified date (the “Designated Event Offer Termination Date”) which is at least 20 Business Days from the date such notice is mailed. During the period specified in such notice, holders of Convertible Notes may elect to tender their Convertible Notes in whole or in part in integral multiples of $1,000 in exchange for cash. Payment shall be made by the Company in respect of Convertible Notes properly tendered pursuant to this Section 4.06 on a specified Business Day (the “Designated Event Payment Date”) which shall be no later than 35 days after the applicable Designated Event.

The notice, which shall govern the terms of the Designated Event Offer, shall include such disclosures as are required by law and shall state:

(a) that a Designated Event Offer is being made pursuant to this Section 4.06 and that all Convertible Notes will be accepted for payment;

 

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(b) the event, transaction or transactions that constitute the Designated Event;

(c) the Designated Event Payment for each Convertible Note, the Designated Event Offer Termination Date and the Designated Event Payment Date;

(d) that any Convertible Note not accepted for payment will continue to accrue interest and Liquidated Damages, if applicable, in accordance with the terms thereof;

(e) that, unless the Company defaults on making the Designated Event Payment, any Convertible Note accepted for payment pursuant to the Designated Event Offer shall cease to accrue interest and Liquidated Damages, if applicable, on the Designated Event Payment Date and no further interest or Liquidated Damages shall accrue on or after such date;

(f) that holders electing to have Convertible Notes repurchased pursuant to a Designated Event Offer will be required to surrender their Convertible Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Designated Event Offer Termination Date and must complete any form letter of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent;

(g) that holders of Convertible Notes will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Designated Event Offer Termination Date, a facsimile transmission or letter setting forth the name of the holder, the principal amount of Convertible Notes the holder delivered for purchase, the Convertible Note certificate number (if any) and a statement that such holder is withdrawing his election to have such Convertible Notes purchased;

(h) that holders whose Convertible Notes are repurchased only in part will be issued Convertible Notes equal in principal amount to the unpurchased portion of the Convertible Notes surrendered;

(i) the instructions that holders must follow in order to tender their Convertible Notes; and

(j) that in the case of a Designated Event Payment Date that is also an interest payment date, the interest payment and Liquidated Damages, if any, due on such date shall be paid to the person in whose name the Convertible Note is registered at the close of business on the relevant Designated Event Offer Termination Date.

 

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On the Designated Event Offer Termination Date, the Company shall (i) accept for payment all Convertible Notes or portions thereof properly tendered pursuant to the Designated Event Offer, (ii) deposit with the Paying Agent money sufficient to pay the Designated Event Payment with respect to all Convertible Notes or portions thereof so tendered and accepted and (iii) deliver or cause to be delivered to the Trustee the Convertible Notes so accepted together with an Officers’ Certificate setting forth the aggregate principal amount of Convertible Notes or portions thereof tendered to and accepted for payment by the Company. On the Designated Event Payment Date, the Paying Agent shall mail or deliver the Designated Event Payment to the holders of Convertible Notes so accepted and the Trustee shall promptly authenticate and mail or cause to be transferred by book entry to such holders a new Convertible Note equal in principal amount to any unpurchased portion of the Convertible Note surrendered, if any; provided, however, that such new Convertible Subordinate Notes will be in a principal amount of $1,000 or an integral multiple thereof. Any Convertible Notes not so accepted shall be promptly mailed or delivered by the Company to the holder thereof.

In the case of any reclassification, change, consolidation, merger, share exchange, combination or sale or conveyance to which Section 12.06 applies in which the Common Stock of the Company is changed or exchanged as a result into the right to receive stock, securities or other property or assets (including cash) which includes shares of common stock of the Company or another person that are, or upon issuance will be, traded on a United States national securities exchange or approved for trading on an established automated over-the-counter trading market in the United States and such shares constitute at the time such change or exchange becomes effective in excess of 50% of the aggregate Fair Market Value of such stock, securities or other property and assets (including cash) (as determined by the Company, which determination shall be conclusive and binding), then the person formed by such consolidation or resulting from such merger or share exchange or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture (which shall comply with the TIA as in force at the date of execution of such supplemental indenture) modifying the provisions of this Indenture relating to the right of holders of Convertible Notes to cause the Company to repurchase Convertible Notes following a Designated Event, including the applicable provisions of this Section 4.06 and the definitions of Designated Event, Change of Control and Termination of Trading, as appropriate, as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provision apply to such common stock and the issuer thereof if different from the Company and Common Stock of the Company (in lieu of the Company and the Common Stock of the Company).

The Designated Event Offer shall be made by the Company in compliance with all applicable provisions of the Exchange Act, and all applicable tender offer rules promulgated thereunder, to the extent such laws and regulations are then applicable and shall include all instructions and materials that the Company shall reasonably deem necessary to enable such holders of Convertible Notes to tender their Convertible Notes.

SECTION 4.07. Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so that there shall at all times be a Trustee hereunder.

 

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SECTION 4.08. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter enforced, that may affect the Company’s obligation to pay the Convertible Notes; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law insofar as such law applies to the Convertible Notes, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

SECTION 4.09. Taxes. The Company shall, and shall cause each of its subsidiaries to, pay prior to delinquency all taxes, assessments and government levies; provided, however, that the Company shall not be required to pay or cause to be paid any such tax, assessment or levy (i) if the failure to do so will not, in the aggregate, have a material adverse impact on the Company and its subsidiaries taken as a whole, or (ii) if the amount, applicability or validity is being contested in good faith by appropriate proceedings.

  SECTION 4.10. Reports. If at any time the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a holder of a Convertible Note, the Company will promptly furnish or cause to be furnished to such holder or to a prospective purchaser of such Convertible Note designated by such holder, as the case may be, the information, if any, required to be delivered by it pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with the resale of such Convertible Note; provided, however, that the Company shall not be required to furnish such information in connection with any request made on or after the date which is two years from the later of the date such Convertible Note was last acquired from the Company or an “affiliate” of the Company.

  SECTION 4.11. Investment Company Act. As long as any Convertible Notes are outstanding, the Company will conduct its business and operations so as not to become an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”), and will take all steps required in order for it to continue not to be an “investment company” and not to be required to be registered under the Investment Company Act, including, if necessary, redeployment of the assets of the Company.

 

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ARTICLE V

Successors

SECTION 5.01. When the Company May Merge, Etc. The Company may not, in a single transaction or series of related transactions, consolidate or merge with or into or effect a share exchange with (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets to, any person as an entirety or substantially as an entirety unless:

(a) either

(i) the Company shall be the surviving or continuing corporation, or

(ii) the person formed by or surviving any such consolidation, merger or share exchange (if other than the Company) or the person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company substantially as an entirety

(1) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and

(2) shall expressly assume, by supplemental indenture in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee, the due and punctual payment of the principal of, and interest and Liquidated Damages, if any, on all of the Convertible Notes and the performance of every covenant of the Convertible Notes and this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed, including, without limitation, modifications to rights of holders to cause the repurchase of Convertible Notes upon a Designated Event in accordance with the penultimate paragraph of Section 4.06 and conversion rights in accordance with Section 12.06 to the extent required by such Sections;

(b) immediately after giving effect to such transaction no Default and no Event of Default shall have occurred and be continuing; and

(c) the Company or such successor person shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel each stating that such consolidation, merger, share exchange, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this provision of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied.

 

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For purposes of this Section 5.01, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more subsidiaries of the Company, the capital stock of which individually or in the aggregate constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

SECTION 5.02. Successor Corporation Substituted. Upon any such consolidation, merger, share exchange, sale, assignment, conveyance, lease, transfer or other disposition in accordance with Section 5.01, the successor person formed by such consolidation or share exchange or into which the Company is merged or to which such sale, assignment, conveyance, lease, transfer or other disposition is made will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein, and thereafter (except in the case of a lease) the predecessor corporation will be relieved of all further obligations and covenants under this Indenture and the Convertible Notes.

SECTION 5.03. Purchase Option on Change of Control. This Article V does not affect the obligations of the Company (including without limitation any successor to the Company) under Section 4.06.

ARTICLE VI

Defaults and Remedies

SECTION 6.01. Events of Default. An “Event of Default” with respect to any Convertible Notes occurs if:

(a) the Company defaults in the payment (whether or not such payment is prohibited by the subordination provisions set forth in Article XI of this Indenture) of principal of, on the Convertible Notes when due at maturity, upon repurchase, upon acceleration or otherwise; or

(b) the Company defaults in the payment (whether or not such payment is prohibited by the subordination provisions set forth in Article XI of this Indenture) of any installment of interest or Liquidated Damages on the Convertible Notes when due (including any interest or Liquidated Damages payable in connection with a repurchase pursuant to Section 4.06) and continuance of such default for 30 days or more; or

(c) the Company defaults in the payment of the Designated Event Payment in respect of the Convertible Notes on the date therefor, whether or not such payment is prohibited by the subordination provisions set forth in Article XI of this Indenture; or

(d) the Company fails to deliver all cash and any shares of Common Stock when such cash and Common Stock, if any, are required to be delivered upon conversion of a Convertible Note (whether or not such payment is prohibited by the subordination provisions set forth in Article XI of this Indenture); or

 

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(e) the Company fails to provide timely notice of any Designated Event in accordance with Section 4.06; or

(f) the Company defaults (other than a default set forth in clauses (a), (b), (c), (d), or (e) above) in the performance of, or breaches, any other covenant or warranty of the Company set forth in this Indenture or the Convertible Notes and fails to remedy such default or breach within a period of 30 days after the receipt of written notice from the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Convertible Notes; or

(g) a default under any credit agreement, mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Subsidiary of the Company (or the payment of which is guaranteed or secured by the Company or any of its subsidiaries), whether such Indebtedness or guarantee exists on the date of this Indenture or is created thereafter, which default (i) is caused by a failure to pay when due any principal of such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a “Payment Default”) or (ii) results in the acceleration of such Indebtedness prior to its express maturity (without such acceleration being rescinded or annulled) and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10,000,000 or more and such Payment Default is not cured or such acceleration is not annulled within 30 days after receipt of written notice by the Company from the Trustee or by the Company and the Trustee from any holder of Convertible Notes; or

(h) failure to pay a final, nonappealable judgment or final, nonappealable judgments (other than any judgment as to which a reputable insurance company has accepted full liability) for the payment of money entered by a court or courts of competent jurisdiction against the Company or any Material Subsidiaries of the Company, which judgments remain unstayed, unbonded or undischarged for a period of 60 days, provided that the aggregate amount of all such judgments exceeds $10,000,000; or

(i) the Company or any Material Subsidiary, 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,

 

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(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) makes the admission in writing that it generally is unable to pay its debts as the same become due; or

(j) a court of competent jurisdiction enters a judgment, order or decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Material Subsidiary in an involuntary case, and the order or decree remains unstayed and in effect for 90 days,

(ii) appoints a Custodian of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 90 days, or

(iii) orders the liquidation of the Company or any Material Subsidiary, and the order or decree remains unstayed and in effect for 90 days.

The term “Bankruptcy Law” means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default with respect to the Company specified in clauses (i) and (j) of Section 6.01) occurs and is continuing, then and in every such case the Trustee, by written notice to the Company, or the holders of at least 25% in aggregate principal amount of the then outstanding Convertible Notes, by written notice to the Company and the Trustee, may declare the unpaid principal of, and accrued and unpaid interest and Liquidated Damages, if any, on all the Convertible Notes to be due and payable. Upon such declaration, such principal amount, and accrued and unpaid interest and Liquidated Damages, if any, shall become immediately due and payable, notwithstanding anything contained in this Indenture or the Convertible Notes to the contrary, but subject to the provisions of Article XI. If any Event of Default with respect to the Company specified in clauses (i) or (j) of Section 6.01 occurs, all unpaid principal of, and accrued and unpaid interest and Liquidated Damages, if any, on the Convertible Notes then outstanding shall become automatically due and payable subject to the provisions of Article XI, without any declaration or other act on the part of the Trustee or any holder of Convertible Notes.

The holders of a majority in aggregate principal amount of the then outstanding Convertible Notes by notice to the Trustee may rescind an acceleration of the Convertible Notes and its consequences if all existing Events of Default (other than nonpayment of principal of and interest and Liquidated Damages, if any, on the Convertible Notes which has become due solely by virtue of such acceleration) have been cured or waived and if the rescission would not conflict with any judgment or decree of any court of competent jurisdiction. No such rescission shall affect any subsequent Default or Event of Default or impair any right consequent thereto.

 

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SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest or Liquidated Damages, if applicable, on the Convertible Notes or to enforce the performance of any provision of the Convertible Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Convertible Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any holder of a Convertible Note in exercising any right or remedy occurring 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 6.04. Waiver of Past Defaults. The holders of a majority in aggregate principal amount of the Convertible Notes then outstanding may, on behalf of the holders of all the Convertible Notes, waive an existing Default or Event of Default and its consequences, except a Default or Event of Default in the payment of the principal of, or interest or Liquidated Damages, if applicable, on the Convertible Notes (other than the non-payment of principal of, and interest and Liquidated Damages, if any, on the Convertible Notes which has become due solely by virtue of an acceleration which has been duly rescinded as provided above), or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of all holders of Convertible Notes; provided, however, that in order to waive any provisions of Article XI, holders of at least 75% in aggregate principal amount of Convertible Notes then outstanding must consent to such waiver if such waiver would adversely affect the rights of holders of Convertible Notes. When a Default or Event of Default is waived, it is cured and stops continuing. No waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

SECTION 6.05. Control by Majority. The holders of a majority in aggregate principal amount of the then outstanding Convertible 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 that the Trustee determines may be unduly prejudicial to the rights of other holders of Convertible Notes or that may involve the Trustee in personal liability; provided, however, that the Trustee shall have no duty or obligation (subject to Section 7.01) to ascertain whether or not such actions or forebearances are unduly prejudicial to such holders; provided further, however that the Trustee may take any other action the Trustee deems proper that is not inconsistent with such directions.

