EXHIBIT 10.7
[Execution]
AMENDMENT NO. 6 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 6 TO LOAN AND
SECURITY AGREEMENT, dated as of May 22, 2007, by and among
Spartan Stores, Inc., a Michigan corporation ("Parent"), Spartan
Stores Distribution, LLC, a Michigan limited liability company
("Stores Distribution"), Market Development Corporation, a Michigan
corporation ("MDC"), Spartan Stores Associates, LLC, a Michigan
limited liability company ("Associates"), Family Fare, LLC, a
Michigan limited liability company ("Family Fare"), MSFC, LLC, a
Michigan limited liability company ("MSFC"), Seaway Food Town,
Inc., a Michigan corporation ("Seaway"), The Pharm of Michigan,
Inc. ("Pharm"), a Michigan corporation, Valley Farm Distributing
Co., an Ohio corporation ("Valley Farm"), Gruber's Real Estate,
LLC, a Michigan limited liability company ("Gruber RE"), Prevo's
Family Markets, Inc., a Michigan corporation ("Prevo"), Buckeye
Real Estate Management Co., an Ohio corporation ("Buckeye"),
Spartan Stores Fuel, LLC, a Michigan limited liability company
(together with Lead Borrower, Stores Distribution, United, MDC,
Associates, Family Fare, MSFC, Seaway, Pharm, Valley Farm, Gruber
RE, Prevo and Buckeye, each individually a "Borrower" and
collectively, "Borrowers"), Spartan Stores Holding, Inc., a
Michigan corporation ("Holding"), SI Insurance Agency, Inc., a
Michigan corporation ("SI", together with Holding, each
individually a "Guarantor" and collectively, "Guarantors"), the
parties to the Loan Agreement (as hereinafter defined) from time to
time as lenders (each individually, a "Lender" and collectively,
"Lenders") and Wachovia Capital Finance Corporation (Central),
formerly known as Congress Financial Corporation (Central), an
Illinois corporation, in its capacity as agent for Lenders (in such
capacity, "Agent").
W I
T N E S S E T
H :
WHEREAS, Borrowers and
Guarantors have entered into financing arrangements with Agent and
Lenders pursuant to which Lenders (or Agent on behalf of Lenders)
have made and may make loans and advances and provide other
financial accommodations to Borrowers as set forth in the Loan and
Security Agreement, dated December 23, 2003, by and among
Borrowers, Guarantors, Agent and Lenders, as amended and
supplemented by Amendment No. 1 to Loan and Security Agreement,
dated as of July 29, 2004, Amendment No. 2 to Loan and Security
Agreement, dated as of December 22, 2004, Amendment No. 3 to Loan
and Security Agreement, dated as of December 9, 2005, Amendment No.
4 to Loan and Security Agreement, dated as of March 17, 2006 and
Amendment No. 5 to Loan and Security Agreement, dated as of April
5, 2007 (as the same now exists and is amended and supplemented
pursuant hereto and may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan
Agreement") and the other Financing Agreements (as defined
therein); and
WHEREAS, Borrowers and
Guarantors have requested Agent and Lenders agree to certain
amendments to the Loan Agreement, and Agent and Lenders are willing
to agree to such amendments, subject to the terms and conditions
herein; and
WHEREAS, by this Amendment
No. 6, Borrowers, Guarantors, Agent and Lenders desire and intend
to evidence such amendments;
NOW THEREFORE, in
consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1.
Definitions .
1.1 Additional Definition .
(a) As used herein, the
following terms shall have the meanings given to them below, and
the Loan Agreement and the other Financing Agreements shall be
deemed and are hereby amended to include, in addition and not in
limitation, the following definitions:
(i) "Amendment No. 6" shall mean this Amendment No. 6
to Loan and Security Agreement by and among Borrowers, Guarantors,
Agent and Lenders, as amended, modified, supplemented, extended,
renewed, restated or replaced.
(ii) "Convertible Note Indenture" shall mean an
Indenture by and between Parent, as issuer, and a trustee, with
respect to the Convertible Notes, to be entered into, in all
material respects, substantially on the terms set forth in the
Description of Notes attached hereto as Exhibit A, as the same may
be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time.
(iii) "Convertible Notes" shall mean, collectively,
the Senior Unsecured Convertible Notes issued by Parent in the
original aggregate principal amount not to exceed $125,000,000
pursuant to the Convertible Note Indenture, as the same may be
amended, modified, supplemented, extended, renewed, restated or
replaced from time to time.
