FORM 10-Q

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

 

 

 

Commission File Number:  1-10658

 

Micron Technology, Inc.

(Exact name of registrant as specified in its charter)

 

State or other jurisdiction of incorporation or organization:  Delaware

 

Internal Revenue Service - Employer Identification No. 75-1618004

 

8000 S. Federal Way, P.O. Box 6, Boise, Idaho  83707-0006

(Address of principal executive offices)

 

(208) 368-4000

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý           No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  ý           No o

 

The number of outstanding shares of the registrant’s common stock as of April 8, 2003, was 608,643,469.

 

 

Part I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

MICRON TECHNOLOGY, INC.

 

Consolidated Statements of Operations

(Amounts in millions except per share amounts)

(Unaudited)

 

		Quarter ended						Six months ended
		February 27, 2003			February 28, 2002			February 27, 2003			February 28, 2002
Net sales		$	785.0		$	645.9		$	1,470.1		$	1,069.8
Cost of goods sold		1,008.9			502.9			1,731.3			1,139.4
Gross margin		(223.9		)	143.0			(261.2		)	(69.6		)
Selling, general and administrative		92.4			79.3			188.8			159.2
Research and development		174.1			135.9			328.6			290.4
Restructure charge		107.9			—			107.9			—
Other operating (income) expense		2.3			(13.2		)	10.7			(8.2		)
Operating loss		(600.6		)	(59.0		)	(897.2		)	(511.0		)
Interest income		4.7			14.6			11.1			32.1
Interest expense		(7.8		)	(4.0		)	(12.7		)	(6.7		)
Other non-operating income (expense)		2.1			(2.3		)	2.7			(8.2		)
Loss before taxes		(601.6		)	(50.7		)	(896.1		)	(493.8		)
Income tax (provision) benefit		(17.6		)	20.3			(39.0		)	197.5
Net loss		$	(619.2	)	$	(30.4	)	$	(935.1	)	$	(296.3	)
Loss per share:
Basic		$	(1.02	)	$	(0.05	)	$	(1.55	)	$	(0.49	)
Diluted		(1.02		)	(0.05		)	(1.55		)	(0.49		)
Number of shares used in per share calculations:
Basic		607.2			600.5			606.2			599.8
Diluted		607.2			600.5			606.2			599.8

 

See accompanying notes to consolidated financial statements.

 

1

 

MICRON TECHNOLOGY, INC.

 

Consolidated Balance Sheets

(Amounts in millions except par value amounts)

(Unaudited)

 

As of		February 27, 2003			August 29, 2002
Assets
Cash and equivalents		$	915.1		$	398.2
Short-term investments		290.8			587.5
Receivables		482.6			537.9
Inventories		367.9			545.4
Prepaid expenses		44.3			35.6
Deferred income taxes		7.4			14.2
Total current assets		2,108.1			2,118.8
Intangible assets, net		293.1			317.0
Property, plant and equipment, net		4,653.2			4,699.5
Deferred income taxes		96.7			124.8
Other assets		185.3			295.3
Total assets		$	7,336.4		$	7,555.4
Liabilities and shareholders’ equity
Accounts payable and accrued expenses		$	621.8		$	554.1
Deferred income		18.5			25.5
Equipment purchase contracts		116.2			80.0
Current portion of long-term debt		109.0			93.1
Total current liabilities		865.5			752.7
Long-term debt		1,030.6			360.8
Other liabilities		80.9			75.3
Total liabilities		1,977.0			1,188.8
Commitments and contingencies
Redeemable common stock		63.3			60.2
Common stock, $0.10 par value, authorized 3.0 billion shares, issued and outstanding 607.6 million and 602.9 million shares		60.6			60.3
Additional capital		4,160.1			4,229.6
Retained earnings		1,075.0			2,015.5
Accumulated other comprehensive income		0.4			1.0
Total shareholders’ equity		5,296.1			6,306.4
Total liabilities and shareholders’ equity		$	7,336.4		$	7,555.4

 

See accompanying notes to consolidated financial statements.

 

2

 

MICRON TECHNOLOGY, INC.

 

Consolidated Statements of Cash Flows

(Amounts in millions)

(Unaudited)

 

For the six months ended		February 27, 2003			February 28, 2002
Cash flows from operating activities
Net loss		$	(935.1	)	$	(296.3	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		610.1			588.5
Restructure and other charges		115.7			—
Provision to write down inventories to estimated market values		288.2			176.6
Loss from write-down or disposition of equipment		11.6			17.1
Loss (gain) from write-down or disposition of investments		(0.7		)	9.6
Additional capital tax effect of stock plans		—			8.2
Change in operating assets and liabilities:
Decrease in receivables		55.0			330.5
Increase in inventories		(125.2		)	(232.2		)
Increase (decrease) in accounts payable and accrued expenses		64.8			(62.4		)
Deferred income taxes		37.0			(198.7		)
Other		3.9			(24.9		)
Net cash provided by operating activities		125.3			316.0
Cash flows from investing activities
Expenditures for property, plant and equipment		(545.7		)	(323.0		)
Purchase of available-for-sale securities		(319.7		)	(1,110.6		)
Proceeds from maturities of available-for-sale securities		533.0			1,099.3
Proceeds from sales of available-for-sale securities		241.6			322.7
Proceeds from sales of property, plant and equipment		4.8			0.9
Other		(21.8		)	(54.2		)
Net cash used for investing activities		(107.8		)	(64.9		)
Cash flows from financing activities
Proceeds from issuance of debt		667.5			—
Proceeds from equipment sale-leaseback transactions		60.6			—
Proceeds from issuance of common stock		37.6			43.4
Purchase of call spread options		(109.1		)	—
Payments on equipment purchase contracts		(90.1		)	(40.0		)
Repayments of debt		(50.1		)	(45.7		)
Debt issuance costs		(17.1		)	—
Other		0.1			—
Net cash provided by (used for) financing activities		499.4			(42.3		)
Net increase in cash and equivalents		516.9			208.8
Cash and equivalents at beginning of period		398.2			469.1
Cash and equivalents at end of period		$	915.1		$	677.9
Supplemental disclosures
Income taxes refunded, net		$	104.9		$	538.6
Interest paid, net of amounts capitalized		(8.2		)	(4.6		)
Noncash investing and financing activities:
Equipment acquisitions on contracts payable and capital leases		188.7			47.0

 

See accompanying notes to consolidated financial statements.

 

3

 

MICRON TECHNOLOGY, INC.

 

Notes to Consolidated Financial Statements

(All tabular amounts in millions except per share amounts)

 

Unaudited Interim Financial Statements

 

Basis of presentation:  Micron Technology, Inc., and its subsidiaries (hereinafter referred to collectively as the “Company”) principally design, develop, manufacture and market semiconductor products.  All significant intercompany accounts and transactions have been eliminated.  The Company’s fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.  The Company’s second quarter of fiscal 2003 and 2002 ended on February 27, 2003, and February 28, 2002, respectively.  The Company’s fiscal 2002 ended on August 29, 2002.  In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company, and its consolidated results of operations and cash flows.

 

These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the year ended August 29, 2002.

 

Recently issued accounting standards:  In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51,” which provides guidance on the identification of and reporting for variable interest entities.  Interpretation No. 46 expands the criteria for consideration in determining whether a variable interest entity should be consolidated.  Interpretation No. 46 is effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  The Company is required to adopt the interpretation in the first quarter of 2004 for variable interest entities acquired before February 1, 2003.  The Company is currently assessing the impact of Interpretation No. 46 on its results of operations and financial position.

 

In December 2002, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.”  SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS No. 148 is effective for the Company in the third quarter of 2003.  The Company does not expect to effect a voluntary change in accounting to the fair value based method, and, accordingly, does not expect the adoption of SFAS No. 148 to have a significant impact on the Company’s future results of operations or financial position.

 

Segment information:  The Company has determined, based on the nature of its operations and products offered to customers, that its only reportable segment is Semiconductor Operations.  The Semiconductor Operations segment’s primary product is DRAM.

 

Product warranty:  The Company generally provides a limited warranty that its products are in compliance with Company specifications existing at the time of delivery.  Under the Company’s general terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items.  Under certain circumstances the Company may provide more extensive limited warranty coverage and general legal principles may, under certain circumstances, impose upon the Company more extensive liability than that provided under the Company’s general terms and conditions.  The Company’s warranty obligations are not material.

4

 

Supplemental Balance Sheet Information

 

Receivables		February 27, 2003			August 29, 2002
Trade receivables		$	422.1		$	370.7
Joint venture		31.7			10.5
Taxes other than income		15.9			23.9
Income taxes		12.5			122.2
Other		7.2			16.8
Allowance for doubtful accounts		(6.8		)	(6.2		)
		$	482.6		$	537.9

 

Inventories		February 27, 2003			August 29, 2002
Finished goods		$	148.5		$	257.9
Work in process		132.1			202.2
Raw materials and supplies		114.1			112.4
Allowance for obsolescence		(26.8		)	(27.1		)
		$	367.9		$	545.4

 

In the second and first quarters of 2003, the Company recognized write-downs of $197.4 million and $90.8 million, respectively, to record work in process and finished goods inventories of semiconductor products at their estimated market values.

 

Property, Plant and Equipment		February 27, 2003			August 29, 2002
Land		$	106.4		$	106.3
Buildings		2,287.3			2,219.8
Equipment		6,348.4			6,024.9
Construction in progress		239.5			294.2
Software		197.8			194.6
		9,179.4			8,839.8
Accumulated depreciation		(4,526.2		)	(4,140.3		)
		$	4,653.2		$	4,699.5

 

Depreciation expense was $297.3 million and $584.4 million for the second quarter and first six months of 2003, respectively, and $278.5 million and $563.3 million in the second quarter and first six months of 2002, respectively.

 

As part of a restructure plan announced in the second quarter of 2003, the Company recorded an impairment charge of $53.9 million to write down the carrying value of certain assets consisting primarily of assets used in the Company’s 200 mm production line in Virginia.  Prior to the charge, these assets had a carrying value of $77.3 million.  These assets are classified as held for sale and are included in other assets in the accompanying consolidated balance sheet.  (See “Restructure and Other Charges” note.)

 

The Company’s Lehi, Utah facility, the construction of which was initiated in 1995, is at present only partially utilized by the Company for component test operations.  Timing for completion of the Lehi facility is dependent upon market conditions, including, but not limited to, worldwide market supply of, and demand for, semiconductor products and the Company’s operations, cash flows and alternative capacity utilization opportunities.  As of February 27, 2003, construction in progress included costs of $197.1 million related to certain assets in Lehi, which were not ready for their intended use and were not being depreciated.  As of February 27, 2003, the Company had assets in Lehi with a net book value of approximately $179.9 million, which were not in use but were being depreciated.

 

5

 

Accounts Payable and Accrued Expenses		February 27, 2003			August 29, 2002
Accounts payable		$	295.4		$	278.9
Salaries, wages and benefits		114.0			106.2
Joint venture		46.1			52.8
Taxes other than income		31.8			38.6
Restructure charge		30.0			—
Other		104.5			77.6
		$	621.8		$	554.1

 

Debt		February 27, 2003			August 29, 2002
Convertible subordinated notes payable, interest rate of 2.5%, due February 2010		$	632.5		$	—
Notes payable in periodic installments through July 2015, weighted average interest rate of 2.4% and 2.3%		237.3			241.7
Subordinated notes payable, face amount of $210.0 million and stated interest rate of 6.5%, due September 2005, with an effective yield to maturity of 10.7%, net of unamortized discount of $19.1 million and $22.2 million		190.9			187.8
Capital lease obligations payable in monthly installments through December 2007, weighted average imputed interest rate of 5.6% and 2.4%		78.9			24.4
		1,139.6			453.9
Less current portion		(109.0		)	(93.1		)
		$	1,030.6		$	360.8

 

As of February 27, 2003, notes payable and capital lease obligations of $187.2 million and $18.6 million, respectively, were denominated in Japanese Yen and had weighted average interest rates of 1.5% and 1.8%, respectively.

 

In February 2003, the Company issued $632.5 million of 2.5% Convertible Subordinated Notes due February 1, 2010 (the “Notes”).  The issuance costs associated with the Notes totaled approximately $16.5 million and the net proceeds to the Company from the offering of the Notes were $616.0 million.  Holders of the Notes may convert all or some of their Notes at any time prior to maturity, unless previously redeemed or repurchased, into the Company’s common stock at a conversion rate of 84.8320 shares for each $1,000 principal amount of Notes.  This conversion rate is equivalent to a conversion price of approximately $11.79 per share.  The Company may redeem the notes at any time after February 6, 2006 at declining premiums to par.

 

Concurrent with the issuance of the Notes, the Company purchased call spread options (the “Call Spread Options”) covering 53.7 million shares of the Company’s common stock, which is the number of shares issuable upon conversion of the Notes in full.  The Call Spread Options, have a lower strike price of $11.79, a higher strike price of $18.19, may be settled at the Company’s option either in cash or net shares and expire on January 29, 2008.  The maximum benefit to the Company from the Call Spread Options is a cash amount of $343.4 million or 18.9 million shares.  The Call Spread Options therefore have the potential of limiting the dilution associated with the conversion of the Notes from 53.7 million shares to as few as 34.8 million shares, depending upon market conditions. The Call Spread Option transactions, including fees and costs of $109.1 million, are accounted for as capital transactions.

 

The Call Spread Options are designed to mitigate dilution from conversion of the Notes in the event that the market price per share of the Company’s common stock upon exercise of the Call Spread Options is greater than $11.79.  Settlement of the Call Spread Options in cash on January 29, 2008, the expiration date, would result in the

 

6

 

Company receiving an amount ranging from zero if the market price per share of the Company’s common stock is at or below $11.79 to a maximum of $343.4 million if the market price per share of the Company’s common stock were at or above $18.19.  Settlement of the Call Spread Options in net shares on the expiration date would result in the Company receiving a number of shares, not to exceed 18.9 million shares, of the Company’s common stock with a value equal to the amount otherwise receivable on cash settlement.  Should there be an early unwind of the Call Spread Options the amount of cash or net shares potentially received by the Company will be dependent upon then existing overall market conditions, and on the Company’s stock price, the volatility of the Company’s stock and the amount of time remaining on the Call Spread Options.

 

Intangible Assets

 

		February 27, 2003						August 29, 2002
		Gross Carrying Amount			Accumulated Amortization			Gross Carrying Amount			Accumulated Amortization
Product and process technology		$	317.0		$	(104.6	)	$	320.5		$	(91.5	)
Joint venture supply arrangement		98.0			(25.4		)	98.0			(20.6		)
Other		14.7			(6.6		)	15.0			(4.4		)
		$	429.7		$	(136.6	)	$	433.5		$	(116.5	)

 

During the first six months of 2003, the Company expended $17.8 million for product and process technology and $2.5 million for other intangible assets with weighted average useful lives of nine and three years, respectively.  During the first six months of 2002, the Company expended $31.5 million for product and process technology and $3.8 million for other intangible assets with weighted average useful lives of nine and two years, respectively.  As part of a restructure plan announced in the second quarter of 2003, the Company wrote off $16.1 million of product and process technology and $2.5 million of other intangible assets associated with discontinued products.  (See “Restructure and Other Charges” note.)

 

Amortization expense for intangible assets was $13.0 million and $25.6 million for the second quarter and first six months of 2003, respectively, and $11.5 million and $22.5 million for the second quarter and first six months of 2002, respectively.  Annual amortization expense for intangible assets held as of February 27, 2003, is estimated to be $49.7 million for 2003, $45.2 million in 2004, $42.0 million in 2005, $40.7 million in 2006, and $40.6 million in 2007.

 

Contingencies

 

As is typical in the semiconductor and other high technology industries, from time to time, others have asserted, and may in the future assert, that the Company’s products or its processes infringe their product or process technology rights.  The Company is currently engaged in litigation with Rambus, Inc. (“Rambus”) relating to certain patents of Rambus and certain of the Company’s claims and defenses.  Lawsuits between Rambus and the Company are pending in the United States, Germany, France, the United Kingdom and Italy.  The Company is unable to predict the outcome of the Rambus suits or of other assertions of infringements made against the Company.  A court determination that the Company’s manufacturing processes or products infringe the product or process rights of others could result in significant liability and/or require the Company to make material changes to its products and/or manufacturing processes.  Any of the foregoing results could have a material adverse effect on the Company’s business, results of operations or financial condition.

 

On June 17, 2002, the Company received a grand jury subpoena from the U.S. District Court for the Northern District of California seeking information regarding an investigation by the Antitrust Division of the Department of Justice (the “DOJ”) into possible antitrust violations in the “Dynamic Random Access Memory” or “DRAM” industry.  The Company is cooperating fully and actively with the DOJ in its investigation.  Subsequent to the commencement of the DOJ investigation, 24 purported class action lawsuits were filed against the Company and other DRAM suppliers in various federal and state courts alleging violations of the Federal Sherman Antitrust Act or

 

7

 

California’s Cartwright Antitrust Act and Unfair Competition Law relating to the sale and pricing of DRAM products.  The complaints seek treble damages for the alleged damages sustained by purported class members, in addition to restitution, costs and attorneys’ fees, as well as an injunction against the allegedly unlawful conduct.  The Company is unable to predict the outcome of these suits.  Based upon the Company’s analysis of the claims made and the nature of the DRAM industry, the Company believes that class treatment of these cases is not appropriate and that any purported injury alleged by plaintiffs would be more appropriately resolved on a customer-by-customer basis.  There can be no assurance that the final resolution of these alleged violations of federal or state antitrust laws will not result in significant liability and will not have a material adverse effect on the Company’s results of operations and financial condition.

 

The Company has accrued a liability and charged operations for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the balance sheet date.  The Company is currently a party to various other legal actions arising out of the normal course of business, none of which is expected to have a material adverse effect on the Company’s financial position or results of operations.

 

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters.  Typically, these obligations arise in the context of contracts entered into by the Company, under which the Company may agree to hold the other party harmless against losses arising from a breach of representations or under which the Company may have an indemnity obligation to the counterparty with respect to certain intellectual property matters or certain tax related matters.  Customarily, payment by the Company with respect to such matters is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims.  Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by the Company.  It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement.  Historically, payments made by the Company under these agreements have not had a material effect on the Company’s financial position or results of operations.  The Company believes if it were to incur a loss in any of these matters, such loss should not have a material effect on the Company’s financial position or results of operations.

 

Redeemable Common Stock

 

In connection with the issuance of the 1.5 million shares of common stock for the Toshiba DRAM Acquisition, the Company granted Toshiba Corporation (“Toshiba”) an option to require the Company to repurchase on October 21, 2003, all of these shares for $67.5 million in cash.  The option expires if the closing price of the Company’s common stock is at or above $45.05 per share for 20 consecutive trading days.  The carrying value of the redeemable common stock is accreted to its redemption amount of $67.5 million by a charge directly to retained earnings and is included in the computations of earning per share.  Accretion of redeemable common stock was $1.6 million and $3.1 million in the second quarter and first six months of 2003.  (See “Acquisition of Toshiba Corporation DRAM Assets” note.)

 

Income Taxes

 

The income tax provision for the second quarter and first six months of 2003 was $17.6 million and $39.0 million, respectively, which primarily reflects taxes on foreign operations.  Income tax benefit for the second quarter and first six months of 2002 was $20.3 million and $197.5 million, respectively.  The Company recognized no tax benefit on its domestic net operating losses in 2003.  As of February 27, 2003, the Company had outstanding domestic net operating loss carryforwards of approximately $2.0 billion.  Until the Company utilizes these operating loss carryforwards, the income tax provision will only reflect modest levels of taxes from the Company’s foreign operations.

 

8

 

Earnings (Loss) Per Share

 

Basic earnings per share is computed based on the weighted average number of common shares outstanding.  Diluted earnings per share is computed based on the weighted average number of common shares outstanding plus the dilutive effects of stock options, warrants and convertible notes.  The potential common shares that were antidilutive for the second quarter and first six months of 2003 amounted to 128.9 million shares and 124.8 million shares, respectively, and for the second quarter and first six months of 2002 amounted to 109.3 million shares and 107.1 million shares, respectively.  Basic and diluted earnings per share computations reflect the effect of accretion of redeemable common stock.

 

		Quarter ended						Six months ended
		February 27, 2003			February 28, 2002			February 27, 2003			February 28, 2002
Net loss		$	(619.2	)	$	(30.4	)	$	(935.1	)	$	(296.3	)
Redeemable common stock accretion		(1.6		)	—			(3.1		)	—
Net loss available to common shareholders		$	(620.8	)	$	(30.4	)	$	(938.2	)	$	(296.3	)
Weighted average common shares outstanding		607.2			600.5			606.2			599.8
Loss per share:
Basic		$	(1.02	)	$	(0.05	)	$	(1.55	)	$	(0.49	)
Diluted		(1.02		)	(0.05		)	(1.55		)	(0.49		)

 

Comprehensive Income (Loss)

 

Comprehensive loss for the second quarter and first six months of 2003 was $620.2 million and $935.7 million, respectively, and included $1.0 million and $0.6 million net of tax, respectively, of unrealized losses on investments.  Comprehensive loss for the second quarter and first six months of 2002 was $32.2 million and $292.6 million, respectively, and included $1.8 million of unrealized losses and $3.7 million of unrealized gains net of tax, respectively, on investments.

 

Restructure and Other Charges

 

As a result of the prolonged downturn in the semiconductor memory industry and the Company’s eight consecutive quarters of operating losses, in the second quarter of 2003 the Company announced a plan to restructure its operations.  The restructure plan includes the shutdown of the Company’s 200 mm production line in Virginia, discontinuance of certain memory products, including SRAM and TCAM products, and a 10% reduction of the Company’s worldwide workforce.  The Company expects the restructure to result in a lower overall cost structure, to provide better focus on products with greater potential for growth and profitability and to allow continuing investment in new technology.  In connection with the plan, the Company recorded a restructure charge of $107.9 million in the second quarter of 2003.  In addition, the Company recorded other restructure-related charges of $7.8 million, which are included in cost of goods sold in the accompanying consolidated statements of operation, to write-down the carrying value of raw materials and work-in-process inventories associated with discontinued products.  The Company expects to substantially complete the restructure plan by the end of 2003 and estimates that it will incur additional restructure related charges of approximately $15 million in the second half of 2003, primarily for the redeployment of equipment from its Virginia site to Boise and to certain of its international facilities.  The components of the restructure and other charges are as follows:

 

9

 

		Quarter ended February 27, 2003
Restructure charge:
Write-down of equipment		$	53.9
Severance and other termination benefits		25.5
Write-down of intangible assets		18.6
Other		9.9
Total restructure charge		107.9
Other:
Write-down of raw materials and work in process inventories		7.8
Total restructure and other charges		$	115.7

 

Through February 27, 2003, the Company had paid essentially none of the severance and other costs related to the restructure.  As of February 27, 2003, the Company’s accounts payable and accrued expenses included $30.0 million for remaining costs accrued in connection with the restructure plan, consisting primarily of severance and other termination benefits.

 

Acquisition of Toshiba Corporation DRAM Assets

 

On April 22, 2002, the Company acquired substantially all of the assets of Toshiba Corporation’s (“Toshiba”) DRAM business as conducted by Dominion Semiconductor L.L.C., a wholly-owned subsidiary of Toshiba located in Virginia (the “Toshiba DRAM Acquisition”).  The total purchase price of $327.9 million included cash and 1.5 million shares of the Company’s common stock, which was valued at $58.1 million on the date of acquisition.  The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values.  In connection with the purchase, the Company recorded total assets of $363.3 million, including property, plant and equipment of $292.8 million and intangible assets of $7.8 million, and total liabilities of $35.4 million.  (See “Redeemable Common Stock” note.)

 

Joint Venture

 

TECH Semiconductor Singapore Pte. Ltd. (“TECH”) is a memory manufacturing joint venture in Singapore among Micron Technology, Inc., the Singapore Economic Development Board, Canon Inc. and Hewlett-Packard Company.  TECH’s semiconductor manufacturing facilities use the Company’s product and process technology.  Subject to specific terms and conditions, the Company has agreed to purchase all of the products manufactured by TECH.  The Company generally purchases semiconductor memory products from TECH at prices determined quarterly, based on a discount from average selling prices realized by the Company for the immediately preceding quarter.  The Company performs assembly and test services on product manufactured by TECH.  The Company also provides certain technology, engineering and training to support TECH.  All of these transactions with TECH are recognized as part of the net cost of products purchased from TECH.  The net cost of products purchased from TECH amounted to $86.9 million and $147.5 million for the second quarter and first six months of 2003, respectively, and ($3.7) million and $22.3 million for the second quarter and first six months of 2002, respectively.  In 2000, as part of an equity capital infusion by the majority of TECH’s shareholders, the Company funded TECH with $98.0 million as support for continuing the TECH supply arrangement.  The Company amortizes the value of the TECH supply arrangement on a straight-line basis over the remaining contractual life of the TECH shareholders’ agreement.  Amortization expense resulting from the TECH supply arrangement, included in the cost of product purchased from TECH, was $2.4 million and $4.8 million for the second quarter and first six months of 2003, respectively, and $2.5 million and $5.1 million for the second quarter and first six months of 2002, respectively.  Receivables from TECH were $31.7 million and payables to TECH were $46.1 million as of February 27, 2003.  Receivables from TECH were $10.5 million and payables to TECH were $52.8 million as of August 29, 2002.

 

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As of February 27, 2003, the Company had pledged $50.0 million, which is included in other noncurrent assets in the accompanying consolidated balance sheet, as cash collateral for a fully-drawn revolving line of credit for TECH.

 

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”  Interpretation No. 45 requires an entity, at the time it issues a guarantee, to recognize an initial liability for the fair value of obligations assumed under the guarantee and elaborates on existing disclosure requirements.  The initial recognition requirements of Interpretation No. 45 are effective for guarantees issued or modified after December 31, 2002, and the disclosure requirements became effective for the Company in its second quarter of 2003.  Subsequent to the end of the second quarter of 2003, on March 13, 2003, TECH entered into a new $250 million term loan credit facility, the proceeds of which were used to refinance amounts borrowed under its former facility.  In connection therewith, the $50 million originally pledged by the Company as cash collateral with respect to TECH’s previous credit facility was re-pledged and supplemented by an additional $50 million by the Company.  With respect to this $100 million in cash collateral, certain shareholders in TECH have agreed, in the event all or a portion of the cash collateral is required to be used to meet TECH’s principal loan payments, to indemnify the Company for approximately one-half of such amounts.  Additionally, the Company and these indemnifying shareholders are entitled to proceed against TECH and its assets to the extent such cash collateral is required to be used to meet TECH’s principal loan payments.  However, such rights are subordinated to the rights of the banks participating in the new credit facility.

 

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Micron Technology, Inc., and its subsidiaries (hereinafter referred to collectively as the “Company”) principally design, develop, manufacture and market semiconductor products.