SECTION 6.06. Limitation on Suits. A holder of a Convertible Note may not pursue any remedy with respect to this Indenture or the Convertible Notes unless:

(a) the holder gives to the Trustee notice of a continuing Event of Default;

 

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(b) the holders of at least 25% in aggregate principal amount of the then outstanding Convertible Notes make a written request to the Trustee to pursue the remedy;

(c) such holder or holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

(d) the Trustee does not comply with the request within 30 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

(e) during such 30-day period the holders of a majority in aggregate principal amount of the then outstanding Convertible Notes do not give the Trustee a direction inconsistent with the request.

A holder of a Convertible Note may not use this Indenture to prejudice the rights of another holder or to obtain a preference or priority over another holder.

SECTION 6.07. Rights of Holders To Receive Payment. Subject to the provisions of Article XI hereof, notwithstanding any other provision of this Indenture, the right of any holder of a Convertible Note to receive payment of principal, and interest and Liquidated Damages, if any, on the Convertible Note, on or after the respective due dates expressed in the Convertible Note, or to bring suit for the enforcement of any such payment on or after such respective dates, or to bring suit for the enforcement of the right to convert the Convertible Note shall not be impaired or affected without the consent of the holder of a Convertible Note.

SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a), (b) or (c) 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 and Liquidated Damages, if any, remaining unpaid on the Convertible Notes and interest on overdue principal, and interest and Liquidated Damages, if any, and such further amount as shall be 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 6.09. 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 of Convertible Notes 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 of a Convertible Note any plan of reorganization, arrangement, adjustment or composition affecting the Convertible 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.

 

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SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article VI, it shall pay out the money in the following order:

First: to the Trustee for amounts due under Section 7.07, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee, and the costs and expenses of collection;

Second: to holders of Senior Debt to the extent required by Article XI;

Third: to holders of Convertible Notes for amounts due and unpaid on the Convertible Notes for principal, and interest and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Convertible Notes for principal, and interest and Liquidated Damages, if any, respectively; and

Fourth: to the Company.

Except as otherwise provided in Section 2.12, the Trustee may fix a record date and payment date for any payment to holders of Convertible Notes.

SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit, other than the Trustee, 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 does not apply to a suit by the Trustee, a suit by a holder pursuant to Section 6.07 or a suit by holders of more than 10% in principal amount of the then outstanding Convertible Notes.

ARTICLE VII

The Trustee

The Trustee hereby accepts the trust imposed upon it by this Indenture and covenants and agrees to perform the same, as herein expressed. Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VII.

SECTION 7.01. Duties of the Trustee. (a) If an Event of Default known to a Trust Officer of the Trustee has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

 

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(b) Except during the continuance of an Event of Default known to the Trustee:

(1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, 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 to the form required by this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

(d) Whether or not therein expressly so provided, every provision of this Indenture that is in any way related to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk of liability is not reasonably assured to it.

(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree 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 7.02. Rights of the Trustee. (a) The Trustee may conclusively rely on and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, security or other 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 contained therein.

 

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(b) Any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof is herein specifically prescribed). In addition, before the Trustee acts or refrains from acting, it may require an Officers’ Certificate, 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. The Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its attorneys and agents and other persons not regularly in its employ and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith without negligence or willful misconduct which it believes to be authorized or within its discretion, rights or powers.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

(f) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or discretion of any of the holders of Convertible Notes pursuant to the provisions of this Indenture, unless such holders have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby.

(h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, security or other document unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the Convertible Notes then outstanding, provided that if the Trustee determines in its discretion to make any such investigation, then it shall be entitled, upon reasonable prior notice and during normal business hours, to examine the books and records and the premises of the Company, personally or by agent or attorney, and the reasonable expenses of every such examination shall be paid by the Company or, if paid by the Trustee or any predecessor Trustee, shall be reimbursed by the Company upon demand.

(i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct.

 

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(j) The Trustee shall not be responsible for the computation of any adjustment to the Conversion Price or for any determination as to whether an adjustment is required and shall not be deemed to have knowledge of any adjustment unless and until it shall have received the notice from the Company contemplated by Section 12.05(j).

(k) Subject to the limitations of TIA § 315(d) and Section 7.01(c), in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office for the Trustee, and such notice references the Convertible Notes and this Indenture.

(m) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other persons employed to act hereunder.

(n) The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

(o) In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances..

SECTION 7.03. Individual Rights of the Trustee. Subject to Sections 7.10 and 7.11, the Trustee in its individual or any other capacity may become the owner or pledgee of Convertible Notes with the same rights it would have if it were not the Trustee and may otherwise deal with the Company or an Affiliate of the Company and receive, collect, hold and retain collections from the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.

SECTION 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Convertible Notes. It shall not be accountable for the Company’s use of the proceeds

 

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from the Convertible Notes or any money paid to the Company or upon the Company’s direction under any provision of this Indenture. It shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Convertible Notes or any other document in connection with the sale of the Convertible Notes or pursuant to this Indenture other than its certificate of authentication.

SECTION 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to a Trust Officer of the Trustee, the Trustee shall mail to each holder of a Convertible Note a notice of the Default or Event of Default within 60 days after it occurs. A Default or an Event of Default shall not be considered known to a Trust Officer of the Trustee unless it is a Default or Event of Default in the payment of principal, or interest or Liquidated Damages, if any, when due under Section 6.01(a), (b) or (c) or a Trust Officer of the Trustee shall have received notice thereof, in accordance with this Indenture, from the Company or from the holders of a majority in principal amount of the outstanding Convertible Notes. Except in the case of a Default or Event of Default in payment of principal of, or interest or Liquidated Damages, if any, on any Convertible 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 interest of the holders of the Convertible Notes.

SECTION 7.06. Reports by the Trustee to Holders. Within 60 days after the reporting date stated in Section 10.10, the Trustee shall mail to holders of Convertible Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

A copy of each report at the time of its mailing to holders of Convertible Notes shall be filed, at the expense of the Company, by the Trustee with the Commission and each stock exchange or securities market, if any, on which the Convertible Notes are listed. The Company shall timely notify the Trustee when the Convertible Notes are listed or quoted on any stock exchange or securities market and of any delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as the Company and the Trustee shall from time to time agree in writing, for its acceptance of this Indenture and its services hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by or on behalf of it in addition to the compensation for its services. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee’s agents, counsel and other persons not regularly in its employ.

 

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The Company shall indemnify the Trustee or any predecessor Trustee and their agents, against, and defend and hold them harmless from, any loss, liability or expense, including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), arising out of or in connection with the acceptance or administration of its duties under this Indenture and the trusts hereunder, including the costs and expenses of defending itself against or investigating any claim (whether asserted by the Company, or any holder of Convertible Notes or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, or in connection with enforcing the provisions of this Section 7.07, except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim with counsel designated by the Company, who may be outside counsel to the Company but shall in all events be reasonably satisfactory to the Trustee, and the Trustee shall cooperate in the defense. In addition, the Trustee may retain one separate counsel and, if deemed advisable by such counsel, local counsel, and the Company shall pay the reasonable fees and expenses of such separate counsel and local counsel. The indemnification herein extends to any settlement; provided, however, that the Company will not be liable for any settlement made without its consent; provided further, however, that such consent will not be unreasonably withheld.

The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or willful misconduct.

The Trustee shall have a lien prior to the Convertible Notes on all money or property held or collected by the Trustee to secure the Company’s payment obligations in this Section 7.07, except that held in trust to pay principal, and interest and Liquidated Damages, if any, on Convertible Notes. Such liens and the Company’s obligations under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

SECTION 7.08. Replacement of the 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 7.08.

The Trustee may resign at any time and be discharged from the trust hereby created by so notifying the Company. The holders of a majority in principal amount of the then outstanding Convertible Notes may remove the Trustee by so notifying the Trustee and the Company in writing and may appoint a successor Trustee. The Company may remove the Trustee if:

(a) the Trustee fails to comply with Section 7.10;

 

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(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 Convertible Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company or the holders of at least 10% in principal amount of the then outstanding Convertible Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee after written request by any holder of a Convertible Note who has been a holder for at least six months fails to comply with Section 7.10, such holder 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 of Convertible Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided that all sums owing to the retiring Trustee hereunder have been paid and subject to the lien provided for in Section 7.07. Notwithstanding the replacement of the Trustee pursuant to this Section 7.08, the Company’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee with respect to expenses and liabilities incurred by it prior to such replacement.

Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the preceding paragraph.

SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business (including the trust created by this Indenture) to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein.

 

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SECTION 7.10. Eligibility, Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310 (a) (1). The Trustee shall always have a combined capital and surplus as stated in Section 10.10. The Trustee is subject to TIA § 310(b) regarding the disqualification of a trustee upon acquiring a conflicting interest.

SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA § 311(a), excluding any creditor relationship set forth in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE VIII

Satisfaction and Discharge of Indenture

SECTION 8.01. Discharge of Indenture. When (a) the Company delivers to the Trustee for cancellation all Convertible Notes theretofore authenticated (other than any Convertible Notes which have been destroyed, lost or stolen and in lieu of or in substitution for which other Convertible Notes have been authenticated and delivered) and not theretofore canceled, or (b) all the Convertible Notes not theretofore canceled or delivered to the Trustee for cancellation have become due and payable, or by their terms will become due and payable within one year, or are delivered to the Trustee for conversion in accordance with this Indenture, and the Company deposits with the Trustee, in trust, amounts sufficient to pay at maturity all of the Convertible Notes (other than any Convertible Notes which have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Convertible Notes have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and interest and Liquidated Damages, if any, due or to become due to such date of maturity, as the case may be, and if in either case the Company also pays, or causes to be paid, all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer, substitution, replacement and exchange and conversion of Convertible Notes, (ii) rights hereunder of holders of Convertible Notes to receive payments of principal of and interest, and Liquidated Damages, if any, on, the Convertible Notes, (iii) the obligations under Sections 2.03 and 8.05 hereof and (iv) the rights, obligations and immunities of the Trustee hereunder), and the Trustee, on demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel as required by Section 10.04 and at the Company’s cost and expense, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Convertible Notes.

SECTION 8.02. Deposited Moneys to be Held in Trust by Trustee. Subject to Section 8.04, all moneys deposited with the Trustee pursuant to Section 8.01 shall be held in trust and applied by it to the payment, notwithstanding the provisions of Article XI,

 

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either directly or through the Paying Agent, to the holders of the particular Convertible Notes for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest, and Liquidated Damages, if any.

SECTION 8.03. Paying Agent to Repay Moneys Held. Upon the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent (other than the Trustee) shall, upon the Company’s demand, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

SECTION 8.04. Return of Unclaimed Moneys. Subject to the requirements of applicable law, any moneys deposited with or paid to the Trustee for payment of the principal of, or interest or Liquidated Damages, if any, on Convertible Notes and not applied but remaining unclaimed by the holders thereof for two years after the date upon which the principal of, or interest, or Liquidated Damages, if any, on such Convertible Notes, as the case may be, have become due and payable, shall be repaid to the Company by the Trustee on demand; provided, however, that the Company, or the Trustee at the written request and expense of the Company, shall have first caused notice of such payment to the Company to be mailed to each holder of a Convertible Note entitled thereto no less than 30 days prior to such payment and all liability of the Trustee shall thereupon cease with respect to such moneys; and the holder of any of the Convertible Notes shall thereafter look only to the Company for any payment which such holder may be entitled to collect unless an applicable abandoned property law designates another person.

SECTION 8.05. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 8.02 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Convertible Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with Section 8.02; provided, however, that if the Company makes any payment of interest, Liquidated Damages, if any, on or principal of any Convertible Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the holders thereof to receive such payment from the money held by the Trustee or Paying Agent.

 

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ARTICLE IX

Amendments

SECTION 9.01. Without the Consent of Holders. The Company and the Trustee may amend this Indenture or the Convertible Notes without notice to or the consent of any holder of a Convertible Note for the purposes of:

(a) curing any ambiguity or correcting or supplementing any defective or inconsistent provision contained in this Indenture or making any other changes in the provisions of this Indenture which the Company and the Trustee may deem necessary or desirable, provided such amendment does not materially and adversely affect the legal rights under this Indenture of the holders of Convertible Notes;

(b) providing for uncertificated Convertible Notes in addition to or in place of certificated Convertible Notes;

(c) evidencing the succession of another person to the Company and providing for the assumption by such successor of the covenants and obligations of the Company thereunder and in the Convertible Notes as permitted by Section 5.01;

(d) providing for conversion rights or repurchase rights of holders of Convertible Notes in the event of consolidation, merger, share exchange or sale of all or substantially all of the assets of the Company as required to comply with Sections 5.01 or 12.06;

(e) reducing the Conversion Price;

(f) evidencing and providing for the acceptance of appointment under this Indenture of a successor Trustee;

(g) making any changes that would provide the holders of the Convertible Notes with any additional rights or benefits or that do not adversely affect the legal rights under this Indenture of any such holder;

(h) to reopen this Indenture and issue Additional Convertible Notes in accordance with the provisions of Section 2.02; or

(i) complying with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA.

SECTION 9.02. With the Consent of Holders. Subject to Section 6.07, the Company and the Trustee may amend this Indenture or the Convertible Notes with the written consent of the holders of at least a majority in principal amount of the then outstanding Convertible Notes (including consents obtained in connection with a tender offer or exchange offer for Convertible Notes).