1.2 Amendment to Definitions . The
definition of "Change of Control" set forth in Loan Agreement is
hereby amended by adding the following new subsection (f) at the
end thereof: ", or (f) the occurrence of a "fundamental change" as
such term is defined in the Convertible Notes or the Convertible
Note Indenture at all times that any Indebtedness or other
obligations evidenced by any Convertible Notes are
outstanding."
1.3 Interpretation . For purposes
of this Amendment No. 6, unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings
assigned to such terms in the Loan Agreement.
2.
Encumbrances . Section 9.8 of the Loan Agreement is hereby
amended by adding the following new subsection (p) at the end
thereof:
"(p)
pledges of stock of third parties acquired by Borrowers in the
ordinary course of business in connection with investments
permitted under Section 9.10(k) hereof."
3.
Indebtedness .
(a) Section 9.9(e) of the Loan Agreement is hereby deleted
in its entirety and the following substituted therefor:
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"(e)
unsecured Indebtedness of any Borrower or Guarantor arising after
the date hereof to any third person (but not to any other Borrower
or Guarantor), provided , that , each of the
following conditions is satisfied as determined by Agent: (i) such
Indebtedness shall be on terms and conditions acceptable to Agent,
(ii) Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower or Guarantor to
incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Agent the amount of such Indebtedness, the
person or persons to whom such Indebtedness will be owed, the
interest rate, the schedule of repayments and maturity date with
respect thereto and such other information as Agent may request
with respect thereto, (iii) Agent shall have received true, correct
and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except
as Agent may otherwise agree in writing, all of the proceeds of the
loans or other accommodations giving rise to such Indebtedness
shall be paid to Agent for application to the Obligations in such
order and manner as Agent may determine, (v) as of the date of
incurring such Indebtedness and after giving effect thereto, no
Default or Event of Default shall exist or have occurred, (vi) such
Borrower and Guarantor shall not, directly or indirectly, (A)
amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto,
except , that , such Borrower or Guarantor may, after
prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) without Agent's prior written consent, redeem,
retire, defease, purchase or otherwise acquire such Indebtedness
(except pursuant to regularly scheduled payments permitted herein),
or set aside or otherwise deposit or invest any sums for such
purpose; and (vii) Borrowers and Guarantors shall furnish to Agent
all notices or demands in connection with such Indebtedness either
received by any Borrower or Guarantor or on its behalf promptly
after the receipt thereof, or sent by any Borrower or Guarantor or
on its behalf concurrently with the sending thereof, as the case
may be;"
(b) Section 9.9 of the Loan Agreement is hereby amended by
adding the following new subsections (m) and (n) at the end
thereof:
"(m)
unsecured Indebtedness of Parent evidenced by the Convertible Notes
as in effect on the date of their issuance or as permitted to be
amended pursuant to the terms hereof, provided , that
:
(i) the aggregate principal
amount of all such Indebtedness evidenced by the Convertible Notes
shall not exceed $125,000,000 less the aggregate amount of all
repayments or redemptions, whether optional or mandatory, in
respect thereof, plus interest thereon calculated in the manner
provided for in the Convertible Notes as in effect on the date of
the issuance thereof,
(ii) Borrowers and Guarantors
shall not, directly or indirectly, make any payments in respect of
such Indebtedness, except that Parent may make (A)
regularly scheduled payments of interest and fees (which interest
rate on the principal amount of
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the Convertible
Notes, excluding contingent interest and additional amounts payable
upon a Registration Default as defined in Exhibit A to Amendment
No. 6, shall not exceed 5% per annum), if any, in respect of such
Indebtedness when due in accordance with the terms of the
Convertible Notes as in effect on the date of the issuance thereof,
(B) payments of principal in respect of such Indebtedness when
scheduled to mature in accordance with the terms of the Convertible
Note Indenture as in effect on the date thereof and any other
mandatory prepayments as required under the terms of the
Convertible Note Indenture as in effect on the date thereof, and
(C) payments to the extent permitted under Section 9.9(m)(iv)
below,
(iii) Borrowers and Guarantors
shall not, directly or indirectly, amend, modify, alter or change
in any material respect any terms of such Indebtedness or any of
the Convertible Notes or the Convertible Note Indenture or any
related agreements, documents and instruments, except
that Parent may, after prior written notice to Agent, amend,
modify, alter or change the terms thereof so as to extend the
maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness
other than pursuant to payments thereof, or to reduce the interest
rate or any fees in connection therewith,
(iv) Borrowers and Guarantors
shall not, directly or indirectly, redeem, retire, defease,
purchase, convert Convertible Notes to cash or otherwise acquire
such Indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, except , that, (A) Parent may