 

The following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties.  Forward-looking statements include, but are not limited to, statements such as those made in “Critical Accounting Policies – Income Taxes” and “Income Taxes” regarding the modest levels of taxes from the Company foreign operations; in “Net Sales” regarding DDR SDRAM sales in future periods; in “Gross Margin” regarding the Company’s transition to .13µ technology, manufacturing costs in the remaining two quarters of 2003, the estimated amount of write-down remaining in inventory at the end of the third quarter of 2003 and relative gross margins on TECH products in the remainder of 2003; in “Research and Development” regarding the level of research and development expense in future periods; in “Restructure and Other Charges” regarding timing and additional costs to complete the restructure and the estimated cost savings in future periods and in “Liquidity and Capital Resources” regarding capital spending in 2003 and 2004.  The Company’s actual results could differ materially from the Company’s historical results and those discussed in the forward-looking statements.  Factors that could cause actual results to differ materially include, but are not limited to, those identified in “Certain Factors.”  This discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes and with the Company’s Annual Report on Form 10-K for the year ended August 29, 2002.  All period references are to the Company’s fiscal periods unless otherwise indicated.  All per share amounts are presented on a diluted basis.  All tabular dollar amounts are in millions.

 

Critical Accounting Policies

 

The preparation of financial statements and related disclosures in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.  Estimates and judgments are based on historical experience, forecasted future events and various other assumptions that the Company believes to be reasonable under the circumstances.  Estimates and judgments may vary under different assumptions or conditions.  The Company evaluates its estimates and judgments on an ongoing basis.  Management believes the accounting policies below are critical in the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective or complex judgments.

 

Income taxes:  The Company has recorded a valuation allowance against its deferred tax assets arising from net operating loss carryforwards of its domestic operations.  The Company expects that until it utilizes these operating loss carryforwards the consolidated income tax provision will only reflect modest levels of taxes from the Company’s foreign operations.  The Company evaluates the realizability of its deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of the Company’s performance and other relevant factors when determining the need for a valuation allowance with respect to these deferred tax assets.  The Company’s ability to realize deferred tax assets is dependent on its ability to generate future taxable income sufficient to utilize loss carryforwards or tax credits before their expiration.  In the evaluation of realizability of deferred tax assets, factors such as recent losses are given substantially more weight than forecasted future profitability.

 

The Company is required to estimate its provision for income taxes and amounts ultimately payable or recoverable in numerous jurisdictions around the world.  Such estimates involve interpretations of regulations and are inherently complex.  Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year.

 

Inventories:  Inventories are stated at the lower of average cost or market value.  Cost includes labor, material and overhead costs, including product and process technology costs.  Determining market value of inventories involves judgment in that it requires the Company to project average selling prices, sales volumes for future periods and completion costs for products in work in process inventories.  To project average selling prices and sales volumes for future periods, the Company reviews recent sales volumes, existing customer orders, current contract prices, industry analysis of supply and demand, seasonal factors, general economic trends and other information.  When these analyses reflect market values that are below the Company’s costs, the Company records a charge to

 

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cost of goods sold in advance of when the inventory is actually sold.  Differences in forecasted average selling prices used in calculating lower of cost or market adjustments can result in significant changes in the estimated net realizable value of product inventories and accordingly the amount of write-down recorded.  Due to the volatile nature of the semiconductor memory industry, actual selling prices and volumes often vary significantly from projected prices and volumes and as a result, the timing of when product costs are charged to operations can vary significantly.  For example, a 5% variance in the estimated average selling prices used to calculate the inventory write-down of $197 million in the second quarter of 2003 would have changed the recorded write-down by $28 million.

 

U.S. GAAP provides for products to be grouped into categories in order to compare costs to market values.  The amount of any inventory write-down can vary significantly depending on the determination of inventory categories.  A majority of the Company’s inventory has been categorized as volatile (DRAM and SRAM) or non-volatile (Flash).  The major characteristics the Company considers in determining inventory categories are product type and markets.

 

Product and process technology:  Costs incurred to acquire product and process technology or to patent technology developed by the Company are capitalized and amortized on a straight-line basis over periods currently ranging up to 10 years.  The Company capitalizes a portion of costs incurred based on its analysis of historical and projected patents issued as a percent of patents filed.  Capitalized product and process technology costs are amortized over the shorter of (i) the estimated useful life of the technology, (ii) the patent term or (iii) the term of the technology agreement.

 

Property, plant and equipment:  The Company reviews the carrying value of property, plant and equipment for impairment when events and circumstances indicate that the carrying value of an individual asset or groups of assets may not be recoverable from the estimated future cash flows expected to result from their use and/or eventual disposition.  In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss would be recognized equal to an amount by which the carrying value exceeds the estimated fair value of the assets.  The estimation of future cash flows involves numerous assumptions which require judgment by the Company, including, but not limited to, future use of the assets for Company operations versus sale or disposal of the assets, future selling prices for the Company’s products and future sales and production volumes.

 

Research and development:  Costs related to the conceptual formulation and design of products and processes are expensed as research and development when incurred.  Determining when product development is complete requires judgment by the Company.  The Company deems development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability and is internally qualified for sale to customers.  Subsequent to product qualification, product costs are valued in inventory.

 

Contingencies:  The Company is subject to the possibility of various loss contingencies.  Considerable judgment is necessary to estimate the probability and amounts of such contingencies.  An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated.  The Company accrues a liability and charges operations for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the balance sheet date.  The Company regularly evaluates current information available to determine whether such accruals should be adjusted.

 

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Results of Operations

		Second Quarter										Six Months
		2003			% of net sales		2002			% of net sales		2003			% of net sales		2002			% of net sales
Net sales		$	785.0		100.0	%	$	645.9		100.0	%	$	1,470.1		100.0	%	$	1,069.8		100.0	%
Gross margin		(223.9		)	(28.5	)%	143.0			22.1	%	(261.2		)	(17.8	)%	(69.6		)	(6.5	)%
SG&A		92.4			11.8	%	79.3			12.3	%	188.8			12.8	%	159.2			14.9	%
R&D		174.1			22.2	%	135.9			21.0	%	328.6			22.4	%	290.4			27.1	%
Restructure charge		107.9			13.7	%	—			—	%	107.9			7.3	%	—			—	%
Operating loss		(600.6		)	(76.5	)%	(59.0		)	(9.1	)%	(897.2		)	(61.0	)%	(511.0		)	(47.8	)%

 

On February 18, 2003, the Company announced a series of cost-reduction initiatives including the shut-down of its 200 mm wafer fabrication line in Virginia, the discontinuance of certain product lines and a 10% reduction in its worldwide workforce.  In connection therewith, the Company’s operating results for the second quarter and first six months of 2003 include a restructure charge of $108 million and a write-down of $8 million, included in cost of goods sold, of raw materials and work in process inventories associated with discontinued products. (See “Restructure and Other Charges” and “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Restructure and Other Charges.”)

 

Results of operations include charges of $197 million and $288 million for the second quarter and first six months of 2003, respectively, and $4 million and $177 million for the second quarter and first six months of 2002, respectively, for write-downs of inventories to their estimated market values.

 

Results of operations for the second quarter and first six months of 2002 do not reflect Toshiba Corporation’s (“Toshiba”) DRAM operations at Dominion Semiconductor L.L.C. in Virginia, the assets of which were acquired on April 22, 2002.  The total purchase price of $328 million included cash and 1.5 million shares of the Company’s common stock.  (See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Acquisition of Toshiba Corporation DRAM Assets.”)

 

Absent the restructure and other charges of $116 million in the second quarter of 2003 and the aggregate effects of current and prior quarters’ inventory write-downs, which were unfavorable by $99 million and favorable by $48 million for the second and first quarters of 2003, respectively, the Company’s operating loss would have been $386 million and $345 million for the second and first quarters of 2003, respectively.  These adjusted amounts have not been prepared in accordance with generally accepted accounting principles, however the Company believes this information may be useful in assessing the effects of restructure and other charges and inventory write-downs on the Company’s operating loss and analyzing the Company’s operating cost trends.

 

Net Sales

 

Net sales for the second quarter of 2003 increased by 15% as compared to the first quarter of 2003 as a result of an 18% increase in megabits of memory sold.  Average selling prices for the Company’s semiconductor memory products decreased 3% in the second quarter of 2003 compared to the immediately preceding quarter.  This slight decrease reflects a significant decrease in the average selling prices for the Company’s DDR SDRAM products offset by a significant increase in the average selling prices for the Company’s SDRAM products.  DDR SDRAM products constituted approximately 60% of the Company’s megabits sold in the second quarter of 2003 compared to approximately 40% in the first quarter of 2003.

 

Net sales for the second quarter of 2003 increased by 22% compared to the second quarter of 2002, primarily due to a 42% increase in total megabits of memory sold partially offset by a 15% decrease in average selling prices for the Company’s semiconductor memory products.  Net sales for the first six months of 2003 increased by 37% compared to the first six months of 2002, primarily due to a 24% increase in total megabits of memory sold and an 11% increase in average selling prices for the Company’s semiconductor memory products.  The Company’s primary product in the first six months of 2003 was DDR SDRAM, while SDRAM was the Company’s primary product in the first six months of 2002.

 

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Gross Margin

 

The Company’s gross margin has been significantly affected by the timing of inventory write-downs.  In recent periods, average selling prices for the Company’s semiconductor products have been below manufacturing costs, and accordingly the Company’s results of operations, cash flows and financial condition have been adversely affected.  To the extent the estimated market values of products held in finished goods and work in process inventories at a quarter end date are below the cost of these products, the Company recognizes a charge to cost of goods sold to write down the carrying value of inventory to these estimated market values.  In each of the last eight quarters, the Company recorded charges to cost of goods sold to write down the carrying value of its inventories to their estimated market values.  As these charges are recorded in advance of when inventory subject to the write-down is sold, gross margins in the period of sale are higher than they would be absent the effect of the previous write-downs.

 

The following table sets forth adjusted gross margins absent the inventory write-downs and the estimated aggregate effects of previous write-downs.  These amounts have not been prepared in accordance with generally accepted accounting principles, however the Company believes this information may be useful in assessing the effects of inventory write-downs on the Company’s gross margin and analyzing the Company’s gross margin trends.

 

		Second Quarter										First Quarter					Six Months
		2003			% of net sales		2002			% of net sales		2003			% of net sales		2003			% of net sales		2002			% of net sales
Gross margin:
As reported		$	(223.9	)	(28.5	)%	$	143.0		22.1	%	$	(37.3	)	(5.4	)%	$	(261.2	)	17.8	%	$	(69.6	)	(6.5	)%
Inventory write-down		197.4					3.8					90.7					288.1					176.6
Estimated effect of previous write-downs		(98.6		)			(261.9		)			(138.8		)			(237.4		)			(574.3		)
As adjusted		$	(125.1	)	(15.9	)%	$	(115.1	)	(17.8	)%	$	(85.4	)	(12.5	)%	$	(210.5	)	(14.3	)%	$	(467.3	)	(43.7	)%

 

The Company’s reported gross margin for the second quarter of 2003 decreased as compared to the first quarter of 2003 primarily due to the aggregate effects of inventory write-downs.  The $197 million write-down of inventories in the second quarter of 2003 includes $72 million related to products that were discontinued by the Company pursuant to its restructure plan.  The Company’s per megabit manufacturing costs for the second quarter of 2003 remained relatively flat compared to the first quarter of 2003.  During the second quarter of 2003, the Company continued to transition to its .13µ technology.  The Company’s transition to .13µ technology is expected to be substantially completed in the third quarter of 2003.  As a result, the Company expects manufacturing efficiencies to improve and per megabit manufacturing costs to be lower for the remaining two quarters of 2003.

 

The Company’s gross margin for the second quarter of 2003 decreased as compared to the second quarter of 2002, primarily due to the aggregate effects of inventory write-downs.  Absent the effects of inventory write-downs, the gross margin percentage improved slightly for the second quarter of 2003 as compared to the second quarter of 2002, primarily due to a decrease in per megabit manufacturing costs due to manufacturing efficiency gains, partially offset by the 15% decrease in average selling prices.

 

The Company’s gross margin for the first six months of 2003 decreased as compared to the first six months of 2002, primarily due to the aggregate effects of inventory write-downs.  Absent the effects of inventory write-downs, the gross margin for the first six months of 2003 improved as compared to the first six months of 2002, primarily due to the 11% increase in average selling prices for the Company’s semiconductor memory products and a decrease in per megabit costs, partially offset by charges aggregating $20 million for write-downs of discontinued products and obsolescence charges for older EDO DRAM products.

 

Of the cumulative inventory write-downs recognized in the last eight quarters, the Company estimates that approximately $290 million is associated with product remaining in inventory as of February 27, 2003.  The Company estimates that approximately half of this amount will remain in inventory at the end of the third quarter of 2003.

 

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Subject to specific terms and conditions, the Company has agreed to purchase all of the products manufactured by its joint venture memory manufacturing operation, TECH Semiconductor Singapore Pte. Ltd. (“TECH”).  TECH supplied approximately 30% of the total megabits of memory produced by the Company in the second quarter and first six months of 2003 and supplied approximately 20% in the second quarter and first six months of 2002.  The Company generally purchases semiconductor products from TECH at prices determined quarterly, based on a discount from average selling price realized by the Company for the immediately preceding quarter.  The Company performs assembly and test services on products manufactured by TECH.  The Company also provides certain technology, engineering, and training support to TECH.  All of these transactions with TECH are recognized as part of the net cost of products purchased from TECH.

 

Depending on market conditions, the gross margin from the sale of TECH products may be higher or lower than the gross margin from the sale of products manufactured by the Company’s wholly-owned facilities.  The Company realized significantly higher gross margin percentages on sales of TECH products than for products manufactured by its wholly-owned facilities in the second quarter and first six months of 2003 and 2002.  The Company expects gross margins on sales of TECH products in the third quarter of 2003 to be higher than gross margins realized on products manufactured by the Company’s wholly-owned operations.

 

Selling, General and Administrative

 

Selling, general and administrative (“SG&A”) expense was slightly lower for the second quarter of 2003 as compared to the first quarter of 2003.  SG&A expense increased in the second quarter and first six months of 2003 as compared to the corresponding periods of 2002, primarily due to increased costs associated with outstanding legal matters.  (See “Notes to Financial Statements – Contingencies.”)

 

Research and Development

 

Research and development (“R&D”) expenses vary primarily with the number of development wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs.  Product development costs are recorded as R&D expense.  The Company deems development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability and is internally qualified for sale to customers.  R&D expense for the second quarter of 2003 was $174 million, representing a 13% increase as compared to the first quarter of 2003.  The Company expects R&D expense to increase to approximately $195 million in the third quarter of 2003 due to the large volume of wafers dedicated to the development of .11µ devices and further investment in the Company’s 300 mm production line prior to its internal qualification.

 

The Company’s DRAM process technology research and development efforts are focused on its .11µ and ..095µ line-width process technologies, which are designed to facilitate the Company’s transition to next generation products.  Additional process development work includes processes to support Flash, CMOS imagers, and new memory materials.  In addition to its process technology efforts, the Company continues to emphasize product designs that utilize advanced process technology.  Efforts towards the design and development of new products are concentrated on the Company’s 512 Meg and 1 Gig DDR SDRAMs, DDRII SDRAMs and GDDRIII SDRAMs, Flash memory products, CMOS imagers and certain advanced DRAM technology products.

 

Other Operating Expense

 

Other operating expense in the second quarter and first six months of 2003 includes losses of $13 million and $9 million, respectively, from changes in currency exchange rates.  Other operating income in the second quarter of 2003 includes $14 million in receipts from the U.S. government in connection with anti-dumping tariffs.  Other operating expense in the first six months of 2003 also includes losses net of gains on write-downs and disposals of semiconductor equipment of $11 million.  Other operating income in the second quarter and first six months of 2002 includes gains of $12 million and $17 million, respectively, from changes in currency exchange rates.

 

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Restructure and Other Charges

 

As a result of the prolonged downturn in the semiconductor memory industry and the Company’s eight consecutive quarters of operating losses, in the second quarter of 2003 the Company announced a plan to restructure its operations.  The restructure plan includes the shutdown of the Company’s 200 mm production line in Virginia, the discontinuance of certain memory products, including SRAM and TCAM products, and a 10% reduction of the Company’s worldwide workforce. In connection with the plan, the Company recorded a restructure charge of $108 million in the second quarter of 2003.  In addition, the Company recorded other restructure-related charges of $8 million, which are included in cost of goods sold in the accompanying consolidated statements of operation, to write-down the carrying value of raw materials and work-in-process inventories associated with discontinued products.  The Company expects to substantially complete the restructure plan by the end of 2003 and estimates that it will incur additional restructure related charges of approximately $15 million in the second half of 2003, primarily for the redeployment of equipment from its Virginia site to Boise and to certain of its international facilities.  The components of the restructure and other charges are as follows:

 

Restructure charge:
Write-down of equipment		$	53.9
Severance and other termination benefits		25.5
Write-down of intangible assets		18.6
Other		9.9
Total restructure charge		107.9
Other:
Write-down of raw materials and work in process inventories		7.8
Total restructure and other charges		$	115.7

 

Through February 27, 2003, the Company had paid essentially none of the severance and other costs related to the restructure.  As of February 27, 2003, the Company’s accounts payable and accrued expenses included $30 million for remaining costs accrued in connection with the restructure plan, primarily consisting of severance and other termination benefits.

 

The Company expects the restructure to result in a lower overall cost structure, to provide better focus on products with greater potential for growth and profitability and to allow continuing investment in new technology.  The Company expects to realize annualized cost savings in excess of $250 million as a result of this restructure plan.

 

Income Taxes

 

The income tax provision for the second quarter and first six months of 2003 were $18 million and $39 million respectively, which primarily reflects taxes on foreign operations.  Income tax benefit for the second quarter and first six months of 2002 was $20 million and $198 million, respectively.  The Company recognized no tax benefit on its domestic net operating losses in 2003.  As of February 27, 2003, the Company had outstanding domestic net operating loss carryforwards of approximately $2 billion.  Until the Company utilizes these operating loss carryforwards, the income tax provision will only reflect modest levels of taxes from the Company’s foreign operations.

 

Recently Issued Accounting Standards

 

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an interpretation of ARB No. 51,” which provides guidance on the identification of and reporting for variable interest entities.  Interpretation No. 46 expands the criteria for consideration in determining whether a variable interest entity should be consolidated.  Interpretation No. 46 is effectively immediately to variable interest entities created after January 31, 2003, and to variable interest entities in

 

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which an enterprise obtains an interest after that date.  The Company is required to adopt the interpretation in the first quarter of 2004 for variable interest entities acquired before February 1, 2003.  The Company is currently assessing the impact of Interpretation No. 46 on its results of operations and financial position.

 

In December 2002, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure –  an amendment of FASB Statement No. 123.”  SFAS No. 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS No. 148 is effective for the Company in the third quarter of 2003.  The Company does not expect to effect a voluntary change in accounting to the fair value method, and, accordingly, does not expect the adoption of SFAS No. 148 to have a significant impact on the Company’s future results of operations or financial position.

 

Liquidity and Capital Resources

 

As of February 27, 2003, the Company had cash and short-term investments totaling $1,206 million.  During the first six months of 2003, the Company received net financing proceeds of $602 million and spent $546 million for property, plant and equipment.  In addition, the Company received income tax refunds of $109 million in the first quarter of 2003.  The Company’s liquidity is highly dependent on overall industry demand for semiconductor memory and average selling prices for its semiconductor products.

 

Financing proceeds reflect $633 million of 2.5% seven-year convertible subordinated notes issued by the Company in the second quarter of 2003.  In conjunction with the issuance of the notes, the Company spent $109 million to purchase call spread options.  In addition to the convertible subordinated notes, the Company received $95 million in financing during the first six months of 2003.

 

The Company believes that to develop new product and process technologies, support future growth, achieve operating efficiencies and maintain product quality, it must continue to invest in manufacturing technology, facilities and capital equipment, research and development, and product and process technology.  The Company expects capital spending to approximate $1 billion in 2003 and has spent approximately $735 million to date.  Note that $59 million of the amounts included in the consolidated statement of cash flows for 2003 as equipment acquisition on contracts payable and capital leases relate to assets sold and reacquired in equipment sale-leaseback transactions.  The Company originally acquired the majority of these assets prior to 2003.  The Company expects capital spending to approximate $1 billion in 2004.  These capital spending estimates include expenditures for ongoing equipment upgrades and expenditures for the Company’s 300 mm production line.  As of February 27, 2003, the Company had commitments extending into 2004 of approximately $180 million for the acquisition of property, plant and equipment.  The Company anticipates cash expenditures of approximately $45 million in the second half of 2003 to complete its restructure plan.

 

The Company has historically utilized external sources of financing to fund a portion of operations and since April 2000 has had a shelf registration statement in place pursuant to which the Company may from time to time issue debt or equity securities for up to $1 billion.  The Company may also seek to raise funds through issuing securities not covered by the existing shelf registration statement, by increasing the size of the existing shelf registration statement or pursuing other external sources of financing.

 

In connection with the acquisition of the Virginia facility, the Company issued 1.5 million shares of common stock.  The Company granted Toshiba an option to require Micron to repurchase on October 21, 2003, all of these shares for $68 million cash.  The option expires if the closing price of the Company’s common stock is at or above $45.05 per share for 20 consecutive trading days.

 

Subsequent to the end of the second quarter of 2003, on March 13, 2003, TECH entered into a new $250 million term loan credit facility, the proceeds of which were used to refinance amounts borrowed under its former facility.  In connection therewith, the $50 million originally pledged by the Company as cash collateral with respect

 

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to TECH’s previous credit facility was re-pledged and supplemented by an additional $50 million by the Company.  With respect to this $100 million in cash collateral, certain shareholders in TECH have agreed, in the event all or a portion of the cash collateral is required to be used to meet TECH’s principal loan payments, to indemnify the Company for approximately one-half of such amounts.  Additionally, the Company and these indemnifying shareholders are entitled to proceed against TECH and its assets to the extent such cash collateral is required to be used to meet TECH’s principal loan payments.  However, such rights are subordinated to the rights of the banks participating in the new credit facility.

 

As of February 27, 2003, maturities of notes payable, future minimum lease payments under capital leases and minimum commitments under operating leases were as follows:

 

 

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Certain Factors

 

In addition to the factors discussed elsewhere in this Form 10-Q, the following are important factors which could cause actual results or events to differ materially from those contained in any forward looking statements made by or on behalf of the Company.

 

If average selling prices for our semiconductor products do not exceed our costs, we expect to incur losses.

 

Average selling prices for our semiconductor products decreased by 3% in the second quarter of 2003 as compared to the first quarter of 2003 and decreased by 12% in the first quarter of 2003 as compared to the fourth quarter of 2002.  In five of the last six fiscal years, we experienced the following decreases in average selling prices for our semiconductor products:  53% in 2002, 60% in 2001, 37% in 1999, 60% in 1998 and 75% in 1997.  We are unable to predict pricing conditions for any future period.

 

In recent quarters, average selling prices for our semiconductor products have been below our manufacturing costs.  If average selling prices are below costs in future periods, we expect to continue to incur losses on product sales and for our results of operations, cash flows and financial condition to be adversely affected.  To the extent the estimated market value of products held in finished goods and work in process inventories at a quarter end date is below the cost of these products, we recognize a charge against operations to write down the carrying value of inventory to market value.

 

If average selling prices of semiconductor products do not improve, we may not be able to generate sufficient cash flows to fund our operations and make adequate capital investments.

 

Our cash flows from operations depend primarily on the volume of semiconductor memory sold, average selling prices and per megabit manufacturing costs.  In recent quarters, average selling prices have been below our manufacturing costs.  To develop new product and process technologies, support future growth, achieve operating efficiencies and maintain product quality, we must make significant capital investments in facilities and capital equipment, research and development, and product and process technology.  Weak market conditions for the semiconductor industry have led us to significantly reduce actual and projected expenditures.  If average selling prices do not improve, we may not be able to generate sufficient cash flows to fund our operations or make adequate capital investments.  We have historically utilized external sources of financing.  However, depending on general market and economic conditions or other factors, we may not be able to access capital markets for sufficient funds on acceptable terms.

 

Increased worldwide DRAM production or lack of demand for semiconductor products could lead to further declines in average selling prices for DRAM or limit our ability to sell our products.

 

The transition to smaller geometries and 300 mm wafers in the industry (which is expected to occur within the next five years) could, depending upon the rate of transition, lead to a significant increase in the worldwide supply of DRAM.  Increases in worldwide supply of DRAM also result from DRAM fab capacity expansions, either by way of new facilities, increased capacity utilization or reallocation of other semiconductor production to DRAM production.  Some of our competitors may receive government support to withstand downturns in the semiconductor memory market and to invest in technology resulting in increased worldwide supply.  Increases in worldwide supply of DRAM, if not offset by increases in demand, could lead to further declines in average selling prices for our products and adversely affect our results of operations, cash flows and financial condition.  In addition, if a lack of demand for semiconductor products limits our ability to sell our inventory, our liquidity and financial position could be adversely affected.

 

Depressed pricing for semiconductor memory products may lead to future inventory write-downs.

 

We recorded inventory write-downs of $197 million and $91 million in the second and first quarter of 2003, respectively, and we recorded inventory write-downs totaling $376 million in 2002 and $727 million in 2001 as a result of the significant decreases in average selling prices for our semiconductor memory products.  To the extent the estimated market value of products held in finished goods and work in process inventories at a quarter end date

 

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is below the cost of these products, we recognize a charge to cost of goods sold to write down the carrying value of inventory to market value.

 

If the growth rate of either PCs sold or the amount of semiconductor memory included in each PC decreases, sales of our semiconductor products could decrease.

 

We are dependent on the PC market as most of the semiconductor products we sell are used in PCs or peripheral products.  DRAMs are the most widely used semiconductor components in PCs.  In recent years, the growth rate of PCs sold has slowed or declined.  If we experience a sustained reduction in the growth rate of either PCs sold or the average amount of semiconductor memory included in each PC, sales of our semiconductor products built for those markets could decrease, and our results of operations, cash flows and financial condition could be adversely affected.

 

The semiconductor memory industry is highly competitive.

 

We face intense competition from a number of companies, some of which are large corporations or conglomerates (e.g. Samsung Semiconductor, Inc.) that may have greater resources to withstand downturns in the semiconductor memory market, invest in technology and capitalize on growth opportunities.

 

Current economic and political conditions may harm our business.

 

Global economic conditions and the effects of military or terrorist actions may cause significant disruptions to worldwide commerce.  If these disruptions result in delays or cancellations of customer orders, a decrease in corporate spending on information technology or our inability to effectively market, manufacture or ship our products, our results of operations, cash flows and financial condition could be adversely affected.  In addition, our ability to raise capital for capital expenditures, research and development and ongoing operations is dependent upon ready access to capital markets.  During times of adverse global economic and political conditions, accessibility to capital markets could decrease.  If we are unable to access the capital markets over an extended period of time, we may be unable to make capital expenditures, fully carry out our research and development efforts and fund operations, which could materially adversely affect our results of operations, cash flows and financial condition.

 

If any one of our major PC customers significantly reduces its purchases of DRAM from us, our results of operations, cash flows and financial condition could be adversely affected.

 

Approximately 85% of our sales of semiconductor products for the second quarter of 2003 was to the computer market.  Aggregate sales to two of our PC customers approximated 29% of our net sales in the second quarter of 2003.  If any one of our major PC customers significantly reduces its purchases of DRAM from us, our results of operations, cash flows and financial condition could be adversely affected.

 

If our TECH joint venture experiences financial difficulty, or if our supply of semiconductor products from TECH is disrupted, our results of operations, cash flows and financial condition could be adversely affected.