Subject to Sections 6.04 and 6.07, the holders of a majority in principal amount of the Convertible Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for Convertible Notes) may also waive compliance in a particular instance by the Company with any provision of this Indenture or the Convertible Notes.

 

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However, without the consent of each holder of a Convertible Note affected, an amendment or waiver under this Section may not (with respect to any Convertible Notes held by a non-consenting holder):

(a) reduce the principal amount of Convertible Notes whose holders must consent to an amendment, supplement or waiver;

(b) reduce the principal of or change the fixed maturity of any Convertible Note or alter the mandatory repurchase provisions with respect thereto;

(c) reduce the rate of, or change the time for payment of, interest, including defaulted interest, or Liquidated Damages on any Convertible Note;

(d) change the make-whole premium payable pursuant to Section 12.01(h) hereof;

(e) waive a Default or Event of Default in the payment of principal of or interest or Liquidated Damages, if any, on the Convertible Notes (except a rescission of acceleration of the Convertible Notes by the holders of at least a majority in aggregate principal amount of the Convertible Notes then outstanding and a waiver of the payment default that resulted from such acceleration);

(f) make the principal of, or interest or Liquidated Damages, if any, on, any Convertible Note payable in money other than as provided for herein and in the Convertible Notes;

(g) make any change in the provisions of this Indenture relating to waivers of past Defaults or Events of Default or the rights of holders of Convertible Notes to receive payments of principal of, or interest or Liquidated Damages on the Convertible Notes;

(h) waive a mandatory repurchase payment with respect to any Convertible Notes;

(i) except as permitted herein (including Section 9.01(a)), increase the Conversion Price or modify the provisions contained herein relating to conversion of the Convertible Notes in a manner adverse to the holders thereof; or

(j) make any change to the abilities of holders of Convertible Notes to enforce their rights under this Indenture.

To secure a consent of the holders of Convertible Notes under this Section 9.02, it shall not be necessary for such holders to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

 

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After an amendment or waiver under this Section 9.02 becomes effective, the Company shall mail to holders of Convertible Notes a notice briefly describing the amendment or waiver.

In order to amend any provisions of Article XI, holders of at least 75% in aggregate principal amount of Convertible Notes then outstanding must consent to such amendment if such amendment would adversely affect the rights of holders of Convertible Notes.

SECTION 9.03. Compliance with the Trust Indenture Act. Every amendment to this Indenture or the Convertible Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

SECTION 9.04. Revocation and Effect of Consents. Until an amendment or waiver becomes effective, a consent to it by a holder of a Convertible Note is a continuing consent by the holder and every subsequent holder of a Convertible Note or portion of a Convertible Note that evidences the same debt as the consenting holder’s Convertible Note, even if notation of the consent is not made on any Convertible Note. However, any such holder or subsequent holder may revoke the consent as to his or her Convertible Note or portion of a Convertible 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 Convertible Notes have consented to the amendment or waiver.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the holders of Convertible Notes entitled to consent to any amendment or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those persons who were holders of Convertible Notes at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment or waiver or to revoke any consent previously given, whether or not such persons continue to be holders after such record date.

After an amendment or waiver becomes effective it shall bind every holder of a Convertible Note, unless it is of the type described in clauses (a) - (i) of Section 9.02. In such case, the amendment or waiver shall bind each holder of a Convertible Note who has consented to it and every subsequent holder of a Convertible Note or portion of a Convertible Note that evidences the same debt as the consenting holder’s Convertible Note.

SECTION 9.05. Notation on or Exchange of Convertible Notes. Convertible Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Trustee, bear a notation in the form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Convertible Notes so modified as to conform, in the opinion of the Company and the Trustee, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Convertible Notes without charge to the holders of the Convertible Notes, except as specified in Section 2.06.

 

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SECTION 9.06. Trustee Protected. The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article IX if such amendment or supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee.

If such amendment or supplemental indenture does adversely affect the rights, duties, liabilities or immunities of the Trustee, the Trustee may, but need not, sign it. In signing such amendment or supplemental indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms.

ARTICLE X

General Provisions

SECTION 10.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA § 318(c), such duties imposed by such section of the TIA shall control. If any provision of this Indenture expressly modifies or excludes any provision of the TIA that may be so modified or excluded, the Indenture provision so modifying or excluding such provision of the TIA shall be deemed to apply.

SECTION 10.02. Notices. Any notice or communication by the Company or the Trustee to the other is duly given if in writing (which may be by facsimile) and delivered in person or mailed by first-class mail, with postage prepaid (registered or certified, return receipt requested), or sent by facsimile or overnight air couriers guaranteeing next day delivery, to the other’s address as stated in Section 10.10. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to holders of Convertible Notes) shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when transmission is confirmed, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Notwithstanding the foregoing, all notices to the Trustee shall be effective only upon receipt by a Trust Officer.

Any notice or communication to a holder of a Convertible Note shall be mailed by first-class mail, with postage prepaid, to his or her 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.

 

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If a notice or communication to a holder of a Convertible Note is sent in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Company sends a notice or communication to holders of Convertible Notes, it shall send a copy to the Trustee and each Agent at the same time.

All notices or communications shall be in writing.

SECTION 10.03. Communication by Holders with Other Holders. Holders may communicate pursuant to TIA § 312(b) with other holders with respect to their rights under this Indenture or the Convertible Notes. The Company, the Trustee, the Registrar and the paying agent shall have the protection of TIA § 312(c).

SECTION 10.04. 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:

(a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05) stating that, in the opinion of such person, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 10.05) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.

SECTION 10.05. 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 a certificate provided pursuant to TIA § 314(a)(4)) shall include:

(a) a statement that the person making such certificate or 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, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

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(d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

Any Officers’ Certificate may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such Officer knows that the opinion with respect to the matters upon which his or her certificate may be based as aforesaid is erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon certificates, statements or opinions of, or representations by an officer or officers of the Company, or other persons or firms deemed appropriate by such counsel, unless such counsel knows that the certificates, statements or opinions or representations with respect to the matters upon which his or her opinion may be based as aforesaid are erroneous.

Any Officers’ Certificate, statement or Opinion of Counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representation by an accountant (who may be an employee of the Company), or firm of accountants, unless such Officer or counsel, as the case may be, knows that the certificate or opinion or representation with respect to the accounting matters upon which his or her certificate, statement or opinion may be based as aforesaid is erroneous.

SECTION 10.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by, or a meeting of, holders of Convertible Notes. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

SECTION 10.07. Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions in The City of New York are not required to be open, and a “Business Day” is any day that is not a Legal Holiday. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If any date specified in this Indenture is a Legal Holiday, then such date shall be the next succeeding Business Day.

SECTION 10.08. No Recourse Against Others. No director, officer, employee, shareholder or Affiliate, as such, of the Company from time to time shall have any liability for any obligations of the Company under the Convertible 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 Convertible Note waives and releases all such liability. This waiver and release are part of the consideration for the Convertible Notes. Each of such directors, officers, employees, shareholders and Affiliates of the Company is a third party beneficiary of this Section 10.08.

SECTION 10.09. Counterparts. This Indenture may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

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SECTION 10.10. Other Provisions. The Company initially appoints the Trustee as Paying Agent, Registrar and authenticating agent.

The reporting date for Section 7.06 is May 15 of each year. The first reporting date is the May 15 following the issuance of Convertible Notes hereunder.

The Trustee shall always have, or shall be a Subsidiary of a bank or bank holding company which has, a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

The Company’s address is:

Credence Systems Corporation

1421 California Circle

Milpitas, California 95035

Attention: Chief Financial Officer

Facsimile: (510) 623-2560

Telephone: (510) 657-7400

The Trustee’s address is:

The Bank of New York Trust Company, N.A.

700 South Flower Street, Suite 500

Los Angeles, California 90017

Attention: Corporate Trust Administration

Facsimile: (213) 630-6298

SECTION 10.11. Governing Law. The internal laws of the State of New York shall govern this Indenture and the Convertible Notes, without regard to the conflict of laws provisions thereof.

SECTION 10.12. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such other indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 10.13. Successors. All agreements of the Company in this Indenture and the Convertible Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

SECTION 10.14. Severability. In case any provision in this Indenture or in the Convertible 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.

 

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SECTION 10.15. 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.

ARTICLE XI

Subordination and Ranking

SECTION 11.01. Agreement to Subordinate. The Company agrees, and each holder of Convertible Notes by accepting a Convertible Note agrees, that the indebtedness evidenced by the Convertible Note is subordinated in right of payment, to the extent and in the manner provided in this Article XI, to the prior payment in full in cash or payment satisfactory to holders of Senior Debt of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred or assumed), and that the subordination is for the benefit of the holders of Senior Debt.

SECTION 11.02. Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company’s assets and liabilities:

(a) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) in cash or other payment satisfactory to the holders of the Senior Debt before holders of Convertible Notes shall be entitled to receive any payment with respect to the Convertible Notes; and

(b) until all Senior Debt is paid in full in cash or other payment satisfactory to the holders of the Senior Debt, any distribution to which holders of Convertible Notes would be entitled but for this Article XI shall be made to holders of Senior Debt, as their interests may appear.

SECTION 11.03. Default on Designated Senior Debt. Anything in this Indenture to the contrary notwithstanding, no payment on account of principal of, or interest or Liquidated Damages, if any, on or other amounts due on the Convertible Notes (including without limitation the making of a deposit pursuant to Section 4.06), and no redemption, repurchase or other acquisition of the Convertible Notes, shall be made by or on behalf of the Company unless:

(a) full payment of all amounts then due for principal of and interest on, and of all other amounts then due on, all Designated Senior Debt has been made or duly provided for pursuant to the terms of the instruments governing such Designated Senior Debt; and

 

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(b) at the time for, and immediately after giving effect to, any such payment, redemption, repurchase or other acquisition, there shall not exist under any Designated Senior Debt, or any agreement pursuant to which any Designated Senior Debt is issued, any default which shall not have been cured or waived and which default shall have resulted in the full amount of such Designated Senior Debt being declared due and payable.

In addition, if the Trustee shall receive written notice from the holders of Designated Senior Debt or their Representative (a “Payment Blockage Notice”) that there has occurred and is continuing under such Designated Senior Debt, or any agreement pursuant to which such Designated Senior Debt is issued, any non-payment default, which default shall not have been cured or waived, giving the holders of such Designated Senior Debt the right to declare such Designated Senior Debt immediately due and payable, then, anything in this Indenture to the contrary notwithstanding, no payment on account of the principal of, interest or Liquidated Damages, if any, on or any other amounts due on the Convertible Notes (including without limitation the making of a deposit pursuant to Section 4.06), and no redemption, repurchase or other acquisition of the Convertible Notes, shall be made by or on behalf of the Company during the period (the “Payment Blockage Period”) commencing on the date of receipt of the Payment Blockage Notice and ending on the earliest of (i) the date on which such default shall have been cured or waived, (ii) 179 days from the receipt of the Payment Blockage Notice and (iii) the date the Payment Blockage Notice is withdrawn by the holders of such Designated Senior Debt. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in Section 11.02 and the first sentence of this Section 11.03), unless the holders of such Designated Senior Debt or the Representative of such holders shall have accelerated the maturity of such Designated Senior Debt, the Company may resume payments on the Convertible Notes after the end of such Payment Blockage Period. Not more than one Payment Blockage Notice may be given in any consecutive 365-day period, irrespective of the number of defaults with respect to one or more issues of Designated Senior Debt during such period.

SECTION 11.04. Acceleration of Convertible Notes. In the event of the acceleration of the Convertible Notes because of an Event of Default, the Company may not make any payment or distribution to the Trustee or any holder of Convertible Notes in respect of Obligations with respect to Convertible Notes and may not acquire or purchase from the Trustee or any holder of Convertible Notes any Convertible Notes until all Senior Debt has been paid in full in cash or other payment satisfactory to the holders of Senior Debt or such acceleration is rescinded in accordance with the terms of this Indenture.

If payment of the Convertible Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt or trustees of such Senior Debt of the acceleration.

SECTION 11.05. When Distribution Must Be Paid Over. In the event that the Trustee, any holder of Convertible Notes or any other person receives any payment or distributions of assets of the Company of any kind with respect to the

 

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Convertible Notes in contravention of any subordination terms contained in this Indenture, whether in cash, property or securities, including, without limitation, by way of set-off or otherwise, then such payment shall be held by the recipient in trust for the benefit of holders of Senior Debt, and shall be immediately paid over and delivered to the holders of Senior Debt or their Representative, to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor, to or for the holders of Senior Debt; provided, however, that the foregoing shall apply to the Trustee only if a Trust Officer of the Trustee has actual knowledge (as determined in accordance with Section 11.11) that such payment or distribution is prohibited by this Indenture.

With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article XI, 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 be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to or on behalf of holders of Convertible Notes or the Company or any other person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article XI.

SECTION 11.06. Notice by Company. The Company shall promptly notify the Trustee of any facts known to the Company that would cause a payment of any Obligations with respect to the Convertible Notes or the purchase of any Convertible Notes by the Company to violate this Article XI, but failure to give such notice shall not affect the subordination of the Convertible Notes to the Senior Debt as provided in this Article XI.

SECTION 11.07. Subrogation. After all Senior Debt is paid in full and until the Convertible Notes are paid in full, holders of Convertible Notes shall be subrogated (equally and ratably with all other indebtedness pari passu with the Convertible Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the holders of Convertible Notes have been applied to the payment of Senior Debt. A distribution made under this Article XI to holders of Senior Debt that otherwise would have been made to holders of Convertible Notes is not, as between the Company and holders of Convertible Notes, a payment by the Company on the Convertible Notes.