convert Convertible Notes to cash or purchase such Indebtedness in
accordance with and to the extent required by the terms of the
Convertible Note Indenture, so long as Agent shall have received
not less than one (1) Business Day prior written notice of the
intention of Parent to so convert Convertible Notes to cash or
purchase such Indebtedness if such conversion or purchase requires
payments in excess of $5,000,000, or the aggregate amount of all
such payments prior thereto has been in excess of $20,000,000,
which notice shall specify the date of the proposed purchase or
conversion, the amount to be paid by Parent in respect thereof and
the amount of the Convertible Notes to be so purchased or
converted, (B) Parent may make optional prepayments or redemptions
of the Convertible Notes, so long as, as of the date of any such
optional prepayment or redemption or any payment in respect thereof
and after giving effect thereto, (1) Agent shall have received not
less than three (3) Business Days' prior written notice of the
intention of Parent to so redeem or prepay such Indebtedness, which
notice shall specify the date of the proposed prepayment or
redemption, the amount to be paid by parent in respect thereof and
the amount of the Convertible Notes to be so prepaid or redeemed,
(2) the aggregate amount of the Excess Availability of Borrowers
for each of the immediately preceding ten (10) consecutive days
shall have been not less than $25,000,000 and as of the date of any
such payment and after giving effect thereto, the aggregate amount
of the Excess Availability of Borrowers shall be not less than
$25,000,000, and (3) as of the date of any such payment and after
giving effect thereto, no Default or Event of Default shall exist
or have occurred and be continuing, (C) nothing contained herein
shall be construed to limit the right of Parent to convert
Convertible Notes to shares of common stock of Parent in accordance
with the terms thereof as in effect on the date of the issuance
thereof and (D) Parent may make payments to the extent permitted
under Section 9.9(m)(ii) above;
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(v) the Convertible Notes and
the Convertible Note Indenture shall each be , in all material
respects, substantially on the terms set forth in the Description
of Notes attached hereto as Exhibit A to Amendment No. 6, and Agent
shall have received true, correct and complete copies of the
Convertible Notes and the Convertible Note Indenture promptly after
the issuance of the Convertible Notes (and Agent shall receive
copies of drafts thereto promptly after they are distributed to
Parent), and
(vi) Borrowers and Guarantors
shall furnish to Agent all written notices or demands in connection
with such Indebtedness either received by any Borrower or Guarantor
or on its behalf, promptly after the receipt thereof, or sent by
any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be;
(n)
guarantees by any Borrower of any Indebtedness of any other
Borrower otherwise permitted to be incurred under this
Agreement."
4.
Loans, Investments, Etc . Section 9.10 of the Loan Agreement
is hereby amended by adding the following new subsections (k) and
(l) at the end thereof:
"(k)
investments in the ordinary course of business of Borrowers not
otherwise permitted in Section 9.10 hereof, provided ,
that , the aggregate amount of all such investments shall
not exceed $1,000,000 in any fiscal year;
(l)
the purchase or repurchase by Parent of Indebtedness evidenced by
the Convertible Notes to the extent permitted in Section 9.9(m)(iv)
hereof."
5.
Events of Default . Section 10.1 of the Loan Agreement is
hereby amended by adding the following new subsection (p) at the
end thereof:
"(p)
the conversion by Parent of any of the Convertible Notes to cash,
and either (i) as of the date of any such payment and after giving
effect thereto, the aggregate amount of the Excess Availability of
Borrowers for any of the immediately preceding ten (10) consecutive
days shall have been less than $25,000,000 or (ii) as of the date
of any such payment and after giving effect thereto, the aggregate
amount of the Excess Availability of Borrowers is less than
$25,000,000,"
6.
Representations and Warranties . Each Borrower and Guarantor
hereby represents and warrants to Agent and Lenders the following
(which shall survive the execution and delivery of this Amendment
No. 6), the truth and accuracy of which are a continuing condition
of the making of Loans and providing Letter of Credit
Accommodations to Borrowers:
6.1 This
Amendment No. 6 and each other agreement or instrument (including
the Convertible Notes and Convertible Note Indenture) to be
executed and delivered by the Borrowers and Guarantors pursuant
hereto have been duly authorized, executed and delivered by all
necessary action on the part of each of the Borrowers and
Guarantors which is a party hereto and thereto and, if necessary,
their respective stockholders and is in full force and effect as of
the date hereof, as the case may be, and the agreements and
obligations of each of the Borrowers and Guarantors, as the case
may be, contained herein and therein, constitute the legal, valid
and binding obligations of each of the Borrowers and Guarantors,
respectively, enforceable against
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them in accordance with their
terms, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except
to the extent that availability of the remedy of specific
performance or injunctive relief is subject to the discretion of
the court before which any proceeding therefor may be brought.