 

TECH supplied approximately 30% of the total megabits of memory produced by the Company in the second quarter and first six months of 2003 and supplied approximately 20% in the second quarter and first six months of 2002.  We have agreements to purchase all of the production from TECH subject to specific terms and conditions.  Any reduction in supply could adversely affect our results of operations, cash flows and financial condition.  Subsequent to the end of the second quarter of 2003, on March 13, 2003, TECH entered into a new $250 million term loan credit facility the proceeds of which were used to refinance amounts borrowed under its former facility.  In connection therewith, the $50 million pledged by the Company as cash collateral with respect to TECH’s previous credit facility was re-pledged and supplemented by an additional $50 million by the Company.  With respect to this $100 million in cash collateral, certain shareholders in TECH have agreed in the event all or a portion of the cash collateral is required to be used to meet TECH’s principal loan payments, to indemnify the Company for approximately one-half of such amounts.  As of February 27, 2003, we had remaining unamortized costs of $73 million in intangible assets relating to the supply arrangement to purchase product from TECH.  In the event that our supply of semiconductor products from TECH is reduced or eliminated, we may be required to write off part or all of these assets and our results of operations could be adversely affected.

 

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We may be unable to maintain or reduce per megabit manufacturing costs at the same rate as we have in the past.

 

Historically, we have decreased per megabit manufacturing costs through improvements in our manufacturing processes, including reducing the die size of our existing products.  In future periods, we may be unable to maintain our per megabit manufacturing costs or reduce costs at historical rates.  Our ability to maintain or reduce per megabit manufacturing costs in future periods may be affected by:

 

•                                          our ability to successfully implement product and process technology upgrades, specifically our ongoing transition to .13µ and .11µ process technologies

 

•                                          our manufacturing wafer output or yields, which may decrease as we implement more complex technologies, including our transition to 300 mm wafer processing, and

 

•                                          our ability to ramp the latest reduced die size versions of existing devices or new generation devices.

 

If we are unable to respond to customer demand for diversified semiconductor memory products or are unable to do so in a cost-effective manner, we may lose market share and our results of operations may be adversely affected.

 

In recent periods, the semiconductor memory market has become relatively segmented, with diverse memory needs being driven by the different requirements of desktop and notebook PCs, servers, workstations, handheld devices, and communications, industrial and other applications that demand specific memory solutions.  We currently offer customers a variety of memory products including DDR SDRAM, SDRAM and Flash.  In addition, we are designing and developing other semiconductor products, including DDRII SDRAM, GDDRII SDRAM, reduced latency DRAM (“RLDRAM”), CellularRAM and CMOS imaging sensors.

 

We need to dedicate significant resources to product design and development to respond to customer demand for the continued diversification of semiconductor products.  If we are unable to invest sufficient resources to meet the diverse memory needs of customers, we may lose market share.  In addition, as we diversify our product lines we may encounter difficulties penetrating certain markets, particularly markets where we do not have existing customers.  If we are unable to respond to customer demand for market diversification in a cost-effective manner, our results of operations may be adversely affected.

 

An adverse determination that our products and processes infringe the intellectual property rights of others could adversely affect our results of operations, cash flows and financial condition.

 

As is typical in the semiconductor and other high technology industries, from time to time, others have asserted, and may in the future assert, that our products or processes infringe their product or process technology rights.  We are currently engaged in litigation with Rambus, Inc. (“Rambus”) relating to certain of Rambus’ patents and certain of our claims and defenses.  On August 28, 2000, we filed a declaratory judgment action against Rambus in the U.S. District Court for the District of Delaware.  On February 1, 2001, we amended our complaint.  Pursuant to our amended complaint, we are seeking (1) relief under the federal antitrust laws for violations by Rambus of Section 2 of the Sherman Act; (2) a declaratory judgment that (a) certain Rambus patents are not infringed, are invalid and/or are unenforceable, (b) we have an implied license to Rambus’ patents, and (c) Rambus is estopped from enforcing its patents against us because of its conduct in the Joint Electron Device Engineering Council standards setting body; and (3) damages and declaratory relief for Rambus’ breach of contract, fraud, deceptive trade practices, negligent misrepresentation, and conduct requiring the application of equitable estoppel.  On February 15, 2001, Rambus filed an answer and counterclaim denying that we are entitled to relief and has alleged willful infringement by us of eight Rambus patents.  In addition, Rambus has filed lawsuits against the Company in Italy, Germany, France and the United Kingdom alleging infringement of certain Rambus European patents.  We are unable to predict the outcome of the Rambus suits or of other assertions of infringement that have been made, or may in the future be made against us.  A court determination that our manufacturing processes or products infringe the product or process rights of others could result in significant liability and/or require us to make material changes to our products and/or

 

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manufacturing processes.  Any of the foregoing results could have a material adverse effect on our business, results of operations or financial condition.

 

We have a number of patent and intellectual property license agreements.  Some of these license agreements require us to make one time or periodic payments.  We may need to obtain additional patent licenses or renew existing license agreements in the future.  We are unable to predict whether these license agreements can be obtained or renewed on acceptable terms.

 

Allegations of anticompetitive practices.

 

On June 17, 2002, we received a grand jury subpoena from the U.S. District Court for the Northern District of California seeking information regarding an investigation by the Antitrust Division of the Department of Justice (the “DOJ”) into possible antitrust violations in the “Dynamic Random Access Memory” or “DRAM” industry.  We are cooperating fully and actively with the DOJ in its investigation.  Subsequent to the commencement of the DOJ investigation, 24 purported class action lawsuits were filed against us and other DRAM suppliers in various federal and state courts alleging violations of the Federal Sherman Antitrust Act or California’s Cartwright Antitrust Act and Unfair Competition Law relating to the sale and pricing of DRAM products.  The complaints seek treble damages for the alleged damages sustained by purported class members, in addition to restitution, costs and attorneys’ fees, as well as an injunction against the allegedly unlawful conduct.  There can be no assurance that additional purported class action lawsuits will not be filed against us, either within or without the United States.  We are unable to predict the outcome of these suits.  Based upon our analysis of the claims made and the nature of the DRAM industry, we believe that class treatment of these cases is not appropriate and that any purported injury alleged by plaintiffs would be more appropriately resolved on a customer-by-customer basis.  We cannot assure you that the final resolution of these alleged violations of federal or state antitrust laws will not result in significant liability and not have a material adverse effect on our results of operations and financial condition.

 

New product development may not be successful.

 

We are developing new products that complement our traditional memory products or leverage their underlying design or process technology.  We anticipate expending significant resources for new semiconductor product development over the next several years.  There can be no assurance that our product development efforts will be successful, that we will be able to cost-effectively manufacture these new products or that we will be able to successfully market these products.

 

If we are unable to successfully transition our operations to 300 mm wafer processing at the appropriate time, our results of operations, cash flows and financial condition could be adversely affected.

 

We have in the past reduced our per megabit manufacturing costs by transitioning to larger wafer sizes.  By transitioning to larger wafers, we should be able to produce significantly more die for each wafer, resulting in substantially reduced costs for each die.  Our transition to 300 mm wafer processing across a significant portion of our operations will require us to make substantial capital investments, which will depend on our ability to generate funds from operations or to obtain additional funds from external sources.  We may also experience disruptions in manufacturing operations and reduced yields during our transition to larger wafer sizes.  If we are unable to successfully transition to 300 mm wafer processing at the appropriate time, we could be at a cost disadvantage with respect to our competitors and our results of operations, cash flows and financial condition could be adversely affected.

 

We face risks associated with our international sales and operations that could adversely affect our results of operations, cash flows and financial condition.

 

Sales to customers outside the United States approximated ­­56% of our consolidated net sales in the second quarter of 2003.  In addition, we have or support manufacturing operations in Italy, Japan, Scotland and Singapore.  Our international sales and operations are subject to a variety of risks, including:

 

•                                          currency fluctuations, export duties, changes to import and export regulations, and restrictions on the transfer of funds,

 

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•                                          political and economic instability,

 

•                                          problems with the transportation or delivery of our products,

 

•                                          issues arising from cultural or language differences and labor unrest,

 

•                                          longer payment cycles and greater difficulty in collecting accounts receivable, and

 

•                                          compliance with trade and other laws in a variety of jurisdictions.

 

These factors may adversely affect our results of operations, cash flows and financial condition.

 

If our manufacturing process is disrupted, our results of operations, cash flows and financial condition could be adversely affected.

 

We manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance.  Difficulties in the manufacturing process can reduce yields or disrupt production and may increase our per megabit manufacturing costs.  From time to time, we have experienced minor disruptions in our manufacturing process as a result of power outages.  If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected or we may be unable to meet our customers’ requirements and they may purchase products from other suppliers.  This could result in a significant increase in manufacturing costs, loss of revenues or damage to customer relationships.

 

Disruptions in our supply of raw materials could adversely affect our results of operations, cash flows and financial position.

 

Our operations require raw materials that meet exacting standards.  We generally have multiple sources of supply for our raw materials.  However, only a limited number of suppliers are capable of delivering certain raw materials that meet our standards.  Various factors could reduce the availability of raw materials such as silicon wafers, photomasks, chemicals, gases, lead frames and molding compound.  Shortages may occur from time to time in the future.  In addition, any transportation problems could delay our receipt of raw materials.  Lead times for the supply of raw materials have been extended in the past.  If our supply of raw materials is disrupted or our lead times extended, our results of operations, cash flows and financial condition could be adversely affected.

 

We may not realize the expected benefits of our restructure program.

 

In the second quarter of 2003, we announced a series of cost-reduction initiatives including the shutdown of our 200 mm fabrication line in Virginia, the discontinuance of certain product lines and the 10% reduction in worldwide workforce.  We expect to substantially complete the restructure plan by the end of 2003 and expect to realize annualized cost savings in excess of $250 million as a result of this restructure plan.  However, we may not realize the expected benefits of our restructure program.

 

Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise adversely affect our results of operations, cash flows and financial position.

 

Because the design and production process for semiconductor memory is highly complex, it is possible that we may produce products that do not comply with customer specifications, contain defects or are otherwise incompatible with end uses.  If, despite design review, quality control and product qualification procedures, problems with nonconforming, defective or incompatible products occur after we have shipped such products, we could be adversely affected in the following ways:

 

•                                          we may need to replace product or otherwise compensate customers for costs incurred or damages caused by defective or incompatible product, and

 

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•                                          we may encounter adverse publicity, which could cause a decrease in sales of our products.

 

We expect to make future acquisitions where advisable, which involve numerous risks.

 

We expect to make future acquisitions where we believe it is advisable to enhance our market position.  Acquisitions involve numerous risks, including:

 

•                                          increasing our exposure to changes in average selling prices for semiconductor memory products,

 

•                                          difficulties in integrating the operations, technologies, and products of the acquired companies,

 

•                                          increasing capital expenditures to upgrade and maintain facilities,

 

•                                          increasing debt to finance any acquisition,

 

•                                          diverting management’s attention from normal daily operations,

 

•                                          managing larger operations and facilities and employees in separate geographic areas, and

 

•                                          hiring and retaining key employees.

 

Mergers and acquisitions of high-technology companies are inherently risky, and future acquisitions may not be successful and may materially adversely affect our results of operations, cash flows or financial condition.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Substantially all of the Company’s investments and debt are at fixed interest rates; therefore, the fair value of these instruments is affected by changes in market interest rates.  The Company believes that the market risk arising from its holdings of investments is minimal as the Company’s investments generally mature within one year.  The carrying value of the Company’s debt was $1,140 million at February 27, 2003, and $454 million at August 29, 2002.  The functional currency for substantially all of the Company’s operations is the U.S. dollar.  The Company held aggregate cash and other assets in foreign currency valued at approximately U.S. $207 million as of February 27, 2003, and U.S. $220 million as of August 29, 2002 (including deferred tax assets denominated in Japanese Yen valued at approximately U.S. $138 million as of February 27, 2003, and U.S. $165 million as of August 29, 2002).  The Company also held aggregate foreign currency liabilities valued at approximately U.S. $451 million as of February 27, 2003, and U.S. $434 million as of August 29, 2002 (including debt denominated in Japanese Yen valued at approximately U.S. $206 million as of February 27, 2003, and U.S. $233 million as of August 29, 2002).  Foreign currency receivables and payables are comprised primarily of Japanese Yen, Euros, Singapore Dollars and British Pounds.

 

Item 4.  Controls and Procedures

 

As of a date within the 90-day period prior to the filing date of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures were adequate to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

 

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There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.  There were no significant deficiencies or material weaknesses noted during the evaluation, and therefore no corrective actions were taken.

 

Part II.  OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

On August 28, 2000, the Company filed a declaratory judgment action against Rambus, Inc. (“Rambus”) in U.S. District Court for the District of Delaware.  On February 1, 2001, the Company amended its complaint.  Pursuant to its amended complaint, the Company is seeking (1) relief under the federal antitrust laws for violations by Rambus of Section 2 of the Sherman Act; (2) a declaratory judgment (a) that certain Rambus patents are not infringed by the Company, are invalid, and/or are unenforceable due to, among other reasons, Rambus’ fraudulent conduct in misusing and enforcing those patents, (b) that the Company has an implied license to those patents and (c) that Rambus is estopped from enforcing those patents against the Company because of its conduct in the Joint Electron Device Engineering Council, and (3) damages and declaratory relief for Rambus’ breach of contract, fraud, deceptive trade practices, negligent misrepresentation, and conduct requiring the application of equitable estoppel.  On February 15, 2001, Rambus filed an answer and counterclaim against the Company in Delaware denying the Company is entitled to relief and alleging infringement of eight Rambus patents subject to the Company’s declaratory judgment action.  On September 1, 2000, Rambus filed suit against Micron Semiconductor GmbH in the District Court of Mannheim, Germany, alleging that certain SDRAM and DDR SDRAM products infringe German patent and utility model counterparts to European patent 525 068.  On September 13, 2000, Rambus filed suit against Micron Europe Limited in the High Court of Justice, Chancery Division in London, England, alleging that certain SDRAM and DDR SDRAM products infringe the U.K. counterpart to European patent 525 068.  On September 22, 2000, Rambus filed a complaint against the Company and Reptronic (a distributor of the Company’s products) in Court of First Instance of Paris, France, alleging that certain SDRAM and DDR SDRAM products infringe the French counterpart to European patent 525 068.  In its suits against the Company, Rambus is seeking monetary damages and injunctive relief.  On September 29, 2000, the Company filed suit against Rambus in the Civil Court of Milan, Italy, alleging invalidity and non-infringement of the Italian counterpart to European patent 525 068.  On September 29, 2000, Rambus filed a preliminary proceeding against the Company and EBV (a distributor of the Company’s products) in the Civil Court of Monza, Italy, alleging that certain SDRAM products infringe the Italian counterpart to European patent 525 068, and seeking the seizure of certain materials and the entry of a preliminary injunction as to products manufactured at the Company’s Avezzano, Italy, site.  On December 21, 2000, an appeals panel of the Court of Monza held that the Monza trial court had no jurisdiction to adjudicate the seizure matter.  The Monza trial court ordered that technical review proceedings continue with respect to the issue of preliminary injunction.  On May 24, 2001, the trial court rejected Rambus’ assertions of infringement and denied its request for a preliminary injunction.  Rambus’ appeal from the trial judge’s ruling was rejected by the Monza appeals panel on July 18, 2001.  On December 29, 2000, the Company filed suit against Rambus in the Civil Court of Avezzano, Italy, alleging invalidity and non-infringement of the Italian counterpart to European patent 1 004 956.  On August 10, 2001, Rambus filed suit against the Company and Assitec (an electronics retailer) in the Civil Court of Pavia, Italy, alleging that certain DDR SDRAM products infringe the Italian counterpart to European patent 1 022 642.  The Company is unable to predict the outcome of these suits.  A court determination that the Company’s manufacturing processes or products infringe the product or process rights of others could result in significant liability and/or require the Company to make material changes to its products and/or manufacturing processes.  Any of the foregoing results could have a material adverse effect on the Company’s business, results of operations or financial condition.

 

On June 17, 2002, the Company received a grand jury subpoena from the U.S. District Court for the Northern District of California seeking information regarding an investigation by the Antitrust Division of the Department of Justice (the “DOJ”) into possible antitrust violations in the “Dynamic Random Access Memory” or “DRAM” industry.  The Company is cooperating fully and actively with the DOJ in its investigation.  Subsequent to the commencement of the DOJ investigation, a number of purported class action lawsuits were filed against the Company and other DRAM suppliers.  Sixteen cases were filed between June 21, 2002, and September 19, 2002, in the following federal district courts:  one in the Southern District of New York, five in the District of Idaho, and ten in the Northern District of California.  Each of the federal district court cases purports to be on behalf of a class of

 

26

 

individuals and entities who purchased DRAM directly from the various DRAM suppliers during a specified time period commencing on or after October 1, 2001.  The complaints allege price-fixing in violation of the Sherman Act and seek treble damages in unspecified amounts, costs, attorneys’ fees, and an injunction against the allegedly unlawful conduct.  On September 26, 2002, the Judicial Panel on Multi-District Litigation (“JPML”) held a hearing and subsequently ordered that the foregoing federal cases be transferred to the U.S. District Court for the Northern District of California (San Francisco) for coordinated or consolidated pretrial proceedings.  Eight additional cases were filed between August 2, 2002, and March 11, 2003, in the following California state superior courts:  five in San Francisco County, one in Santa Clara County, one in Los Angeles County, and one in Humbolt County.  Each of the California state cases purports to be on behalf of a class of individuals and entities who indirectly purchased DRAM during a specified time period commencing December 1, 2001.  The complaints allege violations of California’s Cartwright Act and Unfair Competition Law and unjust enrichment and seek treble damages in unspecified amounts, restitution, costs, attorneys’ fees, and an injunction against the allegedly unlawful conduct.  In response to a petition filed by one of the plaintiffs, a judge appointed by the Judicial Council of California subsequently ordered that the then-pending state cases be coordinated for pretrial purposes and recommended that they be transferred to San Francisco County Superior Court for coordinated or consolidated pretrial proceedings.  The Company is unable to predict the outcome of these suits.  Based upon the Company’s analysis of the claims made and the nature of the DRAM industry, the Company believes that class treatment of these cases is not appropriate and that any purported injury alleged by plaintiffs would be more appropriately resolved on a customer-by-customer basis.  The Company can give no assurance that the final resolution will not result in significant liability and will not have a material adverse effect on the Company’s results of operations and financial condition.

 

Item 2.  Changes in Securities and Use of Proceeds

 

In February 2003, the Company issued $633 million of 2.5% Convertible Subordinated Notes due February 1, 2010  (the “Notes”) in a private placement to Qualified Institutional Buyers in reliance on Rule 144A of the Securities Act.  The initial transaction fees associated with the Notes totaled approximately $17 million, and the net proceeds to the Company from the offering of the Notes were approximately $616 million.  Holders of the Notes may convert all or some of their Notes at any time prior to maturity, unless previously redeemed or repurchased, into the Company’s Common Stock at a conversion rate of 84.8320 shares for each $1,000 principal amount of Notes.  This conversion rate is equivalent to a conversion price of approximately $11.79 per share.  The initial conversion rate is subject to adjustment under certain circumstances as specified in the indenture for the Notes.  The Company may redeem the notes at any time after February 6, 2006 at declining premiums to par.

 

Item 6.  Exhibits and Reports on Form 8-K

 

(a)                                  The following are filed as a part of this report:

 

Exhibit Number		Description of Exhibit
4.12		Indenture dated February 4, 2003, between the Company and Wells Fargo Bank for 2.5% Convertible Subordinated Notes Due February 1, 2010
10.141		Registration Rights Agreement dated February 4, 2003, among the Company, Goldman, Sachs & Co. and Lehman Brothers Inc.
99.1		Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

(b)                                 The registrant filed the following reports on Form 8-K during the fiscal quarter ended February 27, 2003:

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Micron Technology, Inc.
	(Registrant)
Dated:  April 14, 2003	/s/ W. G. Stover, Jr.
	Wilbur G. Stover, Jr., Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer)

 

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CERTIFICATION

 

I, Steven R. Appleton, certify that:

 

1.                               I have reviewed this quarterly report on Form 10-Q of Micron Technology, Inc.;

 

2.                               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.                               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.                               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

a.                  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b.                 evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c.                  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.                               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

a.                  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

b.                 any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.                               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 11, 2003
	/s/ Steven R. Appleton
	Steven R. Appleton
	Chief Executive Officer

 

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CERTIFICATION

 

I, Wilbur G. Stover, Jr., certify that:

 

1.                               I have reviewed this quarterly report on Form 10-Q of Micron Technology, Inc.;

 

2.                               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.                               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.                               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

a.                  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b.                 evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c.                  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.                               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

a.                  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

 

b.                 any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.                               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  April 11, 2003
	/s/ W. G. Stover, Jr.
	Wilbur G. Stover, Jr.
	Chief Financial Officer

 

30

EXHIBIT 4.12

 

 

MICRON TECHNOLOGY, INC.,

 

ISSUER

 

TO

 

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

 

TRUSTEE

 

 

INDENTURE

 

Dated as of February 4, 2003

 

 

2.50% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2010

 

 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.1 Definitions

SECTION 1.2 Compliance Certificates and Opinions

SECTION 1.3 Form of Documents Delivered to the Trustee

SECTION 1.4 Acts of Holders of Securities

SECTION 1.5 Notices, Etc to the Trustee and Company

SECTION 1.6 Notice to Holders of Securities; Waiver

SECTION 1.7 Effect of Headings and Table of Contents

SECTION 1.8 Successors and Assigns

SECTION 1.9 Separability Clause

SECTION 1.10 Benefits of Indenture

SECTION 1.11 Governing Law

SECTION 1.12 Legal Holidays

SECTION 1.13 Conflict With Trust Indenture Act

ARTICLE II SECURITY FORMS

SECTION 2.1 Form Generally

SECTION 2.2 Form of Security

PERIOD

SECTION 2.3 Form of Certificate of Authentication

SECTION 2.4 Form of Conversion Notice

SECTION 2.5 Form of Assignment

ARTICLE III THE SECURITIES

SECTION 3.1 Title and Terms

SECTION 3.2 Denominations

SECTION 3.3 Execution, Authentication, Delivery and Dating

SECTION 3.4 Global Securities; Non-global Securities; Book-entry Provisions

SECTION 3.5 Registration; Registration of Transfer and Exchange; Restrictions on Transfer

SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities

SECTION 3.7 Payment of Interest; Interest Rights Preserved

SECTION 3.8 Persons Deemed Owners

SECTION 3.9 Cancellation

SECTION 3.10 Computation of Interest

SECTION 3.11 CUSIP Numbers

ARTICLE IV SATISFACTION AND DISCHARGE

SECTION 4.1 Satisfaction and Discharge of Indenture

 

 

SECTION 4.2 Application of Trust Money

ARTICLE V REMEDIES

SECTION 5.1 Events of Default

SECTION 5.2 Acceleration of Maturity; Rescission and Annulment

SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee

SECTION 5.4 Trustee May File Proofs of Claim

SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities

SECTION 5.6 Application of Money Collected

SECTION 5.7 Limitation on Suits

SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert

SECTION 5.9 Restoration of Rights and Remedies

SECTION 5.10 Rights and Remedies Cumulative

SECTION 5.11 Delay or Omission Not Waiver

SECTION 5.12 Control by Holders of Securities

SECTION 5.13 Waiver of Past Defaults

SECTION 5.14 Undertaking for Costs

SECTION 5.15 Waiver of Stay, Usury or Extension Laws

ARTICLE VI THE TRUSTEE

SECTION 6.1 Certain Duties and Responsibilities

SECTION 6.2 Notice of Defaults

SECTION 6.3 Certain Rights of Trustee

SECTION 6.4 Not Responsible for Recitals or Issuance of Securities

SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures

SECTION 6.6 Money Held in Trust

SECTION 6.7 Compensation, Reimbursement and Indemnity

SECTION 6.8 Corporate Trustee Required; Eligibility

SECTION 6.9 Resignation and Removal; Appointment of Successor

SECTION 6.10 Acceptance of Appointment by Successor

SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business

SECTION 6.12 Authenticating Agents

SECTION 6.13 Disqualification; Conflicting Interests

SECTION 6.14 Preferential Collection of Claims Against Company

ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 7.1 Company May Consolidate, Etc. Only on Certain Terms

SECTION 7.2 Successor Substituted

 

ii

 

ARTICLE VIII SUPPLEMENTAL INDENTURES

SECTION 8.1 Supplemental Indentures Without Consent of Holders of Securities

SECTION 8.2 Supplemental Indentures with Consent of Holders of Securities

SECTION 8.3 Execution of Supplemental Indentures

SECTION 8.4 Effect of Supplemental Indentures

SECTION 8.5 Reference in Securities to Supplemental Indentures

ARTICLE IX MEETINGS OF HOLDERS OF SECURITIES

SECTION 9.1 Purposes for Which Meetings May Be Called

SECTION 9.2 Call, Notice and Place of Meetings

SECTION 9.3 Persons Entitled to Vote at Meetings

SECTION 9.4 Quorum; Action

SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment of Meetings

SECTION 9.6 Counting Votes and Recording Action of Meetings

ARTICLE X COVENANTS

SECTION 10.1 Payment of Principal, Premium and Interest

SECTION 10.2 Maintenance of Offices or Agencies

SECTION 10.3 Money for Security Payments to Be Held in Trust

SECTION 10.4 Existence

SECTION 10.5 Maintenance of Properties

SECTION 10.6 Payment of Taxes and Other Claims

SECTION 10.7 Registration and Listing

SECTION 10.8 Statement by Officers as to Default

SECTION 10.9 Delivery of Certain Information

SECTION 10.10 Registration Rights

SECTION 10.11 Waiver of Certain Covenants

ARTICLE XI REDEMPTION OF SECURITIES

SECTION 11.1 Right of Redemption

SECTION 11.2 Applicability of Article

SECTION 11.3 Election to Redeem; Notice to Trustee

SECTION 11.4 Selection by Trustee of Securities to Be Redeemed

SECTION 11.5 Notice of Redemption

SECTION 11.6 Deposit of Redemption Price

SECTION 11.7 Securities Payable on Redemption Date

SECTION 11.8 Conversion Arrangement on Call for Redemption

 

iii

 

ARTICLE XII CONVERSION OF SECURITIES

SECTION 12.1 Conversion Privilege and Conversion Rate

SECTION 12.2 Exercise of Conversion Privilege

SECTION 12.3 Fractions of Shares

SECTION 12.4 Adjustment of Conversion Rate

SECTION 12.5 Notice of Adjustments of Conversion Rate

SECTION 12.6 Notice of Certain Corporate Action

SECTION 12.7 Company to Reserve Common Stock

SECTION 12.8 Taxes on Conversions

SECTION 12.9 Covenant as to Common Stock

SECTION 12.10 Cancellation of Converted Securities

SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of Assets

SECTION 12.12 Rights Issued in Respect of Common Stock

SECTION 12.13 Responsibility of Trustee for Conversion Provisions

ARTICLE XIII SUBORDINATION OF SECURITIES

SECTION 13.1 Securities Subordinate to Senior Debt

SECTION 13.2 Payment Over of Proceeds Upon Dissolution, Etc.

SECTION 13.3 Prior Payment to Senior Debt Upon Acceleration of Securities.

SECTION 13.4 No Payment in Certain Circumstances.