SECTION 11.08. Relative Rights. This Article XI defines the relative rights of holders of Convertible Notes and holders of Senior Debt. Nothing in this Indenture shall:

(a) impair, as between the Company and holders of Convertible Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, and interest and Liquidated Damages, if any, on the Convertible Notes in accordance with their terms;

 

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(b) affect the relative rights of holders of Convertible Notes and creditors (other than with respect to Senior Debt) of the Company, other than their rights in relation to holders of Senior Debt; or

(c) prevent the Trustee or any holder of Convertible Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to holders of Convertible Notes.

If the Company fails because of this Article XI to pay principal of, or interest or Liquidated Damages, if any, on a Convertible Note on the due date, the failure is still a Default or Event of Default.

SECTION 11.09. Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the indebtedness evidenced by the Convertible Notes shall be impaired by any act or failure to act by the Company or any holder of Convertible Notes or by the failure of the Company or any such holder to comply with this Indenture.

SECTION 11.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative.

Upon any payment or distribution of assets of the Company referred to in this Article XI, the Trustee and the holders of Convertible Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other person making any distribution to the Trustee or to the holders of Convertible Notes 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 XI.

SECTION 11.11. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article XI or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee may continue to make payments on the Convertible Notes, unless a Trust Officer shall have received at least two Business Days prior to the date of such payment or distribution written notice of facts that would cause such payment or distribution with respect to the Convertible Notes to violate this Article XI. Only the Company or a Representative may give the notice.

Nothing in this Article XI shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.

 

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The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.

SECTION 11.12. Authorization to Effect Subordination. Each holder of a Convertible Note by the holder’s acceptance thereof authorizes and directs the Trustee on the holder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article XI, and appoints the Trustee to act as the holder’s attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Debt or their Representatives are hereby authorized to file an appropriate claim for and on behalf of the holders of the Convertible Notes.

SECTION 11.13. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article XI shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XI in addition to or in place of the Trustee; provided, however, that the second and third paragraphs of Section 11.11 shall not apply to the Company or any Subsidiary of the Company if it or such Subsidiary acts as Paying Agent.

SECTION 11.14. Senior Debt Entitled to Rely. The holders of Senior Debt shall have the right to rely upon this Article XI, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless the holders affected thereby shall have agreed in writing thereto.

SECTION 11.15. Permitted Payments. Notwithstanding anything to the contrary in this Article XI, the holders of Convertible Notes may receive and retain at any time on or prior to the Maturity Date (i) securities that are subordinated to at least the same extent as the Convertible Notes to (a) Senior Debt and (b) any securities issued in exchange for Senior Debt and (ii) payments and other distributions made from any trust created pursuant to Section 8.01.

SECTION 11.16. Ranking. The Convertible Notes shall be “Designated Senior Debt” for purposes of the indenture governing the Company’s 1.5% Convertible Subordinated Notes due 2008.

ARTICLE XII

Conversion of Convertible Notes

SECTION 12.01. Right To Convert. (a) Subject to the obligation and the right of the Company to pay some or all of the conversion consideration in cash in accordance with Section 12.12, and upon compliance with the provisions of this Indenture, each holder of Convertible Notes shall have the right, at his or her option, at any time on or

 

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before the close of business on the last Trading Day prior to the Maturity Date (except that, with respect to any Convertible Note or portion thereof subject to a duly completed election for repurchase, such right shall terminate at the close of business on the Designated Event Offer Termination Date (unless the Company defaults in the payment due upon repurchase or such holder elects to withdraw the submission of such election to repurchase in accordance with Section 4.06)) to convert the principal amount of any Convertible Note held by such holder, or any portion of such principal amount which is $1,000 or an integral multiple thereof, into that number of fully paid and non-assessable shares of Common Stock (as such shares shall then be constituted) obtained by dividing the principal amount of the Convertible Note or portion thereof to be converted by the Conversion Price in effect at such time, only under the following circumstances:

(1) during any calendar quarter beginning after December 31, 2006, and only during such calendar quarter, if, as of the last day of the immediately preceding calendar quarter, the Volume Weighted Average Price per share of the Common Stock for at least 20 Trading Days in the period of the 30 consecutive Trading Days ending on the last Trading Day of such preceding calendar quarter was more than 150% of the Conversion Price on the last day of such preceding calendar quarter (the “Conversion Trigger Price”);

(2) during any five Trading Day period after any five consecutive Trading Day period in which the Trading Price per $1,000 principal amount of Convertible Notes, as determined following a request by a holder in accordance with the procedures described below in Section 12.01(d)(ii), for each day of that period was less than 98% of the product of (x) the Volume Weighted Average Price of the Common Stock for each day in that period and (y) the Conversion Rate per $1,000 principal amount of Convertible Notes;

(3) if the Company distributes to all holders of Common Stock rights or warrants entitling them to purchase, for a period expiring within 45 days of the date of issuance, Common Stock at less than the Closing Price of the Common Stock on the day of issuance;

(4) if the Company distributes to all holders of Common Stock, assets, debt securities or rights to purchase the Company’s securities, which distribution has a per share value exceeding 7.5% of the Volume Weighted Average Price of the Common Stock on the Business Day preceding the declaration date for such distribution;

(5) if a Designated Event (or an event that would have been a Designated Event but for the existence of the proviso in the definition of Change of Control) occurs or is anticipated to occur (as further described in clause (h));

 

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(6) at any time after the Company delivers a Conversion Termination Notice to the holders as further described in Section 12.13; or

(7) at any time during the period beginning 60 days prior to, but excluding, any scheduled Designated Event Payment Date or the Maturity Date.

Notwithstanding the foregoing, even if the Convertible Notes are otherwise convertible as set forth in Section 12.01(a)(1), 12.01(a)(2), 12.01(a)(3), 12.01(a)(4) and 12.01(a)(6), the Convertible Notes shall not be convertible unless the Convertible Notes are convertible pursuant to Sections 12.01(a)(5), or 12.01(a)(7) if, at the time a holder of Convertible Notes tenders its Convertible Notes for conversion, there exists a default or event of default under the Credit Agreement. The inability of a holder to convert its Convertible Notes because of this restriction set forth in the immediately preceding sentence will not constitute a Default or an Event of Default under this Indenture.

If the Convertible Notes would be convertible but are not convertible because of the restrictions set forth in the immediately preceding paragraph and a holder tenders its Convertible Notes for conversion, the Company will use reasonable efforts to permit such conversions, which may include, without limitation, seeking to obtain the consent of the lenders under the Credit Agreement, attempting to refinance the debt under the Credit Agreement and the issuance and sale of additional equity securities. If, despite the Company’s reasonable efforts, conversions continue to be prohibited, the Company will promptly inform such converting holder and return such holder’s Convertible Notes and any related notice of conversion will be deemed to be revoked to the extent of such returned Convertible Notes.

The Company will not make any dividend or distribution of the type referred to in Sections 12.01(a)(3) or 12.01(a)(4) or deliver a Conversion Termination notice to the holders pursuant to Section 12.13 to the extent that a holder would be unable to convert such Convertible Note and receive such dividend or distribution, if applicable, as a result of the conversion restrictions set forth in this Section 12.01(a).

(b) In the case of a distribution contemplated by clauses (3) and (4) of Section 12.01(a), the Company shall notify holders at least 20 days prior to the ex-dividend date for such distribution (the “Distribution Notice”). Once the Company has given the Distribution Notice, holders may surrender their Convertible Notes for conversion at any time until the earlier of the close of business on the last Trading Day preceding the ex-dividend date or the Company’s announcement that such distribution will not take place. In the event of a distribution contemplated by clauses (3) and (4) of Section 12.01(a), holders may not convert the Convertible Notes if the holders will otherwise participate in such distribution without converting their Convertible Notes. The Company will provide written notice to the Conversion Agent as soon as reasonably practicable of any anticipated or actual event or transaction that will cause or causes the Convertible Notes to become convertible pursuant to clauses (3) or (4) of Section 12.01(a).

 

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(c) In the case of a transaction contemplated by clause (5) of section 12.01(a), the Company will notify the holders and Trustee at least 15 Trading Days prior to the anticipated Designated Event Date of any Designated Event (or an event that would have been a Designated Event but for the existence of the proviso in the definition of Change of Control) that the Company knows or reasonably should know will occur. If the Company does not know, and should not reasonably know, that a Designated Event will occur until a date that is within 15 Trading Days before the anticipated Designated Event Effective Date or other applicable event, the Company will notify the holders and the Trustee promptly after the Company has knowledge of such Designated Event or such other event. Holders may surrender Convertible Notes for conversion at any time beginning 15 Trading Days before the anticipated Designated Event Date of a Designated Event (or an event that would have been a Designated Event but for the existence of the proviso in the definition of Change of Control) and until the Trading Day prior to the date of the Designated Event Payment Date (or other applicable event).

(d) (i) For each calendar quarter of the Company, beginning with the calendar quarter beginning at any time after December 31, 2006, the Conversion Agent, on behalf of the Company, will determine, on the first Business Day following the last Trading Day of the previous calendar quarter, whether the Convertible Notes are convertible pursuant to clause (1) of Section 12.01(a), and, if so, will notify the Trustee and the Company in writing. Upon request of the Conversion Agent, the Company shall provide, or cause to be provided to, the Conversion Agent the Volume Weighted Average Price per share of Common Stock for the 30 consecutive Trading Days ending on the last Trading Day of the preceding calendar quarter.

      (ii) The Bid Solicitation Agent shall have no obligation to determine the Trading Price of the Convertible Notes and whether the Convertible Notes are convertible pursuant to clause (2) of Section 12.01(a) unless the Company has requested such determination in writing; and the Company shall have no obligation to make such request unless a holder of Convertible Notes provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Convertible Notes would be less than 98% of the product of the Volume Weighted Average Price of the Common Stock and the Conversion Rate per $1,000 principal amount of Convertible Notes. At such time, the Company shall instruct the Bid Solicitation Agent to determine the Trading Price of the Convertible Notes beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 principal amount of the Convertible Notes is greater than 98% of the product of the Volume Weighted Average Price of the Common Stock and the Conversion Rate per $1,000 principal amount of the Convertible Notes.

(e) The conversion rights pursuant to this Article 12 shall commence on the initial issuance date of the Convertible Notes and expire at the close of business on the Business Day immediately preceding the Maturity Date, but shall be exercisable only during the time periods specified with respect to each circumstance pursuant to which the Convertible Notes become convertible. If a Convertible is submitted or presented for

 

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purchase upon a Designated Event pursuant to Section 4.06, such conversion right shall terminate at the close of business on the Business Day immediately preceding the Designated Event Payment Date for such Convertible Note (unless the Company shall fail to make the Designated Event payment when due in accordance with Section 4.06, in which case the conversion right shall terminate at the close of business on the date such failure is cured and such Convertible Note is purchased). If a Convertible Note is convertible as a result of a Designated Event, such conversion right shall commence and terminate as set forth in Section 12.01(c). Convertible Notes in respect of which a Designated Event Offer has been delivered may not be surrendered for conversion pursuant to this Article 12 prior to a valid withdrawal of such Designated Event Notice in accordance with the provisions of Section 4.06.

(f) Provisions of this Indenture that apply to conversion of all of a Convertible Note also apply to conversion of a portion of a Convertible Note.

(g) A holder of Convertible Notes is not entitled to any rights of a holder of Common Stock until such holder has converted its Convertible Notes into Common Stock, and only to the extent such Convertible Notes are deemed to have been converted into Common Stock pursuant to this Article 12.

(h) If there shall have occurred a Designated Event (or an event that would have been a Designated Event but for the existence of the proviso in the definition of Change of Control) (other than a Change of Control where 10% or more of the fair market value of the consideration for the Common Stock (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value) in the corporation transaction consists of (i) cash (not including cash payments for fractional shares), (ii) other property or (iii) securities that are not traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or the Nasdaq National Market), then the Conversion Rate per $1,000 principal amount of Convertible Notes otherwise in effect in respect of Convertible Notes for which a conversion notice is received by the Conversion Agent during the period beginning 15 Trading Days before the date announced by the Company as the anticipated Designated Event Date and ending at the close of business on the Trading Day immediately preceding the Designated Event Payment Date shall be increased by the amount, if any, determined by reference to the table below, based on the Designated Event Date and the Stock Price of such Designated Event; provided that if the Stock Price or Designated Event Date are not set forth on the table: (i) if the actual Stock Price on the Designated Event Date is between two Stock Prices on the table or the actual Designated Event Date is between two Designated Event Dates on the table, the amount of the Conversion Rate adjustment will be determined by a straight-line interpolation between the adjustment amounts set forth for the two Stock Prices and the two Designated Event Dates on the table based on a 365-day year, as applicable, (ii) if the Stock Price on the Designated Event Date exceeds $20.00 per share, subject to adjustment as set forth herein, no adjustment to the applicable Conversion Rate will be made, and (iii) if the Stock Price on the Designated Event Date is less than $5.27 per share, subject to adjustment as set forth herein, no adjustment to the applicable Conversion Rate will be made. If holders of the Common Stock receive only cash in the Designated Event, the Stock Price shall be the

 

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cash amount paid per share of the Common Stock in connection with the Designated Event. Otherwise, the Stock Price shall be equal to the Volume Weighted Average Price of the Common Stock for each of the 10 Trading Days immediately preceding, but not including, the applicable Designated Event Date.

