0000891618-95-000470.txt : 19950815 0000891618-95-000470.hdr.sgml : 19950815 ACCESSION NUMBER: 0000891618-95-000470 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALTERA CORP CENTRAL INDEX KEY: 0000768251 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770016691 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16617 FILM NUMBER: 95562767 BUSINESS ADDRESS: STREET 1: 2610 ORCHARD PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95134-2020 BUSINESS PHONE: 4088947000 MAIL ADDRESS: STREET 1: 2610 ORCHARD PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95134-2020 10-Q 1 FORM 10-Q JUNE 30, 1995 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1995 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to __________ Commission file number 0-16617 ALTERA CORPORATION (Exact name of registrant as specified in its charter) California 77-0016691 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2610 Orchard Parkway, San Jose, California 95134 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 894-7000 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 at least the past 90 days. Yes X No ------- ------- Number of shares of common stock outstanding at June 30, 1995: 43,332,407 2 ALTERA CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 PART I FINANCIAL INFORMATION AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3 ALTERA CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited)
June 30, Dec. 31, 1995 1994 -------- -------- ASSETS ------ Current assets: Cash, cash equivalents $ 53,954 $ 41,639 Short-term investments 269,699 50,955 -------- -------- Total cash, cash equivalents, and 323,653 92,594 short-term investments Accounts receivable, less allowance for doubtful accounts of $895 and $727 52,903 31,662 Inventories 38,283 38,477 Deferred income taxes 18,365 12,365 Other current assets 2,554 2,244 -------- -------- Total current assets 435,758 177,342 Property and equipment, net 44,480 18,212 Investments and other assets 23,601 18,328 -------- -------- $503,839 $213,882 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 17,538 $ 11,313 Accrued liabilities 51,701 35,919 Accrued compensation 9,247 8,631 -------- -------- Total current liabilities 78,486 55,863 Long Term Debt 230,000 - --------- -------- Shareholders' equity: Common stock; no par value: 80,000,000 shares authorized, 43,332,407 and 42,975,628 shares issued and outstanding 75,751 73,146 Retained earnings 119,602 84,873 -------- -------- 195,353 158,019 -------- -------- $503,839 $213,882 ======== ========
4 ALTERA CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------- ------------------------- June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------- -------- -------- -------- Sales $92,165 $47,061 $167,203 $90,571 ------- ------- -------- ------- Costs and expenses: Cost of sales 37,489 18,207 67,540 35,186 Research and development 7,677 5,167 14,263 9,899 Selling, general, and administrative 17,014 11,170 32,396 21,079 ------- ------- -------- ------- Total operating expenses 62,180 34,544 114,199 66,164 ------- ------- -------- ------- Operating income 29,985 12,517 53,004 24,407 Interest and other income 1,177 645 2,122 910 ------- ------- -------- ------- Income before taxes 31,162 13,162 55,126 25,317 Provision for income taxes 11,530 4,870 20,397 9,368 ------- ------- -------- ------- Net income $19,632 $ 8,292 $ 34,729 $15,949 ======= ======= ======== ======= Net income per share $ 0.43 $ 0.19 $ 0.77 $ 0.37 ======= ======= ======== ======= Shares and equivalents used in calculation of earnings per share 45,524 42,844 45,339 42,818 ======= ======= ======== =======
5 ALTERA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (In thousands) (Unaudited)
SIX MONTHS ENDED --------------------- June 30, June 30, 1995 1994 --------- -------- Cash flows from operating activities: Net income $ 34,729 $15,949 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,573 4,254 Changes in assets and liabilities: Accounts receivable, net (21,241) (4,240) Inventories 194 (3,819) Deferred income taxes (6,000) - Other current and non-current assets (1,385) (107) Accounts payable 6,225 3,328 Accrued liabilities 15,699 3,476 Accrued compensation 615 (968) --------- ------- Cash provided by operating activities 34,409 17,873 --------- ------- Cash flows from investing activities: Purchases of property and equipment (30,780) (3,951) Net change in short-term investments (218,744) 3,530 --------- ------- Cash used for investing activities (249,524) (421) --------- ------- Cash flows from financing activities: Long term debt, net of issuance costs 224,825 - Net proceeds from issuance of common stock 2,605 2,731 --------- ------- Cash provided by financing activities 227,430 2,731 --------- ------- Net increase in cash and cash equivalents 12,315 20,183 Cash and cash equivalents at beginning of period 41,639 16,832 --------- ------- Cash and cash equivalents at end of period $ 53,954 $37,015 ========= ======= Supplemental disclosure of cash flow information: Cash paid during the period for income taxes $ 27,989 $ 9,005
6 ALTERA CORPORATION NOTES TO FINANCIAL INFORMATION (Unaudited) Note 1 - Interim Statements: In the opinion of the Company, the accompanying unaudited financial data contain all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly the financial information included therein. This financial data should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report to Shareholders for the year ended December 31, 1994. Results for the interim period presented are not necessarily indicative of results for the entire year. This financial data reflects a 2-for-1 split of the Company's outstanding Common Stock, paid May 31, 1995 to shareholders of record on May 10, 1995. Effective on the Record Date, the number of authorized shares of the Company's Common Stock increased from 40,000,000 to 80,000,000. Note 2 - Balance Sheet Detail:
(In Thousands) June 30, Dec. 31, 1995 1995 ----------- -------- (Unaudited) Inventories: Purchased parts and raw materials $ 2,310 $ 2,185 Work-in-process 24,566 22,230 Finished goods 11,407 14,062 -------- -------- $ 38,283 $ 38,477 ======== ======== Property and equipment: Land $ 19,925 $ - Equipment 51,173 43,284 Office furniture and equipment 5,225 4,124 Leasehold improvements 3,337 2,852 -------- -------- 79,660 50,260 Less accumulated depreciation and amortization (35,180) (32,048) -------- -------- $ 44,480 $ 18,212 ======== ========
7 Note 3 - Earnings per Share: Income per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of the assumed net shares issuable upon the exercise of dilutive stock options using the treasury stock method. Note 4 - Convertible Note Offering: In June, the Company issued $230 million of convertible subordinated notes due in June of 2002 and bearing an interest rate of 5.75%, payable semiannually. The notes are convertible into shares of the Company's common stock at a price of $51.17 per share. Discounts, commissions, and expenses, which will be amortized over the seven year life of the notes, reduced the net proceeds to $224.4 million. The notes are callable by the Company no sooner than June of 1998. Proceeds from the issue have been invested primarily in taxable securities issued by agencies of the federal government paying a fixed interest rate. At present, these investments are held as securities available for sale and will be carried at their market value in accordance with FAS 115. The Company intends to use the net proceeds from the sale of the Notes for general corporate purposes, including to maintain and expand its manufacturing supply capacity, to develop new products, and potentially to acquire businesses, products, or technologies that would complement the Company's business. Note 5 - Subsequent Event: The Company entered into an agreement with Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) in July whereby it has made deposits, in the form of cash and promissory notes payable to TSMC, for future wafer capacity allocations extending into 1999. The cash payments amounted to $2.4 million, and the promissory notes total $14.4 million. 8 ALTERA CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Sales. Second quarter 1995 sales of $92.2 million were 96% higher than the $47.1 million reported for the same period last year, and were up 23% from first quarter 1995 sales of $75.0 million. Sales were higher than the second quarter of 1994 primarily as a result of higher sales of the Company's MAX 7000 and FLEX 8000 product lines, as well as sales of products acquired from Intel on October 1, 1994, including the Classic and FLEXlogic (now called FLASHlogic) product lines. As compared to the same period last year, sales in North America increased 89% and international sales increased 103%. As compared to prior quarter, sales growth was driven by the MAX 7000, FLEX 8000, and FLASHlogic families. FLEX 8000 grew the fastest as measured in percentage terms while MAX 7000 grew the fastest when measured in absolute dollars. By region, sequential percentage growth in Japan was very high after relatively modest growth in the first quarter. Historically, semiconductor prices decline as products mature. New product introductions from competitors may also increase pricing pressure and compete for overall unit sales. Historically, the Company has responded to these pressures with the introduction of new, higher margin products. The Company introduced the FLEX 8000 line of products in late 1992. In order to generate customer acceptance of this product family, and to stimulate selling activity, the Company significantly reduced prices on this product line in 1994. Although the Company has taken actions to reduce the manufacturing cost of the product family, margins