6.2 The execution, delivery and performance
of this Amendment No. 6 are all within each Borrower's and
Guarantor's corporate or limited liability company powers and are
not in contravention of law or the terms of any Borrower's or
Guarantor's certificate or articles of incorporation, by laws, or
other organizational documentation, or any indenture, agreement or
undertaking to which any Borrower or Guarantor is a party or by
which any Borrower or Guarantor or its property are bound.
6.3 No Default or Event of Default exists
or has occurred and is continuing.
7.
Condition Precedent . The effectiveness of the amendments
contained herein shall only be effective upon the following:
7.1 Agent shall have received an executed
original or executed original counterparts of this Amendment No. 6
(as the case may be), duly authorized, executed and delivered by
the parties hereto (including all Lenders required for the consent
and amendments provided for herein); and
7.2 Agent shall have received a true and
correct copy of any consent, waiver or approval (if any) to or of
this Amendment No. 6, which any Borrower is required to obtain from
any other Person.
8.
Effect of this Amendment . Except as expressly amended
pursuant hereto, no other changes or modifications to the Financing
Agreements are intended or implied, and, in all other respects, the
Financing Agreements are hereby specifically ratified, restated and
confirmed by all parties hereto as of the effective date hereof. To
the extent that any provision of the Loan Agreement or any of the
other Financing Agreements are inconsistent with the provisions of
this Amendment No. 6, the provisions of this Amendment No. 6 shall
control.
9.
Further Assurances . Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional
action as may be reasonably requested by Agent to effectuate the
provisions and purposes of this Amendment No. 6.
10.
Governing Law . The validity, interpretation and enforcement
of this Amendment No. 6 and the other Financing Agreements (except
as otherwise provided therein) and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the
State of Illinois but excluding any principles of conflicts of law
or other rule of law that would cause the application of the law of
any jurisdiction other than the laws of the State of Illinois.
11.
Binding Effect . This Amendment No. 6 shall be binding upon
and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
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12.
Headings . The headings listed herein are for convenience
only and do not constitute matters to be construed in interpreting
this Amendment No. 6.
13.
Counterparts . This Amendment No. 6 may be executed in any
number of counterparts, each of which shall be an original, but all
of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Amendment
No. 6 by telefacsimile shall have the same force and effect as the
delivery of an original executed counterpart of this Amendment No.
6. Any party delivering an executed counterpart of this Amendment
No. 6 by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the
parties hereto have caused this Amendment No. 6 to be duly executed
and delivered by their authorized officers as of the day and year
first above written.
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AGENT
WACHOVIA CAPITAL FINANCE
CORPORATION (Central), f/k/a
Congress Financial Corporation (Central), as
Agent
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BORROWERS
SPARTAN STORES, INC.
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By:
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/s/ Vicky Geist
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By:
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/s/ David M. Staples
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Title:
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Director
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Title:
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EVP, CFO and Treasurer
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SPARTAN STORES DISTRIBUTION, LLC
MARKET DEVELOPMENT CORPORATION
SPARTAN STORES ASSOCIATES, LLC
FAMILY FARE, LLC
MSFC, LLC
SEAWAY FOOD TOWN, INC.
THE PHARM OF MICHIGAN, INC.
VALLEY FARM DISTRIBUTING CO.
GRUBER'S REAL ESTATE LLC
PREVO'S FAMILY MARKETS, INC.
BUCKEYE REAL ESTATE MANAGEMENT CO.
SPARTAN STORES FUEL, LLC
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By:
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/s/ David M. Staples
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Title:
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Treasurer
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GUARANTORS
SPARTAN STORES HOLDING, INC.
SI INSURANCE AGENCY, INC.
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By:
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/s/ David M. Staples
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Title:
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Treasurer
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LENDERS
WACHOVIA CAPITAL FINANCE
CORPORATION (CENTRAL), f/k/a
Congress Financial Corporation (Central)
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By:
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/s/ Vicky Geist
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Title:
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Director
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KEY BANK NATIONAL ASSOCIATION
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By:
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/s/ Nadine M. Eames
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Title:
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Vice President
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BANK OF AMERICA N.A. (successor by
merger to Fleet Capital Corporation)
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By:
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/s/ Vice President
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Title:
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Vice President
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NATIONAL CITY BUSINESS CREDIT,
INC.