SECTION 13.5 Payment Permitted if No Default.

SECTION 13.6 Subrogation to Rights of Holders of Senior Debt.

SECTION 13.7 Provisions Solely to Define Relative Rights.

SECTION 13.8 Trustee to Effectuate Subordination.

SECTION 13.9 No Waiver of Subordination Provisions.

SECTION 13.10 Notice to Trustee.

SECTION 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent.

SECTION 13.12 Trustee Not Fiduciary for Holders of Senior Debt.

SECTION 13.13 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee’s Rights.

SECTION 13.14 Article Applicable to Paying Agents.

SECTION 13.15 Obligations of Company and Right to Convert Unconditional.

SECTION 13.16 Reliance by Holders of Senior Debt on Subordination Provisions.

SECTION 13.17 Certain Conversions and Repurchases Deemed Payment

ARTICLE XIV REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL

SECTION 14.1 Right to Require Repurchase

SECTION 14.2 Conditions to the Company’s Election to Pay the Repurchase Price in Applicable Stock

 

iv

 

SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc

SECTION 14.4 Certain Definitions

SECTION 14.5 Consolidation, Merger, etc

ARTICLE XV HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE

SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders

SECTION 15.2 Preservation of Information

SECTION 15.3 Reports by Trustee

SECTION 15.4 Reports by Company

ARTICLE XVI IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 16.1 Indenture and Securities Solely Corporate Obligations

 

v

 

 

Micron Technology, Inc.

Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture, dated as of February 4, 2003, between Micron Technology, Inc. and Wells Fargo Bank Minnesota, National Association, as Trustee.

 

Trust Indenture Act Section		Indenture Section
§ 310(a)(1)		6.8
(a)(2)		6.8
(a)(3)		Not Applicable
(a)(4)		Not Applicable
(a)(5)		6.8
(b)		6.8; 6.9; 6.10; 6.13
§ 311(a)		6.14
(b)		6.14
§ 312(a)		15.1; 15.2(1)
(b)		15.2(2)
(c)		15.2(3)
§ 313(a)		15.3(1)
(b)		15.3(1)
(c)		15.3(1)
(d)		15.3(2)
§ 314(a)		15.4
(b)		Not Applicable
(c)(1)		1.2
(c)(2)		1.2
(c)(3)		Not Applicable
(d)		Not Applicable
(e)		1.2
§ 315(a)		6.2
(b)		6.2
(c)		6.1
(d)		6.1
(d)(1)		6.1(1)
(d)(2)		6.1(3)
(d)(3)		6.1(3)
(e)		5.14
§ 316(a)		5.12; 5.13
(a)(1)(A)		5.12
(a)(1)(B)		5.13
(a)(2)		Not Applicable
(b)		5.8
§ 317(a)(1)		5.5
(a)(2)		5.5
(b)		10.3
§ 318(a)		1.13

 

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

 

vi

 

INDENTURE, dated as of February 4, 2003, between MICRON TECHNOLOGY, INC., INC., a corporation duly organized and existing under the laws of the State of Delaware, having its principal office at 8000 South Federal, Way Boise, Idaho 83716 (herein called the “Company”), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States, as Trustee hereunder (herein called the “Trustee”).

 

RECITALS OF THE COMPANY

 

The Company has duly authorized the creation and issuance of its 2.50% Convertible Subordinated Notes due February 1, 2010 (herein called the “Securities”) of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture.

 

All things necessary to make the Securities, when the Securities are executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. Further, all things necessary to duly authorize the issuance of the Common Stock of the Company issuable upon the conversion of the Securities, and to duly reserve for issuance the number of shares of Common Stock issuable upon such conversion, have been done.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

 

ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

SECTION 1.1                     Definitions.

 

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

 

(1)           the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

 

(2)           all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and

 

1

 

(3)           the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

 

“Act”, when used with respect to any Holder of a Security, has the meaning specified in Section 1.4.

 

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

 

“Agent 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 DTC or any successor Depository, in each case to the extent applicable to such transaction and as in effect from time to time.

 

“Applicable Stock” means (i) the Common Stock and (ii) in the event of a merger, consolidation or other similar transaction involving the Company that is otherwise permitted hereunder in which the Company is not the surviving corporation, the common stock, common equity interests, ordinary shares or American Depositary Shares of such surviving corporation or its direct or indirect parent corporation.

 

“Authenticating Agent” means any Person authorized pursuant to Section 6.12 to act on behalf of the Trustee to authenticate Securities.

 

“Board of Directors” means either the board of directors of the Company or any duly authorized committee of that board.

 

“Board Resolution” means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, shall have been delivered to the Trustee.

 

“Business Day”, when used with respect to any Place of Payment, Place of Conversion or any other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in such Place of Payment, Place of Conversion or other place, as the case may be, are authorized or obligated by law or executive order to close; provided, however, that a day on which banking institutions in New York, New York or Boise, Idaho are authorized or obligated by law or executive order to close shall not be a Business Day for purposes of Section 13.10.

 

2

 

“Change in Control” has the meaning specified in Section 14.4(2).

 

“Closing Price Per Share” means, with respect to the Common Stock, for any day, (i) the closing sale price (or, if no closing price is reported, the last reported sale price regular way) on the New York Stock Exchange or, (ii) if the Common Stock is not listed on the New York Stock Exchange, the last reported sale price regular way per share or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or (iii) if the Common Stock is not then listed on a national securities exchange, then the last reported sale price as quoted by the Nasdaq Stock Market, or (iv) if the Common Stock is not then listed on a national securities exchange or quoted by the Nasdaq Stock Market, then the last quoted bid price for the Common Stock in the over the counter market as reported by the National Quotation Bureau or similar organization.

 

“Code” has the meaning specified in Section 2.l.

 

“Commission” means the United States Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

 

“Common Stock” means the common stock, par value $0.10 per share, of the Company authorized at the date of this instrument as originally executed.  Subject to the provisions of Section 12.11, shares issuable on conversion or repurchase of Securities shall include only shares of Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of Securities shall include shares of all such classes, and 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.

 

“common stock” includes any stock of any class of capital stock 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 issuer thereof and which is not subject to redemption by the issuer thereof.

 

“Company” means the Person named as the “Company” in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.

 

“Company Notice” has the meaning specified in Section 14.3.

 

“Company Request” or “Company Order” means a written request or order signed in the name of the Company by (i) its Chairman of the Board, its Vice Chairman of the Board, its Chief

 

3

 

Executive Officer, its President, an Executive Vice President or a Vice President, and by (ii) its principal financial officer, Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

 

“Constituent Person” has the meaning specified in Section 12.11.

 

“Conversion Agent” means any Person authorized by the Company to convert Securities in accordance with Article XII. The Company has initially appointed the Trustee as its Conversion Agent pursuant to Section 10.2 hereof.

 

“Conversion Price” shall equal U.S. $1,000 divided by the Conversion Rate (rounded to the nearest cent).

 

“Conversion Rate” has the meaning specified in Section 12.1.

 

“Corporate Trust Office” means the office of the Trustee at which at any particular time the trust created by this Indenture shall be principally administered (which at the date of this Indenture is located at MAC N9303-121, Sixth and Marquette, Minneapolis, Minnesota  55479, Attention: Corporate Trust Operation (Micron Technology, Inc., 2.50% Convertible Subordinated Notes due February 1, 2010)).

 

“corporation” means a corporation, company, association, joint-stock company or business trust.

 

“Defaulted Interest” has the meaning specified in Section 3.7.

 

“Depositary” means, with respect to the Securities (including 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 the Securities (or any successor securities clearing agency so registered).

 

“Designated Senior Debt” means the Company’s obligations under any particular Senior Debt in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which the Company is a party) expressly provides that such Senior Debt shall be “Designated Senior Debt” for 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).

 

“Distributed Assets” has the meaning set forth in Section 12.4(4).

 

“Documents” has the meaning set forth in Section 6.3(1).

 

“Dollar” or “U.S. $” means a dollar or other equivalent unit in such coin or currency of the United States as at the relevant time shall be legal tender for the payment of public and private debts.

 

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

 

4

 

“Effective Failure” has the meaning specified in Section 2.2.

 

“Effectiveness Period” has the meaning specified in Section 2.2.

 

“Electing Holders” has the meaning given such term in the Registration Rights Agreement.

 

“Event of Default” has the meaning specified in Section 5.1.

 

“Exchange Act” means the United States Securities Exchange Act of 1934 (or any successor statute), as amended from time to time.

 

“Expiration Time” has the meaning specified in Section 12.4(6).

 

“Global Security” means a Security that is registered in the Security Register in the name of a Depositary or a nominee thereof.

 

“Holder” means the Person in whose name the Security is registered in the Security Register.

 

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively.

 

“Initial Purchasers” means Goldman, Sachs & Co., Lehman Brothers Inc., Banc of America Securities LLC and Salomon Smith Barney Inc.

 

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Securities.

 

“Issue Date” means February 4, 2003.

 

“Liquidated Damages” has the meaning specified in Section 2.2.

 

“Maturity”, when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, exercise of the repurchase right set forth in Article XIV or otherwise.

 

“Non-electing Share” has the meaning specified in Section 12.11.

 

“Notice of Default” has the meaning specified in Section 5.1.

 

“Officers’ Certificate” means a certificate signed by (i) the Chairman of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the President, an Executive Vice President, a

 

5

 

Senior Vice President or a Vice President and by (ii) the principal financial officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. One of the Officers signing an Officers’ Certificate given pursuant to Section 10.8 shall be the principal executive, financial or accounting officer of the Company.

 

“Opinion of Counsel” means a written opinion of counsel, who may be counsel for the Company and who shall be acceptable to the Trustee.

 

“Outstanding”, when used with respect to the Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

 

(i)             Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

 

(ii)          Securities for the payment or redemption of which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities, provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;

 

(iii)       Securities which have been paid pursuant to Section 3.6 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; and

 

(iv)      Securities converted into Common Stock pursuant to Article XII;

 

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have given, made or taken any request, demand, authorization, direction, notice, consent or waiver or other action hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such determination as to the presence of a quorum or upon any such request, demand, authorization, direction, notice, consent or waiver or other action, only Securities which a Responsible Officer of the Trustee has been notified in writing to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor, and the Trustee shall be protected in relying upon an Officer’s Certificate to such effect.

 

6

 

“Paying Agent” means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company and, except as otherwise specifically set forth herein, such term shall include the Company if it shall act as its own Paying Agent. The Company has initially appointed the Trustee as its Paying Agent pursuant to Section 10.2 hereof.

 

“Payment Blockage Notice” has the meaning specified in Section 13.4.

 

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

 

“Place of Conversion” has the meaning specified in Section 3.1.

 

“Place of Payment” has the meaning specified in Section 3.1.

 

“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

 

“Purchase Agreement” means the Purchase Agreement, dated as of January 29, 2003, between the Company and the Initial Purchasers, as such agreement may be amended from time to time.

 

“Press Release” means any press release issued by the Company and disseminated to Reuters Business News Services and Bloomberg News Services.

 

“Previous Payments” has the meaning specified in Section 13.1.

 

“Qualified Institutional Buyer” shall mean a “qualified institutional buyer” as defined in Rule 144A.

 

“Record Date” means any Regular Record Date or Special Record Date.

 

“Record Date Period” means the period from the close of business of any Regular Record Date immediately preceding any Interest Payment Date to the opening of business on such Interest Payment Date.

 

“Redemption Date”, when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.

 

“Redemption Price”, when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

 

7

 

“Registrable Securities” has the meaning specified in Section 10.10.

 

“Registration Default” has the meaning specified in Section 2.2.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of February 4, 2003, between the Company and the Initial Purchasers, as such agreement may be amended from time to time.

 

“Regular Record Date” for interest payable in respect of any Security on any Interest Payment Date means the January 15 or July 15 (whether or not a Business Day), as the case may be, immediately preceding such 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.

 

“Repurchase Date” has the meaning specified in Section 14.1.

 

“Repurchase Price” has the meaning specified in Section 14.1.

 

“Responsible Officer”, when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject.

 

“Restricted Global Security” has the meaning specified in Section 2.1.

 

“Restricted Securities” means all Securities required pursuant to Section 3.5(3) to bear any Restricted Securities Legend. Such term includes the Restricted Global Security.

 

“Restricted Securities Legend” has the meaning specified in Section 2.2.

 

“Rule 144” means Rule 144 under the Securities Act (or any successor provision), as it may be amended from time to time.

 

“Rule 144A” means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.

 

“Rule 144A Information” has the meaning specified in Section 10.9.

 

8

 

“Securities” has the meaning ascribed to it in the first paragraph under the caption “Recitals of the Company.”

 

“Securities Act” means the United States Securities Act of 1933 (or any successor statute), as amended from time to time.

 

“Security Register” and “Security Registrar” have the respective meanings specified in Section 3.5.

 

“Senior Debt” means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company whether or not such claim for post-petition interest is allowed in such proceeding) on, rent with respect to, and all fees and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of this Indenture or thereafter created, incurred or assumed: (a) indebtedness of the Company evidenced by any credit or loan agreement, note, bond, debenture or other written obligation, (b) all obligations of the Company for money borrowed, (c) all obligations of the Company evidenced by a note or similar instrument given in connection with the acquisition of any businesses, properties or assets of any kind, (d) obligations of the Company (i) as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles, (ii) as lessee under other leases for facilities, equipment or related assets, whether or not capitalized, entered into or leased after the date of this Indenture for financing purposes (as determined in good faith by the Company) or (iii) under any lease or related document (including a purchase agreement) that provides that the Company is contractually obligated to purchase or cause a third party to purchase the leased property and the obligations of the Company under such lease or related document to purchase or to cause a third party to purchase such leased property, (e) all obligations of the Company under interest rate and currency swaps, caps, floors, collars, hedge agreements, option contracts, forward contracts, or similar agreements or arrangements, (f) all obligations of the Company with respect to letters of credit, bankers’ acceptances or similar facilities (including reimbursement obligations with respect to any of the foregoing), (g) all obligations of the Company issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable arising in the ordinary course of business), (h) all obligations of the type referred to in clauses (a) through (g) above of another Person and all dividends of another Person, the payment of which, in either case, the Company has assumed or guaranteed (or in effect guaranteed through an agreement to purchase or otherwise (including, without limitation, “take or pay” and similar arrangements)), or for which the Company is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise, or which is secured by a lien on property of the Company, and (i) renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in clauses (a) through (h) of this paragraph; provided, however, that Senior Debt shall not include the (i) Securities, (ii) the Company’s 6.5% Subordinated Promissory Note due September 2005, or (iii) any such indebtedness or obligation if the terms of such indebtedness or obligation (or the terms of the instrument under which, or pursuant to which it is issued) expressly provide that such indebtedness or obligation is not superior in right of payment to the Securities.

 

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“Shelf Registration Statement” has the meaning specified in Section 2.2.

 

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Company pursuant to Section 3.7.

 

“Stated Maturity”, when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable.

 

“Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, “voting stock” means stock or other similar interests in the corporation which ordinarily has or have voting power for the election of directors, or persons performing similar functions, whether at all times or only so long as no senior class of stock or other interests has or have such voting power by reason of any contingency.

 

“Successor Security” of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

 

“Surrender Certificate” means a certificate substantially in the form set forth in Annex B.

 

“Trading Day” means (i) if the Common Stock is listed or admitted for trading on The New York Stock Exchange or any other national or regional securities exchange, days on which such national or regional securities exchange is open for business, (ii) if the Common Stock is quoted on the Nasdaq National Market or any other system of automated dissemination of quotations of securities prices, days on which trades may be effected through such system, or (iii) if the Common Stock is not listed on The New York Stock Exchange or any other national or regional securities exchange or quoted on the Nasdaq National Market or any other system of automated dissemination of quotation of securities prices, days on which the Common Stock is traded regular way in the over-the-counter market and for which a closing bid and a closing asked price for the Common Stock are available.

 

“Trust Indenture Act” means the Trust Indenture Act of 1939, and the rules and regulations thereunder, as in force at the date as of which this instrument was executed, provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment, the Trust Indenture Act of 1939, and the rules and regulations thereunder, as so amended.

 

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“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

 

“United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (its “possessions” including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).

 

“Unrestricted Securities Certificate” means a certificate substantially in the form set forth in Annex A.

 

SECTION 1.2                     Compliance Certificates and Opinions.

 

Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

 

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (including certificates provided for in Section 10.8) shall include:

 

(1)           a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

 

(2)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(3)           a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

(4)           a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

 

SECTION 1.3                     Form of Documents Delivered to the Trustee.

 

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other

 

11

 

such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any other Person stating that the information with respect to such factual matters is in the possession of the Company or such other Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

SECTION 1.4                     Acts of Holders of Securities.

 

(1)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities may be embodied in and evidenced by (A) one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing by such Holders or (B) the record of Holders of Securities voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities duly called and held in accordance with the provisions of Article IX. Such action shall become effective when such instrument or instruments or record is delivered to the Trustee and, where it is hereby expressly required, to the Company. The Trustee shall promptly deliver to the Company copies of all such instruments and records delivered to the Trustee. Such instrument or instruments and records (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders of Securities signing such instrument or instruments or so voting at such meeting. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company if made in the manner provided in this Section. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 9.6.

 

(2)           The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.

 

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(3)           The principal amount and serial number of any Security held by any Person, and the date of his holding the same, shall be proved by the Security Register.

 

(4)           The fact and date of execution of any such instrument or writing and the authority of the Person executing the same may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this Section 1.4.

 

(5)           The Company may set any day as the record date for the purpose of determining the Holders entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted by this Indenture to be given, made or taken by Holders. Promptly and in any case not later than ten days after setting a record date, the Company shall notify the Trustee and the Holders of such record date. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 15.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, the Holders on such date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to give, make or take, or vote on, the relevant action, whether or not such Holders remain Holders after such record date. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions of this paragraph shall not apply with respect to, any notice, declaration or direction referred to in the next paragraph.

 

Upon receipt by the Trustee from any Holder of (i) any notice of default or breach referred to in Section 5.1(4), if such default or breach has occurred and is continuing and the Trustee shall not have given such a notice to the Company, (ii) any declaration of acceleration referred to in Section 5.2, if an Event of Default has occurred and is continuing and the Trustee shall not have given such a declaration to the Company, or (iii) any direction referred to in Section 5.12, if the Trustee shall not have taken the action specified in such direction, then, with respect to clauses (ii) and (iii), a record date shall automatically and without any action by the Company or the Trustee be set for determining the Holders entitled to join in such declaration or direction, which record date shall be the close of business on the tenth day (or, if such day is not a Business Day, the first Business Day thereafter) following the day on which the Trustee receives such declaration or direction, and, with respect to clause (i), the Trustee may set any day as a record date for the purpose of determining the Holders entitled to join in such notice of default. Promptly after such receipt by the Trustee of any such declaration or direction referred to in clause (ii) or (iii), and promptly after setting any record date with respect to clause (i), and as soon as practicable  thereafter, the Trustee shall notify the Company and the Holders of any such record date so fixed. The Holders on such record date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to join in such notice, declaration or direction, whether or not such Holders remain Holders after such record date; provided that, unless such notice, declaration or direction shall have become effective by virtue of Holders of the requisite principal amount of Securities on such record date (or their duly appointed agents or proxies) having joined therein on or prior to the 90th day after such record date, such notice, declaration or direction shall automatically and without any action by any Person be

 

13

 

canceled and of no further effect. Nothing in this paragraph shall be construed to prevent a Holder (or a duly appointed agent or proxy thereof) from giving, before or after the expiration of such 90-day period, a notice, declaration or direction contrary to or different from, or, after the expiration of such period, identical to, the notice, declaration or direction to which such record date relates, in which event a new record date in respect thereof shall be set pursuant to this paragraph. In addition, nothing in this paragraph shall be construed to render ineffective any notice, declaration or direction of the type referred to in this paragraph given at any time to the Trustee and the Company by Holders (or their duly appointed agents or proxies) of the requisite principal amount of Securities on the date such notice, declaration or direction is so given.

 

(6)           Except as provided in Sections 5.12 and 5.13, any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

 

(7)           The provisions of this Section 1.4 are subject to the provisions of Section 9.5.

 

SECTION 1.5                     Notices, Etc to the Trustee and Company.

 

Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of Holders of Securities or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

 

(1)           the Trustee by any Holder of Securities or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with a Responsible Officer of the Trustee and received at the following address:  Wells Fargo Bank Minnesota, National Association, MAC N-9303-110, Minneapolis, MN 55479, Attention: Corporate Trust Services (Micron Technology, Inc., 2.50% Convertible Subordinated Notes due February 1, 2010); or

 

(2)           the Company by the Trustee or by any Holder of Securities shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing, mailed, first-class postage prepaid, or telecopied and confirmed by mail, first-class postage prepaid, or delivered by hand or overnight courier, addressed to the Company at 8000 South Federal Way, Boise, ID 83707 Attention:  Chief Financial Officer, or at any other address previously furnished in writing to the Trustee by the Company.

 

SECTION 1.6                     Notice to Holders of Securities; Waiver.

 

Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Securities of any event, such notice shall be sufficiently given to Holders if in writing and mailed, first-class postage prepaid or delivered by an overnight delivery service, to each Holder of a Security affected by such event, at the address of such Holder as it appears in the Security Register,

 

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not earlier than the earliest date, if any, and not later than the latest date, if any, prescribed for the giving of such notice.  Such notice shall be deemed to have been given when such notice is mailed.

 

Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Security shall affect the sufficiency of such notice with respect to other Holders of Securities. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Securities as shall be made with the approval of the Trustee, which approval shall not be unreasonably withheld, shall constitute a sufficient notification to such Holders for every purpose hereunder.

 

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

SECTION 1.7                     Effect of Headings and Table of Contents.

 

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

SECTION 1.8                     Successors and Assigns.

 

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

 

SECTION 1.9                     Separability Clause.

 

In case any provision in this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 1.10                   Benefits of Indenture.

 

Except as provided in the next sentence, nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns hereunder and the Holders of Securities, any benefit or legal or equitable right, remedy or claim under this Indenture. The provisions of  Article XIII are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt.

 

SECTION 1.11                   Governing Law.

 

THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,

 

15

 

THE UNITED STATES OF AMERICA.

 

SECTION 1.12                   Legal Holidays.

 

In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the last day on which a Holder of a Security has a right to convert his Security shall not be a Business Day at a Place of Payment or Place of Conversion, as the case may be, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal of, premium, if any, or interest on, or the payment of the Redemption Price or Repurchase Price (whether the same is payable in cash or in shares of Applicable Stock in the case of the Repurchase Price) with respect to, or delivery for conversion of, such Security need not be made at such Place of Payment or Place of Conversion, as the case may be, on or by such day, but may be made on or by the next succeeding Business Day at such Place of Payment or Place of Conversion, as the case may be, with the same force and effect as if made on the Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated Maturity or by such last day for conversion, as the case may be; provided, however, that in the case that payment is made on such succeeding Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date, Stated Maturity or last day for conversion, as the case may be, to such Business Day on which such payment is made.

 

SECTION 1.13                   Conflict With Trust Indenture Act.

 

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Until such time as this Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust Indenture Act to the same extent as would be the case if this Indenture were so qualified on the date hereof.

 

ARTICLE II
SECURITY FORMS

 

SECTION 2.1                     Form Generally.

 

The Securities shall be in substantially the form set forth in this Article, with such appropriate insertions, omissions, substitutions and other  variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange, the Internal Revenue Code of 1986, as amended, and regulations thereunder (the “Code”), or as may, consistent herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof.  All Securities shall be in fully registered form.

 

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The Trustee’s certificates of authentication shall be in substantially the form set forth in Section 2.3.

 

Conversion notices shall be in substantially the form set forth in Section 2.4.

 

Repurchase notices shall be substantially in the form set forth under the heading “Election of Holder to Require Repurchase” in Section 2.2.

 

The Securities shall be printed, lithographed, typewritten or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any automated quotation system or securities exchange (including on steel engraved borders if so required by any securities exchange upon which the Securities may be listed) on which the Securities may be quoted or listed, as the case may be, all as determined by the officers executing such Securities, as evidenced by their execution thereof.

 

Upon their original issuance, Securities issued as contemplated by the Purchase Agreement to Qualified Institutional Buyers in reliance on Rule 144A shall be issued in the form of one or more Global Securities in definitive, fully registered form without interest coupons and bearing the Restricted Securities Legend.  Such Global Security shall be registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Security, together with its Successor Securities that are Global Securities, are collectively herein called the “Restricted Global Security.”

 

SECTION 2.2                     Form of Security.

 

[FORM OF FACE]

 

[THE FOLLOWING LEGEND (THE “RESTRICTED SECURITIES LEGEND”)) SHALL APPEAR ON THE FACE OF EACH RESTRICTED SECURITY:

 

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE  SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.  EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

 

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE

 

17

 

ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

 

THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.  THE HOLDER OF THIS NOTE AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]

 

[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:

 

THIS SECURITY 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 SECURITY FOR ALL PURPOSES.

 

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

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES

 

18

 

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.]

 

MICRON TECHNOLOGY, INC.

 

2.50% CONVERTIBLE SUBORDINATED NOTE DUE FEBRUARY 1, 2010

 

No.

$

 

CUSIP NO. 595112 AF 0

 

MICRON TECHNOLOGY, INC., a corporation duly organized and existing under the laws of the State of Delaware (herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to                  , or registered assigns, the principal sum of              United States Dollars (U.S.$          ) [if this Security is a Global Security, then insert — (which principal amount may from time to time be increased or decreased to such other principal amounts (which, taken together with the principal amounts of all other Outstanding Securities, shall not exceed U.S. $632,500,000) by adjustments made on the records of the Trustee hereinafter referred to in accordance with the Indenture)] on February 1, 2010 and to pay interest thereon, from February 4, 2003, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, semi-annually in arrears on February 1 and August 1 in each year (each, an “Interest Payment Date”), commencing August 1, 2003, at the rate of 2.50% per annum, until the principal hereof is due, and at the rate of 2.50% per annum on any overdue principal and premium, if any, and, to the extent permitted by law, on any overdue interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more  Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the January 15 or July 15 (whether or not a Business Day), as the case may be, immediately preceding such Interest Payment Date.  Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Securities not less than 10 days prior to the Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any automated quotation system or securities exchange on which the Securities may be quoted or listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payments of principal and premium, if any, shall be made upon the surrender of this Security at the option of the Holder at the Corporate Trust

 

19

 

Office of the Trustee in such lawful monies of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, or at such other offices or agencies as the Company may designate, by United States Dollar check drawn on, or wire transfer to, a United States Dollar account (such a transfer to be made only to a Holder of an aggregate principal amount of Securities in excess of U.S.$2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date). Payment of interest on this Security may be made by United States Dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register, or, upon written application by the Holder to the Security Registrar setting forth wire instructions not later than the relevant Record Date, by transfer to a United States Dollar account (such a transfer to be made only to a Holder of an aggregate principal amount of Securities in excess of U.S. $2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date).

 

Except as specifically provided herein and in the Indenture, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.

 

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective authorized signatories, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

IN WITNESS WHEREOF, the Company has caused this Security to be duly executed.

 

			MICRON TECHNOLOGY, INC.,
			By:
			Name:
			Title:
Attest:
By:
Name:
Title:

 

20

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities referred to in the within-mentioned Indenture.