are still lower than Company's margins on average. In the second quarter of 1995 the Company began shipping a new product family, the MAX 9000 family. As indicated above, the high rates of growth the Company is presently experiencing are the result of increased sales of the Company's MAX 7000 and FLEX 8000 product lines. Future growth rates will be highly dependent on, among other things, market acceptance of the MAX 9000 family and other newly announced product lines such as the FLEX 10K family. There can be no assurance that the MAX 9000 family or other new products will be successful in securing broad market acceptance or achieving higher margins, or that the average selling price decline on existing products will not accelerate. In general, economic conditions in many of the end markets that use the Company's products have been favorable in recent quarters. The favorable economic climate has been a positive factor in stimulating demand for the Company's products. There can be no assurance that general economic 9 conditions will remain favorable or will not deteriorate. The Company's business prospects in the next several quarters will depend, in part, on worldwide economic conditions, and may weaken due to the factors discussed above. Altera's sales history cannot be used to predict future results. Gross Margin. Gross margin percentage in the second quarter was 59.3%, down from 60.0% last quarter and also down from 61.3% in the same period a year ago. As compared to prior quarter, the decrease in gross margin percentage was caused by increasing costs of silicon wafers. Presently, the majority of the Company's silicon wafers are purchased from Sharp Corporation of Japan and are priced in Yen. The increasing value of the Yen versus the dollar has increased the dollar cost of the purchased wafers resulting in lower margins. The increased cost of silicon wafers stemming from a strengthening Yen was also the predominant factor in the declining margin percentage as compared to the second quarter of 1994. Although selling prices have declined over the last year, this has largely been offset by lower manufacturing costs resulting from improved yields and also from improved scale economies on higher manufacturing volumes. Although yields improved in the last quarter, as compared to prior quarter, there can be no assurances that recently achieved yield improvements will continue or that yields will not deteriorate. The Company continues to spend significant research and development resources improving production yields on its products to commercially acceptable levels. The need to improve product yields also exists with the new products and fabrication processes used by the Company. The Company recently began contracting with Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) of Taiwan and is now commencing commercial volume production at this vendor. Management is hopeful that TSMC's aggressive manufacturing processes will enable the Company to lower its costs, particularly on the FLEX 8000 family. However, there can be no assurances that these cost reductions will be achieved. Start-up difficulties often occur when beginning production of products on new processes, and these difficulties could potentially result in higher costs and reduced product availability. Management also expects to introduce products in the future using other process technologies new to the Company and expects that it may encounter similar difficulties at such times. Production throughput times also vary considerably among the Company's wafer suppliers. The Company has experienced delays from time to time in processing some of its products and recently experienced long lead times from vendors on some of its newer products. Long vendor lead times impair the Company's ability to respond to rapidly changing market conditions. Many other uncertainties exist that could adversely impact future margins, including deterioration of production yields, delays in new product availability, shortages from suppliers, or lack of market acceptance of new products. 10 The Company has at times been unable, and is currently unable, to fully satisfy customer demand because of insufficient wafer allocation from its foundries. The Company is currently limiting the amount of orders that it will accept based on available production capacity. The Company's future growth will depend in large part on increasing its wafer capacity allocation from current foundries, adding additional foundries, and improving yields of die per wafer from its foundries through reductions in the die size of the Company's products and implementation of advanced process technologies. Wafer capacity in the semiconductor industry, particularly in the Company's advanced process geometries, has been and is presently extremely limited. Partly in response to these limitations, the Company entered into an agreement with TSMC in July of this year whereby it has made deposits, in the form of cash and promissory notes payable to TSMC, for future wafer capacity allocations extending into 1999. The cash payments amounted to $2.4 million, and the promissory notes total $14.4 million. Even so, the amount of wafers secured by the deposits do not meet the Company's anticipated demand from TSMC over the span of the agreement. The Company will, from time to time, consider other alternatives to secure additional wafer capacity including, without limitation, equity investments in, or loans or other financial commitments to, independent wafer manufacturers in exchange for production capacity, or the use of contracts which firmly commit the Company to purchase specified quantities of wafers over extended periods. Any such transactions could require the Company to seek equity or debt financing to fund such activities and, in certain circumstances, to grant product or technology rights in return for production capacity. There can be no assurance that any such additional financing could be obtained on terms acceptable to the Company, if at all, or that the grant of any such product or technology rights would not materially adversely affect the Company's business. Moreover, there can be no assurance that even if the Company enters into agreements with its suppliers, that its suppliers will ultimately deliver according to the provisions of the agreement. There can be no assurance that the Company will be able to satisfy its future wafer needs from current or alternative manufacturing sources. Any increase in general demand for wafers within the industry, or any reduction of existing wafer supply from any of the Company's foundry sources, could materially adversely affect the Company's business. Furthermore, there can be no assurance that the Company will be able to obtain an increased number of functional die per wafer. Research and Development. Research and development expenditures were $7.7 million, or $2.5 million higher than the quarter ended a year ago, and up $1.1 million from the prior quarter. The increase as compared to the previous year is the result of higher expenditures on prototype and development wafers, especially for the recently announced MAX 9000 and FLEX 10K families of products. Additional increases in research and development spending included process development 11 costs, the development of new packages, and greater software development efforts. Management of the Company expects to continue investing significant research and development efforts into the development of programmable logic chips, related development software and hardware, and advanced semiconductor wafer fabrication processes. However, even if the Company accomplishes its goals for the development of new products and manufacturing processes, there is no assurance that these products will achieve market acceptance or that the new manufacturing processes will be successful, or that the suppliers will provide the Company with the quality or quantity of wafers and materials that the Company requires. The Company must continue to develop and introduce new products in a timely manner to counter the industry's historical trend of prices declining as products mature. Selling, General, and Administrative. Second quarter selling, general, and administrative expenses of $17.0 million increased $5.8 million from a year ago, and $1.6 million from prior quarter. The increase as compared to prior year was due to increased commission and incentive expenses (on the increased sales volume), increased advertising and promotional expenditures, and increased field sales, marketing, and administrative headcounts. Increased commission and incentive expenses and increased administrative expenses were the primary reasons for the increase compared to prior quarter. As a percentage of revenue, second quarter selling, general, and administrative expenses at 18.5% were down from both of the referenced quarters due to revenues increasing at a faster rate than expenses. Selling costs measured in dollar terms have increased compared to both last year and last quarter, driven by increased advertising and merchandising expenditures, higher commissions and incentives (on increased sales), and increased marketing and field sales headcounts. The Company uses three methods to market its products: direct sales to electronics manufacturers via independent sales representatives, sales through licensed domestic and foreign distributors, and direct sales to customers by Altera sales department personnel. The Company has thirteen U.S. and eight international sales offices. Approximately 78% percent of the Company's worldwide sales are made through distributors. As a percent of revenue, selling expenses were lower than they were in the prior quarter and in the quarter ended one year ago. Operating Income. Second quarter 1995 operating income ($30.0 million) represented 32.5% of sales, and was higher than both the second quarter of 1994 and the most recent prior quarter on a percentage of revenue basis. This improvement is attributed to the growth in revenues, which have grown faster that operating expenses. Interest and Other Income. Interest income improved over last quarter and prior year as a result of increased cash balances. 