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By:
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/s/ Vice President
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Title:
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Vice President
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GENERAL ELECTRIC CAPITAL
CORPORATION
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By:
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/s/ Rebecca A. Ford
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Title:
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Duly Authorized Signatory
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FIFTH THIRD BANK, a Michigan Banking
Corporation
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By:
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/s/ Vice President
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Title:
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Vice President
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EXHIBIT A
TO
AMENDMENT NO. 6
Description of Notes
See attached
Draft - April 6, 2007
DESCRIPTION OF NOTES
We will issue the notes under an indenture, to be dated
as of
,
2007, between us and
[ ],
as trustee. The notes and the common stock issuable upon conversion
of the notes, if any, will be covered by a registration rights
agreement. Each holder may request a copy of the indenture and the
registration rights agreement from the trustee at the address
provided herein.
The following description is a summary of the material
provisions of the notes, the indenture and the registration rights
agreement and does not purport to be complete. This summary is
subject to and is qualified by reference to all the provisions of
the notes and the indenture, including the definitions of certain
terms used in the indenture, and to all provisions of the
registration rights agreement. Wherever particular provisions or
defined terms of the indenture or the notes are referred to, these
provisions or defined terms are incorporated in this offering
memorandum by reference. We urge you to read the indenture because
it, and not this description, defines each holder's rights as a
holder of the notes.
As used in this "Description of Notes" section, references
to "Spartan," the "company," "we," "us" and "our" refer only to
Spartan Stores, Inc. and do not include its
subsidiaries.
General
We are offering $[75,000,000] aggregate principal amount of
notes ($[90,000,000] aggregate principal amount if the initial
purchaser exercises in full its option to purchase additional notes
to cover over-allotments, if any).
The notes will mature on May 1, 2027 unless earlier
converted, redeemed or repurchased. Each holder of notes has the
option, subject to certain qualifications and the satisfaction of
certain conditions, to convert its notes into cash and shares, if
any, of our common stock at an initial conversion rate of
shares per $1,000 principal amount of notes. This is equivalent to
an initial conversion price of approximately
$
per share of common stock. The conversion rate is subject to
adjustment if certain events occur.
Upon a surrender of a holder's notes for conversion, unless
we have previously exercised our option to satisfy all of our
future conversion obligations entirely in common stock as described
below under "- Conversion Rights - Option to Irrevocably Elect to
Satisfy Future Conversion Obligations in Common Stock," we will
deliver cash equal to the lesser of the aggregate principal amount
of notes to be converted and our total conversion obligation. We
will deliver shares of our common stock in respect of the
remainder, if any, of our conversion obligation, as described below
under "- Conversion Rights - Payment Upon Conversion." If we
deliver common stock upon conversion of a note, a holder will not
receive fractional shares but a cash payment to account for any
such fractional share, as described below. A holder will not
receive any cash payment for interest (or contingent interest or
additional amounts, if any) accrued and unpaid to the conversion
date except under the limited circumstances described below,
including under "- Registration Rights" below.
The notes will be our senior, unsecured obligations and will
rank equal in right of payment to all of our existing and future
unsecured and unsubordinated indebtedness. The notes will be issued
only in denominations of $1,000 principal amount and integral
multiples thereof. References to "a note" or "each note" in this
offering memorandum refer to $1,000 principal amount of the
notes.
As used in this offering memorandum, "business day" means
any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City
of New York.
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Any reference to "common stock" means our common stock, no
par value.
Each holder will be deemed to have agreed in the indenture,
for United States federal income tax purposes, to treat the notes
as "contingent payment debt instruments" and to be bound by our
application of the U.S. Treasury regulations that govern contingent
payment debt instruments, including our determination that the rate
at which interest will be deemed to accrue for United States
federal income tax purposes will be
%, which is the comparable yield, or the rate at which we
would have borrowed on a non-contingent, nonconvertible basis at
the issue date of the notes.
Accordingly, each holder will be required to accrue interest
on a constant yield to maturity basis at that rate, with the result
that a holder will recognize taxable income significantly in excess
of cash received while the notes are outstanding. See "United
States Federal Income Tax Considerations." YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR REGARDING THE TAX TREATMENT OF AN INVESTMENT IN THE
NOTES AND WHETHER AN INVESTMENT IN THE NOTES IS ADVISABLE IN LIGHT
OF THE AGREED UPON TAX TREATMENT AND YOUR PARTICULAR TAX
SITUATION.