 

Dated:

 

 

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

as Trustee

 

By:
	Authorized Signatory

 

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[FORM OF REVERSE]

 

This Security is one of a duly authorized issue of securities of the Company designated as its “2.50% Convertible Subordinated Notes due February 1, 2010” (herein called the “Securities”), limited in aggregate principal amount to U.S. $632,500,000, issued and to be issued under an Indenture, dated as of February 4, 2003 (herein called the “Indenture”), between the Company and Wells Fargo Bank Minnesota, National Association, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Debt and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of any authorized denominations as requested by the Holder surrendering the same upon surrender of the Security or Securities to be exchanged, at the Corporate Trust Office of the Trustee.  The Trustee upon such surrender by the Holder will issue the new Securities in the requested denominations.

 

No sinking fund is provided for the Securities.

 

The Securities are subject to redemption at the option of the Company at any time on or after February 6, 2006, in whole or in part, upon not less than 20 nor more than 60 days’ notice to the Holders prior to the Redemption Date at the Redemption Prices (expressed as percentages of the principal amount) as set forth below for Securities redeemed during the following periods described below:

 

PERIOD		REDEMPTION PRICE
Beginning on February 6, 2006 and ending January 31, 2007		101.429	%
Beginning on February 1, 2007 and ending January 31, 2008		101.071
Beginning on February 1, 2008 and ending January 31, 2009		100.714
Beginning on February 1, 2009 and ending January 31, 2010		100.357

 

and thereafter at a Redemption Price equal to 100% of the principal amount, together, in each case, with accrued interest to, but excluding, the Redemption Date; provided, however, that interest installments on Securities whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.

 

In the event of a redemption of the Securities, the Company will not be required (a) to register the transfer or exchange of Securities for a period of 15 days immediately preceding the date

 

22

 

notice is given identifying the serial numbers of the Securities called for such redemption or (b) to register the transfer or exchange of any Security, or portion thereof, called for redemption.

 

In any case where the due date for the payment of the principal of, premium, if any, interest, or Liquidated Damages on any Security or the last day on which a Holder of a Security has a right to convert his Security shall be, at any Place of Payment or Place of Conversion as the case may be, a day on which banking institutions at such Place of Payment or Place of Conversion are authorized or obligated by law or executive order to close, then payment of principal, premium, if any, interest, or Liquidated Damages, or delivery for conversion of such Security need not be made on or by such date at such place but may be made on or by the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law or executive order to close, with the same force and effect as if made on the date for such payment or the date fixed for redemption or repurchase, or by such last day for conversion, and no interest shall accrue on the amount so payable for the period after such date.

 

Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at his option, at any time on or before the close of business on the date of Maturity, or in case this Security or a portion hereof is called for redemption or the Holder hereof has exercised his right to require the Company to repurchase this Security or such portion hereof, then in respect of this Security until the Business Day immediately preceding, but (unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be) not after, the close of business on the Business Day immediately preceding the Redemption Date or the Repurchase Date, as the case may be, to convert this Security (or any portion of the principal amount hereof that is an integral multiple of U.S. $1,000, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof) into fully paid and nonassessable shares of Common Stock of the Company at an initial Conversion Rate of 84.8320 shares of Common Stock for each U.S. $1,000 principal amount of Securities (or at the current adjusted Conversion Rate in effect at the date of such conversion if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank and, in case such surrender shall be made during a Record Date Period, also accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted (except that no such payment need be made if this Security or portion thereof has been called for redemption on a Redemption Date, or has been submitted for repurchase on a Repurchase Date, occurring, in either case, within the period from the close of business on any Regular Record Date immediately preceding any Interest Payment Date to the close of business on the third Business Day following such Interest Payment Date and, as a result, the right to convert such Security would otherwise terminate in such period if not exercised), and also the conversion notice hereon duly executed, to the Company at the Corporate Trust Office of the Trustee, or at such other office or agency of the Company, subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any Conversion Agent (as defined below) as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate (each a “Conversion Agent”).  The interest that is payable on such Interest Payment Date

 

23

 

with respect to any Security (or portion thereof, if applicable) that is surrendered for conversion during the Record Date Period shall be paid to the Holder of such Security as of such Regular Record Date in an amount equal to the interest that would have been payable on such Security if such Security had been converted as of the close of business on such Interest Payment Date. Subject to the provisions of the preceding sentence and, in the case of a conversion after the close of business on the Regular Record Date next preceding any Interest Payment Date and on or before the close of business on such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security of record as of such Regular Record Date) to receive the related installment of interest to the extent and under the circumstances provided in the Indenture, no cash payment or adjustment is to be made on conversion for interest accrued hereon from the Interest Payment Date immediately preceding the day of conversion, or for dividends on the Common Stock issued on conversion hereof.  The Company shall thereafter deliver to the Holder or to the Trustee for delivery to the Holder the fixed number of shares of Common Stock (together with any cash adjustment, as provided in the Indenture) into which this Security is convertible and such delivery will be deemed to satisfy the Company’s obligation to pay the principal amount of this Security.  No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest (calculated to the nearest 1/100^th of a share) the Company shall pay a cash adjustment as provided in the Indenture.  The Conversion Rate is subject to adjustment as provided in the Indenture.  In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party (other than a consolidation or merger that does not result in any reclassification, conversion, exchange or cancellation of the Common Stock) or the conveyance, transfer, sale or lease of all or substantially all of the property and assets of the Company, the Indenture shall be amended, without consent of any Holders of Securities, so that this Security, if then Outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of the number of shares of Common Stock of the Company into which this Security could have been converted immediately prior to such consolidation, merger, conveyance, transfer, sale or lease (assuming such holder of Common Stock is not a Constituent Person or an Affiliate of a Constituent Person, failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of Non-electing Shares).  No adjustment in the Conversion Rate will be made until such adjustment would require an increase or decrease of at least one percent of such rate, provided that any adjustment that would otherwise be made will be carried forward and taken into account in the computation of any subsequent adjustment.

 

If this Security is a Registrable Security (as defined in this Indenture), then the Holder of this Security [if this security is a global security, then insert — (including any Person that has a beneficial interest in this Security)] and the Common Stock of the Company issuable upon conversion hereof is entitled to the benefits of a Registration Rights Agreement, dated as of February 4, 2003, executed by the Company (the “Registration Rights Agreement”).  Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the Holders from time to time of the Registrable Securities that it will, at its expense, (a) uses its reasonable efforts to file a shelf registration statement (the “Shelf Registration Statement”) with the Commission with respect to resales of the Registrable Securities within 90 days after the Issue Date, (b) use its reasonable

 

24

 

efforts to cause such Shelf  Registration Statement to be declared effective by the Commission within 180 days after the Issue Date of the Securities, provided, however, that the Company may, upon written notice to all the Holders, postpone having the Shelf Registration Statement declared effective for a reasonable period not to exceed 90 days if the Company possesses material non-public information, the disclosure of which would have a material adverse effect on the Company and its Subsidiaries taken as a whole, and (c) use its reasonable efforts to maintain such Shelf Registration Statement effective under the Securities Act of 1933, as amended, until the earliest of (1) such time as there are no Registrable Securities outstanding, (2) the expiration of the period referred to in Rule 144(k) of the Securities Act with respect to all Registrable Securities held by Persons that are not Affiliates of the Company, and (3) two years from the Issue Date (the “Effectiveness Period”). The Company will be permitted to suspend the use of the prospectus that is part of the Shelf Registration Statement during certain periods of time as provided in the Registration Rights Agreement.

 

If (i) on or prior to 90 days following the Issue Date, a Shelf Registration Statement has not been filed with the Commission, or (ii) on or prior to the 180th day following the Issue Date, such Shelf Registration Statement is not declared effective (each, a “Registration Default”), additional interest (“Liquidated Damages”) will accrue on the Registrable Securities from and including the day following such Registration Default to, but excluding, the day on which such Registration Default has been cured. Liquidated Damages will be paid semi-annually in arrears, with the first semi-annual payment due on the first Interest Payment Date in respect of the Registrable Securities following the date on which such Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to one-quarter of one percent (0.25%) of the principal amount of the Registrable Securities to and including the 90th day following such Registration Default and at a rate per annum equal to one-half of one percent (0.50%) of the principal amount of the Registrable Securities from and after the 91st day following such Registration Default. Pursuant to the Registration Rights Agreement, in the event that the Shelf Registration Statement ceases to be effective or the Electing Holders of Registrable Securities are otherwise prevented or restricted by the Company from effecting sales pursuant thereto (each, an “Effective Failure”) during the Effectiveness Period for more than 45 days, whether or not consecutive, during any 90-day period or for more than 90 days, whether or not consecutive, during any 12-month period, then the interest rate borne by the Registrable Securities held by Electing Holders shall increase by an additional one-half of one percent (0.50%) per annum from the 46th day of the applicable 90-day period or the 91st day of the applicable 12-month period until the earlier of (A) such time as the Effective Failure is cured or (B) the Effectiveness Period expires.  Liquidated Damages will accrue (1) with respect to a Registrable Securities at the rates set forth above, as applicable, on the principal amount of the Registrable Securities and (2) in respect of the Common Stock issued upon conversion of the Registrable Securities, at the rates set forth above, as applicable, applied to the Conversion Price at that time.  In no event shall the Company be required to pay Liquidated Damages in excess of the applicable maximum amount of one-half of one percent (0.5%) set forth above regardless of whether one or multiple Registration Defaults exist.

 

Whenever in this Security there is a reference, in any context, to the payment of the principal of, premium, if any, or interest on, or in respect of, any Security, such mention shall be deemed to

 

25

 

include mention of the payment of Liquidated Damages payable as described in the preceding paragraph to the extent that, in such context, Liquidated Damages are, were or would be payable in respect of such Security and express mention of the payment of Liquidated Damages (if applicable) in any provisions of this Security shall not be construed as excluding Liquidated Damages in those provisions of this Security where such express mention is not made.

 

[If this Security is a Registrable Security and the Holder of this Security [if this security is a global security, then insert — (including any Person that has a beneficial interest in this Security)] elects to sell this Security pursuant to the Shelf Registration Statement then, by its acceptance hereof, such Holder of this Security agrees to be bound by the terms of the Registration Rights Agreement relating to the Registrable Securities which are the subject of such election.]

 

If a Change in Control occurs, the Holder of this Security, at the Holder’s option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase this Security (or any portion of the principal amount hereof that is at least U.S. $1,000 or an integral multiple of U.S. $1,000 in excess thereof, provided that the portion of the principal amount of this Security to be Outstanding after such repurchase is at least equal to U.S. $1,000) at a Repurchase Price equal to 100% of the principal amount thereof plus interest accrued to, but excluding, the Repurchase Date. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the conditions provided in the Indenture, by delivery of shares of Applicable Stock having a fair market value equal to the Repurchase Price. For purposes of this paragraph, the fair market value of shares of Applicable Stock shall be determined by the Company and shall be equal to 95% of the average of the Closing Price Per Share for the five consecutive Trading Days immediately preceding the second Trading Day prior to the Repurchase Date.

 

[The following paragraph shall appear in each Global Security:

 

In the event of a deposit or withdrawal of an interest in this Security, including an exchange, transfer, redemption, repurchase or conversion of this Security in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the Applicable Procedures.]

 

[The following paragraph shall appear in each Security that is not a Global Security:

 

In the event of redemption, repurchase or conversion of this Security in part only, a new Security or Securities for the unredeemed, unrepurchased or unconverted portion hereof will be issued in the name of the Holder hereof.]

 

The indebtedness evidenced by this Security is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Company, and this Security is issued subject to such provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be

 

26

 

necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes.

 

If an Event of Default shall occur and be continuing, the principal of all the Securities, together with accrued interest to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture. Upon payment (i) of the amount of principal so declared due and payable, together with accrued interest to the date of declaration, and (ii) of interest on any overdue principal and, to the extent permitted by applicable law, overdue interest, all of the Company’s obligations in respect of the payment of the principal of and interest on the Securities shall terminate.

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with either (a) the written consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least 66²/₃% in aggregate principal amount of the Outstanding Securities represented and entitled to vote at such meeting. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued in exchange therefore or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security or such other Security.  Certain modifications or amendments to the Indenture require the consent of the Holder of each Outstanding Security affected.

 

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default, the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of the Securities Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof, premiums if any, or interest (including Liquidated Damages, if any) hereon on or after the respective due dates expressed herein or for the enforcement of the right to convert this Security as provided in the Indenture.

 

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the

 

27

 

principal of, premium, if any, and interest (including Liquidated Damages, if any) on this Security at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register upon surrender of this Security for registration of  transfer at the Corporate Trust Office of the Trustee, or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees by the Security Registrar. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentation of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered, as the owner thereof for all purposes, whether or not such Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

No recourse for the payment of the principal (and premium, if any) or interest (including Liquidated Damages, if any) on this Security and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of consideration for the issue hereof, expressly waived and released.

 

THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

 

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

28

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription of the face of this Security, shall be construed as though they were written out in full according to applicable laws or regulations:

 

TEN COM	as tenant in common	UNIF GIFT MIN ACT	Custodian
TEN ENT	as tenants by the entireties (Cust)		(Cust)	(Minor)
JT TEN	as joint tenants with right of survivorship and not as tenants in common		under Uniform Gifts to Minors Act
			(State)

 

Additional abbreviations may also be used though not in the above list.

 

29

 

ELECTION OF HOLDER TO REQUIRE REPURCHASE

 

(1)                           Pursuant to Section 14.1 of the Indenture, the undersigned hereby elects to have this Security repurchased by the Company.

 

(2)                           The undersigned hereby directs the Trustee or the Company to pay it or                          an amount in cash or, at the Company’s election, Applicable Stock valued as set forth in the Indenture, equal to 100% of the principal amount to be repurchased (as set forth below), plus interest accrued to, but excluding, the Repurchase Date, as provided in the Indenture.

 

Dated:
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
Signature Guaranteed
Principal amount to be repurchased (at least U.S. $1,000 or an integral multiple of $1,000 in excess thereof):
Remaining principal amount following such repurchase (not less than U.S. $1,000):

 

NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the face of this Security in every particular, without alteration or any change whatsoever.

 

SECTION 2.3                     Form of Certificate of Authentication.

 

The Trustee’s certificate of authentication shall be in substantially the following form:

 

This is one of the Securities referred to in the within-mentioned Indenture.

 

Dated:

 

30

 

	WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
	as Trustee
	By:
		Authorized Signatory

 

SECTION 2.4                     Form of Conversion Notice.

 

CONVERSION NOTICE

 

The undersigned Holder of this Security hereby irrevocably exercises the option to convert this Security, or any portion of the principal amount hereof (which is U.S.$1,000 or an integral multiple of U.S.$1,000 in excess thereof, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof) below designated, into shares of Common Stock in accordance with the terms of the Indenture referred to in this Security, and directs that such shares, together with a check in payment for any fractional share and any Securities representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If shares of Common Stock or Securities are to be registered in the name of a Person other than the undersigned, (a) the undersigned will pay all transfer taxes payable with respect thereto and (b) signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any amount required to be paid by the undersigned on account of interest accompanies this Security.

 

Dated:
			Signature(s)
If shares or Securities are to be registered in the name of a Person other than the Holder, please print such Person’s name and address:
(Name)
(Address)
Social Security or other Identification
Number, if any.

 

31

 

[Signature Guaranteed]

 

If only a portion of the Securities is to be converted, please indicate:

 

1.             Principal amount to be converted: U.S. $

 

2.                                       Principal amount and denomination of Securities
representing unconverted principal amount to be issued:

 

Amount: U.S. $                     Denominations: U.S. $

 

(U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof)

 

SECTION 2.5                     Form of Assignment.

 

For value received                         hereby sell(s), assign(s) and transfer(s) unto                           (Please insert social security or other identifying number of assignee) the within Security, and hereby irrevocably constitutes and appoints                         as attorney to transfer the said Security on the books of the Company, with full power of substitution in the premises.

 

Dated:
				Signature(s)
				Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad - 15 under the Securities Exchange Act of 1934.
				Signature Guaranteed

 

32

 

ARTICLE III
THE SECURITIES

 

SECTION 3.1                     Title and Terms.

 

The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to U.S. $632,500,000, except for Securities authenticated and delivered pursuant to Section 3.4, 3.5, 3.6, 8.5, 12.2 or 14.3(5) in exchange for, or in lieu of, other Securities previously authenticated and delivered under this Indenture.

 

(1)           The Securities shall be known and designated as the “2.50% Convertible Subordinated Notes due February 1, 2010” of the Company.  Their Stated Maturity shall be February 1, 2010 and they shall bear interest on their principal amount from February 4, 2003, payable semi-annually in arrears on February 1 and August 1 in each year, commencing August 1, 2003, at the rate of 2.50% per annum until the principal thereof is due and at the rate of 2.50% per annum on any overdue principal and, to the extent permitted by law, on any overdue interest; provided, however, that payments shall only be made on a Business Day as provided in Section 1.12.

 

The principal of, premium, if any, and interest on the Securities shall be payable as provided in the form of Securities set forth in Section 2.2, and the Repurchase Price, whether payable in cash or in shares of Common Stock, shall be payable at such places as are identified in the Company Notice given pursuant to Section 14.3 (any city in which any Paying Agent is located being herein called a “Place of Payment”).

 

The Registrable Securities are entitled to the benefits of a Registration Rights Agreement as provided by Section 10.11 and in the form of Security set forth in Section 2.2. The Securities are entitled to the payment of Liquidated Damages as provided by Section 10.10 and in the form of Security set forth in Section 2.2.

 

The Securities shall be redeemable at the option of the Company at any time on or after February 6, 2006, in whole or in part, subject to the conditions and as otherwise provided in Article XI and in the form of Security set forth in Section 2.2.

 

The Securities shall be convertible as provided in Article XII (any city in which any Conversion Agent is located being herein called a “Place of Conversion”).

 

The Securities shall be subordinated in right of payment to Senior Debt of the Company as provided in Article XIII.

 

33

 

The Securities shall be subject to repurchase by the Company at the option of the Holders as provided in Article XIV.

 

SECTION 3.2                   Denominations.

 

The Securities shall be issuable only in registered form, without coupons, in denominations of U.S.$1,000 and integral multiples of U.S.$1,000 in excess thereof.

 

SECTION 3.3                     Execution, Authentication, Delivery and Dating.

 

The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President, its Chief Operating Officer, one of its Executive Vice Presidents, one of its Senior Vice Presidents or one of its Vice Presidents, and attested by its Chief Financial Officer, Secretary or one of its Assistant Secretaries. Any such signature may be manual or facsimile.

 

Securities bearing the manual or facsimile signature of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

 

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee or to its order for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as provided in this Indenture.

 

Each Security shall be dated the date of its authentication.

 

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

 

SECTION 3.4                     Global Securities; Non-global Securities; Book-entry Provisions.

 

(1)           Global Securities

 

(i)         Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.

 

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(ii)        Except for exchanges of Global Securities for definitive, non-global Securities at the sole discretion of the Company, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered as such under the Exchange Act or announces an intention permanently to cease business or does in fact do so or (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security.  In such event, if a successor Depositary for such Global Security is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company will execute, and the Trustee, upon receipt of an Officers’ Certificate directing the authentication and delivery of Securities, will authenticate and deliver, Securities, in any authorized denominations in an aggregate principal amount equal to the principal amount of such Global Security in exchange for such Global Security.

 

(iii)       If any Global Security is to be exchanged for other Securities or canceled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation, as provided in this Article III. If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, in each case, as provided in Section 3.5, then either (A) such Global Security shall be so surrendered for exchange or cancellation, as provided in this Article III, or (B) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 3.5(3) and as otherwise provided in this Article III, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article III if such order, direction or request is given or made in accordance with the Applicable Procedures.

 

(iv)      Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article III or otherwise, shall be authenticated and delivered in the form of, and shall be, a registered Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof, in which case such Security shall be authenticated and delivered in definitive, fully registered form, without interest coupons.

 

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(v)       The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under the Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner’s beneficial interest in a Global Security will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members and such owners of beneficial interests in a Global Security will not be considered the owners or holders thereof.

 

(2)           Non-global Securities.  Securities issued upon the events described in Section 3.4(l)(ii) shall be in definitive, fully registered form, without interest coupons, and shall bear the Restricted Securities Legend if and as required by this Indenture.

 

SECTION 3.5                     Registration; Registration of Transfer and Exchange; Restrictions on Transfer.

 

(1)           The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office referred to as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed “Security Registrar” for the purpose of registering Securities and transfers and exchanges of Securities as herein provided.

 

Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 10.2 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

 

At the option of the Holder, and subject to the other provisions of this Section 3.5, Securities may be exchanged for other Securities of any authorized denomination and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at any such office or agency. Whenever any Securities are so surrendered for exchange, and subject to the other provisions of this Section 3.5, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the Holder making the exchange is entitled to receive. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

 

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

 

No service charge shall be made to a Holder for any registration of transfer or exchange of Securities except as provided in Section 3.6, but the Company may require payment of a sum

 

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sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.4, 8.5, 12.2 or 14.3 (other than where the shares of Common Stock are to be issued or delivered in a name other than that of the Holder of the Security) not involving any transfer and other than any stamp and other duties, if any, which may be imposed in connection with any such transfer or exchange by the United States or any political subdivision thereof or therein, which shall be paid by the Company.

 

In the event of a redemption of the Securities, neither the Company nor the Securities Registrar will be required (a) to register the transfer of or exchange Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption or (b) to register the transfer of or exchange any Security, or portion thereof, called for redemption.

 

(2)           Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 3.5(2) shall be made only in accordance with this Section 3.5(2).

 

(i)    Restricted Global Security to Restricted Non-global Security.  In the event that Non-global Securities are to be issued pursuant to Section 3.4(1)(ii) in connection with any transfer of Securities, such transfer may be effected only in accordance with the provisions of this clause (2)(i) and subject to the Applicable Procedures.  Upon receipt by the Trustee, as Security Registrar, of (A) a Company Order from the Company directing the Trustee, as Security Registrar, to (x) authenticate and deliver one or more Securities of the same aggregate principal amount as the beneficial interest in the Restricted Global Security to be transferred, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Securities to be so issued and appropriate delivery instructions and (y) decrease the beneficial interest of a specified Agent Member’s account in a Restricted Global Security by a specified principal amount not greater than the principal amount of such Restricted Global Security, and (B) such other certifications, legal opinions or other information as the Company or the Trustee 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, then the Trustee, as Security Registrar, shall decrease the principal amount of the Restricted Global Security by the specified amount and authenticate and deliver Securities in accordance with such instructions from the Company as provided in Section 3.4(1)(iii).

 

(ii)   Restricted Non-global Security to Restricted Global Security.  If the Holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Restricted Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected only in accordance with the provisions of this clause (2)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of such Restricted Security as provided in Section 3.5(1) and instructions from the Company directing that a beneficial interest in the Restricted Global Security in a specified principal amount not greater than the principal amount of

 

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such Security be credited to a specified Agent Member’s account, then the Trustee, as Security Registrar, shall cancel such Restricted Security (and issue a new Restricted Security in respect of any untransferred portion thereof) as provided in Section 3.5(1) and increase the principal amount of the Restricted Global Security by the specified principal amount as provided in Section 3.4(1)(iii).

 

(iii)  Exchanges Between Global Security and Non-global Security.  A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security only as provided in Section 3.4 or only if such exchange occurs in connection with a transfer effected in accordance with clause 2(i) above, provided that, if such interest is a beneficial interest in the Restricted Global Security, then such interest shall be exchanged for a Restricted Security (subject in each case to Section 3.5(3)). A Security that is not a Global Security may be exchanged for a beneficial interest in a Global Security only if such exchange occurs in connection with a transfer effected in accordance with clause (2)(ii) above.

 

(3)           Securities Act Legends. All Securities issued pursuant to this Indenture, and all Successor Securities, shall bear the Restricted Securities Legend subject to the following:

 

(i)    subject to the following clauses of this Section 3.5(3), a Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Restricted Securities Legend borne by such Global Security for which the Security was exchanged;

 

(ii)   subject to the following clauses of this Section 3.5(3), a new Security that is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Restricted Securities Legend borne by the Security for which the new Security was exchanged;

 

(iii)  any Securities that are sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act (including the Shelf Registration Statement), together with their Successor Securities shall not bear a Restricted Securities Legend; the Company shall inform the Trustee in writing of the effective date of any such registration statement registering the Securities under the Securities Act and shall notify the Trustee at any time when prospectuses must be delivered with respect to Securities to be sold pursuant to such registration statement. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned registration statement;

 

(iv)  at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof that bears such a legend if the Trustee has received an Unrestricted Securities Certificate, satisfactory to the Trustee and duly executed by the Holder of such Security bearing a Restricted Securities Legend or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall

 

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authenticate and deliver such new Security in exchange for or in lieu of such other Security as provided in this Article III;

 

(v)   a new Security that does not bear a Restricted Securities Legend may be issued in exchange for or in lieu of a Security or any portion thereof that bears such a legend if, in the Company’s judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Company, shall authenticate and deliver such a new Security as provided in this Article III; and

 

(vi)  notwithstanding the foregoing provisions of this Section 3.5(3), a Successor Security of a Security that does not bear a Restricted Securities Legend shall not bear such legend unless the Company has reasonable cause to believe that such Successor Security is a “restricted security” within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article III.

 

(4)           Any stock certificate representing shares of Common Stock issued upon conversion of the Securities shall bear the Restricted Securities Legend borne by such Securities, to the extent required by this Indenture, unless such shares of Common Stock have been sold pursuant to a registration statement that has been declared effective under the Securities Act (and that continues to be effective at the time of such transfer) or sold pursuant to Rule 144(k) of the Securities Act, or unless otherwise agreed by the Company in writing with written notice thereof to the transfer agent for the Common Stock.  With respect to the transfer of shares of Common Stock issued upon conversion of the Securities that are restricted hereunder, any deliveries of certificates, legal opinions or other instruments that would be required to be made to the Security Registrar in the case of a transfer of Securities, as described above, shall instead be made to the transfer agent for the Common Stock.

 

(5)           Neither the Trustee, the Paying Agent nor any of their agents shall (i) have any duty to monitor compliance with or with respect to any federal or state or other securities or tax laws or (ii) have any duty to obtain documentation on any transfers or exchanges other than as specifically required hereunder.

 

SECTION 3.6                     Mutilated, Destroyed, Lost or Stolen Securities.

 

If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

 

If there be delivered to the Company and to the Trustee:

 

(1)           evidence to their satisfaction of the destruction, loss or theft of any Security, and

 

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(2)           such security or indemnity as may be satisfactory to the Company and the Trustee to save each of them and any agent of either of them harmless,

 

then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

 

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion, but subject to any conversion rights, may, instead of issuing a new Security, pay such Security, upon satisfaction of the conditions set forth in the preceding paragraph.

 

Upon the issuance of any new Security under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto (other than any stamp and other duties, if any, which may be imposed in connection therewith by the United States or any political subdivision thereof or therein, which shall be paid by the Company) and any other expenses (including the fees and expenses of the Trustee) connected therewith.

 

Every new Security issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

 

The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies of any Holder with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

 

SECTION 3.7                     Payment of Interest; Interest Rights Preserved.

 

Subject to the last paragraph of this Section, interest (including Liquidated Damages, if any) on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.