12 Income Taxes. The Company's provision for income taxes was 37%, consistent with the second quarter of 1994 and prior quarter. Future Results. Future operating results depend on the Company's ability to develop, manufacture, and sell complicated semiconductor components and complex software that offer customers greater value than competing vendors. The Company's efforts in this regard may not be successful. Also, a number of factors outside of the Company's control, including general economic conditions and cycles in world markets, exchange rate fluctuations, or a lack of growth in the Company's end markets could impact future results. The Company is highly dependent upon subcontractors to manufacture silicon wafers and perform assembly and testing services. Disruptions or adverse supply conditions arising from market conditions, political strife, labor disruptions, natural or man-made disasters, other factors, and even normal process variations could have a material adverse effect on the Company's future operating results. Competitive break-throughs, and particularly competitive pricing could also impact future operating results. Additionally, litigation relating to competitive patents and intellectual property could have a material adverse impact on the Company's financial condition or operating results. The Company owns more than 50 United States patents and has additional pending United States patent applications on its semiconductor products. The Company also has technology licensing agreements with AMD, Cypress, Intel, and Texas Instruments giving the Company royalty-free rights to design, manufacture, and package products using certain patents they control. Other companies have filed applications for, or have been issued, other patents and may develop, or obtain proprietary rights relating to, products or processes competitive with those of the Company. From time to time the Company may find it desirable to obtain additional licenses from the holders of patents relating to products or processes competitive with those of the Company. Although its patents and patent applications may have value in discouraging competitive entry into the Company's market segment and the Company believes that its current licenses will assist it in developing additional products, there can be no assurance that any additional patents will be granted to the Company, that the Company's patents will provide meaningful protection from competition, or that any additional products will be developed based on any of the licenses that the Company currently holds. The Company believes that its future success will depend primarily upon the technical competence and creative skills of its personnel, rather than on its patents, licenses, or other proprietary rights. 13 The Company, in the normal course of business, from time to time receives and makes inquiries with respect to possible patent infringements. As a result of inquiries received from companies, it may be necessary or desirable for the Company to obtain additional licenses relating to one or more of its current or future products. There can be no assurance that such additional licenses could be obtained, and, if obtainable, could be obtained on conditions that would not have a material adverse effect on the Company's operating results. If the inquiring companies were to allege infringement of their patents, as is the case in the Company's current litigation with two of its competitors, there can be no assurance that any necessary licenses could be obtained, and, if obtainable, that such licenses would be on terms or conditions that would not have a material adverse effect on the Company. In addition, if litigation ensued, there can be no assurance that these companies would not succeed in obtaining significant monetary damages or an injunction against the manufacture and sale of one or more of the Company's product families. It may be necessary or desirable for the Company to incur significant litigation expenses to enforce its intellectual property rights. Liquidity and Capital Resources In June 1995, the Company issued $230 million of convertible subordinated notes due in June of 2002 and bearing an interest rate of 5.75%, payable semiannually. The notes are convertible into shares of the Company's common stock at a price of $51.17 per share. Discounts, commissions, and expenses, which will be amortized over the seven year life of the notes, reduced the net proceeds to $224.4 million. The notes are callable by the Company no sooner than June of 1998. Proceeds from the issue have been invested primarily in taxable securities issued by agencies of the federal government paying a fixed interest rate. At present, these investments are held as securities available for sale and will be carried at their market value in accordance with FAS 115. The Company intends to use the net proceeds from the sale of the notes for general corporate purposes, including to maintain and expand its manufacturing supply capacity, to develop new products, and potentially to acquire businesses, products, or technologies that would complement the Company's business. The Company from time to time has discussions with third parties regarding possible arrangements with respect to manufacturing supply capacity, such as purchasing options for such capacity or making investments in new or existing fabrication facilities. Also in June, the Company concluded a $19.9 million purchase, for cash, of approximately 25 acres of land near its present headquarters for the long term development of a multiple building corporate headquarters. The Company is formulating development plans for the site, but presently anticipates initially building approximately 350,000 square feet of office and light manufacturing space on 14 the new site, with capacity for an additional 150,000 square feet of expansion. The first phase of construction is expected to be completed in 1997. Although the Company might consider outside financing for the development and construction of the site, management believes that the total costs, estimated to be approximately $50 million (excluding the land), could be provided by existing cash balances and future cash flows from operations. Excluding the convertible debt financing and the land purchase, the Company's cash and investments increased by $10.6 million in the second quarter. Excluding the land purchase, capital expenditures through the first six months of 1995 totaled $10.9 million. The Company expects to invest approximately $12 million of additional capital during the last six months of 1995. The Company believes that its cash, cash equivalents, and short-term investments, combined with cash generated from ongoing operations, will be adequate to finance the Company's operations and capital investment needs for at least the next year. Impact of Currency and Inflation. The Company purchases the majority of its materials and services in U.S. Dollars, and most of its foreign sales are transacted in U.S. dollars. However, Altera does have Yen denominated purchase contracts with Sharp Corporation of Japan for processed silicon wafers. Recent results have been adversely impacted by the recent increase in the Yen, and the concomitant increase in material costs. The Company historically has engaged in a variety of foreign exchange hedging strategies to mitigate the exposure from these Yen denominated purchases. This hedging has included the purchase of forward contracts and the use of offsetting Yen receipts. Throughout 1994 and the first half of this year, the Company held no forward Yen contracts. However, in July of this year the Company purchased Yen forward contracts in an amount approximately equal to its expected Yen requirements for the balance of the third quarter. In addition, the Company purchased Yen options that will mitigate against the Company's operating exposure to significant further increases in the dollar value of the Yen in the fourth quarter. The cost of these options (less than $200,000) will be expensed ratably over the life of the options. The Company has not engaged in any contracts or use of financial instruments that will mitigate the Company's exposure to increases in the value of the yen beyond December of 1995. Any continuing or increasing strength in the value of the Yen would continue to unfavorably impact the Company's material costs. Effects of inflation on Altera's financial results have not been significant. 