The following table shows the amount, if any, by which the applicable Conversion Rate will increase for each Stock Price and Designated Event Effective Date set forth below:

Make Whole Premium Upon a Designated Event

(Increase in Applicable Conversion Rate)

 

Stock Price on

Effective Date

 

December 20,

2006

 

May 15,

2007

 

May 15,

2008

 

May 15,

2009

 

May 15,

2010

$ 5.27   60.8   60.8   60.8   60.8   60.8
$ 6.50   39.6   39.6   38.3   36.1   32.6
$ 8.00   24.9   24.9   22.6   18.9   3.8
$ 9.50   16.8   16.1   135.   9.9   0.0
$ 11.00   12.2   11.3   8.7   5.3   0.0
$ 12.50   9.7   8.6   5.8   3.0   0.0
$ 14.00   8.7   7.7   5.2   2.7   0.0
$ 15.50   7.8   6.9   4.7   2.4   0.0
$ 17.00   7.3   6.3   4.3   2.2   0.0
$ 18.50   6.6   5.8   3.9   2.0   0.0
$ 20.00   6.1   5.4   3.6   1.9   0.0

The Stock Prices set forth in the first column of the table above will be adjusted as of any date on which the Conversion Rate of the Convertible Notes is adjusted. The adjusted Stock Prices will equal the Stock Prices applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Stock Price adjustment and the denominator of which is the Conversion Rate as so adjusted. The Conversion Rate adjustment amounts set forth in the table above will be adjusted in the same manner as the Conversion Rate as set forth in Section 12.05 hereof, other than as a result of an adjustment of the Conversion Rate by virtue of the provisions of this Section 12.01(h).

Notwithstanding the foregoing, in no event will the conversion rate exceed 182.01213 per $1,000 principal amount of Convertible Notes, other than on account of proportional adjustments to the Conversion Rate in the manner set forth in Section 12.05 below.

(i) Except as set forth in Section 12.02, by delivering the amount of cash and, if applicable, the number of shares of Common Stock issuable on conversion to the Trustee, the Company will be deemed to have satisfied its obligation to pay the principal

 

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amount of the Convertible Notes so converted and its obligation to pay accrued and unpaid interest attributable to the period from the most recent Interest Payment Date through the Conversion Date (which amount will be deemed paid in full rather than cancelled, extinguished or forfeited).

(j) If a holder has delivered a Notice that it wishes to have its Convertible Notes repurchased in accordance with Section 4.06, the holder may not surrender such Convertible Note for conversion until the holder has withdrawn such notice in accordance with Section 4.06.

SECTION 12.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends. To exercise, in whole or in part, the conversion privilege with respect to any Convertible Note, the holder of such Convertible Note shall surrender such Convertible Note, duly endorsed, at an office or agency maintained by the Company pursuant to Section 4.04, accompanied by the funds, if any, required by the penultimate paragraph of this Section 12.02, and shall give written notice of conversion in the form provided on the Convertible Notes (or such other notice which is acceptable to the Company) to the office or agency that the holder of Convertible Notes elects to convert such Convertible Note or such portion thereof specified in said notice. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock which are issuable on such conversion shall be issued, and shall be accompanied by transfer taxes, if required pursuant to Section 12.07. Each such Convertible Note surrendered for conversion shall, unless the shares issuable on conversion are to be issued in the same name as the registration of such Convertible Note, be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the holder of Convertible Notes or his or her duly authorized attorney. The holder of such Convertible Notes will not be required to pay any tax or duty which may be payable in respect of the issue or delivery of Common Stock on conversion, but will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue or delivery of Common Stock in a name other than the same name as the registration of such Convertible Note.

As promptly as practicable after the later of the satisfaction of the requirements for conversion set forth above and the date all calculations necessary to make such payment and delivery have been made, but in no event later than five Trading Days after the later of such dates, the Company shall (i) pay the cash to the holders (including in respect of any fractional interest in respect of a share of Common Stock arising upon such conversion) and (ii) issue and shall deliver to such holder at the office or agency maintained by the Company for such purpose pursuant to Section 4.04, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such Convertible Note or portion thereof in accordance with the provisions of this Article XII. Certificates representing shares of Common Stock will not be issued or delivered unless all taxes and duties, if any, payable by the holder have been paid. In case any Convertible Note of a denomination of an integral multiple greater than $1,000 is surrendered for partial conversion, and subject to Section 2.02, the Company shall execute, and the Trustee shall authenticate and deliver to the holder of the Convertible Note so surrendered, without charge

 

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to him or her, a new Convertible Note or Convertible Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Convertible Note.

Each conversion shall be deemed to have been effected as to any such Convertible Note (or portion thereof) on the date on which the requirements set forth above in this Section 12.02 have been satisfied as to such Convertible Note (or portion thereof), and the person in whose name any certificate or certificates for shares of Common Stock are issuable upon such conversion shall be deemed to have become on said date the holder of record of the shares represented thereby; provided, however, that any such surrender on any date when the Company’s stock transfer books are closed shall constitute the person in whose name the certificates are to be issued as the record holder thereof for all purposes on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such Convertible Note is surrendered.

Any Convertible Note or portion thereof surrendered for conversion during the period from the close of business on the record date for any interest payment through the close of business on the last Trading Day immediately preceding such interest payment date shall be accompanied by payment, in funds acceptable to the Company, of an amount equal to the interest, otherwise payable on such interest payment date on the principal amount being converted, unless such Convertible Notes have been surrendered for conversion following the regular record date immediately preceding the Maturity Date; provided, however, that such payment may be reduced by the amount of any existing payment default in respect of such Convertible Notes. An amount equal to such payment shall be paid by the Company on such interest payment date to the holder of such Convertible Note at the close of business on such record date. Except as provided above in this Section 12.02, no adjustment shall be made for interest and Liquidated Damages, if any, accrued on any Convertible Note converted or for dividends on any shares issued upon the conversion of such Convertible Note as provided in this Article XII. If any Convertible Note is converted after a record date for the payment of interest and prior to the next succeeding interest payment date, interest payable on such interest payment date shall be payable notwithstanding such conversion, and such interest shall be paid to the holder of such Convertible Note on the applicable record date.

Upon the Company’s determination that a holder is or will be entitled to convert its Convertible Notes into cash and, if applicable, shares of Common Stock pursuant to this Article 12, the Company will promptly after making such determination issue a press release and use its reasonable efforts to post such information on the Company’s website or otherwise publicly disclose such information.

SECTION 12.03. Cash Payments in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon conversion of Convertible Notes. If more than one Convertible Note shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal

 

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amount of the Convertible Notes (or specified portions thereof to the extent permitted hereby) so surrendered for conversion. If any fractional share of stock otherwise would be issuable upon the conversion of any Convertible Note or Convertible Notes, the Company shall make an adjustment therefor in cash based upon the Current Market Price of the Common Stock on the last Trading Day prior to the date of conversion.

SECTION 12.04. Conversion Price. The conversion price shall be as specified in the form of Convertible Note attached as Exhibit A hereto, subject to adjustment as provided in this Article XII.

SECTION 12.05. Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time by the Company as follows:

(a) If the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 12.05(g)) fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 12.05(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

(b) If the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

(c) If the Company shall issue rights or warrants to all or substantially all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 12.05(g)) on the Record Date fixed for the determination of shareholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record

 

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Date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price, and of which the denominator shall be the number of shares of Common Stock outstanding on the close of business on the Record Date plus the total number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of shareholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Conversion Price shall be readjusted to be the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of shareholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, with the value of such consideration, if other than cash, to be determined by the Board of Directors.

(d) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 12.05(a) applies) or evidences of its indebtedness, cash or other assets (including securities, but excluding (i) any rights or warrants of a type referred to in Section 12.05(c) and (ii) dividends and distributions paid exclusively in cash) (the foregoing hereinafter in this Section 12.05(d) called the “Securities”), then, in each such case, the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date (as defined in Section 12.05(g)) with respect to such distribution by a fraction of which the numerator shall be the Current Market Price (determined as provided in Section 12.05(g)) on such date less the Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) on such date of the portion of the Securities so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price, such reduction to become effective immediately prior to the opening of business on the day following the Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the Fair Market Value of any distribution for purposes of this Section 12.05(d) by reference to the actual or when issued trading market for any securities comprising all or part of such

 

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distribution, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price pursuant to Section 12.05(g) to the extent possible.

Notwithstanding any other provision of Section 12.05(c) or this Section 12.05(d) to the contrary, rights, warrants, evidences of indebtedness, other securities, cash or other assets (including, without limitation, any rights distributed pursuant to any shareholder rights plan) shall be deemed not to have been distributed for purposes of Section 12.05(c) or this Section 12.05(d), as applicable, if the Company makes proper provision so that each holder of Convertible Notes who converts a Convertible Note (or any portion thereof) after the date fixed for determination of shareholders entitled to receive such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of such distributions that such holder would have been entitled to receive if such holder had, immediately prior to such determination date, converted such Convertible Note into Common Stock, and, in the case of this Section 12.05(d), interest accrued as a consequence of the investment, in U.S. Government Obligations with a maturity of not more than three months, of the cash amount that such holder would have been so entitled to receive.

Rights or warrants distributed by the Company to all or substantially all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company’s capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 12.05(d) (and no adjustment to the Conversion Price under this Section 12.05(d) shall be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment to the Conversion Price under this Section 12.05(d) shall be made. If any such rights or warrants, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to subsequent events, upon the occurrence of each of which such rights or warrants shall become exercisable to purchase different securities, evidences of indebtedness or other assets, then the occurrence of each such event shall be deemed to be such date of issuance and record date with respect to new rights or warrants (and a termination or expiration of the existing rights or warrants without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event with respect thereto, that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Price under this Section 12.05(d) was made, (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase

 

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price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Price shall be readjusted as if such rights and warrants had not been issued.

For purposes of this Section 12.05(d) and Sections 12.05(a) and (c), any dividend or distribution to which this Section 12.05(d) is applicable that also includes shares of Common Stock to which Section 12.05(a) applies, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 12.05(c) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock or rights or warrants to which Section 12.05(a) or (c) applies (and any Conversion Price reduction required by this Section 12.05(d) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Conversion Price reduction required by Sections 12.05(a) and (c) with respect to such dividend or distribution shall then be made, except that (A) the Record Date of such dividend or distribution shall be substituted as “the date fixed for the determination of shareholders entitled to receive such dividend or other distribution”, “Record Date fixed for such determination” and “Record Date” within the meaning of Section 12.05(a) and as “the date fixed for the determination of shareholders entitled to receive such rights or warrants”, “the Record Date fixed for the determination of the shareholders entitled to receive such rights or warrants” and “such Record Date” within the meaning of Section 12.05(c) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding at the close of business on the date fixed for such determination” within the meaning of Section 12.05(a)).

(e) If the Company shall, by dividend or otherwise, distribute cash to all holders of its Common Stock (excluding any cash that is distributed upon a merger, share exchange or consolidation to which Section 12.06 applies or as part of a distribution referred to in Section 12.05(d)), then, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction (i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) total amount of such dividend or distribution and (y) the number of shares of Common Stock outstanding on the Record Date and (ii) the denominator of which shall be equal to the Current Market Price on such Record Date; provided, however, that if the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of Convertible Notes shall have the right to receive upon conversion of a Convertible Note (or any portion thereof) the Common Stock issuable upon such conversion and the amount of cash such holder would have received had such holder converted such Convertible

 

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Note (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

(f) If a tender offer made by the Company or any of its subsidiaries for all or any portion of the Common Stock expires and such tender offer (as amended upon the expiration thereof) requires the payment to shareholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)), then, immediately prior to the opening of business on the day after the last time (the “Expiration Time”) tenders could have been made pursuant to such tender offer (as it may be amended), the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to close of business on the date of the Expiration Time by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the amount of cash plus the Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction (if any) to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 12.05(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 12.05(f).

(g) For purposes of this Section 12.05, the following terms shall have the meanings indicated:

(1) “Closing Price” with respect to any securities on any day means the closing price on such day or, if no closing price is available, the average of the reported high and low prices on such day, in each case on the Nasdaq Global Select Market or New York Stock Exchange, as

 

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applicable, or, if such security is not listed or admitted to trading on such national market or exchange, on the principal national securities exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the high and low prices of such security on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose, or a price determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors.

(2) “Current Market Price” means the average of the daily Closing Prices per share of Common Stock for the 10 consecutive Trading Days immediately prior to the date in question; provided, however, that (1) if the “ex” date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Sections 12.05(a), (b), (c), (d), (e) or (f) occurs during such 10 consecutive Trading Days, the Closing Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event, (2) if the “ex” date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Sections 12.05(a), (b), (c), (d), (e) or (f) occurs on or after the “ex” date for the issuance or distribution requiring such computation and prior to the day in question, the Closing Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event, and (3) if the “ex” date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or after such “ex” date shall be adjusted by adding thereto the amount of any cash and the Fair Market Value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Sections 12.05(d) or (f), whose determination shall be conclusive and described in a resolution of the Board of Directors) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such “ex” date. For purposes of any computation under Section 12.05(f), the Current Market Price on any date shall be deemed to be the average of the daily Closing

 

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Prices per share of Common Stock for such day and the next two succeeding Trading Days; provided, however, that if the “ex” date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant to Sections 12.05(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the Closing Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term “ex” date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution, (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective, and (3) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 12.05, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.05 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors.

(3) “Fair Market Value” shall mean the amount which a willing buyer would pay a willing seller in an arm’s length transaction.