Interest and Contingent
Interest
The notes will bear interest at a rate of
% per year. In addition,
we will pay contingent interest to holders of the notes during the
period commencing
[ ,
2012] and ending on
[ ,
2012] and for any six-month period thereafter, from and including
an interest payment date up to, but excluding, the next interest
payment date, if the average contingent interest trading price (as
defined below) per $1,000 principal amount of the notes for the
five-trading-day (as defined below) period ending on the third
trading day immediately preceding the first day of such interest
period equals 120% or more of the principal amount of the
notes.
During any interest period in which contingent interest
shall be payable, the contingent interest payable per $1,000
principal amount of the notes will equal [0.25]% per annum of the
average contingent interest trading price of $1,000 principal
amount of notes during the five-trading-day measuring period ending
on the third trading day immediately preceding the applicable
interest period used to determine whether contingent interest must
be paid.
For so long as the notes are held in book-entry only form,
interest (including contingent interest and additional amounts, if
any) will be payable on each payment date to the person in whose
name a given note is registered at the close of business on the
business day before the interest payment date (each, a "record
date"). In the event that the notes do not remain in book-entry
only form or are not in the form of a global certificate, we will
have the right to select record dates, which will be at least one
business day before an interest payment date. Interest will be
calculated on the basis of a 360-day year consisting of twelve
30-day months and will accrue from
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2007 or from the most recent date to which interest has been paid
or duly provided for. We will pay interest (including contingent
interest and additional amounts, if any) semi-annually, in arrears
on May 1 and November 1 of each year, commencing on
November 1, 2007.
Contingent interest, if any, will accrue from the first day
of any relevant interest period and be payable on the interest
payment date at the end of the relevant six-month period to holders
of the notes as of the record date relating to such interest
payment date. In the event of any determination that holders will
be entitled to receive contingent interest with respect to an
interest period, we will promptly (i) issue a press release and use
our reasonable efforts to post such information on our website or
otherwise publicly disclose this information or (ii) provide notice
to the holders of the notes in a manner contemplated by the
indenture, including through the facilities of DTC.
2
If, in connection with a payment of contingent interest, we
determine that United States withholding tax may be required as
described under "United States Federal Income Tax Considerations -
Non-United States Holders," we will provide this information
through a press release disseminated as provided above.
"Contingent interest trading price" means, on any date of
determination, the average of the secondary bid quotations per note
obtained by the conversion agent for $5,000,000 principal amount of
the notes at approximately 3:30 p.m., New York City time, on such
determination date from three independent nationally recognized
securities dealers we select; provided that, if at least three such
bids cannot reasonably be obtained, but two such bids can
reasonably be obtained, then the average of these two bids shall be
used; provided, further, that, if at least two such bids cannot
reasonably be obtained, but one such bid can reasonably be
obtained, this one bid shall be used. If on any date of
determination the conversion agent cannot reasonably obtain at
least one bid for $5,000,000 principal amount of the notes from an
independent nationally recognized securities dealer or, in our
reasonable judgment, the bid quotations are not indicative of the
secondary market value of the notes, then the contingent interest
trading price of the notes on such date of determination will be
(a) the applicable conversion rate of the notes (as defined below)
multiplied by (b) the closing sale price of our common stock on
such determination date.
Upon conversion of a note, a holder will not receive any
cash payment of interest (including contingent interest and
additional amounts, if any) unless, as described below, such
conversion occurs after a record date and prior to the interest
payment date to which that record date relates or such conversion
occurs during a registration default as described under "-
Registration Rights" below. If we deliver common stock upon
surrender of a note for conversion, we will not issue fractional
common stock. Instead, we will pay cash in lieu of fractional
shares based on the closing sale price of the common stock on the
trading day immediately prior to the conversion date. Our delivery
to a holder of the full amount of cash and common stock, if any, as
described below under "- Payment upon Conversion," together with
any cash payment for any fractional share, will be deemed to
satisfy our obligation to pay:
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the principal amount of the note;
and
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accrued but unpaid interest
(including contingent interest and additional amounts, if any) to
but excluding the conversion date.
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As a result, accrued but unpaid
interest (including contingent interest and additional amounts, if
any) up to but excluding the conversion date will be deemed to be
paid in full rather than cancelled, extinguished or forfeited. For
a general discussion of the U.S. federal income tax treatment upon
receipt of our common stock upon conversion, see "Material U.S.