15 ALTERA CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 PART II OTHER INFORMATION 16 Item 3. Legal Procedings In June 1993, Xilinx, Inc. ("Xilinx") brought suit against the Company seeking monetary damages and injunctive relief based on the Company's alleged infringement of certain patents held by Xilinx. In June 1993, the Company brought suit against Xilinx, seeking monetary damages and injunctive relief based on Xilinx's alleged infringement of certain patents held by the Company. In April 1995, the Company filed a separate lawsuit against Xilinx in Delaware, Xilinx's state of incorporation, seeking monetary damages and injunctive relief based on Xilinx's alleged infringement of one of the Company's patents. In May 1995, Xilinx counterclaimed against the Company in Delaware, asserting defenses and seeking monetary damages and injunctive relief based on the Company's alleged infringement of certain patents held by Xilinx. Due to the nature of the litigation with Xilinx and because the lawsuits are still in the pre-trial stage, the Company's management cannot estimate the total expense, the possible loss, or the range of loss that may ultimately be incurred in connection with the allegations. Management cannot ensure that Xilinx will not succeed in obtaining significant monetary damages or an injunction against the manufacture and sale of the Company's MAX 5000, MAX 7000, FLEX 8000, and MAX 9000 families of products, or succeed in invalidating any of the Company's patents. There can be no assurance that any of such results will not have a material adverse effect on the Company's financial condition or results of operations. In August 1994, Advanced Micro Devices ("AMD") brought suit against the Company seeking monetary damages and injunctive relief based on the Company's alleged infringement by the MAX 7000 product family of certain patents held by AMD. In September 1994, Altera answered the complaint asserting that it is licensed to use the patents which AMD claims are infringed and filed a counterclaim against AMD alleging infringement of certain patents held by the Company. In May 1995, AMD amended its complaint to assert that the Classic, MAX 5000, FLEX 8000, MAX 9000, FLEX 10K, and FLASHlogic product families infringe certain AMD patents. The Company also amended its counterclaim to assert that AMD's products infringe an additional patent owned by the Company. Due to the nature of the litigation with AMD, and because the lawsuit is at an early stage, the Company's management cannot estimate the total expense, the possible loss, if any, or the range of loss that may ultimately be incurred in connection with the allegations. Management cannot ensure that AMD will not succeed in obtaining significant monetary damages or an injunction against the manufacture and sale of the Classic, MAX 5000, MAX 7000, FLEX 8000, MAX 9000, FLEX 10K, and FLASHlogic product families, or succeed in invalidating any of the Company's patents. There can be no assurance that any of such results will not have a material adverse effect on the Company's financial condition or results of operations. 17 Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders of the Company was held on April 26, 1995 at 10:00 a.m., at which time the following matters were acted upon:
Votes Votes Votes Withheld/ Broker Non- Matter Acted Upon For Against Abstentions Votes 1. Rodney Smith 36,860,342 0 772,478 0 Michael A. Ellison 37,520,870 0 111,950 0 Paul Newhagen 37,391,452 0 241,368 0 Robert Reed 37,387,094 0 245,726 0 William Terry 37,528,308 0 104,512 0 2. Approval of amendment to 25,745,216 11,695,314 86,690 105,600 the 1988 Director Stock Option Plan to increase the Common Stock available for issuance by 100,000 shares 3. Approval of amendment to 23,273,316 14,168,124 85,780 105,600 the 1987 Stock Option Plan to increase the Common Stock available for issuance by 1,300,000 shares 4. Approval of amendment to 36,959,324 491,278 76,618 105,600 the 1987 Employee Stock Purchase Plan to increase the Common Stock available for issuance by 200,000 shares 5. Ratification of Price 37,536,914 41,788 54,118 0 Waterhouse LLP as independent accountants for the Company for the year ending December 31, 1995.
18 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.2 Certificate of Amendment of Articles of Incorporation of the Company filed on May 10, 1995. 4.2 Indenture agreement dated as of June 15, 1995 by and between registrant and The First National Bank of Boston, as trustee. 4.3 Form of Convertible Subordinated Note due 2002. 10.39 Wafer Supply Agreement dated June 26, 1995 between registrant and Taiwan Semiconductor Manufacturing Co., Ltd.* 10.40 Option Agreement dated June 26, 1995 between registrant and Taiwan Semiconductor Manufacturing Co., Ltd.* 11.1 Computation of earnings per share (see Note 3 to Financial Information in Part 1 of this Form 10-Q). 27. Financial Data Schedule.
*Confidential treatment requested. (b) Reports on Form 8-K On June 5, 1995, the registrant filed a report on Form 8-K reporting that the registrant had announced its intention, subject to market and other conditions, to raise $150 million in a private placement of convertible subordinated notes to institutional buyers, and up to $172.5 million if an over-allotment option to be granted to the initial purchasers were exercised in full. On June 20, 1995, the registrant filed a report on Form 8-K reporting that the registrant had announced the purchase of approximately 25 acres of undeveloped land for approximately $20,000,000, to be used for development of a new corporate facility. On June 22, 1995, the registrant filed a report on Form 8-K reporting that the registrant had announced that it increased the size of its private placement of 5-3/4% convertible subordinated notes due 2002 from $150 million to $200 million ($230 million including the full over-allotment option) and that the transaction had closed June 21, 1995. 19 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. ALTERA CORPORATION /s/Thomas J. Nicoletti ------------------------------------ Thomas J. Nicoletti, Vice President (duly authorized officer), and Chief Financial Officer (principal financial officer) Date: August 14, 1995 EX-3.2 2 CERT. OF AMEND. MAY 10, 1995 1 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF RESTATED ARTICLES OF INCORPORATION OF ALTERA CORPORATION RODNEY SMITH and MARTIN R. BAKER hereby certify that: 1. They are the President and Secretary, respectively, of ALTERA CORPORATION, a California corporation (the "Corporation"). 2. Article III of the Corporation's Restated Articles of Incorporation is amended and restated to read as follows: "III. This corporation is authorized to issue one class of shares designated Common Stock. The total number of shares of Common Stock this corporation shall have the authority to issue is 80,000,000, without par value. Upon the amendment of this Article III as set forth herein, each share of this corporation's Common Stock shall be divided into two shares of this corporation's Common Stock." 3. The foregoing amendment of the Corporation's Restated Articles of Incorporation has been duly approved by the Corporation's Board of Directors. 4. Pursuant to Section 902(c) of the California Corporations Code, approval of the Corporation's shareholders is not required to effect this amendment to the Corporation's Restated Articles of Incorporation. 5. Pursuant to Section 110(c) of the California Corporations Code, the foregoing amendment of the Corporation's Restated Articles of Incorporation shall become effective at the close of business on May 10, 1995. 2 We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate of Amendment of Restated Articles of Incorporation are true and correct of our own knowledge. Dated: May 5, 1995 /s/ Rodney Smith -------------------------------------- RODNEY SMITH, President /s/ Martin R. Baker -------------------------------------- MARTIN R. BAKER, Secretary -2- EX-4.2 3 INDENTURE AGREEMENT 1 EXHIBIT 4.2 ================================================================================ ALTERA CORPORATION AND THE FIRST NATIONAL BANK OF BOSTON Trustee INDENTURE Dated as of June 15, 1995 5 3/4% Convertible Subordinated Notes Due 2002 ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 1 Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES . . . . . . . . . . . . . . . 8 Section 2.1 Designation, Amount and Issue of Notes . . . . . . . . . . . . . . . . . . 8 Section 2.2 Form of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.3 Date and Denomination of Notes; Payments of Interest . . . . . . . . . . . 9 Section 2.4 Execution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary . . . . . . . . . . . . . . . . . . . 11 Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . . . . . . . . 20 Section 2.7 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 2.8 Cancellation of Notes Paid, Etc. . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE III REDEMPTION OF NOTES . . . . . . . . . . . . . . . 22 Section 3.1 Redemption Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.2 Notice of Redemption; Selection of Notes . . . . . . . . . . . . . . . . . 22 Section 3.3 Payment of Notes Called for Redemption . . . . . . . . . . . . . . . . . . 24 Section 3.4 Conversion Arrangement on Call for Redemption . . . . . . . . . . . . . . . 25 ARTICLE IV SUBORDINATION OF NOTES . . . . . . . . . . . . . . 26 Section 4.1 Agreement of Subordination . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.2 Payments to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.3 Subrogation of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 4.4 Authorization by Noteholders . . . . . . . . . . . . . . . . . . . . . . . 29 Section 4.5 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 4.6 Trustee's Relation to Senior Indebtedness . . . . . . . . . . . . . . . . . 31 Section 4.7 No Impairment of Subordination . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.8 Certain Conversions Deemed Payment . . . . . . . . . . . . . . . . . . . . 31 ARTICLE V PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . 32 Section 5.1 Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . 32 Section 5.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . 32 Section 5.3 Appointments to Fill Vacancies in Trustee's Office . . . . . . . . . . . . 33 Section 5.4 Provisions as to Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 33 Section 5.5 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-i- 3 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 5.6 Rule 144A Information Requirement . . . . . . . . . . . . . . . . . . . . . 