 

Any interest (or Liquidated Damages, if any) on any Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

 

(1)           The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of

 

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business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security, the date of the proposed payment and the Special Record Date, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon, the Trustee shall fix the Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at such Holder’s address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2).

 

(2)           The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

 

Subject to the provisions of this Section 3.7 and of Section 3.5, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest (including Liquidated Damages, if any) accrued and unpaid, and to accrue, which were carried by such other Security.

 

Interest on any Security that is converted in accordance with Section 12.2 during a Record Date Period shall be payable in accordance with the provisions of Section 12.2.

 

SECTION 3.8                     Persons Deemed Owners.

 

Prior to due presentment of a Security for registration of transfer, the Company, the Trustee, any Paying Agent and any agent of the Company, the Trustee or any Paying Agent may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.7) interest (including Liquidated Damages, if any) on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee, any Paying Agent nor any agent of the Company, the Trustee or any Paying Agent shall be affected by notice to the contrary.

 

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SECTION 3.9                     Cancellation.

 

All Securities surrendered for payment, redemption, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Securities so delivered to the Trustee shall be canceled promptly by the Trustee (or its agent). No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section 3.9. The Trustee shall dispose of all canceled Securities in accordance with applicable law and its customary practices in effect from time to time.

 

SECTION 3.10                   Computation of Interest.

 

Interest (including Liquidated Damages, if any) on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.

 

SECTION 3.11                   CUSIP Numbers.

 

The Company in issuing Securities may use “CUSIP” numbers (if then generally in use) in addition to serial numbers; if so, the Trustee shall use such CUSIP numbers in addition to serial numbers in notices of redemption and repurchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Securities or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Securities, and any such redemption or repurchase shall not be affected by any defect in or omission of such CUSIP numbers.

 

ARTICLE IV
SATISFACTION AND DISCHARGE

 

SECTION 4.1                     Satisfaction and Discharge of Indenture.

 

This Indenture shall upon a Company Request cease to be of further effect (except as to any surviving rights of conversion, or registration of transfer or exchange, or replacement of Securities herein expressly provided for and any right to receive Liquidated Damages as provided in Section 10.11 and in the form of Securities set forth in Section 2.2 and the Company’s obligations to the Trustee pursuant to Section 6.7), and the Trustee, at the expense of the Company, shall execute proper instruments in form and substance satisfactory to the Trustee acknowledging satisfaction and discharge of this Indenture, when:

 

(1)           either

 

(i)    all Securities theretofore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 3.6 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or

 

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(ii)   all such Securities not theretofore delivered to the Trustee or its agent for cancellation (other than Securities referred to in clauses (A) and (B) of clause (1)(i) above)

 

(a)   have become due and payable, or

 

(b)   will have become due and payable at their Stated Maturity within one year, or

 

(c)   are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

 

and the Company, in the case of clause (a), (b) or (c) above, has deposited or caused to be deposited with the Trustee as trust funds (immediately available to the Holders in the case of clause (a)) in trust for the purpose an amount in cash sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest (including any Liquidated Damages) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;

 

(2)           the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

 

(3)           the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

 

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, the obligations of the Company to any Authenticating Agent under Section 6.12, the obligation of the Company to pay Liquidated Damages, if money shall have been deposited with the Trustee pursuant to clause (1)(ii) of this Section 4.1, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 and the obligations of the Company and the Trustee under Section 3.5 and Article XII shall survive. Funds held in trust pursuant to this Section are not subject to the provisions of Article XIII.

 

SECTION 4.2                     Application of Trust Money.

 

Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 and in accordance with the provisions of Article XIII shall be held in trust for the sole benefit of the Holders and not be subject to the subordination provisions of Article XIII, and such monies shall be applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent, to the Persons entitled thereto, of the principal, premium, if any, and interest (including Liquidated Damages, if any) for whose payment such money has been deposited with the Trustee.

 

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All moneys deposited with the Trustee pursuant to Section 4.1 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request.

 

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed or assessed against all money deposited with the Trustee pursuant to Section 4.1 (other than income taxes and franchise taxes incurred or payable by the Trustee and such other taxes, fees or charges incurred or payable by the Trustee that are not directly the result of the deposit of such money with the Trustee).

 

ARTICLE V
REMEDIES

 

SECTION 5.1                     Events of Default.

 

“Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XIII or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

 

(1)           default in the payment of the principal of or premium, if any, on any Security at its Maturity, whether or not such payment is prohibited by the subordination provisions of this Indenture; or

 

(2)           default in the payment of any interest (including any Liquidated Damages) upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days, whether or not such payment is prohibited by the subordination provisions of this Indenture; or

 

(3)           failure by the Company to give a Company Notice in accordance with Section 14.3 whether or not such Company Notice is prohibited by the subordination provisions of this Indenture; or

 

(4)           default in the performance of any agreement or covenant of the Company in this Indenture (other than a covenant a default in the performance of which is specifically dealt with elsewhere in this Section or any failure to perform any covenant related to the registration rights granted to the Holders under the Registration Rights Agreement (except for covenants requiring the payment of Liquidated Damages by the Company)), and continuance of such default for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

 

(5)           failure by the Company to pay any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company in a principal amount then

 

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outstanding in excess of $50,000,000 at final maturity (either at its stated maturity or upon acceleration thereof), and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 30 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

 

(6)           the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property thereof, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or

 

(7)           the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Company to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of the property of the Company, or the making by it of an assignment for the benefit of its creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

 

SECTION 5.2                     Acceleration of Maturity; Rescission and Annulment.

 

If an Event of Default (other than an Event of Default specified in Section 5.1(6) or 5.1(7)) occurs and is continuing, then the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may, subject to the provisions of Article XIII, declare the principal of, and accrued interest (including Liquidated Damages, if any) on, all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 5.1(6) or 5.1(7) occurs, the principal of, and accrued interest (including Liquidated Damages, if any) on, all the Securities shall, subject to the provisions of Article XIII, automatically become immediately due and

 

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payable without any declaration or other Act of the Holders or any act or declaration on the part of the Trustee.

 

At any time after such declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article V provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may, on behalf of all Holders, rescind and annul such declaration and its consequences if:

 

(1)           the Company has paid or deposited with the Trustee a sum sufficient to pay

 

(i)    all overdue interest (including Liquidated Damages, if any) on all Securities,

 

(ii)   the principal of and premium, if any, on any Securities that have become due otherwise than by such declaration of acceleration and any interest thereon at the rate borne by the Securities,

 

(iii)  to the extent permitted by applicable law, interest upon overdue interest at a rate of 2.50% per annum, and

 

(iv)  all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

 

(2)           all Events of Default, other than the nonpayment of the principal of the Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13; and

 

(3)           such rescission and annulment would not conflict with any judgment or decree issued in appropriate judicial proceedings regarding the payment by the Trustee to the Holders of the amounts referred to in 5.2(1).

 

No rescission or annulment referred to above shall affect any subsequent default or impair any right consequent thereon.

 

SECTION 5.3                     Collection of Indebtedness and Suits for Enforcement by Trustee.

 

The Company covenants that if:

 

(1)           default is made in the payment of any interest (including any Liquidated Damages) on any Security when it becomes due and payable and such default continues for a period of 30 days, or

 

(2)           default is made in the payment of the principal of or premium, if any, on any Security at the Maturity thereof,

 

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the Company will, upon demand of the Trustee but subject to the provisions of Article XIII pay to it, for the benefit of the Holders of such Securities the whole amount then due and payable on such Securities for principal and interest (including any Liquidated Damages) and interest on any overdue principal and premium, if any, and, to the extent permitted by applicable law, on any overdue interest (including Liquidated Damages, if any), at a rate of 2.50% per annum, and in addition thereto, such further amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

 

If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.

 

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

SECTION 5.4                     Trustee May File Proofs of Claim.

 

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or the creditors of either, the Trustee (irrespective of whether the principal of, and any interest on, the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

 

(1)           to file a proof of claim for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Securities and take such other actions, including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter, and to file such other papers or documents, in each of the foregoing cases, as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders of Securities allowed in such judicial proceeding, and

 

(2)           to collect and receive any moneys or other property payable or deliverable on any such claim and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each

 

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Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 6.7.

 

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding; provided, however, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or similar official.

 

SECTION 5.5                     Trustee May Enforce Claims Without Possession of Securities.

 

All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which judgment has been recovered.

 

SECTION 5.6                     Application of Money Collected.

 

Subject to Article XIII, any money collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

 

FIRST:  To the payment of all amounts due the Trustee under Section 6.7;

 

SECOND:  To the payment of the amounts then due and unpaid for principal of, premium, if any, or interest (including Liquidated Damages, if any) on, the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest (including Liquidated Damages, if any), respectively;

 

THIRD:  To such other Person or Persons, if any, to the extent entitled thereto; and

 

FOURTH:  Any remaining amounts shall be repaid to the Company.

 

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SECTION 5.7                     Limitation on Suits.

 

No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

 

(1)           such Holder has previously given written notice to the Trustee of an Event of Default and such Event of Default is continuing at the time of such institution;

 

(2)           the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

 

(3)           such Holder or Holders have offered to the Trustee, and if requested, shall have provided, reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

 

(4)           the Trustee for 60 days after its receipt of such notice, request and offer of indemnity (or if requested, receipt of indemnity) has failed to institute any such proceeding; and

 

(5)           no direction inconsistent with such written request has been given to the Trustee by the Holders of a majority in aggregate principal amount of the Outstanding Securities,

 

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

 

SECTION 5.8                                                              Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert.

 

Notwithstanding any other provision in this Indenture, but subject to the provisions of Article XIII, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of, premium, if any, and (subject to Section 3.7) interest (including Liquidated Damages, if any) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption or repurchase, on the Redemption Date or Repurchase Date, as the case may be), and to convert such Security in accordance with Article XII, and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder.

 

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SECTION 5.9                     Restoration of Rights and Remedies.

 

If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Securities shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holders shall continue as though no such proceeding had been instituted.

 

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SECTION 5.10                   Rights and Remedies Cumulative.

 

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

 

SECTION 5.11                   Delay or Omission Not Waiver.

 

No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders of Securities may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or (subject to the limitations contained in this Indenture) by the Holders of Securities as the case may be.

 

SECTION 5.12                   Control by Holders of Securities.

 

Subject to Section 6.3, the Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that:

 

(1)           such direction shall not be in conflict with any rule of law or with this Indenture; and

 

(2)           the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and

 

(3)           the Trustee need not take any action that might involve it in personal liability, unless the Trustee is offered indemnity or security satisfactory to it, or that the Trustee determines in good-faith would be unjustly prejudicial to the Holders of Securities not consenting.

 

SECTION 5.13                   Waiver of Past Defaults.

 

The Holders, either (i) through the written consent of not less than a majority in principal amount of the Outstanding Securities or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least 66²/₃% in principal amount of the Outstanding Securities represented at such meeting, may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (A) in the payment of the principal of, premium, if any, or interest (including Liquidated Damages, if any) on any Security, or (B) in respect of a covenant or provision hereof which under Article VIII

 

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cannot be modified or amended without the consent of the Holder of each Outstanding Security affected.

 

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

 

SECTION 5.14                   Undertaking for Costs.

 

All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the principal of, premium, if any, or interest on any Security on or after the respective Stated Maturity or Maturities expressed in such Security (or, in the case of redemption or repurchase, on or after the Redemption Date or Repurchase Date, as the case may be) or for the enforcement of the right to convert any Security in accordance with Article XII.

 

SECTION 5.15                   Waiver of Stay, Usury or Extension Laws.

 

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, usury or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede by reason of such law the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

ARTICLE VI
THE TRUSTEE

 

SECTION 6.1                     Certain Duties and Responsibilities.

 

(1)           Except during the continuance of an Event of Default:

 

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(i)            the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

 

(ii)           in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof.

 

(2)           In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

 

(3)           No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

 

(i)            this paragraph (3) shall not be construed to limit the effect of paragraph (1) of this Section;

 

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

 

(iii)          the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

 

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

 

(4)           Whether or not therein 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 Section.

 

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SECTION 6.2                     Notice of Defaults.

 

Within 90 days after the occurrence of any default hereunder as to which the Trustee has received written notice, the Trustee shall give to all Holders of Securities, in the manner provided in Section 1.6, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Security the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided, further, that in the case of any default of the character specified in Section 5.1(4), no such notice to Holders of Securities shall be given until at least 60 days after the occurrence thereof or, if applicable, the cure period specified therein. For the purpose of this Section, the term “default” means any event that is, or after notice or lapse of time or both would become, an Event of Default.

 

SECTION 6.3                     Certain Rights of Trustee.

 

Subject to the provisions of Section 6.1:

 

(1)           the Trustee may rely, and shall be protected in acting or refraining from acting, upon any resolution, Officers’ Certificate, other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document (collectively, the “Documents”) believed by it to be genuine and to have been signed or presented by the proper party or parties, and the Trustee need not investigate any fact or matter stated in such Documents;

 

(2)           any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

 

(3)           whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be the one specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers’ Certificate or Opinion of Counsel;

 

(4)           the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(5)           the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities pursuant to this Indenture, unless such Holders shall have offered, and, if requested by the Trustee, delivered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

 

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(6)           the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and

 

(7)           the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

 

SECTION 6.4                     Not Responsible for Recitals or Issuance of Securities.

 

The recitals contained herein and in the Securities (except the Trustee’s certificates of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness.  The Trustee makes no representations as to the validity or sufficiency of this Indenture, of the Securities or of the Common Stock issuable upon the conversion of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.

 

SECTION 6.5                     May Hold Securities, Act as Trustee under Other Indentures.

 

The Trustee, any Authenticating Agent, any Paying Agent, any Conversion Agent or any other agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Section 6.13 and Section 6.14, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other agent.

 

Subject to the limitations posed by the Trust Indenture Act, nothing in this Indenture shall prohibit the Trustee from becoming and acting as trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee hereunder.

 

SECTION 6.6                     Money Held in Trust.

 

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.

 

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SECTION 6.7                     Compensation, Reimbursement and Indemnity.

 

The Company agrees:

 

(1)           to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for its acceptance of this Indenture and for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

 

(2)           except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and

 

(3)           to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.

 

When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(6) or Section 5.1(7), the expenses (including the reasonable charges of its counsel) and the compensation for the services are intended to constitute expenses of the administration under any applicable Federal or state bankruptcy, insolvency or other similar law.

 

SECTION 6.8                     Corporate Trustee Required; Eligibility.

 

There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, having (or be part of a holding company group with) a combined capital and surplus of at least U.S. $50,000,000, subject to supervision or examination by federal or state authority, and in good standing. The Trustee or an Affiliate of the Trustee shall maintain an established place of business in the Borough of Manhattan, The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article and a successor shall be appointed pursuant to Section 6.9.

 

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SECTION 6.9                     Resignation and Removal; Appointment of Successor.

 

(1)           No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10.

 

(2)           The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

(3)           The Trustee may be removed at any time by an Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and the Company. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

(4)           The Trustee may be removed at any time by the Company and the Company may appoint a successor Trustee pursuant to this Article, provided, that (i) there is not an Event of Default that is continuing at the time of removal, (ii) the successor Trustee appointed by the Company meets the eligibility requirements of Section 6.8, and (iii) such removal and resignation shall not become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10.

 

(5)           If at any time:

 

(i)    the Trustee shall cease to be eligible under Section 6.8 and shall fail to resign after written request therefor by the Company or by any Holder of a Security; or

 

(ii)   the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

 

then, in any such case (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder of a Security may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

 

(6)           If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee and shall comply with the applicable requirements of this Section and Section 6.10. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring

 

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Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.10, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner required by this Section and Section 6.10, any Holder of a Security may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

(7)           The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Securities in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

 

SECTION 6.10                   Acceptance of Appointment by Successor.

 

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments to more fully and certainly vest in and to confirm to such successor Trustee all such rights, powers and trusts.

 

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article.

 

SECTION 6.11                   Merger, Conversion, Consolidation or Succession to Business.

 

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee (including the trust created by this Indenture), shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.

 

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SECTION 6.12                   Authenticating Agents.

 

The Trustee may, with the consent of the Company, appoint an Authenticating Agent or Agents acceptable to the Company with respect to the Securities, which Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon exchange, substitution or otherwise pursuant to this Indenture.

 

Securities authenticated by an Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder, and every reference in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be subject to acceptance by the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent and subject to supervision or examination by government or other fiscal authority. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.12, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.12.

 

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent (including the authenticating agency contemplated by this Indenture), shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section 6.12, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

 

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.12, the Trustee may appoint a successor Authenticating Agent which shall be subject to acceptance by the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 6.12.

 

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.12.

 

If an Authenticating Agent is appointed with respect to the Securities pursuant to this Section 6.12, the Securities may have endorsed thereon, in addition to or in lieu of the Trustee’s certification of authentication, an alternative certificate of authentication in the following form:

 

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This is one of the Securities referred to in the within-mentioned Indenture.

 

	WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
	as Trustee
	By:
	As Authenticating Agent
	By:
	Authorized Signatory

 

SECTION 6.13                   Disqualification; Conflicting Interests.

 

If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

 

SECTION 6.14                   Preferential Collection of Claims Against Company.

 

If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).

 

ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

 

SECTION 7.1                     Company May Consolidate, Etc. Only on Certain Terms.

 

The Company shall not consolidate with or merge into any other Person or convey, transfer, sell or lease its properties and assets substantially as an entirety to any Person (other than to one or more of Company’s subsidiaries) unless:

 

(1)           the Person formed by such consolidation or into or with which the Company is merged or the Person to which the properties and assets of the Company are so conveyed, transferred, sold or leased shall be a corporation, limited liability company, partnership, trust or other business entity organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and, if other than the Company, shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any, and interest (including

 

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Liquidated Damages, if any) on the Securities and the performance of the covenants under this Indenture;

 

(2)           immediately after giving effect to such transaction, no Event of Default, and no event that after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

 

(3)           the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, together with any documents required under Section 8.3.

 

SECTION 7.2                     Successor Substituted.

 

Upon any consolidation of the Company with, or merger of the Company into any other Person or any conveyance, transfer, sale or lease of the properties and assets of the Company substantially as an entirety to any Person in accordance with Section 7.1, the successor Person formed by such consolidation or into or with which the Company is merged or to which such conveyance, transfer, sale or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities.

 

ARTICLE VIII

SUPPLEMENTAL INDENTURES

 

SECTION 8.1                     Supplemental Indentures Without Consent of Holders of Securities.

 

Without the consent of any Holders of Securities the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto for any of the following purposes:

 

(1)           to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants and obligations of the Company herein and in the Securities as permitted by Article VII of this Indenture; or

 

(2)           to add to the covenants of the Company for the benefit of the Holders of Securities or to surrender any right or power herein conferred upon the Company; or

 

(3)           to add any additional Event of Default for the benefit of the Holders of Securities; or

 

(4)           to secure the Securities; or

 

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(5)           to make provision with respect to the conversion rights of Holders of Securities pursuant to Section 12.11 or to make provision with respect to the repurchase rights of Holders of Securities pursuant to Section 14.5; or

 

(6)           to make any changes or modifications to this Indenture necessary in connection with the registration of any Registrable Securities under the Securities Act as contemplated by Section 10.11, provided such action pursuant to this clause (6) shall not adversely affect the interests of the Holders of Securities in any material respect; or

 

(7)           to comply with the requirements of the Trust Indenture Act or the rules and regulations of the Commission thereunder in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by this Indenture or otherwise; or

 

(8)           to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or

 

(9)           subject to Section 13.12, to make any change in Article XIII that would limit or terminate the benefits available to any holder of Senior Debt under such Article; or

 

(10)         to cure any ambiguity, to correct or supplement any provision herein that may be defective or may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture as the Company and the Trustee may deem necessary or desirable, provided such action pursuant to this clause (10) shall not adversely affect the interests of the Holders of Securities in any material respect.

 

Upon Company Request, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and subject to and upon receipt by the Trustee of the documents described in Section 8.3 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained.

 

Notwithstanding any other provision of the Indenture or the Securities, the Registration Rights Agreement and the obligation to pay Liquidated Damages thereunder may be amended, modified or waived in accordance with the provisions of the Registration Rights Agreement.

 

SECTION 8.2                     Supplemental Indentures with Consent of Holders of Securities.

 

With either (i) the written consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by the Act of said Holders delivered to the Company and the Trustee, or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Securities at which a quorum is present, by the Holders of at least 66²/₃% in principal amount of the Outstanding Securities represented at such meeting, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities under this

 

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Indenture; provided, however, that no such supplemental indenture shall, without the consent or affirmative vote of the Holder of each Outstanding Security affected thereby:

 

(1)           change the Stated Maturity of the principal of, or any installment of interest on (including Liquidated Damages, if any) , any Security, or reduce the principal amount of, or the premium, if any, or the rate of interest payable thereon, or reduce the amount payable upon a redemption or mandatory repurchase, or change the place or currency of payment of the principal of, premium, if any, or interest (including Liquidated Damages, if any) on any Security or impair the right to institute suit for the enforcement of any payment in respect of any Security on or after the Stated Maturity thereof or, except as permitted by Section 12.11, adversely affect the right of Holders to convert any Security as provided in Article XII, or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders; or

 

(2)           reduce the requirements of Section 9.4 for quorum or voting, or reduce the percentage in principal amount of the Outstanding Securities the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or

 

(3)           modify the obligation of the Company to maintain an office or agency in the Borough of Manhattan, The City of New York, pursuant to Section 10.2; or

 

(4)           modify any of the provisions of this Section or Section 5.13 or 10.11, except to increase any percentage contained herein or therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or

 

(5)           modify the provisions of Article XIV in a manner adverse to the Holders; or

 

(6)           modify the provisions of Article XI in a manner adverse to the Holders; or

 

(7)           modify any of the provisions of Section 10.9.

 

It shall not be necessary for any Act of Holders of Securities under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

 

After the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 8.2, the Company shall give notice to the Holders of Securities of such fact, setting forth in general terms the substance of such supplemental indenture.  Any failure of the Company to give such notice, or any defect therein, shall not in any way impair or affect the validity of any such supplemental indenture.

 

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SECTION 8.3                     Execution of Supplemental Indentures.

 

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article VIII or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

SECTION 8.4                     Effect of Supplemental Indentures.

 

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder appertaining thereto shall be bound thereby.

 

SECTION 8.5                     Reference in Securities to Supplemental Indentures.

 

Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the 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 Securities.

 

ARTICLE IX

MEETINGS OF HOLDERS OF SECURITIES

 

SECTION 9.1                     Purposes for Which Meetings May Be Called.

 

A meeting of Holders of Securities may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities.

 

SECTION 9.2                     Call, Notice and Place of Meetings.

 

(1)           The Trustee may at any time call a meeting of Holders of Securities for any purpose specified in Section 9.1, to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine. Notice of every meeting of Holders of Securities, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.6, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

 

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(2)           In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities shall have requested the Trustee to call a meeting of the Holders of Securities for any purpose specified in Section 9.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities in the amount specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (1) of this Section.

 

SECTION 9.3                     Persons Entitled to Vote at Meetings.

 

To be entitled to vote at any meeting of Holders of Securities, a Person shall be (i) a Holder of one or more Outstanding Securities, or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

 

SECTION 9.4                     Quorum; Action.

 

The Persons entitled to vote a majority in principal amount of the Outstanding Securities shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities, be dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting (subject to repeated applications of this sentence). Notice of the reconvening of any adjourned meeting shall be given as provided in Section 9.2(1), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened.  Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the principal amount of the Outstanding Securities that shall constitute a quorum.

 

Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum, the Persons entitled to vote 25% in aggregate principal amount of the Outstanding Securities at the time shall constitute a quorum for the taking of any action set forth in the notice of the original meeting.

 

At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by the proviso to Section 8.2 and except to the extent Section 10.12 requires a different vote) shall be effectively passed and decided if passed or decided by the lesser of (i) the Holders of not less than a majority in principal amount of

 

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Outstanding Securities and (ii) the Persons entitled to vote not less than 66²/₃% in aggregate principal amount of Outstanding Securities represented and entitled to vote at such meeting.

 

Any resolution passed or decisions taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities whether or not present or represented at the meeting. The Trustee shall, in the name and at the expense of the Company, notify all the Holders of Securities of any such resolutions or decisions pursuant to Section 1.6.

 

SECTION 9.5                     Determination of Voting Rights; Conduct and Adjournment of Meetings.

 

(1)           Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4 or by having the signature of the Person executing the proxy guaranteed by any bank, broker or other eligible institution participating in a recognized medallion signature guarantee program.

 

(2)           The Trustee shall, by an instrument in writing, appoint a temporary chairman (which may be the Trustee) of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 9.2(2), in which case the Company or the Holders of Securities calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities represented at the meeting.

 

(3)           At any meeting, each Holder of a Security or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy.

 

(4)           Any meeting of Holders of Securities duly called pursuant to Section 9.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities represented at the meeting, and the meeting may be held as so adjourned without further notice.

 

SECTION 9.6                     Counting Votes and Recording Action of Meetings.

 

The vote upon any resolution submitted to any meeting of Holders of Securities shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities or of their

 

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representatives by proxy and the principal amounts at Stated Maturity and serial numbers of the Outstanding Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

 

ARTICLE X

COVENANTS

 

SECTION 10.1                   Payment of Principal, Premium and Interest.

.

The Company covenants and agrees that it will duly and punctually pay the principal of and premium, if any, and interest (including Liquidated Damages, if any) on the Securities in accordance with the terms of the Securities and this Indenture.

 

SECTION 10.2                   Maintenance of Offices or Agencies.

 

The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Securities may be surrendered for registration of transfer or exchange or for presentation for payment or for conversion, redemption or repurchase and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served, which shall initially be an office or agency of the Trustee.  The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed 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, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office or the office or agency of the Trustee in the Borough of Manhattan, The City of New York.

 

The Company may at any time and from time to time vary or terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided, however, that until all of the Securities have been delivered to the Trustee for cancellation, or moneys sufficient to pay the principal of, premium, if any, and interest on the Securities have been made available for payment and either paid or returned to the Company pursuant to the provisions of Section 10.3, the Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment and conversion,

 

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which shall initially be Wells Fargo Bank Minnesota, National Association office of the Trustee located at 45 Broadway, Twelfth Floor, MAC N2666-120, New York, New York 10006, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee, and notice to the Holders in accordance with Section 1.6, of the appointment or termination of any such agents and of the location and any change in the location of any such office or agency.

 

The Company hereby initially designates the Trustee as Paying Agent, Security Registrar and Conversion Agent, and each of the Corporate Trust Office of the Trustee and the office or agency of the Trustee in the Borough of Manhattan, The City of New York, located at 45 Broadway, Twelfth Floor, MAC N2666-120, New York, New York 10006, attention: Corporate Trust Operations (Micron Technology, Inc. 2.50% Convertible Subordinated Notes due February 1, 2010) as one such office or agency of the Company for each of the aforesaid purposes.

 

SECTION 10.3                   Money for Security Payments to Be Held in Trust.

 

If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and the Company will promptly notify the Trustee of its action or failure so to act.

 

Whenever the Company shall have one or more Paying Agents, it will, no later than the opening of business on each due date of the principal of, premium, if any, or interest on any Securities, deposit with the Trustee a sum in funds immediately payable on the payment date sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held for the benefit of the Persons entitled to such principal, premium, if any, or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure so to act.