Federal Income Tax Considerations."
Notwithstanding the preceding paragraph, if notes are
converted after the close of business on a record date but prior to
the opening of business on the interest payment date to which that
record date relates, holders of such notes at the close of business
on the record date will receive the interest (including contingent
interest and additional amounts, if any) payable on the notes on
the corresponding interest payment date notwithstanding the
conversion. Such notes, upon surrender for conversion, must be
accompanied by funds equal to the amount of interest (including
contingent interest and additional amounts, if any) payable on the
notes so converted on the next succeeding interest payment date.
However, no such payment need be made:
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in connection with any conversion
following the regular record date immediately preceding the
maturity date;
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if we have specified a redemption
date that is after a record date and on or prior to the
corresponding interest payment date;
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if we have specified a repurchase
date or a fundamental change purchase date that is after a record
date and on or prior to the corresponding interest payment date;
or
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to the extent of any overdue
interest (including overdue contingent interest and additional
amounts, if any) if overdue interest, contingent interest or
additional amounts exist at the time of conversion with respect to
such note.
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If any interest payment date, maturity date, redemption
date, repurchase date or settlement date (including upon the
occurrence of a fundamental change, as described below) falls on a
day that is not a business day, then the required payment will be
made on the next succeeding business day with the same force and
effect as if made on the date that the payment was due, and no
additional interest will accrue on that payment for the period from
and after the interest payment date, maturity date, redemption date
or repurchase date, as the case may be, to that next succeeding
business day.
Conversion
Rights
General
Subject to the qualifications and the satisfaction of the
conditions and during the periods described below, holders will
have the right to convert their notes prior to the close of
business on the business day immediately preceding stated maturity,
initially at a conversion rate of
shares per $1,000 principal amount of notes, which is equivalent to
an initial conversion price of approximately
$
per share of common stock based on the issue price per note. Upon a
surrender of a holder's notes for conversion, unless we have
previously exercised our option to satisfy all of our future
conversion obligations entirely in common stock as described below
under "- Option to Irrevocably Elect to Satisfy Future Conversion
Obligations in Common Stock," we will deliver cash equal to the
lesser of the aggregate principal amount of notes to be converted
and our total conversion obligation. We will deliver shares of our
common stock in respect of the remainder, if any, of our conversion
obligation, as described below under "- Payment Upon
Conversion."
The conversion rate in effect at any given time is referred
to in this offering memorandum as the "applicable conversion rate"
and will be subject to adjustments as described under "-Conversion
Rate Adjustments," but it will not be adjusted for accrued
interest. The "applicable conversion price" at any given time is
equal to the principal amount of a note divided by the applicable
conversion rate. Holders will be entitled to convert notes in
denominations of $1,000 principal amount or multiples thereof. Upon
surrender of a note for conversion, we will deliver cash and shares
of our common stock, if any, as described below under "- Payment
upon Conversion."
A holder may convert its notes in whole or in part only in
the following circumstances, which are described in more detail
below, and to the following extent:
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upon satisfaction of the sale
price condition;
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upon satisfaction of the trading
price condition;
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if we have called notes for
redemption, until the close of business one business day prior to
the redemption date for such notes;
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at any time on or after
[ , ];
or
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upon the occurrence of specified
corporate transactions.
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Upon any determination by us or the trustee that holders are
or will be entitled to convert their notes into shares of our
common stock in accordance with the foregoing provisions, we will
issue a press release and publish the information on our
website.
If a holder converts notes, we will pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares
of our common stock upon the conversion, unless the tax is due
because a holder requests the shares to be issued or delivered to
another person, in which case that holder will pay that
tax.
Conversion upon
Satisfaction of Sale Price Condition
Prior to
[ ,
], a
holder may surrender its notes for conversion during any fiscal
quarter after the fiscal quarter ending June [ ],
2007 if the closing sale price per share of our common stock for at
least 20 trading days during the period of 30 consecutive trading
days ending on the last trading day of the previous fiscal quarter
is more than [130]% of the applicable conversion price per share of
our common stock on such last trading day. Upon surrender by a
holder of its notes for conversion, we will deliver cash and common
stock, if any, as described below under "- Payment upon
Conversion."
The "closing sale price" of our common stock on any date
means the closing sale price per share (or, if no closing sale
price is reported, the average of the bid and asked prices or, if
more than one in either case, the average of the average bid and
the average asked prices) on such date as reported by the Nasdaq
Global Market or, if our common stock is not reported by the Nasdaq
Global Market, in composite transactions for the principal U.S.
national securities exchange on which our common stock is traded.