(4) “Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

(5) “Trading Day” shall mean (x) if the applicable security is listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which the New York Stock Exchange or such other national securities exchange is open for business or (y) if the

 

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applicable security is quoted on the Nasdaq Global Select Market, a day on which trades may be made thereon or (z) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

(h) The Company may make such reductions in the Conversion Price, in addition to those required by Sections 12.05(a), (b), (c), (d), (e) and (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.

The Company from time to time may, to the extent permitted by law, reduce the Conversion Price by any amount for any period of at least 20 days, if the Board of Directors has made a determination that such reduction would be in the Company’s best interests, which determination shall be conclusive and described in a resolution of the Board of Directors. The reduction in Conversion Price shall be irrevocable during this period. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the holders of Convertible Notes at his or her last address appearing on the Register of holders maintained for that purpose a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect.

(i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12.05(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article XII shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be.

No adjustment need be made for a change in the par value or no par value of the Common Stock.

(j) Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers’ Certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of Convertible Notes at his or her last address appearing on the Register of holders maintained for that purpose within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

 

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(k) In any case in which this Section 12.05 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event issuing to the holder of any Convertible Note converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment.

(l) For purposes of this Section 12.05, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

SECTION 12.06. Effect of Reclassification, Consolidation, Merger or Sale. If any of the following events occur: (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger, share exchange or combination of the Company with another person, or (iii) any sale or conveyance of the properties and assets of the Company as an entirety or substantially as an entirety, in each case as a result of which holders of Common Stock shall receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the TIA as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) providing that the Convertible Notes shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of the Convertible Notes (assuming, for such purposes, a sufficient number of authorized shares of Common Stock available to convert all such Convertible Notes) immediately prior to such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance. In the event holders of Common Stock have the opportunity to elect the form of consideration to be received in such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance, the Company will make adequate provision whereby holders of the Convertible Notes shall have the opportunity, on a timely basis, to determine the form of consideration into which all of the Convertible Notes, treated as a single class, shall be convertible. Such determination shall be based on the blended, weighted average of elections made by holders of the Convertible Notes who participate in such determination and shall be subject to any limitations to which all of the holders of Common Stock are subject to, such as pro rata reductions applicable to any portion of the consideration payable. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this

 

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Article XII. If, in the case of any such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and assets of a person other than the successor or purchasing person, as the case may be, in such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other person and shall contain such additional provisions to protect the interests of the holders of the Convertible Notes as the Board of Directors shall reasonably consider necessary by reason of the foregoing. Appropriate provisions will be made, as determined in good faith by the Company’s Board of Directors, to preserve the settlement provisions of Section 12.13 following such reclassification, change, consolidation, merger, share exchange, combination, sale or conveyance to the extent feasible. The Company may not become a party to any such transaction unless its terms are consistent with this Section 12.06.

The Company shall cause notice of the execution of such supplemental indenture to be mailed to each holder of Convertible Notes at his or her address appearing on the Register of holders for that purpose within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

The above provisions of this Section 12.06 shall similarly apply to successive reclassifications, changes, consolidations, mergers, share exchanges, combinations, sales and conveyances.

If this Section 12.06 applies to any event or occurrence, Section 12.05 shall not apply.

SECTION 12.07. Taxes on Shares Issued. The issue of stock certificates on conversions of Convertible Notes shall be made without charge to the converting holder for any tax in respect of the issue thereof. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of the holder of any Convertible Note converted, and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue 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.

SECTION 12.08. Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock. The Company shall provide, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, sufficient shares to provide for the conversion of the Convertible Notes from time to time as such Convertible Notes are presented for conversion. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value, if any, of the shares of Common Stock issuable upon conversion of the Convertible Notes, the Company shall take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue shares of such Common Stock at such adjusted Conversion Price.

 

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The Company covenants that all shares of Common Stock issued upon conversion of Convertible Notes will be fully paid and nonassessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.

The Company further covenants that as long as the Common Stock is quoted on the Nasdaq Global Select Market, or its successor, the Company shall cause all Common Stock issuable upon conversion of the Convertible Notes to be eligible for such quotation in accordance with, and at the times required under, the requirements of such market, and if at any time the Common Stock becomes listed on the New York Stock Exchange or any other national securities exchange, the Company shall cause all Common Stock issuable upon conversion of the Convertible Notes to be so listed and remain listed.

SECTION 12.09. Responsibility of Trustee. The Trustee shall not at any time be under any duty of responsibility to any holders of Convertible Notes to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Convertible Note; and the Trustee makes no representations with respect thereto. Subject to the provisions of Section 7.01, the Trustee shall not be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any Convertible Note for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article XII. Without limiting the generality of the foregoing, the Trustee shall not have any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 12.06 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by holders of Convertible Notes upon the conversion of their Convertible Notes after any event referred to in such Section 12.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 7.01, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’ Certificate and Opinion of Counsel (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.

SECTION 12.10. Notice to Holders Prior to Certain Actions. If

(a) the Company declares a dividend (or any other distribution) on its Common Stock (other than in cash out of retained earnings);

 

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(b) the Company authorizes the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any share of any class of Common Stock or any other rights or warrants (other than rights or warrants referred to in the second paragraph of Section 12.05(d));

(c) there is any reclassification of the Common Stock (other than a subdivision or combination of outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or

(d) there is any voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then the Company shall cause to be filed with the Trustee and to be mailed to each holder of Convertible Notes at his or her address appearing on the Register maintained for that purpose as promptly as possible but in any event at least 15 days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend or distribution of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution are to be determined, or (y) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up.

SECTION 12.11. Restriction on Common Stock Issuable Upon Conversion. (a) Shares of Common Stock to be issued upon conversion of Convertible Notes prior to the effectiveness of a Shelf Registration Statement shall be physically delivered in certificated form to the holders converting such Securities, and the certificate representing such shares of Common Stock shall bear the Restricted Common Stock Legend unless removed in accordance with Section 12.11(c).

(b) If (i) shares of Common Stock to be issued upon conversion of a Convertible Note prior to the effectiveness of a Shelf Registration Statement are to be registered in a name other than that of the holder of such Convertible Note or (ii) shares of Common Stock represented by a certificate bearing the Restricted Common Stock Legend are transferred subsequently by such holder, then, unless the Shelf Registration Statement has become effective and such shares are being transferred pursuant to the Shelf Registration Statement, the holder must deliver to the transfer agent for the Common Stock a certificate

 

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in substantially the form of Exhibit C as to compliance with the restrictions on transfer applicable to such shares of Common Stock, and neither the transfer agent nor the registrar for the Common Stock shall be required to register any transfer of such Common Stock not so accompanied by a properly completed certificate.

(c) Except in connection with a Shelf Registration Statement, if certificates representing shares of Common Stock are issued upon the registration of transfer, exchange or replacement of any other certificate representing shares of Common Stock bearing the Restricted Common Stock Legend, or if a request is made to remove such Restricted Common Stock Legend from certificates representing shares of Common Stock, the certificates so issued shall bear the Restricted Common Stock Legend, or the Restricted Common Stock Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which, in the case of a transfer made pursuant to Rule 144 under the Securities Act, may include an opinion of counsel as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities Act or that such shares of Common Stock are securities that are not “restricted” within the meaning of Rule 144 under the Securities Act. Upon provision to the Company of such reasonably satisfactory evidence, the Company shall cause the transfer agent for the Common Stock to countersign and deliver certificates representing shares of Common Stock that do not bear the legend.

SECTION 12.12. Payment of Cash in Lieu of Common Stock.

(a) In lieu of delivery of some or all of the shares of Common Stock otherwise issuable upon notice of conversion of any Convertible Notes, holders surrendering Convertible Notes for conversion shall receive for each $1,000 principal amount of Convertible Notes surrendered for conversion: (A) cash in an amount equal to the lesser of (1) $1,000 and (2) the Conversion Value; and, in addition to amounts distributed pursuant to (A), (B) if the Conversion Value is greater than $1,000, a number of shares of Common Stock equal to the sum of the Daily Share Amounts for each of the twenty consecutive Trading Days in the Conversion Reference Period, appropriately adjusted to reflect stock splits, stock dividends, combinations or similar events occurring during the Conversion Reference Period, subject to the Company’s right to deliver cash in lieu of all or a portion of such shares as set forth in Section 12.12(b). The Company will deliver such cash and any shares of Common Stock, together with any cash payable for fractional shares, to such holder in accordance with Section 12.02(a).

(b) The Company may elect to pay cash to the holders of Convertible Notes surrendered for conversion in lieu of all or a portion of the Common Stock otherwise issuable pursuant to Section 12.12(a). In such event, on any day prior to the first Trading Day of the applicable Conversion Reference Period, the Company will specify a percentage of the Daily Share Amount that will be settled in cash (the “Cash Percentage”) and the amount of cash that the Company will pay in respect of each Trading Day in the applicable Conversion Reference Period will equal the product of: (1) the Cash Percentage, (2) the Daily Share Amount for such Trading Day and (3) the Closing Price of the Common Stock

 

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for such Trading Day (provided that after the consummation of a Fundamental Change in which the consideration is comprised entirely of cash, the amount used in this clause (3) will be the cash price per share received by holders of the Common Stock in such Fundamental Change). The number of shares that the Company shall deliver in respect of each Trading Day in the applicable Conversion Reference Period will be a percentage of the Daily Share Amount equal to 100% minus the Cash Percentage. Upon making a determination that a percentage of the Daily Share Amount will be settled in cash, the Company shall promptly issue a press release and disclose such information on its website prior to the first Trading Day of the applicable Conversion Reference Period. If the Company does not specify a Cash Percentage by the start of the applicable Conversion Reference Period, the Company shall settle 100% of the Daily Share Amount for each Trading Day in the applicable Conversion Reference Period with shares of Common Stock; provided, however, that the Company shall pay cash in lieu of fractional shares otherwise issuable upon conversion of Convertible Notes.

(c) For the purposes of Sections 12.12(a) and (b), in the event that any of Conversion Value, Daily Share Amounts or Volume Weighted Average Price cannot be determined for all portions of the Conversion Reference Period, the Company’s Board of Directors shall in good faith determine the values necessary to calculate the Conversion Value, Daily Share Amounts and Volume Weighted Average Price, as applicable.

SECTION 12.13. Termination of Conversion Rights by the Company. (a) The Company may, at its option and subject to the last sentence of this paragraph, elect to terminate the right of the holders to convert their Convertible Notes into Common Stock (the “Conversion Right”) if the Closing Price of the Common Stock has exceeded 150% of the Conversion Price for at least 20 Trading Days within a period of any 30 consecutive Trading Days (a “Conversion Termination Trigger Event”). If the Company elects to terminate the Conversion Right upon a Conversion Termination Trigger Event, the Company will be required to deliver an irrevocable notice to holders of Convertible Notes within five Trading Days of the date of the Conversion Termination Trigger Event (the “Conversion Termination Notice,” and the date of such Conversion Termination Notice, the “Conversion Termination Notice Date”). Holders may convert their Convertible Notes at any time on or prior to the twentieth (20th) day following the Conversion Termination Notice Date (the “Conversion Termination Date”). The Conversion Rights of holders shall terminate after the Conversion Termination Date (a “Conversion Termination”), and thereafter the holders shall have no rights to convert and receive shares of Common Stock under the Convertible Notes or this Indenture. The Company may terminate the Conversion Right upon a Conversion Termination Trigger Event during the two-year period after the Issue Date of the Convertible Notes only if a Shelf Registration Statement has been filed by the Company and been declared effective by the Commission and is available for use, and the Company expects such Shelf Registration Statement to remain effective and available for use from the Conversion Termination Notice Date until thirty (30) days following the Conversion Termination Date, unless under the terms of the Registration Rights Agreement the Company is no longer obligated to keep the Shelf Registration Statement effective and available for use.

 

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If the Conversion Termination Date occurs, the Company shall make an additional payment (the “Interest Make-Whole Payment”) in cash with respect to the Convertible Notes converted by holders after the Conversion Termination Notice Date and on or before the Conversion Termination Date in an amount equal to the aggregate amount of interest that would have been payable on the Convertible Notes from the last day through which interest was paid on the Convertible Notes, or December 20, 2006, if no interest has been paid, through and including the Maturity Date. The Company will not be required to make any interest payment to any holder that converts Convertible Notes after the Conversion Termination Notice Date and prior to the Conversion Termination Date on a Conversion Date that is between a record date for the payment of interest to the next succeeding interest payment date, as such holder will instead receive such funds that would otherwise be payable on such interest payment date as part of the Interest Make-Whole Payment.

(b) The Company shall mail the Conversion Termination Notice to the Trustee and to each holder (and to beneficial owners as required by applicable law). The Conversion Termination Notice shall include the form of the conversion notice to be completed by the holder and shall state:

(i) the Conversion Termination Date;

(ii) briefly, the conversion rights of the Convertible Notes;

(iii) the name and address of each Paying Agent and Conversion Agent;

(iv) the Interest Make-Whole Payment; and

(v) the Conversion Price and Conversion Rate and any adjustments thereto.

Whenever in the Convertible Notes or in this Indenture there is a reference, in any context, to any conversion obligation of the Company, such reference shall be qualified by the conversion termination provisions of this Section 12.13, and the Company will not be required to comply with any of the conversion provisions of the Convertible Notes and this Indenture (including, without limitation, Article 12 (other than this Section 12.13)) after a Conversion Termination has occurred pursuant to the provisions of Section 12.13 of this Indenture, and any express mention of the conversion termination provisions of this Section 12.13 in any provision of this Indenture shall not be construed as excluding the conversion termination provisions of this Section 12.13 in those provisions of this Indenture when such express mention is not made.

 

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed, all as of the date first above written, signifying their agreements contained in this Indenture.