 

The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

 

(1)           hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

 

(2)           give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal, premium, if any, or interest; and

 

(3)           at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by such Paying Agent.

 

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The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

 

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease.

 

SECTION 10.4                   Existence.

 

Subject to Article VII, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence.

 

SECTION 10.5                   Maintenance of Properties.

 

The Company will cause all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as, and to the extent, in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holders.

 

SECTION 10.6                   Payment of Taxes and Other Claims.

 

The Company will pay or discharge, or cause to be paid or discharged, before the same may become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Company or upon the income, profits or property of the Company and, (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the property of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (A) if the failure to do so will not, in the aggregate, have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiaries taken as a whole, or

 

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(B) if the amount, applicability or validity of such tax, assessment, charge or claim is being contested in good faith by appropriate proceedings.

 

SECTION 10.7                   Registration and Listing.

 

The Company will effect all registrations with, and obtain all approvals by, all governmental authorities that may be necessary under any United States Federal or state law (including the Securities Act, the Exchange Act and state securities and Blue Sky laws) before the shares of Common Stock issuable upon conversion of Securities are issued and delivered, and qualified or listed as contemplated under the Registration Rights Agreement.

 

Nothing in this Section will limit the application of Section 10.10.

 

SECTION 10.8                   Statement by Officers as to Default.

 

The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

 

SECTION 10.9                   Delivery of Certain Information.

 

At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder of a Restricted Security or the holder of shares of Common Stock issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder of Restricted Securities or such holder of shares of Common Stock issued upon conversion of Restricted Securities, or to a prospective purchaser of any such security designated by any such Holder or holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act (or any successor provision thereto) in connection with the resale of any such security; provided, however, that the Company shall not be required to furnish such information in connection with any request made on or after the date that is two years after the Issue Date.  “Rule 144A Information” shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto).

 

SECTION 10.10                 Registration Rights.

 

The Company agrees that the holders from time to time of Registrable Securities (as defined below) are entitled to the benefits of a Registration Rights Agreement, dated as of February 4, 2003 (the “Registration Rights Agreement”), executed by the Company as it may be amended from time to time in accordance with its terms.

 

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Whenever in this Indenture there is mentioned, in any context, the payment of interest in respect of any Security, such mention shall be deemed to include mention of the payment of Liquidated Damages provided for in this Section to the extent that, in such context, Liquidated Damages are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of Liquidated Damages (if applicable) in any provisions hereof shall not be construed as excluding Liquidated Damages in those provisions hereof where such express mention is not made.

 

For the purposes of the Registration Rights Agreement, “Registrable Securities” means all or any portion of the Securities issued from time to time under this Indenture in registered form and the shares of Common Stock issuable upon conversion, repurchase or redemption of such Securities; except any such Security or share of Common Stock that (i) has been effectively registered under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto), or (iii) has otherwise been transferred and a new Security or share of Common Stock not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with this Indenture.

 

If a Security, or the shares of Common Stock issuable upon conversion of a Security, is a Registrable Security, and the holder thereof elects to sell such Registrable Security pursuant to the Shelf Registration Statement then, by its acceptance thereof, the holder of such Registrable Security will have agreed to be bound by the terms of the Registration Rights Agreement relating to the Registrable Securities which are the subject of such election.

 

If Liquidated Damages are payable under the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of Liquidated Damages that is payable and (ii) the date on which Liquidated Damages are payable.  Unless and until a Responsible Officer of the Trustee receives at the Corporate Trust Office such a certificate, the Trustee may assume without inquiry that no Liquidated Damages are payable.  If Liquidated Damages have been paid by the Company directly to the persons entitled to them, the Company shall deliver to the Trustee a certificate setting forth the particulars of such payment.

 

SECTION 10.11                 Waiver of Certain Covenants.

 

The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 10.5 and 10.6, inclusive (other than a covenant or condition which under Article VIII cannot be modified or amended without the consent of the Holder of each Outstanding Security affected), if before the time for such compliance the Holders shall, through (i) the written consent of not less than a majority in principal amount of the Outstanding Securities or (ii) the adoption of a resolution at a meeting of Holders of the Outstanding Securities at which a quorum is present by the Holders of not less than 66²/₃% in principal amount of the Outstanding Securities represented at such meeting, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except

 

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to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee or any Paying or Conversion Agent in respect of any such covenant or condition shall remain in full force and effect.

 

ARTICLE XI

REDEMPTION OF SECURITIES

 

SECTION 11.1                   Right of Redemption.

 

The Securities may be redeemed in accordance with the provisions of the form of Securities set forth in Section 2.2.

 

SECTION 11.2                   Applicability of Article.

 

Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of the Securities or this Indenture, shall be made in accordance with such provision and this Article XI.

 

SECTION 11.3                   Election to Redeem; Notice to Trustee.

 

The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. Subject to Section 11.5, in case of any redemption at the election of the Company of any of the Securities, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date.

 

SECTION 11.4                   Selection by Trustee of Securities to Be Redeemed.

 

If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee in principal amounts of $1,000 or integral multiples thereof by lot or on a pro rata basis.

 

If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities that have been converted during a selection of Securities to be redeemed may be treated by the Trustee as Outstanding for the purpose of such selection.  The Trustee shall promptly notify the Company and each Security Registrar in writing of the securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

 

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.

 

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SECTION 11.5                   Notice of Redemption.

 

Notice of redemption shall be given in the manner provided in Section 1.6 to the Holders of Securities to be redeemed not less than 20 nor more than 60 days prior to the Redemption Date, and such notice shall be irrevocable.

 

All notices of redemption shall state:

 

(1)           the Redemption Date;

 

(2)           the Redemption Price and accrued interest (including Liquidated Damages, if any) to, but excluding, the Redemption Date;

 

(3)           if less than all Outstanding Securities are to be redeemed, the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities which will be outstanding after such partial redemption;

 

(4)           that on the Redemption Date the Redemption Price and accrued interest (including Liquidated Damages, if any) to, but excluding, the Redemption Date, will become due and payable upon each such Security to be redeemed, and that interest thereon shall cease to accrue on and after said date;

 

(5)           the Conversion Rate, the date on which the right to convert the Securities to be redeemed will terminate and the places where such Securities may be surrendered for conversion; and

 

(6)           the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest (including Liquidated Damages, if any), if any, to, but excluding, the Redemption Date.

 

In case of a partial redemption, the notice shall specify the serial and CUSIP numbers (if any) and the portions thereof called for redemption and that transfers and exchanges may occur on or prior to the Redemption Date.

 

Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company’s written request, by the Trustee in the name of and at the expense of the Company. Notice of redemption of Securities to be redeemed at the election of the Company received by the Trustee shall be given by the Trustee to each Paying Agent in the name of and at the expense of the Company.

 

SECTION 11.6                   Deposit of Redemption Price.

 

On or prior to the Redemption Date, the Company shall deposit with the Trustee (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3) an amount of money (which shall be in immediately available funds on such Redemption Date)

 

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sufficient to pay the Redemption Price and (except if the Redemption Date shall be an Interest Payment Date) accrued interest (including Liquidated Damages, if any) to, but excluding, the Redemption Date on all the Securities which are to be redeemed on that date, other than any Securities called for redemption on that date which have been converted prior to the date of such deposit.

 

If any Security called for redemption is converted, any money deposited with the Trustee or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 3.7) be returned to the Company on Company Request or, if then held by the Company, shall be discharged from such trust.

 

SECTION 11.7                   Securities Payable on Redemption Date.

 

Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price, including accrued interest) such Securities shall cease to bear interest. Upon surrender of any Security for redemption in accordance with said notice such Security shall be paid by the Company at the Redemption Price together with accrued and unpaid interest (including Liquidated Damages, if any) to, but excluding, the Redemption Date; provided, however, that installments of interest on Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 3.7.

 

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal amount of, premium, if any, and, to the extent permitted by applicable law, accrued interest on such Security shall, until paid, bear interest from the Redemption Date at a rate of 2.50% per annum and such Security shall remain convertible until the Redemption Price of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for.

 

Any Security that is to be redeemed only in part shall be surrendered at the Corporate Trust Office or an office or agency of the Company designated for that purpose pursuant to Section 10.2 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.

 

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SECTION 11.8                   Conversion Arrangement on Call for Redemption.

 

In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities by an agreement with one or more investment bankers or other purchasers (the “Purchasers”) to purchase such securities by paying to the Trustee in trust for the Holders, on or before the Redemption Date, an amount not less than the applicable Redemption Price, together with interest accrued to, but excluding, the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article XI the obligation of the Company to pay the Redemption Price, together with interest accrued to, but excluding, the Redemption Date, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such Purchasers. If such an agreement is entered into (a copy of which shall be filed with the Trustee prior to the close of business on the Business Day immediately prior to the Redemption Date), any Securities called for redemption that are not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, and consistent with any agreement or agreements with such Purchasers, to be acquired by such Purchasers from such Holders and (notwithstanding anything to the contrary contained in Article XII) surrendered by such Purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date (and the right to convert any such Securities shall be extended through such time), subject to payment of the above amount as aforesaid. At the direction of the Company, the Trustee shall hold and dispose of any such amount paid to it by the Purchasers to the Holders in the same manner as it would monies deposited with it by the Company for the redemption of Securities. Without the Trustee’s prior written consent, no arrangement between the Company and such Purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such Purchasers, including the costs and expenses, including reasonable legal fees, incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture.

 

ARTICLE XII

CONVERSION OF SECURITIES

 

SECTION 12.1                   Conversion Privilege and Conversion Rate.

 

Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security may be converted into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Company at the Conversion Rate, determined as hereinafter provided, in effect at the time of conversion.  Such conversion right shall commence on the initial issuance date of the Securities and expire at the close of business on the date of Maturity, subject, in the case of conversion of any Global Security, to any Applicable Procedures. In case a Security or portion thereof is called for redemption at the election of the Company or the Holder thereof exercises its right to require the Company to repurchase the Security, such conversion right in respect of the Security, or portion thereof so called or submitted, shall expire at the close of business on the Business Day immediately preceding the Redemption

 

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Date or the Repurchase Date, as the case may be, unless the Company defaults in making the payment due upon redemption or repurchase, as the case may be (in each case subject as aforesaid to any Applicable Procedures with respect to any Global Security).

 

The rate at which shares of Common Stock shall be delivered upon conversion (herein called the “Conversion Rate”) shall be initially 84.8320 shares of Common Stock for each U.S.$1,000 principal amount of Securities. The Conversion Rate shall be adjusted in certain instances as provided in this Article XII.

 

SECTION 12.2                   Exercise of Conversion Privilege.

 

In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed in blank, at any office or agency of the Company maintained for that purpose pursuant to Section 10.2, accompanied by a duly signed conversion notice substantially in the form set forth in Section 2.4 stating that the Holder elects to convert such Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. Each Security surrendered for conversion (in whole or in part) during the Record Date Period shall be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of such Security (or part thereof, as the case may be) being surrendered for conversion; provided, however, that no such payment need be made in the case of any Security or portion thereof which has been called for redemption on a Redemption Date, or is repurchasable on a Repurchase Date, occurring, in either case, within the period from the close of business on any Regular Record Date immediately preceding any Interest Payment Date to the close of business on the third Business Day following such Interest Payment Date and, as a result, the right to convert such Security would otherwise terminate in such period if not exercised.  The interest so payable on such Interest Payment Date with respect to any Security (or portion thereof, if applicable) that is surrendered for conversion during the Record Date Period shall be paid to the Holder of such Security as of such Regular Record Date in an amount equal to the interest that would have been payable on such Security if such Security had been converted as of the close of business on such Interest Payment Date.  Interest payable on any Interest Payment Date in respect of any Security surrendered for conversion on or after such Interest Payment Date shall be paid to the Holder of such Security as of the Regular Record Date immediately preceding such Interest Payment Date, notwithstanding the exercise of the right of conversion.  Except as provided in this paragraph and subject to the last paragraph of Section 3.7, no cash payment or adjustment shall be made upon any conversion on account of any interest accrued from the Interest Payment Date next preceding the conversion date, in respect of any Security (or part thereof, as the case may be) surrendered for conversion, or on account of any dividends on the Common Stock issued upon conversion. The Company’s delivery to the Holder of the number of shares of Common Stock (and cash in lieu of fractions thereof, as provided in this Indenture) into which a Security is convertible will be deemed to satisfy the Company’s obligation to pay the principal amount of the Security.

 

Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing

 

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provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and deliver to the Trustee, for delivery to the Holder (unless a different Person is indicated on the Conversion Notice), a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 12.3.

 

All shares of Common Stock delivered upon such conversion of Restricted Securities shall bear restrictive legends substantially in the form of the legends required to be set forth on the Restricted Securities pursuant to Section 3.5 and shall be subject to the restrictions on transfer provided in such legends. Neither the Trustee nor any agent maintained for the purpose of such conversion shall have any responsibility for the inclusion or content of any such restrictive legends on such Common Stock; provided, however, that the Trustee or any agent maintained for the purpose of such conversion shall have provided, to the Company or to the Company’s transfer agent for such Common Stock, prior to or concurrently with a request to the Company to deliver such Common Stock, written notice that the Securities delivered for conversion are Restricted Securities.

 

In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in an aggregate principal amount equal to the unconverted portion of the principal amount of such Security. A Security may be converted in part, but only if the principal amount of such Security to be converted is any integral multiple of U.S. $1,000 and the principal amount of such security to remain Outstanding after such conversion is equal to U.S. $1,000 or any integral multiple of $1,000 in excess thereof.

 

If shares of Common Stock to be issued upon conversion of a Restricted Security, or Securities to be issued upon conversion of a Restricted Security in part only, are to be registered in a name other than that of the beneficial owner of such Restricted Security, then such Holder must deliver to the Conversion Agent a Surrender Certificate, dated the date of surrender of such Restricted Security and signed by such beneficial owner, as to compliance with the restrictions on transfer applicable to such Restricted Security. Neither the Trustee nor any Conversion Agent, Registrar or Transfer Agent shall be required to register in a name other than that of the beneficial owner, shares of Common Stock or Securities issued upon conversion of any such Restricted Security not so accompanied by a properly completed Surrender Certificate.

 

SECTION 12.3                   Fractions of Shares.

 

No fractional shares of Common Stock shall be issued upon conversion of any Security or Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock that would otherwise be issuable upon

 

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conversion of any Security or Securities (or specified portions thereof), the Company shall calculate and pay a cash adjustment in respect of such fraction (calculated to the nearest 1/100th of a share) in an amount equal to the same fraction of the Closing Price Per Share at the close of business on the day of conversion.

 

SECTION 12.4                   Adjustment of Conversion Rate.

 

The Conversion Rate shall be subject to adjustments from time to time as follows:

 

(1)           In case the Company shall pay or make a dividend or other distribution on shares of Common Stock payable in shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date 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 increase to become effective immediately after the opening of business on the day following the date fixed for such determination. If, after any such date fixed for determination, any dividend or distribution is not in fact paid, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would have been in effect if such determination date had not been fixed. For the purposes of this paragraph (1), 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 will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

 

(2)           In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (8) of this Section 12.4) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants (other than any rights, options or warrants that by their terms will also be issued to any Holder upon conversion of a Security into shares of Common Stock without any action required by the Company or any other Person), the Conversion Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock that the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. If, after any such date fixed for determination, any such rights, options or warrants are not in fact issued, or are not

 

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exercised prior to the expiration thereof, the Conversion Rate shall be immediately readjusted, effective as of the date such rights, options or warrants expire, or the date the Board of Directors determines not to issue such rights, options or warrants, to the Conversion Rate that would have been in effect if the unexercised rights, options or warrants had never been granted or such determination date had not been fixed, as the case may be.  For the purposes of this paragraph (2), 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 will not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company.

 

(3)           In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision or combination becomes effective shall be proportionately reduced, such increase or reduction, 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.

 

(4)           In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class of capital stock or other property (including cash or assets or securities, but excluding (i) any rights, options or warrants referred to in paragraph (2) of this Section, (ii) any dividend or distribution paid exclusively in cash, (iii) any dividend or distribution referred to in paragraph (1) of this Section 12.4 and (iv) any consideration distributed in any merger or consolidation to which Section 12.11 applies (the “Distributed Assets”)), the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (8) of this Section 12.4) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of directors, whose determination shall be conclusive and described in a Board Resolution filed with the Trustee) of the portion of the assets, shares or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such distribution; provided, however, that if the Distributed Assets consist of shares of capital stock of a Subsidiary, the Company may, at its option and in lieu of the foregoing adjustment, elect to make adequate provision so that each Holder of Securities shall have the right to receive, upon conversion of the Securities, the amount of such shares of capital stock of such Subsidiary that such Holder of Securities would have received if such Holder had converted such Securities immediately prior to the record date for determining the shareholders entitled to receive the distribution of such Distributed Assets.  If after any such date fixed for determination, any such distribution is not in fact made, the Conversion Rate shall be

 

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immediately readjusted, effective as of the date of the Board of Directors determines not to make such distribution, to the Conversion Rate that would have been in effect if such determination date had not been fixed.  In the event that the fair market value of Distributed Assets, applicable to one share of Common Stock, distributed to stockholders (1) equals or exceeds the current market price of the Common Stock, or (2) such current market price exceeds the fair market value of such Distributed Assets so distributed by less than $1.00, then, in lieu of an adjustment in the Conversion Rate, the Holder of a Security will be entitled to receive upon conversion of a Security, in addition to shares of Common Stock, the kind and amount of Distributed Assets that such Holder would have received if such Holder had converted such Security immediately prior to the record date for determining the stockholders entitled to receive the distribution.

 

(5)           In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed as part of a distribution referred to in paragraph (4) of this Section or cash distributed upon a merger or consolidation to which Section 12.11 applies) in an aggregate amount that, combined together with (I) the aggregate amount of any other all-cash distributions to all holders of its Common Stock made exclusively in cash within the twelve-month period preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (5) has been made and (II) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for all or any portion of the Common Stock concluded within the twelve-month period preceding the date of payment of such distribution and in respect of which no adjustment pursuant to paragraph (6) of this Section 12.4 has been made (the “combined cash and tender amount”) exceeds 10% of the product of the current market price per share (determined as provided in paragraph (8) of this Section 12.4) of the Common Stock on the date for the determination of holders of shares of Common Stock entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (the “aggregate current market price”), then, and in each such case, immediately after the close of business on such date for determination, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution by a fraction (i) the numerator of which shall be equal to the current market price per share (determined as provided in paragraph (8) of this Section) of the Common Stock on the date fixed for such determination less an amount equal to the quotient of (x) the excess of such combined cash and tender amount over 10% of such aggregate current market price divided by (y) the number of shares of Common Stock outstanding on such date for determination and (ii) the denominator of which shall be equal to the current market price per share (determined as provided in paragraph (8) of this Section 12.4) of the Common Stock on such date fixed for determination.

 

(6)           In case a tender offer made by the Company or any Subsidiary for all or any portion of the Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be

 

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conclusive and described in a Board Resolution) that together with (I) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), as of the expiration of such tender offer, of other consideration payable in respect of any other tender offer by the Company or any Subsidiary for all or any portion of the Common Stock expiring within the twelve month period preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this paragraph (6) has been made and (II) the aggregate amount of any cash distributions to all holders of the Common Stock within the twelve month period preceding the expiration of such tender offer and in respect of which no adjustment pursuant to paragraph (5) of this Section has been made (the “combined tender and cash amount”) exceeds 10% of the product of the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 12.4) as of the last time (the “Expiration Time”) tenders could have been made pursuant to such tender offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) as of the Expiration Time, then, and in each such case immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate immediately prior to close of business on the date of the Expiration Time by a fraction (i) the numerator of which shall be equal to (A) the product of (I) the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 12.4) on the date of the Expiration Time multiplied by (II) the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time less (B) the combined tender and cash amount, and (ii) the denominator of which shall be equal to the product of (A) the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 12.4) as of the Expiration Time multiplied by (B) the number of shares of Common Stock outstanding (including any tendered shares) as of the Expiration Time less the number 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”).

 

(7)           The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 12.11 applies) shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be “the date fixed for the determination of stockholders entitled to receive such distribution” and “the date fixed for such determination” within the meaning of paragraph (4) of this Section), and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be “the day upon which such subdivision becomes effective” or “the day upon which such combination becomes effective”, as the case may be, and “the day upon which such subdivision or combination becomes effective” within the meaning of paragraph (3) of this Section 12.4).

 

(8)           For the purpose of any computation under paragraphs (2), (4), (5) or (6) of this Section 12.4, the current market price per share of Common Stock on any date shall be calculated by the Company and be the average of the daily Closing Prices Per Share for the five consecutive

 

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Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than the earlier of the day in question and the day before the “ex date” with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term “‘ex date”, when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive such issuance or distribution.

 

(9)           No adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this paragraph (9)) would require an increase or decrease of at least one percent in such rate; provided, however, that any adjustments which by reason of this paragraph (9) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

 

(10)         The Company may make such increases in the Conversion Rate, for the remaining term of the Securities or any shorter term, in addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 12.4, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. The Company shall have the power to resolve any ambiguity or correct any error in this paragraph (10) and its actions in so doing shall, absent manifest error, be final and conclusive.

 

(11)         Notwithstanding the foregoing provisions of this Section, no adjustment of the Conversion Rate shall be required to be made (a) upon the issuance of shares of Common Stock pursuant to any present or future plan for the reinvestment of dividends or (b) because of a tender or exchange offer of the character described in Rule 13e-4(h)(5) under the Exchange Act or any successor rule thereto.

 

(12)         To the extent permitted by applicable law, the Company from time to time may increase the Conversion Rate by any amount for any period of time if the period is at least twenty (20) days, the increase is irrevocable during such period, and the Board of Directors shall have made a determination that such increase would be in the best interests of the Company, which determination shall be conclusive; provided, however, that no such increase shall be taken into account for purposes of determining whether the Closing Price Per Share of the Common Stock equals or exceeds 110% of the Conversion Price in connection with an event which would otherwise be a Change in Control pursuant to Section 14.4.  Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall give notice of the increase to the Holders in the manner provided in Section 1.6 at least fifteen (15) days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

 

Notwithstanding anything in this Section 12.4, if at any time the Company shall distribute shares of common stock of any Subsidiary to all holders of the Company’s Common Stock, the Company may

 

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elect to reserve a pro rata portion of such distribution for the benefit of the Holders of the Securities in lieu of adjusting the Conversion Price pursuant to the terms hereof.

 

SECTION 12.5                   Notice of Adjustments of Conversion Rate.

 

Whenever the Conversion Rate is adjusted as herein provided:

 

(1)           the Company shall compute the adjusted Conversion Rate in accordance with Section 12.4 and shall prepare a certificate signed by the Chief Financial Officer of the Company setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall promptly be filed with the Trustee and with each Conversion Agent; and

 

(2)           upon each such adjustment, a notice stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall be required, and as soon as practicable after it is required, such notice shall be provided by the Company to all Holders in accordance with Section 1.6.

 

Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate or the information and calculations contained therein, except to exhibit the same to any Holder of Securities desiring inspection thereof at its office during normal business hours, and shall not be deemed to have knowledge of any adjustment in the Conversion Rate unless and until a Responsible Officer of the Trustee shall have received such a certificate.  Until a Responsible Officer of the Trustee receives such a certificate, the Trustee and each Conversion Agent may assume without inquiry that the last Conversion Rate of which the Trustee has knowledge of remains in effect.

 

SECTION 12.6                   Notice of Certain Corporate Action.

 

In case:

 

(1)           the Company shall declare a dividend (or any other distribution) on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to Section 12.4; or

 

(2)           the Company shall authorize the granting to all or substantially all of the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

 

(3)           of any reclassification of the Common Stock, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or

 

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(4)           of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 10.2, and shall cause to be provided to all Holders in accordance with Section 1.6, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options 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, distribution, rights, options or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice or the notice referred to in the following paragraph nor any defect therein shall affect the legality or validity of the proceedings described in clauses (1) through (4) of this Section 12.6. If at the time the Trustee shall not be the conversion agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee.

 

The Company shall cause to be filed at the Corporate Trust Office and each office or agency maintained for the purpose of conversion of Securities pursuant to Section 10.2, and shall cause to be provided to all Holders in accordance with Section 1.6, notice of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock at or about the time that such notice of tender offer is provided to the public generally.

 

SECTION 12.7                   Company to Reserve Common Stock.

 

The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of Common Stock then issuable upon the conversion of all Outstanding Securities.

 

SECTION 12.8                   Taxes on Conversions.

 

Except as provided in the next sentence, the Company will pay any and all taxes and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax or duty that may be payable in respect of (i) income of the Holder, or (ii) any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid.

 

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SECTION 12.9                   Covenant as to Common Stock.

 

The Company agrees that all shares of Common Stock that may be delivered upon conversion of Securities, upon such delivery, will have been duly authorized and validly issued and will be fully paid and nonassessable and, except as provided in Section 12.8, the Company will pay all taxes, liens and charges with respect to the issue thereof.

 

SECTION 12.10                 Cancellation of Converted Securities.

 

All Securities delivered for conversion shall be delivered to the Trustee or its agent to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 3.9.

 

SECTION 12.11                 Provision in Case of Consolidation, Merger or Sale of Assets.

 

In case of any consolidation or merger of the Company with or into any other Person, any merger of another Person with or into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any conveyance, sale, transfer or lease of all or substantially all of the assets of the Company (other than a sale of all or substantially all of the assets of the Company that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then Outstanding shall have the right thereafter, during the period such Security shall be convertible as specified in Section 12.1, to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, conveyance, sale, transfer or lease, assuming such holder of Common Stock of the Company (i) is not (A) a Person with which the Company consolidated or merged with or into or which merged into or with the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a “Constituent Person”), or (B) an Affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised (“Non-electing Share”), then for the purpose of this Section 12.11 the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares). Such supplemental indenture shall provide for adjustments that, for events subsequent to the effective date of such supplemental indenture, shall be

 

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as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section 12.11 shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. Notice of the execution of such a supplemental indenture shall be given by the Company to the Holder of each Security as provided in Section 1.6 promptly upon such execution.

 

Neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of shares of stock or other securities or property or cash receivable by Holders of Securities upon the conversion of their Securities after any such consolidation, merger, conveyance, transfer, sale or lease or to any such adjustment, but may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Opinion of Counsel with respect thereto, which the Company shall cause to be furnished to the Trustee upon request.

 

SECTION 12.12                 Rights Issued in Respect of Common Stock.

 

Rights or warrants distributed by the Company to 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 not be deemed distributed for purposes of Section 12.4(2) until the occurrence of the earliest Trigger Event.  In addition, in the event of any distribution of rights or warrants, or any Trigger Event with respect thereto, that shall have resulted in an adjustment to the Conversion Rate under Section 12.4(2), (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate 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 price received by a holder of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of any such rights or warrants all of which shall have expired without exercise by any holder thereof, the Conversion Price shall be readjusted as if such issuance had not occurred.

 

SECTION 12.13                 Responsibility of Trustee for Conversion Provisions.