If our common stock is not listed for trading on a U.S. national or
regional securities exchange and not reported by the Nasdaq Global
Market on the relevant date, the closing sale price will be the
last quoted bid price for our common stock in the over-the-counter
market on the relevant date as reported by the National Quotation
Bureau Incorporated or similar organization. If our common stock is
not so quoted, the closing sale price will be the average of the
mid-point of the last bid and asked prices for our common stock on
the relevant date from each of at least three independent
nationally recognized investment banking firms selected by us for
this purpose.
The conversion agent, which initially will be [ insert
name of trustee ], will, on our behalf, determine daily
whether the notes are convertible as a result of the sale price of
our common stock and notify us and the trustee.
Conversion upon
Satisfaction of Trading Price Condition
A holder may surrender any of its notes for conversion
during the five business days immediately following any
five-consecutive-trading-day period in which the trading price per
$1,000 principal amount of the notes (as determined following a
request by a holder of the notes in accordance with the
procedures described below) for each day of that period was less
than 98% of the product of the closing sale price of our common
stock and the applicable conversion rate of the notes on each such
day.
The "trading price" of the notes on any date of
determination means the average of the secondary market bid
quotations obtained by the bid solicitation agent for $5.0 million
aggregate principal amount of the notes at approximately 3:30 p.m.,
New York City time, on the determination date from three
independent nationally recognized securities dealers we select,
provided that if:
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three such bids cannot reasonably
be obtained by the bid solicitation agent, but two such bids are
obtained, then the average of the two bids shall be used,
and
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only one such bid can reasonably
be obtained by the bid solicitation agent, that one bid shall be
used;
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5
provided further if no bids are
received, then for purposes of determining whether the trading
price condition has been met the trading price per $1,000 principal
amount of the notes will be deemed to be less than 98% of the
product of the closing sale price of our common stock and the
applicable conversion rate of the notes on that day.
The trustee will have no obligation to determine the trading
price of the notes as described in this section unless we have
requested such determination; and we shall have no obligation to
make such request unless a holder provides us with reasonable
evidence that the trading price per $1,000 principal amount of
notes would be less than 98% of the product of the closing sale
price of our common stock and the applicable conversion rate of the
notes on that day. At such time, we will instruct the trustee to
determine the trading price of the notes beginning on the next
trading day and on each successive trading day until the trading
price per $1,000 principal amount of notes is greater than or equal
to 98% of the product of the closing price of our common stock and
the applicable conversion rate of the notes.
Conversion Upon Notice of
Redemption
Holders may surrender for conversion any notes called for
redemption at any time prior to the close of business one business
day prior to the redemption date for such notes, even if those
notes are not otherwise convertible at that time.
Conversion On or After
[ , ]
A holder may surrender any of its notes for conversion at
any time on or after
[ ,
] until the close of
business on the business day immediately preceding the maturity
date.
Conversion upon Specified
Corporate Transactions
Certain
Distributions
If we elect to:
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distribute to all or
substantially all holders of our common stock certain rights or
warrants entitling them to purchase, for a period expiring within
60 days after the date of the distribution, shares of our common
stock at less than the closing sale price of a share of our common
stock on the trading day immediately preceding the announcement
date of the distribution; or
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distribute to all or
substantially all holders of our common stock, assets (including
cash), debt securities or rights or warrants to purchase our
securities, which distribution has a per-share value as determined
by our board of directors exceeding 10% of the closing sale price
of our common stock on the trading day immediately preceding the
announcement date for such distribution,
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we must notify holders of the
notes at least 20 business days prior to the ex-dividend date for
such distribution. Once we have given such notice, holders may
surrender their notes for conversion at any time until the earlier
of the close of business on the business day immediately prior to
the ex-dividend date or any announcement that such distribution
will not take place. No holder may exercise this right to convert
if the holder otherwise could participate in the distribution
without conversion. The "ex-dividend" date is the first date upon
which a sale of the common stock does not automatically transfer
the right to receive the relevant distribution from the seller of
the common stock to its buyer.
Fundamental Change
Transactions
6
If a fundamental change occurs, regardless of whether a
holder has the right to put the notes as described under "-
Repurchase of Notes by Us at Option of Holder upon a Fundamental
Change," a holder may surrender notes for conversion at any time
from and after the date which is 35 days prior to the anticipated
effective date of the transaction