 

CREDENCE SYSTEMS CORPORATION
By  

/s/ John C. Batty

Name:   John C. Batty
Title:   Senior Vice President, Chief Financial Officer and Secretary
THE BANK OF NEW YORK TRUST COMPANY, N.A.
By  

/s/ Raymond Torres

Name:   Raymond Torres
Title:   Assistant Vice President

 

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EXHIBIT A

(Face of Security)

[OID Legend]

THIS CONVERTIBLE NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUE PRICE IS $950 PER $1,000 PRINCIPAL AMOUNT AT MATURITY. THE ORIGINAL ISSUE DISCOUNT IS $50 PER $1,000 PRINCIPAL AMOUNT AT MATURITY. THE ISSUE DATE IS DECEMBER 20, 2006. THE YIELD TO MATURITY IS 5.121% PER ANNUM, COMPOUNDED SEMI-ANNUALLY.

[Global Securities Legend]

[The following legend shall appear on the face of each Global Security: THIS CONVERTIBLE NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS CONVERTIBLE NOTE FOR ALL PURPOSES.]

[The following legend shall appear on the face of each Global Security for which The Depository Trust Company is to be the Depositary:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED CONVERTIBLE NOTES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]

[Restricted Securities Legend]

 

A-1


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN “AFFILIATE” (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k) (2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS PERMITTED BY THE SECURITIES ACT.

 

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No.                
$    CUSIP

CREDENCE SYSTEMS CORPORATION

3.5% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE 2010

Credence Systems Corporation, a Delaware corporation, promises to pay to             , or registered assigns, the principal sum of              ($            ) (which principal amount may from time to time be increased or decreased to such other principal amount by adjustments made on the records of the Trustee in accordance with the Indenture) on May 15, 2010.

 

Interest Payment Dates:           May 15 and November 15, commencing May 15, 2007
Regular Record Dates:   May 1 and November 1

[SIGNATURE PAGE FOLLOWS]

 

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CREDENCE SYSTEMS CORPORATION
By  

 

Name:  
Title:  

Certificate of Authentication

This is one of the Convertible Notes described in the within mentioned Indenture.

 

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Trustee

By

 

 

Authorized Signatory

Dated:

 

 

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[FORM OF BACK OF CONVERTIBLE NOTE]

CREDENCE SYSTEMS CORPORATION

3.5% CONVERTIBLE SENIOR SUBORDINATED NOTE DUE 2010

 

1. INTEREST. Credence Systems Corporation, a Delaware corporation (the “Company”), promises to pay interest on the principal amount of this Convertible Note at the rate per annum shown above. The Company will pay interest semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2007. Interest on the Convertible Notes will accrue from the most recent interest payment date to which interest has been paid or, if no interest has been paid, from December 20, 2006. Interest (and Liquidated Damages, if any) will be computed on the basis of a 360-day year composed of twelve 30-day months.

 

2. METHOD OF PAYMENT. The Company will pay interest (and Liquidated Damages, if any) on the Convertible Notes (except defaulted interest) to the person in whose name each Convertible Note is registered at the close of business on the May 1 or November 1 immediately preceding the relevant interest payment date (each a “Regular Record Date”) (other than with respect to a Convertible Note repurchased in connection with a Designated Event on a repurchase date, during the period from the close of business on a Regular Record Date to (but excluding) the next succeeding interest payment date, in which case accrued interest (and Liquidated Damages, if any) shall be payable (unless such Convertible Note or portion thereof is converted) to the holder of the Convertible Note or portion thereof repurchased in accordance with the applicable repurchase provisions of the Indenture). The holder must surrender Convertible Notes to a Paying Agent to collect principal payments. The Company will pay the principal of, and interest and Liquidated Damages, if any, on the Convertible Notes at the office or agency of the Company maintained for such purpose, in money of the United States that at the time of payment is legal tender for payment of public and private debts. Until otherwise designated by the Company, the Company’s office or agency maintained for such purpose will be the principal Corporate Trust Office of the Trustee (as defined below). However, the Company may pay principal, and interest and Liquidated Damages, if any, by check payable in such money, and may mail such check to the holders of the Convertible Notes their respective addresses as set forth in the Register of holders of Convertible Notes.

 

3. PAYING AGENT AND REGISTRAR. The Bank of New York Trust Company, N.A. (together with any successor Trustee under the Indenture referred to below, the “Trustee”), will act as Paying Agent and Registrar. The Company may change the Paying Agent, Registrar or co-registrar without prior notice. Subject to certain limitations in the Indenture, the Company or any of its subsidiaries may act in any such capacity.

 

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4. INDENTURE. The Company issued the Convertible Notes under an Indenture dated as of December 20, 2006 (the “Indenture”) between the Company and the Trustee. The terms of the Convertible Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the “TIA”) as in effect on the date of the Indenture. The Convertible Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and holders are referred to the Indenture and the TIA for a statement of such terms. The Convertible Notes are unsecured subordinated obligations of the Company. The aggregate principal amount of Initial Convertible Notes outstanding at any time may not exceed $122,500,000 in aggregate principal amount, except as provided in Section 2.07 of the Indenture. The Indenture pursuant to which this Convertible Note is issued provides that Additional Convertible Notes may be issued thereunder, if certain conditions are met. Capitalized terms not defined below have the same meaning as is given to them in the Indenture.

 

5. NO OPTIONAL REDEMPTION. The Company shall have no right to redeem the Convertible Notes.

 

6. DESIGNATED EVENT. Upon the occurrence of a Designated Event, the Company shall make a Designated Event Offer to repurchase all outstanding Convertible Notes at a price equal to 100% of the aggregate principal amount of the Convertible Notes, plus accrued and unpaid interest (and Liquidated Damages, if any) to, but excluding, the date of repurchase, such offer to be made as provided in the Indenture. To accept the Designated Event Offer, the holder hereof must comply with the terms thereof, including surrendering this Convertible Note, with the “Option of Holder to Elect Repurchase” portion hereof completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent, at the address specified in the notice of the Designated Event Offer mailed to holders as provided in the Indenture, prior to the Designated Event Offer Termination Date.

 

7. SUBORDINATION. The Company’s payment of the principal of, and interest and Liquidated Damages, if any, on the Convertible Notes is subordinated to the prior payment in full of the Company’s Senior Debt as set forth in the Indenture. Each holder of Convertible Notes by his or her acceptance hereof covenants and agrees that all payments of the principal of, and interest and Liquidated Damages, if any, on the Convertible Notes by the Company shall be subordinated in accordance with the provisions of Article XI of the Indenture, and each holder of Convertible Notes accepts and agrees to be bound by such provisions.

 

8. DENOMINATIONS, TRANSFER, EXCHANGE. The Convertible Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Convertible Notes may be registered and Convertible Notes may be exchanged as provided in the Indenture. As a condition of transfer, the Registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and the Company and the Registrar may require a holder to pay any taxes and fees required by law or permitted

 

A-6


by the Indenture. The Company or the Registrar need not exchange or register the transfer of any Convertible Note or portion of a Convertible Note submitted for repurchase or surrendered for conversion.

 

9. PERSONS DEEMED OWNERS. The registered holder of a Convertible Note shall be treated as its owner for all purposes.

 

10. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Convertible Notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the then outstanding Convertible Notes, and any existing default may be waived with the consent of the holders of a majority in principal amount of the then outstanding Convertible Notes.

Without the consent of any holder, the Indenture or the Convertible Notes may be amended to: (a) cure any ambiguity or correct or supplement any defective or inconsistent provision contained in the Indenture, or make any other changes in the provisions of the Indenture which the Company and the Trustee may deem necessary or desirable provided such amendment does not materially and adversely affect the legal rights under the Indenture of the holders of Convertible Notes; (b) provide for uncertificated Convertible Notes in addition to or in place of certificated Convertible Notes; (c) evidence the succession of another person to the Company and provide for the assumption by such successor of the covenants and obligations of the Company thereunder and in the Convertible Notes as permitted by Section 5.01 of the Indenture; (d) provide for conversion rights or repurchase rights of holders of Convertible Notes in the event of consolidation, merger, share exchange or sale of all or substantially all of the assets of the Company as required to comply with Sections 5.01 or 12.06 of the Indenture; (e) reduce the Conversion Price; (f) evidence and provide for the acceptance of the appointment under the Indenture of a successor Trustee; (g) make any change that would provide any additional rights or benefits to the holders of Convertible Notes or that does not adversely affect the legal rights under the Indenture of any such holder; or (h) comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA.

Without the consent of each holder affected, an amendment or waiver may not (with respect to any Convertible Notes held by a nonconsenting holder): (a) reduce the principal amount of Convertible Notes whose holders must consent to an amendment, supplement or waiver; (b) reduce the principal of, or change the fixed maturity of any Convertible Note or alter the provisions with respect to the mandatory repurchase of the Convertible Notes; (c) reduce the rate of or change the time for payment of interest, including defaulted interest, or Liquidated Damages, if any, on any Convertible Notes; (d) change the make-whole premium payable pursuant to Section 12.01(h); (e) waive a Default or Event of Default in the payment of principal of or interest or Liquidated Damages, if any, on the Convertible Notes (except a rescission of acceleration of the Convertible Notes by the holders of at least a majority in aggregate principal amount of the Convertible Notes and a waiver of

 

A-7


the payment default that resulted from such acceleration); (f) make the principal of, or interest or Liquidated Damages, if any, on, any Convertible Note payable in money other than as provided for in the Indenture and in the Convertible Notes; (g) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of holders of Convertible Notes to receive payments of principal of, or interest or Liquidated Damages, if any, on the Convertible Notes; (h) waive a mandatory repurchase payment with respect to any Convertible Note; (i) except as permitted by the Indenture (including Section 9.01(a)), increase the Conversion Price or modify the provisions of the Indenture relating to conversion of the Convertible Notes in a manner adverse to the holders thereof or (j) make any change to the ability of holder of Convertible Notes to enforce their rights under the Indenture. In addition, any amendment to the provisions of Article XI of the Indenture (which relate to subordination) will require (1) the consent of the holders of at least 75% in aggregate principal amount of the Convertible Notes then outstanding if such amendment would adversely affect the rights of holders of Convertible Notes and (2) the consent of each holder of Senior Debt if such amendment would diminish the rights of such holder of senior debt.

 

11. DEFAULTS AND REMEDIES. An Event of Default is: (a) default in payment of the principal of, the Convertible Notes, when due at maturity, upon repurchase, upon acceleration or otherwise, whether or not such payment is prohibited by the subordination provisions of the Indenture; (b) default for 30 days or more in payment of any installment of interest or Liquidated Damages on the Convertible Notes, whether or not such payment is prohibited by the subordination provisions of the Indenture; (c) default in the payment of the Designated Event Payment in respect of the Convertible Notes on the date therefor, whether or not such payment is prohibited by the subordination provisions of the Indenture; (d) the Company fails to deliver all cash and any shares of Common stock when such cash and Common stock, if any, are required to be delivered upon conversion of a Convertible Note, or; (e) failure to provide timely notice of a Designated Event; (f) default by the Company (other than a default set forth in clauses (a), (b), (c), (d) or (e) above) for 30 days or more after notice in the observance or performance of any other covenants in the Indenture; (g) default under any credit agreement, mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its subsidiaries (or the payment of which is guaranteed or secured by the Company or any of its subsidiaries), whether such Indebtedness or guarantee exists on the date of the Indenture or is created thereafter, which default (i) is caused by a failure to pay when due any principal of such Indebtedness within the grace period provided for in such Indebtedness (which failure continues beyond any applicable grace period) (a “Payment Default”) or (ii) results in the acceleration of such Indebtedness prior to its express maturity (without such acceleration being rescinded or annulled) and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there is a Payment Default or the maturity of which has been so accelerated, aggregates $10,000,000 or more and such Payment Default is not cured or such acceleration is not annulled within 30 days

 

A-8


after notice; or (h) failure by the Company or any Material Subsidiary of the Company to pay final, nonappealable judgments (other than any judgment as to which a reputable insurance company has accepted full liability) aggregating in excess of $10,000,000, which judgments are not stayed, bonded or discharged within 60 days after their entry; or (i) certain events involving bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the then outstanding Convertible Notes may declare the unpaid principal of, and accrued and unpaid interest and Liquidated Damages, if any, on all Convertible Notes then outstanding to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy, insolvency, or reorganization with respect to the Company, all outstanding Convertible Notes become due and payable without further action or notice. Holders of Convertible Notes may not enforce the Indenture or the Convertible Notes except as provided in the Indenture. The Trustee may require an indemnity satisfactory to it before it enforces the Indenture or the Convertible Notes. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Convertible Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders notice of any continuing default (except a default in payment of principal, or interest or Liquidated Damages, if applicable) if it determines that withholding notice is in their interests. The Company must furnish annual compliance certificates to the Trustee.

 

12. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee or any of its Affiliates, in their individual or any other capacities, may make or continue loans to or guaranteed by, accept deposits from and perform services for the Company or its Affiliates and may otherwise deal with the Company or its Affiliates as if it were not Trustee.

 

13. NO RECOURSE AGAINST OTHERS. No director, officer, employee, shareholder or Affiliate, as such, of the Company shall have any liability for any obligations of the Company under the Convertible 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 Convertible Note waives and releases all such liability. The waiver and release are part of the consideration for the Convertible Notes.

 

14. AUTHENTICATION. This Convertible Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

 

15. ABBREVIATIONS. Customary abbreviations may be used in the name of a holder or an assignee, such as: TEN CO = 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.