 

The Trustee, subject to the provisions of Section 6.1, and any Conversion Agent shall not at any time be under any duty or responsibility to any Holder of Securities to determine whether any facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature or

 

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extent of any such adjustment when made, or with respect to the method employed, herein or in any supplemental indenture provided to be employed, in making the same, or whether a supplemental indenture need be entered into. Neither the Trustee, subject to the provisions of Section 6.1, nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any Common Stock, or of any other securities or property or cash, which may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any representation with respect thereto. Neither the Trustee, subject to the provisions of Section 6.1, nor any Conversion Agent shall be responsible for any failure of the Company to make or calculate any cash payment or to issue, transfer or deliver any shares of Common Stock or share certificates or other securities or property or cash upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the provisions of Section 6.1, and any Conversion Agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Article.

 

ARTICLE XIII

SUBORDINATION OF SECURITIES

 

SECTION 13.1                   Securities Subordinate to Senior Debt.

 

The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of, premium, if any, and interest (including Liquidated Damages, if any) on each and all of the Securities or on account of the repurchase or redemption of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt.  Notwithstanding the foregoing, this Article XIII shall not apply to the application of any amounts deposited with the Trustee or any Paying Agent pursuant to Article IV that at the time such amounts were deposited with the Trustee or Paying Agent, as the case may be, such deposits were not prohibited by the provisions of this Article XIII (“Previous Payments”).

 

The expressions “prior payment in full,” “payment in full” and “paid in full” and any other similar term or phrase when used in this Article XIII with respect to Senior Debt shall mean in the case of Senior Debt consisting of contingent obligations the setting apart of cash or other payment acceptable to holders of such Senior Debt sufficient to discharge such portion of Senior Debt in an account for the exclusive benefit of the holders thereof, in which account such holders shall be granted by the Company a first priority perfected security interest, which first priority perfected security interest shall have been retained by the holders of Senior Debt for a period of time in excess of all applicable preference or other similar periods, if any, under applicable bankruptcy, insolvency or creditors' rights laws.

 

SECTION 13.2                   Payment Over of Proceeds Upon Dissolution, Etc.

 

In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization, debt restructuring or other similar case or proceeding in connection

 

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therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of the Company, then and in any such event the holders of Senior Debt shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Debt in cash or other payment satisfactory to the holders of Senior Debt before the Holders of the Securities are entitled to receive any payment on account of principal of, or any premium or interest (including Liquidated Damages, if any) on, the Securities or on account of the repurchase or redemption on the Securities (other than Previous Payments), and to that end the holders of Senior Debt or their representative or representatives or the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Debt may have been issued shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Securities in any such case, proceeding, dissolution, liquidation or other winding up or event, to the extent necessary to pay all Senior Debt in full in cash or other payment satisfactory to the holders of Senior Debt, after giving effect to any concurrent payment or distribution to or for the holders of other Senior Debt.

 

In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, before all Senior Debt is paid in full in cash or other payment satisfactory to the holders of Senior Debt, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt.

 

For purposes of this Article XIII only, the words “cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated in right of payment to all Senior Debt which may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article VII shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article VII.

 

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SECTION 13.3                   Prior Payment to Senior Debt Upon Acceleration of Securities.

 

In the event that any Securities are declared due and payable before their Stated Maturity, then and in such event the holders of the Senior Debt outstanding at the time such Securities so become due and payable shall be entitled to receive payment in full in cash or other payment satisfactory to the holders of Senior Debt of all amounts due or to become due on or in respect of all Senior Debt before the Holders of the Securities are entitled to receive any payment by the Company on account of the principal of or any premium or interest (including Liquidated Damages, if any) on the Securities or on account of the repurchase or redemption on the Securities (other than Previous Payments).  If the payment of Securities is accelerated because of an Event of Default, the Company and the Trustee shall promptly notify holders of Senior Debt of the acceleration.

 

In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company.

 

The provisions of this Section shall not apply to any payment with respect to which Section 13.2 would be applicable.

 

SECTION 13.4                   No Payment in Certain Circumstances.

 

The Company may not make any payment of principal of, or premium, if any, or interest (including Liquidated Damages, if any) on the Securities or on account of the repurchase or redemption on the Securities (other than Previous Payments), if:

 

(i)      a default in the payment of principal, premium, if any, or interest (including a default under any redemption or repurchase obligation) or other amounts with respect to any Senior Debt occurs and is continuing (or, in the case of Senior Debt for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Debt) unless and until such default shall have been cured or waived or shall have ceased to exist; or

 

(ii)     a default, other than a payment default, on any Designated Senior Debt occurs and is continuing that then permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a “Payment Blockage Notice”) from the Company, a holder of such Designated Senior Debt or a Representative of such Designated Senior Debt.

 

If the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice.  No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice.

 

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The Company may and shall resume payments on and distributions in respect of the Securities and may repurchase or redeem on the Securities, upon the earlier of:

 

(1)           in the case of a default referred to in clause (i) above, the date upon which the default is cured or waived or ceases to exist, or

 

(2)           in the case of a default referred to in clause (ii) above, upon the earlier of (A) when the default is cured, waived or ceases to exist, or (B) 179 days pass after the Payment Blockage Notice is received,

 

unless this Article XIII otherwise prohibits the payment, distribution, repurchase or redemption at the time of such payment at the time of such payment, distribution, repurchase or redemption (including, without limitation, in the case of a default referred to in clause (ii) above, as a result of a payment default with respect to the applicable Senior Debt as a consequence of the acceleration of the maturity thereof or otherwise).

 

In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company.

 

The provisions of this Section shall not apply to any payment with respect to which Section 13.2 would be applicable.

 

SECTION 13.5                   Payment Permitted if No Default.

 

Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, debt restructuring, assignment for the benefit of creditors or other marshaling of assets and liabilities of the Company referred to in Section 13.2 or under the conditions described in Section 13.3 or 13.4, from making payments at any time of principal of and any premium or interest (including Liquidated Damages, if any) on the Securities or on account of the repurchase or redemption of Securities, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of and any premium or interest (including Liquidated Damages, if any) on the Securities or on account of the repurchase or redemption of Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article.

 

SECTION 13.6                   Subrogation to Rights of Holders of Senior Debt.

 

Subject to the payment in full of all Senior Debt, the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of and any premium and interest (including Liquidated Damages, if any) on the Securities shall be paid in full. For

 

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purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt.

 

SECTION 13.7                   Provisions Solely to Define Relative Rights.

 

The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest (including Liquidated Damages, if any) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Debt; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

 

SECTION 13.8                   Trustee to Effectuate Subordination.

 

Each Holder of a Security by its acceptance thereof authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee its attorney-in-fact for any and all such purposes.

 

SECTION 13.9                   No Waiver of Subordination Provisions.

 

No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

 

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any instrument

 

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evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise dispose of any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.

 

SECTION 13.10                 Notice to Trustee.

 

The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee or other Representative therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section by at least 12:00 noon New York City time one Business Day prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of and any premium or interest (including Liquidated Damages, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it after 12:00 noon New York City time one Business Day prior to such date.

 

Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt (or a trustee or other Representative therefor) to establish that such notice has been given by a holder of Senior Debt (or a trustee or other Representative therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article XIII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XIII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

 

SECTION 13.11                 Reliance on Judicial Order or Certificate of Liquidating Agent.

 

Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating

 

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trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or 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 XIII.

 

SECTION 13.12                 Trustee Not Fiduciary for Holders of Senior Debt.

 

The Trustee, in its capacity as trustee under this Indenture, 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 it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article or otherwise.

 

SECTION 13.13                 Rights of Trustee as Holder of Senior Debt; Preservation of Trustee’s Rights.

 

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

 

Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7.

 

SECTION 13.14                 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 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 in addition to or in place of the Trustee; provided, however, that Section 13.12 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.

 

SECTION 13.15                 Obligations of Company and Right to Convert Unconditional.

 

Nothing contained in this Article XIII or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and any premium and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Debt, nor shall anything herein or therein prevent the Trustee or the Holder of any Securities from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Debt in

 

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respect of cash, property or securities of the Company received upon the exercise of any such remedy.

 

Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article XII (if applicable).

 

SECTION 13.16                 Reliance by Holders of Senior Debt on Subordination Provisions.

 

Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Debt and such holder of Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders of Senior Debt unless such holders shall have agreed in writing hereto.

 

SECTION 13.17                 Certain Conversions and Repurchases Deemed Payment.

 

For the purposes of this Article XIII only, (i) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article XII or upon the repurchase of Securities in accordance with Article XIV shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest (including Liquidated Damages, if any) on Securities or on account of the purchase or other acquisition of Securities, and (ii) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 12.3 or 14.3(7)), property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section, the term “junior securities” means (a) shares of any stock of any class of the Company and securities into which the Securities are convertible pursuant to Article XII and (b) securities of the Company which are subordinated in right of payment to all Senior Debt that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article XIII.  Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article XII or to exchange such Security for Applicable Stock in accordance with Article XIV if the Company elects to satisfy the obligations under Article XIV by the delivery of Applicable Stock.

 

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ARTICLE XIV

REPURCHASE OF SECURITIES AT THE OPTION OF THE

HOLDER UPON A CHANGE IN CONTROL

 

SECTION 14.1                   Right to Require Repurchase.

 

In the event that a Change in Control (as defined in Section 14.2) shall occur, then each Holder shall have the right, at the Holder’s option, but subject to the provisions of Section 14.2, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, all of such Holder’s Securities not theretofore called for redemption, or any portion of the principal amount thereof that is equal to U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof (provided that no single Security may be repurchased in part unless the portion of the principal amount of such Security to be Outstanding after such repurchase is equal to U.S. $1,000 or integral multiples of U.S. $1,000 in excess thereof), on the date (the “Repurchase Date”) that is 30 days after the date of the Company Notice (as defined in Section 14.3) at a purchase price equal to 100% of the principal amount of the Securities to be repurchased plus interest (including Liquidated Damages, if any) accrued to, but excluding, the Repurchase Date (the “Repurchase Price”); provided, however, that installments of interest on Securities whose Stated Maturity is on or prior to the Repurchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Record Date according to their terms and the provisions of Section 3.7. Such right to require the repurchase of the Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article IV, unless a Change in Control shall have occurred prior to such discharge. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the fulfillment by the Company of the conditions set forth Section 14.2, by delivery of shares of Applicable Stock having a fair market value equal to the Repurchase Price. Whenever in this Indenture (including Sections 2.2, 3.1, 5.1(1) and 5.8) there is a reference, in any context, to the principal of any Security as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect of such Security to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Indenture shall not be construed as excluding the Repurchase Price in those provisions of this Indenture when such express mention is not made; provided, however, that for the purposes of Article XIII such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash.

 

SECTION 14.2                                                          Conditions to the Company’s Election to Pay the Repurchase Price in Applicable Stock.

 

The Company may elect to pay the Repurchase Price by delivery of shares of Applicable Stock pursuant to Section 14.1 if and only if the following conditions shall have been satisfied:

 

(1)           The shares of Applicable Stock deliverable in payment of the Repurchase Price shall have a fair market value as of the Repurchase Date of not less than the Repurchase Price. For

 

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purposes of Section 14.1 and this Section 14.2, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the Closing Prices Per Share of the Applicable Stock for the five consecutive Trading Days immediately preceding the second Trading Day prior to the Repurchase Date;

 

(2)           The Repurchase Price shall be paid only in cash in the event any shares of Applicable Stock to be issued upon repurchase of Securities hereunder (i) require registration under any federal securities law before such shares may be freely transferable without being subject to any transfer restrictions under the Securities Act upon repurchase and if such registration is not completed or does not become effective prior to the Repurchase Date, and/or (ii) require registration with or approval of any governmental authority under any state law or any other federal law before such shares may be validly issued or delivered upon repurchase and if such registration is not completed or does not become effective or such approval is not obtained prior to the Repurchase Date;

 

(3)           Payment of the Repurchase Price may not be made in Applicable Stock unless such stock is, or shall have been listed on a national securities exchange or approved for quotation on the Nasdaq National Market, in either case, prior to the Repurchase Date; and

 

(4)           All shares of Applicable Stock that may be issued upon repurchase of Securities will be issued out of the Company’s authorized but unissued Common Stock or, in the event of a merger, consolidation, or other similar transaction involving the Company that is otherwise permitted under the terms of this Indenture in which the Company is not the surviving corporation, out of the authorized but unissued common stock, common equity interests, ordinary shares or American Depositary Shares of the surviving corporation or its direct or indirect parent corporation and, will upon issue, be duly and validly issued and fully paid and non-assessable and free of any preemptive or similar rights.

 

If all of the conditions set forth in this Section 14.2 are not satisfied in accordance with the terms thereof, the Repurchase Price shall be paid by the Company only in cash.

 

SECTION 14.3                   Notices; Method of Exercising Repurchase Right, Etc.

 

(1)           Unless the Company shall have theretofore called for redemption all of the Outstanding Securities, on or before the 30th day after the occurrence of a Change in Control, the Company or, at the request and expense of the Company on or before the 15th day after such occurrence, the Trustee, shall give to all Holders of Securities, in the manner provided in Section 1.6, notice (the “Company Notice”) of the occurrence of the Change in Control and of the repurchase right set forth herein arising as a result thereof.  The Company shall also deliver a copy of such Company Notice to the Trustee.

 

Each Company Notice shall state:

 

(i)            the Repurchase Date;

 

(ii)           the date by which the repurchase right must be exercised;

 

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(iii)          the Repurchase Price, and whether the Repurchase Price shall be paid by the Company in cash or by delivery of shares of Applicable Stock;

 

(iv)          a description of the procedure that a Holder must follow to exercise a repurchase right, and the place or places where such Securities are to be surrendered for payment of the Repurchase Price and accrued interest (including Liquidated Damages, if any), if any to the Repurchase Date;

 

(v)           that on the Repurchase Date the Repurchase Price, and accrued interest (including Liquidated Damages, if any), if any to the Repurchase Date, will become due and payable upon each such Security designated by the Holder to be repurchased, and that interest thereon shall cease to accrue on and after said date;

 

(vi)          the Conversion Rate then in effect, the date on which the right to convert the principal amount of the Securities to be repurchased will terminate and the place or places where such Securities may be surrendered for conversion;

 

(vii)         the place or places that the Security certificate with the Election of Holder to Require Repurchase as specified in Section 2.2 shall be delivered, and if the Security is a Restricted Securities Certificate the place or places that the Surrender Certificate required by Section 14.3(9) shall be delivered; and

 

(viii)        the Holder’s right to withdraw a completed Company Notice and the procedures for withdrawing a Company Notice pursuant to clause (2) below.

 

No failure of the Company to give the foregoing notices or defect therein shall limit any Holder’ s right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Securities.

 

If any of the foregoing provisions or other provisions of this Article XIV are inconsistent with applicable law, such law shall govern.

 

(2)           To exercise a repurchase right, a Holder shall deliver to the Trustee on or before the second Business Day immediately preceding the 30th day after the date of the Company Notice (i) written notice of the Holder’s exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Securities to be repurchased (and, if any Security is to repurchased in part, the serial number thereof, the portion of the principal amount thereof to be repurchased and the name of the Person in which the portion thereof to remain Outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby, and, in the event that the Repurchase Price shall be paid in shares of Applicable Stock, the name or names (with addresses) in which the certificate or certificates for shares of Applicable Stock shall be issued, and (ii) the Securities with respect to which the repurchase right is being exercised.  Notwithstanding anything in this Indenture to the contrary, any Holder which has delivered a completed Company Notice to the Trustee shall have the right to

 

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withdraw such Company Notice by delivery of a written notice of withdrawal delivered to the Corporate Trust Office of the Trustee in accordance with the Company Notice at any time prior to the close of business on the second Business Day immediately preceding the Repurchase Date specifying:

 

(i)            the certificate number, if any, of the Security in respect of which such notice of withdrawal is being submitted;

 

(ii)           the principal of the Security with respect to which such notice of withdrawal is being submitted; and

 

(iii)          the principal, if any, of such Security which remains subject to the original Purchase Notice and which has been or will be delivered for purchase by the Company.

 

The Trustee shall promptly notify the Company of the receipt by it of any Company Notice or written notice of withdrawal thereof.

 

                The right of the Holder to convert the Securities with respect to which the repurchase right is being exercised shall continue until the close of business on the Business Day immediately preceding the Repurchase Date.

 

(3)           In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase Price in cash or shares of Applicable Stock, as provided above, for payment to the Holder on the Repurchase Date or, if shares of Applicable Stock are to be paid, on the date that is 30 days after the date of the Company Notice, together with accrued and unpaid interest to the Repurchase Date payable with respect to the Securities as to which the repurchase right has been exercised; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Date.

 

(4)           If any Security (or portion thereof) surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount of such Security (or portion thereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the rate of 2.50% per annum, and each Security shall remain convertible into Common Stock until the principal of such Security (or portion thereof, as the case may be) shall have been paid or duly provided for.

 

(5)           Any Security that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, containing identical terms and conditions, each in an authorized

 

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denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered.

 

(6)           Any issuance of shares of Applicable Stock in respect of the Repurchase Price shall be deemed to have been effected immediately prior to the close of business on the Repurchase Date and the Person or Persons in whose name or names any certificate or certificates for shares of Applicable Stock shall be issuable upon such repurchase shall be deemed to have become on the Repurchase Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for repurchase on a date when the stock transfer books of the Company shall be closed shall constitute the Person or Persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Applicable Stock issued upon repurchase of any Security declared prior to the Repurchase Date.

 

(7)           No fractions of shares shall be issued upon repurchase of Securities. If more than one Security shall be repurchased from the same Holder and the Repurchase Price shall be payable in shares of Applicable Stock, the number of full shares that shall be issuable upon such repurchase shall be computed on the basis of the aggregate principal amount of the Securities so repurchased. Instead of any fractional share of Applicable Stock that would otherwise be issuable on the repurchase of any Security or Securities, the Company will deliver to the applicable Holder its check for the current market value of such fractional share. The current market value of a fraction of a share is determined by multiplying the current market price of a full share by the fraction, and rounding the result to the nearest cent. For purposes of this Section, the current market price of a share of Applicable Stock is the Closing Price Per Share of the Applicable Stock on the Trading Day immediately preceding the Repurchase Date.

 

(8)           Any issuance and delivery of certificates for shares of Applicable Stock on repurchase of Securities shall be made without charge to the Holder of Securities being repurchased for such certificates or for any tax or duty in respect of the issuance or delivery of such certificates or the securities represented thereby; provided, however, that the Company shall not be required to pay any tax or duty that may be payable in respect of (i) income of the Holder or (ii) any transfer involved in the issuance or delivery of certificates for shares of Applicable Stock in a name other than that of the Holder of the Securities being repurchased, and no such issuance or delivery shall be made unless and until the Person requesting such issuance or delivery has paid to the Company the amount of any such tax or duty or has established, to the satisfaction of the Company, that such tax or duty has been paid.

 

(9)           If shares of Applicable Stock to be delivered upon repurchase of a Security are to be registered in a name other than that of the beneficial owner of such Security, then such Holder must deliver to the Trustee a Surrender Certificate, dated the date of surrender of such Restricted Security and signed by such beneficial owner, as to compliance with the restrictions on transfer applicable to such Restricted Security. Neither the Trustee nor any Registrar or Transfer Agent or other agents shall be required to register in a name other than that of the beneficial owner shares of Applicable

 

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Stock issued upon repurchase of any such Restricted Security not so accompanied by a properly completed Surrender Certificate.

 

(10)         All Securities delivered for repurchase shall be delivered to the Trustee to be canceled at the direction of the Trustee, which shall dispose of the same as provided in Section 3.9.

 

SECTION 14.4                   Certain Definitions.

 

For purposes of this Article XIV,

 

(1)           the term “beneficial owner” shall be determined in accordance with Rule 13d-3, as in effect on the date of the original execution of this Indenture, promulgated by the Commission pursuant to the Exchange Act;

 

(2)           a “Change in Control” shall be deemed to have occurred at the time, after the original issuance of the Securities, of:

 

(i)            any Person acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such person to exercise 50% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors, other than any such acquisition by the Company, any subsidiary of the Company or any employee benefit plan of the Company; or

 

(ii)           the Company merges or consolidates with or into any other Person, any merger of another Person into the Company, or any sale, transfer or lease of all or substantially all of the assets of the Company to another Person (other than to one or more wholly-owned subsidiaries of the Company), other than any such transaction (A) pursuant to which the holders of 50% or more of the total voting power of all shares of the Company’s capital stock entitled to vote generally in the election of directors immediately prior to such transaction have or have the entitlement to receive, directly or indirectly, at least 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after such transaction or (B) any transaction which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock into solely shares of common stock;

 

provided, however, that a Change in Control shall not be deemed to have occurred if either (I) the Closing Price Per Share of the Common Stock for any five Trading Days within the period of 10 consecutive Trading Days ending immediately after the later of the Change in Control or the public announcement of the Change in Control (in the case of a Change in Control under clause (i) above) or the period of 10 consecutive Trading Days ending immediately before the Change in Control (in the case of a Change in Control under clause (ii) above) shall equal or exceed 110% of the Conversion Price of the Securities in effect on each such Trading Day or (II) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’

 

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appraisal rights) in a merger or consolidation otherwise constituting a Change in Control under clause (i) above and/or clause (ii) above consists of shares of common stock, depository receipts or other certificates representing common equity interests traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following such Change in Control) and as a result of such transaction or transactions the notes become convertible into such common stock, depository receipts or other certificates representing common equity interests; and

 

(3)           for purposes of Section 14.4(2)(i), the term “person” shall include any syndicate or group which would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act, as in effect on the date of the original execution of this Indenture.

 

SECTION 14.5                   Consolidation, Merger, etc.

 

In the case of any merger, consolidation, sale, conveyance, transfer or lease of all or substantially all of the assets of the Company to which Section 12.11 applies, in which the Common Stock of the Company is changed or exchanged as a result into the right to receive shares of stock and other securities or property or assets (including cash) which includes shares of Common Stock of the Company or common stock of 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 shares of stock and other securities, 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 combination or which acquires the properties or assets (including cash) of the Company, as the case may be, shall execute and deliver to the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) modifying the provisions of this Indenture relating to the right of Holders to cause the Company to repurchase the Securities following a Change in Control, including without limitation the applicable provisions of this Article XIV and the definitions of the Common Stock and Change in Control, as appropriate, and such other related definitions set forth herein as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions apply in the event of a subsequent Change in Control to the 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).

 

ARTICLE XV

HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE

 

SECTION 15.1                   Company to Furnish Trustee Names and Addresses of Holders.

 

The Company will furnish or cause to be furnished to the Trustee:

 

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(1)           semi-annually, not more than 15 days after the Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities as of such Regular Record Date; and

 

(2)           at such other times as the Trustee may reasonably request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

 

provided, however, that no such list need be furnished so long as the Trustee is acting as Security Registrar.

 

SECTION 15.2                   Preservation of Information.

 

(1)           The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 15.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list, if any, furnished to it as provided in Section 15.1 upon receipt of a new list so furnished.

 

(2)           After this Indenture has been qualified under the Trust Indenture Act, the rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights, and duties of the Trustee, shall be as provided by the Trust Indenture Act.

 

(3)           Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act.

 

SECTION 15.3                   Reports by Trustee.

 

(1)           After this Indenture has been qualified under the Trust Indenture Act, the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto.

 

(2)           After this Indenture has been qualified under the Trust Indenture Act, a copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange.

 

SECTION 15.4                   Reports by Company.

 

After this Indenture has been qualified under the Trust Indenture Act, the Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and

 

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other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission.

 

ARTICLE XVI

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

 

SECTION 16.1                   Indenture and Securities Solely Corporate Obligations.

 

No recourse for the payment of the principal of or premium, if any, or interest on any Security and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer, or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities.

 

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the day and year first above written.

 

	MICRON TECHNOLOGY, INC
	By:	/s/ W. G. Stover, Jr.
	Name:		Wilbur G. Stover, Jr.
	Title:		Vice President of Finance and Chief Financial Officer
	WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
	as Trustee
	By:	/s/ Michael G. Slade
	Name:		Michael G. Slade
	Title:		Corporate Trust Officer

 

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ANNEX A -- Form of Unrestricted Securities Certificate

 

UNRESTRICTED SECURITIES CERTIFICATE

 

(For removal of Restricted Securities Legend pursuant to Section 3.5(3))

 

Wells Fargo Bank Minnesota, National Association

Corporate Trust Operations

MAC N9303-121

Sixth and Marquette

Minneapolis, Minnesota 55479

 

RE:                              2.50% Convertible Subordinated Notes Due February 1, 2010 of Micron Technology, Inc. (the “Securities”)

 

Reference is made to the Indenture, dated as of February 4, 2003 (the “Indenture”), from Micron Technology, Inc (the “Company”) to Wells Fargo Bank Minnesota, National Association, as Trustee.  Terms used herein and defined in the Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the “Securities Act”) are used herein as so defined.

 

This certificate relates to U.S.$                          principal amount of Securities, which are evidenced by the following certificate(s) (the “Specified Securities”):

 

CUSIP No. 595112 AF 0

 

CERTIFICATE No(s).                                 

 

The person in whose name this certificate is executed below (the “Undersigned”) hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the “Owner”. If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner.  If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner.

 

The Owner has requested that the Specified Securities be exchanged for Securities bearing no Restricted Securities Legend pursuant to Section 3.5(3) of the Indenture. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after a period of at least two years has elapsed since the date the Specified Securities were acquired from the Company or from an “affiliate” (as such term is defined in Rule 144) of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company.  The Owner

 

 

also acknowledges that any future transfers of the Specified Securities must comply with all applicable securities laws of the states of the United States and other jurisdictions.

 

This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Initial Purchasers.

 

Dated:
(Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.)
By:
Name:
Title:

 

(If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.)

 

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ANNEX B -- Form of Surrender Certificate

 

In connection with the certification contemplated by Section 12.2 or 14.3(9) relating to compliance with certain restrictions relating to transfers of Restricted Securities, such certification shall be provided substantially in the form of the following certificate, with only such changes thereto as shall be approved by the Company and Goldman, Sachs & Co.:

 

CERTIFICATE

 

MICRON TECHNOLOGY, INC.

 

2.50% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2010

 

This is to certify that as of the date hereof with respect to U.S. $          principal amount of the above-captioned securities surrendered on the date hereof (the “Surrendered Securities”) for registration of transfer, or for conversion or repurchase where the securities issuable upon such conversion or repurchase are to be registered in a name other than that of the undersigned Holder (each such transaction being a “transfer”), the undersigned Holder (as defined in the Indenture) certifies that the transfer of Surrendered Securities associated with such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below:

 

o                                    The transfer of the Surrendered Securities complies with Rule 144A under the Securities Act; or

 

o                                    The transfer of the Surrendered Securities complies with Rule 144 under the United States Securities Act of 1933, as amended (the “Securities Act”); or

 

o                                    The transfer of the Surrendered Securities has been made to an institution that is an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act in a transaction exempt from the registration requirements of the Securities Act and a signed letter containing certain representations and agreements relating to restrictions on transfer of the Securities (and if such transfer is for an aggregate principal amount less than $250,000 an opinion of counsel acceptable to the Company if requested by the Company, that such transfer is exempt from registration); or

 

o                                    The transfer of the Surrendered Securities has been made pursuant to an exemption from registration under the Securities Act and an opinion of counsel has been delivered to the Company with respect to such transfer.

 

[Name of Holder]

 

Dated:
*To be dated the date of surrender

 

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