34 Section 5.7 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . 35 Section 5.8 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 5.9 Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY . . . . . . . . . 35 Section 6.1 Noteholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 6.2 Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VII DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . 36 Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7.2 Payments of Notes on Default; Suit Therefor . . . . . . . . . . . . . . . . 39 Section 7.3 Application of Monies Collected by Trustee . . . . . . . . . . . . . . . . 41 Section 7.4 Proceedings by Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 7.5 Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.6 Remedies Cumulative and Continuing . . . . . . . . . . . . . . . . . . . . 43 Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.8 Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.9 Undertaking to Pay Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.10 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE VIII CONCERNING THE TRUSTEE . . . . . . . . . . . . . . 45 Section 8.1 Duties and Responsibilities of Trustee. . . . . . . . . . . . . . . . . . . 45 Section 8.2 Reliance on Documents, Opinions, Etc. . . . . . . . . . . . . . . . . . . . 46 Section 8.3 No Responsibility for Recitals, Etc. . . . . . . . . . . . . . . . . . . . 47 Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes. . . . 48 Section 8.5 Monies to Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 8.6 Compensation and Expenses of Trustee. . . . . . . . . . . . . . . . . . . . 48 Section 8.7 Officers' Certificate as Evidence. . . . . . . . . . . . . . . . . . . . . 49 Section 8.8 Conflicting Interests of Trustee. . . . . . . . . . . . . . . . . . . . . . 49 Section 8.9 Eligibility of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 8.10 Resignation or Removal of Trustee. . . . . . . . . . . . . . . . . . . . . 49 Section 8.11 Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . . . . . . 51 Section 8.12 Succession by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 8.13 Limitation on Rights of Trustee as Creditor . . . . . . . . . . . . . . . . 52 ARTICLE IX CONCERNING THE NOTEHOLDERS . . . . . . . . . . . . . 52 Section 9.1 Action by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 9.2 Proof of Execution by Noteholders. . . . . . . . . . . . . . . . . . . . . 53 Section 9.3 Who Are Deemed Absolute Owners . . . . . . . . . . . . . . . . . . . . . . 53 Section 9.4 Company-Owned Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . 53
-ii- 4 TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 9.5 Revocation of Consents; Future Holders Bound . . . . . . . . . . . . . . . 54 ARTICLE X NOTEHOLDERS' MEETINGS . . . . . . . . . . . . . . . 54 Section 10.1 Purpose of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 10.2 Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 10.3 Call of Meetings by Company or Noteholders . . . . . . . . . . . . . . . . 55 Section 10.4 Qualifications for Voting . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 10.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 10.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 10.7 No Delay of Rights by Meeting . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE XI SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . 57 Section 11.1 Supplemental Indentures Without Consent of Noteholders . . . . . . . . . . 57 Section 11.2 Supplemental Indentures with Consent of Noteholders . . . . . . . . . . . . 58 Section 11.3 Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . 59 Section 11.4 Notation on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 11.5 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee . 60 ARTICLE XII CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . . 60 Section 12.1 Company May Consolidate, Etc. on Certain Terms . . . . . . . . . . . . . . 60 Section 12.2 Successor Corporation to Be Substituted . . . . . . . . . . . . . . . . . . 61 Section 12.3 Opinion of Counsel to Be Given Trustee . . . . . . . . . . . . . . . . . . 61 ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . 62 Section 13.1 Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section 13.2 Deposited Monies to Be Held in Trust by Trustee . . . . . . . . . . . . . . 62 Section 13.3 Paying Agent to Repay Monies Held . . . . . . . . . . . . . . . . . . . . . 63 Section 13.4 Return of Unclaimed Monies . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 13.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE XIV IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS . . . . . . . . . . . . . . 63 Section 14.1 Indenture and Notes Solely Corporate Obligations . . . . . . . . . . . . . 63 ARTICLE XV
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PAGE ---- CONVERSION OF NOTES . . . . . . . . . . . . . . . 64 Section 15.1 Right to Convert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends . . . . . . . . . . . . . . . . . . 64 Section 15.3 Cash Payments in Lieu of Fractional Shares . . . . . . . . . . . . . . . . 66 Section 15.4 Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 15.5 Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . . 67 Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale . . . . . . . . . 78 Section 15.7 Taxes on Shares Issued . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock . . 79 Section 15.9 Responsibility of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 15.10 Notice to Holders Prior to Certain Actions . . . . . . . . . . . . . . . . 81 ARTICLE XVI REPURCHASE UPON A DESIGNATED EVENT . . . . . . . . . . . 82 Section 16.1 Repurchase Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 16.2 Notices; Method of Exercising Repurchase Right, Etc. . . . . . . . . . . . 82 Section 16.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 ARTICLE XVII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . 85 Section 17.1 Provisions Binding on Company's Successors . . . . . . . . . . . . . . . . 85 Section 17.2 Official Acts by Successor Corporation . . . . . . . . . . . . . . . . . . 85 Section 17.3 Addresses for Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 17.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 17.5 Evidence of Compliance with Conditions Precedent; Certificates to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 17.6 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 17.7 No Security Interest Created . . . . . . . . . . . . . . . . . . . . . . . 87 Section 17.8 Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 17.9 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 17.10 Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . 87 Section 17.11 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Section 17.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 89 Exhibit A: Form of Note
-iv- 6 INDENTURE, dated as of June 15, 1995, between ALTERA CORPORATION, a California corporation (hereinafter sometimes called the "Company", as more fully set forth in Section 1.1), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association (hereinafter sometimes called the "Trustee", as more fully set forth in Section 1.1). W I T N E S S E T H: WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 5 3/4% Convertible Subordinated Notes due 2002 (hereinafter sometimes called the "Notes"), in an aggregate principal amount not to exceed Two Hundred Thirty Million Dollars ($230,000,000) and, to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and WHEREAS, the Notes, the certificate of authentication to be borne by the Notes, a form of assignment, a form of option to elect repayment upon a Designated Event, a form of conversion notice and a certificate of transfer to be borne by the Notes are to be substantially in the forms hereinafter provided for; and WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid agreement according to its terms, have been done and performed, and the execution of this Indenture and the issue hereunder of the Notes have in all respects been duly authorized; NOW, THEREFORE, THIS INDENTURE WITNESSETH: That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below), as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or 1 7 unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All other terms used in this Indenture, which are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this Indenture. The words "herein," "hereof," "hereunder," and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision. The terms defined in this Article include the plural as well as the singular. Affiliate: of any Person specified 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 or cause the direction of 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. Board of Directors: means the Board of Directors of the Company or a committee of such Board duly authorized to act for it hereunder. Board Resolution: means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or duly authorized committee thereof (to the extent permitted by applicable law), and to be in full force and effect on the date of such certification, and delivered to the Trustee. Business Day: means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which the banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or obligated by law or executive order to close or be closed. Commission: means the Securities and Exchange Commission. Common Stock: means any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Subject to the provisions of Section 15.6, however, shares issuable on conversion of Notes shall include only shares of the class designated as common stock