 

16. CONVERSION. Subject to the obligation and the right of the Company to pay some or all of the conversion consideration in cash in accordance with Section 12.12, and

 

A-9


upon compliance with the provisions of the Indenture, including, without limitation, the provisions of Section 12.01(a) of the Indenture, and upon the occurrence of the events specified in the Indenture, the registered holder of this Convertible Note has the right at any time on or before the close of business on the last Trading Day prior to the Maturity Date (or in case this Convertible Note or any portion hereof is subject to a duly completed election for repurchase, on or before the close of business on the Designated Event Offer Termination Date (unless the Company defaults in payment due upon repurchase or such holder elects to withdraw the submission of such election to repurchase) to convert the principal amount hereof, or any portion of such principal amount which is $1,000 or an integral multiple thereof. The initial Conversion Price of the Convertible Notes shall be equal to $8.25 per share, as adjusted from time to time as provided in the Indenture (the “Conversion Price”). The conversion shall be effected upon surrender of this Convertible Note to the Company at the office or agency maintained for such purpose (and at such other offices or agencies designated for such purpose by the Company), accompanied by written notice of conversion duly executed (and if the shares of Common Stock to be issued on conversion are to be issued in any name other than that of the registered holder of this Convertible Note by instruments of transfer, in form satisfactory to the Company, duly executed by the registered holder or its duly authorized attorney) and, in case such surrender shall be made during the period from the close of business on the Regular Record Date immediately preceding any Interest Payment Date through the close of business on the last Trading Day immediately preceding such Interest Payment Date, also accompanied by payment, in funds acceptable to the Company, of an amount equal to the interest otherwise payable on such Interest Payment Date on the principal amount of this Convertible Note then being converted, unless such Convertible Notes have been surrendered in conversion following the regular record date immediately preceding the Maturity Date, provided, however, that any such payment may be reduced by the amount of any existing payment default with respect to this Convertible Note. Subject to the aforesaid requirement for a payment in the event of conversion after the close of business on a Regular Record Date immediately preceding an Interest Payment Date, no adjustment shall be made on conversion for interest or Liquidated Damages accrued hereon or for dividends on Common Stock delivered on conversion. The right to convert this Convertible Note is subject to the provisions of the Indenture relating to conversion rights in the case of certain consolidations, mergers, share exchanges or sales or transfers of substantially all the Company’s assets.

In lieu of receiving shares of Common Stock, a holder will receive, for each $1,000 principal amount of Convertible Notes surrendered for conversion:

 

    cash in an amount equal to the lesser of (1) $1,000 and (2) the Conversion Value; and

 

    if the Conversion Value is greater than $1,000, a number of shares of Common Stock equal to the sum of the Daily Share Amounts, for each of the twenty consecutive Trading Days in the Conversion Reference Period, appropriately adjusted to reflect stock splits, stock dividends, combinations or similar events occurring during the Conversion Reference Period.

 

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The Conversion Rate on any Convertible Notes surrendered in connection with a Designated Event may be increased by an amount, if any, determined in accordance with Section 12.01(h) of the Indenture.

Subject to the provisions of the Indenture, the Company may elect to terminate the right of the holders to convert their Convertible Notes on or prior to the Maturity Date if the Closing Price of the Common Stock has exceeded 150% of the Conversion Price for at least 20 Trading Days out of the 30 consecutive Trading Days ending within five Trading Days prior to the delivery to the holders of the Automatic Conversion Notice.

If the Company elects to terminate the right to convert some or all of the Convertible Notes prior to the Maturity Date, the Company will be required to make the Interest Make-Whole in cash as provided in the Indenture.

The Company shall not issue fractional shares or scrip representing fractions of shares of Common Stock upon any such conversion, but shall make an adjustment therefor in cash based upon the current market price of the Common Stock on the last Trading Day prior to the date of conversion.

 

17. REGISTRATION RIGHTS AGREEMENT. The holder of this Convertible Note is entitled to the benefits of a Registration Rights Agreement, dated December _ 2006, among the Company and the initial purchasers that are parties thereto (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement the Company has agreed for the benefit of the holders of the Convertible Notes and the Common Stock issued and issuable upon conversion of the Convertible Notes, that (i) it will, at its cost, within 30 days after the Issue Date, file a shelf registration statement (the “Shelf Registration Statement”) with the Securities and Exchange Commission (the “Commission”) with respect to resales of the Convertible Notes and the Common Stock issuable upon conversion thereof, (ii) the Company will use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission under the Securities Act within 90 days after the Issue Date and (iii) the Company will use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act until the earliest of (a) the second anniversary of the Issue Date, (b) the date on which all the Convertible Notes and the Common Stock issuable upon conversion thereof may be sold to persons who are not “affiliates” (as defined in Rule 144) of the Company pursuant to paragraph (k) of Rule 144 (or any successor provision) promulgated by the Commission under the Securities Act and (c) the date as of which the Convertible Notes or the Common Stock issuable upon conversion thereof have been transferred pursuant to Rule 144 under the Securities Act (or any similar provision then in force) or sold pursuant to such Shelf Registration Statement.

 

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If the Shelf Registration Statement (i) is not filed with the Commission on or prior to 30 days, or has not been declared effective by the Commission within 90 days, after the Issue Date or (ii) is filed and declared effective but shall thereafter cease to be effective (without being succeeded immediately by a replacement shelf registration statement filed and declared effective) or ceases to be usable (including, without limitation, as a result of a Suspension Period as defined below) for the offer and sale of Transfer Restricted Securities (as defined below) for a period of time (including any Suspension Period) which shall exceed 90 days in the aggregate in any 12-month period, 45 days in the aggregate in any fiscal quarter or 60 consecutive days in any 12-month period during the period the Company is required to keep the Shelf Registration Statement continuously effective (each such event referred to in clauses (i) and (ii) being referred to herein as a “Registration Default”), the Company will pay liquidated damages (“Liquidated Damages”) to each holder of Transfer Restricted Securities which has complied with its obligations under the Registration Rights Agreement. The amount of Liquidated Damages payable during any period in which a Registration Default shall have occurred and be continuing is that amount which is equal to one quarter of one percent (25.0 basis points) per annum per $1,000 principal amount of Securities constituting Transfer Restricted Securities for the first 90 days during which a Registration Default has occurred and is continuing and one half of one percent (50.0 basis points) per annum per $1,000 principal amount of Securities constituting Transfer Restricted Securities for any additional days during which such Registration Default has occurred and is continuing. The Company will pay all accrued Liquidated Damages by wire transfer of immediately available funds or by Federal funds check on each date specified in the Registration Rights Agreement, and Liquidated Damages will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Following the cure of a Registration Default, Liquidated Damages will cease to accrue with respect to such Registration Default.

“Transfer Restricted Securities” means each Convertible Note and each share of Common Stock issued on conversion thereof until the date on which such Convertible Note or share, as the case may be, (i) has been transferred pursuant to the Shelf Registration Statement or another registration statement covering such Convertible Note or share which has been filed with the Commission pursuant to the Securities Act, in either case after such registration statement has become and while such registration statement is effective under the Securities Act, (ii) has been transferred pursuant to Rule 144 under the Securities Act (or any similar provision then in force), or (iii) may be sold or transferred pursuant to Rule 144(k) under the Securities Act (or any similar provision then in force).

Pursuant to the Registration Rights Agreement, the Company may suspend the use of the prospectus which is a part of the Shelf Registration Statement for a period (which we refer to as a “Suspension Period”) not to exceed 90 days in the aggregate in any 12-month period, 45 days in the aggregate in any fiscal quarter or 60 consecutive days in any 12-month period, during the period which the Company is required to keep the Shelf Registration Statement continuously effective under

 

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certain circumstances; provided, however, that the existence of a Suspension Period will not prevent the occurrence of a Registration Default or otherwise limit the obligation of the Company to pay Liquidated Damages.

The above description of certain provisions of the Registration Rights Agreement is qualified by reference to, and is subject in its entirety to, the more complete description thereof contained in the Registration Rights Agreement.

The Company will furnish to any holder upon written request and without charge a copy of the Indenture and the Registration Rights Agreement. Requests may be made to: Credence Systems Corporation, 1421 California Circle, Milpitas, California 95035, Attention: Secretary.

The internal laws of the State of New York shall govern the Convertible Notes, without regard to the conflict of laws provisions thereof.

 

18. DESIGNATED SENIOR INDEBTEDNESS. This Convertible Note shall be “Designated Senior Indebtedness” for purposes of the indenture governing the Company’s 1.5% Convertible Subordinated Notes due 2008.

 

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FORM OF CONVERSION NOTICE

To: CREDENCE SYSTEMS CORPORATION

The undersigned owner of the Convertible Note hereby irrevocably exercises the option to convert this Convertible Note, or portion hereof (which is $1,000 or an integral multiple thereof) below designated, into shares of Common Stock of Credence Systems Corporation in accordance with the terms of the Indenture referred to in this Convertible Note, and directs that the shares issuable and deliverable upon the conversion, together with any check in payment for fractional shares and Convertible Notes representing any unconverted principal amount hereof, be issued and delivered to the owner hereof unless a different name has been indicated below. If shares or any portion of this Convertible Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest, Liquidated Damages and taxes accompanies this Convertible Note.

 

Dated:   

Fill in for registration of shares if to be delivered, and Convertible Notes if to be issued, other than to and in the name of the owner

(Please Print):

  

 

 

 

   Signature

 

   Principal amount to be converted (if less than all):
(Name)   

 

$            ,000

 

  

 

(Street Address)    Social Security or other Taxpayer Identification Number

 

  
(City, State and Zip Code)   

 

Signature Guarantee:

 

Signatures must be guaranteed by an eligible Guarantor Institution (banks, brokers, dealers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares are to be issued, or Convertible Notes are to be delivered, other than to and in the name of the registered holder.

 

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ASSIGNMENT FORM

To assign this Convertible Note, fill in the form below:

(I) or (we) assign and transfer this Convertible Note to

 

 

(Insert assignee’s social security or tax I.D. no.)

 

 

 

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                          agent to transfer this Convertible Note on the books of the Company. The agent may substitute another to act for him.

 

Your Signature:

  

 

                              (Sign exactly as your name appears on the other side of this Convertible Note)

Date:                     

 

Medallion Signature Guarantee:  

 

 

[FOR INCLUSION ONLY IF THIS CONVERTIBLE NOTE BEARS A RESTRICTED SECURITIES LEGEND] In connection with any transfer of any of the Convertible Notes evidenced by this certificate which are “restricted securities” (as defined in Rule 144 (or any successor thereto) under the Securities Act), the undersigned confirms that such Convertible Notes are being transferred:

CHECK ONE BOX BELOW

 

(1) ¨ to the Company; or

 

(2) ¨ pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or

 

(3) ¨ pursuant to and in compliance with Regulation S under the Securities Act of 1933; or

 

(4) ¨ pursuant to an exemption from registration under the Securities Act of 1933 provided by Rule 144 thereunder.

 

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Unless one of the boxes is checked, the Registrar will refuse to register any of the Convertible Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the Trustee may require, prior to registering any such transfer of the Convertible Notes, such certifications and other information, and if box (4) is checked such legal opinions, as the Company has reasonably requested in writing, by delivery to the Trustee of a standing letter of instruction, to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

 

Your Signature:

 

 

(Sign exactly as your name appears on the other side of this Convertible Note)

Date:                     

 

Medallion Signature Guarantee:

 

 

 

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OPTION OF HOLDER TO ELECT REPURCHASE

If you wish to have this Convertible Note repurchased by the Company pursuant to Section 4.06 of the Indenture, check the Box: ¨

If you wish to have a portion of this Convertible Note purchased by the Company pursuant to Section 4.06 of the Indenture, state the amount (in multiples of $1,000): $            .

 

Date:                                          Your Signature:   

 

   (Sign exactly as your name appears on the other side of this Convertible Note)

 

Medallion Signature Guarantee:  

 

 

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EXHIBIT B

FORM OF RESTRICTED COMMON STOCK LEGEND

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN “AFFILIATE” (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED BY THE SECURITIES ACT.”

 

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EXHIBIT C

FORM OF TRANSFER CERTIFICATE FOR TRANSFER OF RESTRICTED COMMON STOCK

(Transfers pursuant to Section 12.11(c) of the Indenture) [NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]

 

Re: Credence Systems Corporation 3.5% Convertible Senior Subordinated Notes due 2010 (the “Convertible Notes”)

Reference is hereby made to the Indenture dated as of December     , 2006 (the “Indenture”) between Credence Systems Corporation and The Bank of New York Trust Company, N.A., as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.

This letter relates to                      shares of Common Stock represented by the accompanying certificates that were issued upon conversion of Convertible Notes and which are held in the name of [name of transferor] (the “Transferor”) to effect the transfer of such Common Stock.

In connection with the transfer of such shares of Common Stock, the undersigned confirms that such shares of Common Stock are being transferred:

CHECK ONE BOX BELOW

 

(1) ¨ to the Company; or

 

(2) ¨ pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or

 

(3) ¨ pursuant to and in compliance with Regulation S under the Securities Act of 1933; or

 

(4) ¨ pursuant to an exemption from registration under the Securities Act of 1933 provided by Rule 144 thereunder.

Unless one of the boxes is checked, the transfer agent will refuse to register any of the Common Stock evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) or (4) is checked, the transfer agent may require, prior to registering any such transfer of the Common Stock such certifications and other information, and if box (4) is checked such legal opinions, as the Company has reasonably requested in writing, by delivery to the transfer agent of a standing letter of instruction, to confirm that such transfer is being made pursuant to an exemption

 

C-1


from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

 

(Name of Transferor],
By  

 

Name:  
Title:  

Dated:

 

C-2