of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications 2 8 thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. Company: means Altera Corporation, a California corporation, and, subject to the provisions of Article XII, shall include its successors and assigns. Conversion Price: has the meaning specified in Article XV. Corporate Trust Office: means the office of the Trustee at which at any particular time its corporate trust business is principally administered, which office is, at the date as of which this Indenture is dated, located at Blue Hills Office Park, 150 Royall Street, Canton, Massachusetts 02021, Attention: Corporate Trust Division, Mail Stop 45-02-15 (Altera Corporation 5 3/4% Convertible Subordinated Notes due 2002). Custodian: means The First National Bank of Boston, as custodian with respect to the Notes in global form, or any successor entity thereto. default: means any event that is, or after notice or passage of time, or both, would be, an Event of Default. Depositary: means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.5(d) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" means or include such successor. Designated Event: has the meaning specified in Article XVI. Exchange Act: means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Event of Default: has the meaning specified in Article VII. Indenture: means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. Note or Notes: means any Note or Notes, as the case may be, authenticated and delivered under this Indenture in accordance with its terms. 3 9 Noteholder; Holders: as applied to any Note, or other similar terms (but excluding the term "beneficial Holder"), means any Person in whose name at the time a particular Note is registered on the Note Registrar's books. Note Register: has the meaning specified in Section 2.5. Note Registrar: has the meaning specified in Section 2.5. Officers' Certificate: when used with respect to the Company, means a certificate signed by (i) the President, the Chief Executive Officer, Executive or Senior Vice President or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title "Vice President") of the Company and (ii) the Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or Controller of the Company, which is delivered to the Trustee. Each such certificate shall include the statements provided for in Section 17.5 if and to the extent required by the provisions of such Section. Opinion of Counsel: means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or other counsel acceptable to the Trustee, which is delivered to the Trustee. Each such opinion shall include the statements provided for in Section 17.5 if and to the extent required by the provisions of such Section. Outstanding: when used with reference to Notes, shall, subject to the provisions of Section 9.4, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except (a) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Notes, or portions thereof, for the payment, redemption or repurchase of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company acts as its own paying agent);provided that if such Notes are to be redeemed or repurchased, as the case may be, prior to the maturity thereof, notice of such redemption or repurchase, as the case may be, shall have been given as provided in Section 3.2 or Article XVI, respectively, or provision satisfactory to the Trustee shall have been made for giving such notice; (c) Notes in lieu of which, or in substitution for which (the "Substituted Notes"), other Notes shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Trustee is 4 10 presented that any such Substituted Notes are held by bona fide Holders in due course; and (d) Notes converted into Common Stock pursuant to Article XV and Notes deemed not Outstanding pursuant to Section 3.2. Person: means a corporation, an association, a partnership, an individual, a joint venture, a joint stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof. PORTAL Market: means the Private Offerings, Resales and Trading through Automated Linkages Market operated by the National Association of Securities Dealers, Inc. or any successor thereto. Predecessor Note: of any particular Note, means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note that it replaces. QIB: means a "qualified institutional buyer" as defined in Rule 144A. Regulation S: means Regulation S as promulgated under the Securities Act. Repurchase Price: has the meaning specified in Section 16.1. Responsible Officer: when used with respect to the Trustee, means an officer of the Trustee assigned to the Corporate Trust Office, and any other officer of the Trustee to whom such matter is referred to because of his knowledge of, and familiarity with, the particular subject. Restricted Securities: has the meaning specified in Section 2.5(d). Rule 144A: means Rule 144A as promulgated under the Securities Act. Securities Act: means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Senior Indebtedness: means the principal of, premium, if any, interest on, and any other payment due pursuant to, any of the following, whether outstanding on the date of this Indenture or thereafter incurred or created: 5 11 (a) All indebtedness of the Company for money borrowed (including, but not limited to, any indebtedness secured by a security interest, mortgage or other lien on the assets of the Company which is (i) given to secure all or part of the purchase price of property subject thereto, whether given to the vendor of such property or to another, or (ii) existing on property at the time of acquisition thereof); (b) All indebtedness of the Company evidenced by notes, debentures, bonds, or other securities (including, but not limited to, those which are convertible or exchangeable for securities of the Company); (c) All indebtedness of the Company due and owing with respect to letters of credit (including, but not limited to, reimbursement obligations with respect thereto); (d) All lease obligations of the Company which are capitalized on the books of the Company in accordance with generally accepted accounting principles and all lease obligations of the Company under any lease or related document (including a purchase agreement) which provides that the Company is contractually obligated to purchase or cause a third party to purchase and thereby guarantee a minimum residual value of the lease property to the lessor 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 indebtedness consisting of commitment or standby fees due and payable to lending institutions with respect to credit facilities available to the Company; (f) All indebtedness consisting of obligations of the Company due and payable under interest rate and currency swaps, floors, caps, or other similar arrangements intended to hedge or fix interest rate or foreign currency exposure; (g) All indebtedness of others of the kinds described in any of the preceding clauses (a), (b), (c), (e), or (f) and all lease obligations of the kind described in the preceding clause (d) assumed by or guaranteed in any manner by the Company or in effect guaranteed by the Company through an agreement to purchase, contingent or otherwise; and (h) All renewals, extensions, refundings, deferrals, amendments, or modifications of indebtedness of the kinds described in any of the preceding clauses (a), (b), (c), (e), (f), or (g) and all renewals or extensions of lease obligations of the kinds described in either of the preceding clauses (d) or (g); 6 12 unless in the case of any particular indebtedness, lease, renewal, extension, refunding, amendment, modification, or supplement, the instrument, lease or other document creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, lease, renewal, extension, refunding, amendment, modification, or supplement is not superior in right of payment to, or pari passu with, the Notes. Notwithstanding the foregoing, Senior Indebtedness shall not include (i) any indebtedness or lease obligations of any kind of the Company to any subsidiary of the Company, a majority of the voting stock of which is owned, directly or indirectly, by the Company, and (ii) indebtedness for trade payables or constituting the deferred purchase price of assets or services incurred in the ordinary course of business. Significant Subsidiary: means, with respect to any Person, a Subsidiary of such Person that would constitute a "significant subsidiary" as such term is defined under Rule 1-02 of Regulation S-X of the Commission. Subsidiary: means a corporation more than fifty percent (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 which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. Trust Indenture Act: means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this Indenture, except as provided in Sections 11.3 and 15.6; provided, however, that in the event the Trust Indenture Act of 1939 is amended after the date hereof, the term "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. Trustee: means The First National Bank of Boston and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at the time serving as successor trustee hereunder. The definitions of certain other terms are as specified in Article XV and Article XVI. 7 13 ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be designated as "5 3/4% Convertible Subordinated Notes due 2002". Notes not to exceed the aggregate principal amount of Two Hundred Million Dollars ($200,000,000) (or Two Hundred Thirty Million Dollars ($230,000,000) if the overallotment option set forth in Section 3 of the Purchase Agreement, dated June 16, 1995, by and between the Company and the other parties thereto, as amended from time to time by the parties thereto, is exercised in full) (except pursuant to Sections 2.6, 3.3, 15.2 and 16.2) upon the execution of this Indenture, or from time to time thereafter, may be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes upon the written order of the Company, signed by its (a) President, Executive or Senior Vice President or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title "Vice President") and (b) Treasurer or Assistant Treasurer or its Secretary or any Assistant Secretary, without any further action by the Company hereunder. Section 2.2 Form of Notes. The Notes and the Trustee's certificate of authentication to be borne by such Notes shall be substantially in the form set forth in Exhibit A, which is incorporated in and made a part of this Indenture. Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends and endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage. Any Note in global form shall represent such of the Outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate amount of Outstanding Notes from time to time endorsed thereon and that the aggregate amount of Outstanding Notes represented thereby may from time to time be increased or reduced to reflect transfers or exchanges permitted hereby. Any endorsement of a Note in global form to reflect the amount of any increase or decrease in the amount of Outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of principal of and interest and premium, 8 14 if any (including any redemption price), on any Note in global form shall be made to the Holder of such Note by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by the Holder of such Note to the Trustee and paying agent (if different from the Trustee). The terms and provisions contained in the form of Note attached as Exhibit A hereto shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Section 2.3 Date and Denomination of Notes; Payments of Interest. The Notes shall be issuable in registered form without coupons in denominations of One Thousand Dollars ($1,000) principal amount and integral multiples thereof. Every Note shall be dated the date of its authentication, shall bear interest from the applicable date and accrued interest shall be payable semiannually on each June 15 and December 15, commencing December 15, 1995, in each case, as specified on the face of the form of Note attached as Exhibit A hereto. The Person in whose name any Note (or its Predecessor Note) is registered at the close of business on any record date with respect to any interest payment date (including any Note that is converted after the record date and on or before the interest payment date) shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Note upon any transfer, exchange or conversion subsequent to the record date and prior to such interest payment date. Interest may, at the option of the Company, be paid by check mailed to the address of such Person on the registry kept for such purposes; provided that, with respect to any Holder of Notes with an aggregate principal amount equal to or in excess of Five Million Dollars ($5,000,000), at the request of such Holder in writing to the Company, interest on such Holder's Notes shall be paid by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by such Holder to the Trustee and paying agent (if different from Trustee). The term "record date" with respect to any interest payment date means the December 1 or June 1 preceding said December 15 or June 15. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any said December 15 or June 15 (herein called "Defaulted Interest") shall forthwith cease to be payable to the Noteholder on the relevant record date by virtue of his having been such Noteholder; and such Defaulted 9 15 Interest shall 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 Notes (or their respective Predecessor Notes) are registered at the close of 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 to be paid on each Note and the date of the payment (which shall be not less than twenty-five (25) days after the Trustee's receipt of such notice, unless the Trustee shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount 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 a special record date for the payment of such Defaulted Interest which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, 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 Noteholder as of such special record date at his address as it appears in the Note Register not less than ten (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 Notes (or their respective Predecessor Notes) were 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 or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system, 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. 10 16 Section 2.4 Execution of Notes. The Notes shall be signed in the name and on behalf of the Company by the facsimile signature of its President, its Chief Executive Officer or any of its Executive or Senior Vice Presidents, or any of its Vice Presidents and attested by the facsimile signature of its Secretary or any of its Assistant Secretaries (which may be printed, engraved or otherwise reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note attached as Exhibit A hereto, manually executed by the Trustee (or an authenticating agent appointed by the Trustee as provided by Section 17.11), shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee (or such an authenticating agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. In case any officer of the Company who shall have signed any of the Notes shall cease to be such officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Note nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Note had not ceased to be such officer of the Company; and any Note may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Note, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such Person was not such an officer. Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary. (a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency of the Company designated pursuant to Section 5.2 being herein sometimes collectively referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-registrars in accordance with Section 5.2. Upon surrender for registration of transfer of any Note to the Note Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.5, the Company shall execute, and the Trustee shall 11 17 authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount upon surrender of the Notes to be exchanged at any such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Noteholder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding. All Notes presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Trustee, the Note Registrar or any co-registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed by the Noteholder thereof or his attorney duly authorized in writing. No service charge shall be charged to the Noteholder for any exchange or registration of transfer of Notes, but the Company may require payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith. None of the Company, the Trustee, the Note Registrar or any co-registrar shall be required to exchange or register a transfer of (a) any Notes for a period of fifteen (15) days next preceding any selection of Notes to be redeemed, or (b) any Notes called for redemption or, if a portion of any Note is selected or called for redemption, such portion thereof selected or called for redemption, or (c) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof surrendered for conversion, or (d) any Notes surrendered for repurchase pursuant to Article XVI or, if a portion of any Note is surrendered for repurchase pursuant to Article XVI, such portion thereof surrendered for repurchase pursuant to Article XVI. All Notes issued upon any transfer or exchange of Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. (b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by 12 18 law, all Notes to be traded on the PORTAL Market or to a Person who is not a U.S. Person (as defined in Regulation S) who is acquiring the Note in an offshore transaction (a "Non-U.S. Person") in accordance with Regulation S shall be represented by a Note in global form registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in such Note in global form which does not involve the issuance of a definitive Note shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depositary therefor. At any time at the request of the beneficial Holder of an interest in a Note in global form, such beneficial Holder shall be entitled to obtain a definitive Note upon written request to the Trustee and the Custodian in accordance with the standing instructions and procedures existing between the Depositary and the Custodian for the issuance thereof. Upon receipt of any such request, the Trustee or the Custodian, at the Trustee's direction, shall cause, in accordance with the standing instructions and procedures existing between the Depositary and the Custodian, the aggregate principal amount of the Note in global form to be reduced by the principal amount of the definitive Note issued upon such request to such beneficial Holder and, following such reduction, the Company shall execute, and the Trustee shall authenticate and deliver to such beneficial Holder (or its nominee), a definitive Note or Notes in the appropriate aggregate principal amount in the name of such beneficial Holder (or its nominee) and bearing such restrictive legends as may be required by this Indenture. Any transfer of a beneficial interest in a Note in global form which cannot be effected through book-entry settlement must be effected by the delivery to the transferee (or its nominee) of a definitive Note or Notes registered in the name of the transferee (or its nominee) on the books maintained by the Trustee in accordance with the transfer restrictions set forth herein. With respect to any such transfer, the Trustee or the Custodian, at the Trustee's direction, shall cause, in accordance with the standing instructions and procedures existing between the Depositary and the Custodian, the aggregate principal amount of the Note in global form to be reduced by the principal amount of the beneficial interest in the Note in global form being transferred and, following such reduction, the Company shall execute, and the Trustee shall authenticate and deliver to the transferee (or such transferee's nominee, as the case may be), a Note or Notes in the appropriate aggregate principal amount in the name of such transferee (or its nominee) and bearing such restrictive legends as may be required by this Indenture. 13 19 (c) So long as the Notes are eligible for book-entry settlement, and unless otherwise required by law, upon any transfer of a definitive Note to a QIB in accordance with Rule 144A or a Non-U.S. Person in accordance with Regulation S, unless otherwise requested by the transferor, and upon receipt of the definitive Note or Notes being so transferred, together with a certification from the transferor that the transferee is a QIB or a Non-U.S. Person (or other evidence satisfactory to the Trustee), (i) the Trustee shall make, or direct the Custodian to make, an endorsement on the Note in global form to reflect an increase in the aggregate principal amount of the Notes represented by the Note in global form by the principal amount of the Note being transferred to the QIB or the Non-U.S. Person, as applicable, and (ii) the Trustee shall cancel such definitive Note or Notes and cause, or direct the Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Custodian, the aggregate principal amount of Notes represented by the Note in global form to be increased accordingly;provided that no definitive Note, or portion thereof, in respect of which the Company or an Affiliate of the Company held any beneficial interest shall be included in such Note in global form until such definitive Note is freely tradable in accordance with Rule 144(k);provided further that the Trustee shall issue Notes in definitive form upon any transfer of a beneficial interest in the Note in global form to the Company or any Affiliate of the Company. Any Note in global form may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the National Association of Securities Dealers, Inc. in order for the Notes to be tradeable on the PORTAL Market or as may be required for the Notes to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject. (d) Every Note that bears or is required under this Section 2.5(d) to bear the legend set forth in this Section 2.5(d) (together with any Common Stock issued upon conversion of the Notes and required to bear the legend set forth in Section 2.5(e), collectively, the "Restricted Securities") shall be subject to the restrictions on transfer set forth in this Section 2.5(d) (including the legend set forth below), unless such restrictions on transfer shall be 14 20 waived by written consent of the Company, and the Holder of each such Restricted Security, by such Holder's acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security. Until three (3) years after the original issuance date of any Note, any certificate evidencing such Note (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon conversion thereof which shall bear the legend set forth in Section 2.5(e), if applicable) shall bear a legend in substantially the following form (unless such Note has been transferred pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee): THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION 15 21 PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C), 2(D) OR 2(E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Any Note (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of such Note for exchange to the Note Registrar in accordance with the provisions of this Section 2.5, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.5(d). Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.5(d)), a Note in global form may not be transferred as a whole or in part except 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. 16 22 The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as the Depositary. Initially, the global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as Custodian. If at any time the Depositary notifies the Company that it is unwilling or unable to continue as Depositary, the Company may appoint a successor Depositary. If a successor Depositary is not appointed by the Company within ninety (90) days after the Company receives such notice, the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of Notes, will authenticate and deliver, Notes in definitive form, in an aggregate principal amount equal to the principal amount of the Note in global form, in exchange for such Note in global form and upon delivery of such Note in global form to the Trustee, such Note in global form shall be canceled. Definitive Notes issued in exchange for all or a part of a Note in global form pursuant to this Section 2.5(d) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such definitive Notes to the Persons in whose names such definitive Notes are so registered. At such time as all interests in a Note in global form have been redeemed, converted, canceled, repurchased or transferred, such Note in global form shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a global Note is exchanged for definitive Notes, redeemed, converted, canceled, repurchased or transferred to a transferee who receives definitive Notes therefor or any definitive Note is exchanged or transferred for part of a Note in global form, the principal amount of such Note in global form shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Note in global form, by the Trustee or the Custodian, at the Trustee's direction, to reflect such reduction or increase. (e) Until three years after the original issuance date of any Note, any stock certificate representing Common Stock issued upon conversion of such Note shall bear a legend in substantially the following form (unless such Common Stock has been sold pursuant to a registration statement that has been 17 23 declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or such Common Stock has been issued upon conversion of Notes that have been transferred pursuant to a registration statement that has been declared effective under the Securities Act or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee and any transfer agent for the Common Stock): THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER, FURNISHES TO THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER AGENT, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE), IT WILL FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A 18 24 TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE OR THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED OR UPON THE EARLIER SATISFACTION OF THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER AGENT, THAT THE COMMON STOCK HAS BEEN OR IS BEING OFFERED AND SOLD IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like aggregate number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 2.5(e). (f) Any certificate evidencing a Note that has been transferred to an Affiliate of the Company within three years after the original issuance date of the Note, as evidenced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof, shall, until three years after the last date on which the Company or any Affiliate of the Company was an owner of such Note, bear a legend in substantially the following form, unless otherwise agreed by the Company (with written notice thereof to the Trustee): THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO ALTERA CORPORATION OR ANY SUBSIDIARY THEREOF, (B) IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT OR (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (2) THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANS- 19 25 FERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Any stock certificate representing Common Stock issued upon conversion of such Note shall also bear a legend in substantially the form indicated above, unless otherwise agreed by the Company (with written notice thereof to the Trustee). Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or stolen, the Company, in its discretion, may execute, and, upon its request the Trustee or an authenticating agent appointed by the Trustee, shall authenticate and deliver, a new Note, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, the Trustee and, if applicable, such authenticating agent such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, the Trustee and, if applicable, such authenticating agent evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof. The Trustee or such authenticating agent may authenticate any such substituted Note and deliver the same upon the receipt of such security or indemnity as the Trustee, the Company and, if applicable, such authenticating agent may require. Upon the issuance of any substituted Note, 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 and any other expenses connected therewith. If any Note which has matured or is about to mature or has been called for redemption or submitted for repurchase or is about to be converted into Common Stock shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Note, pay, or authorize the payment of, or convert, or authorize the conversion of, the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if the 20 26 applicant for such payment or conversion shall furnish to the Company, the Trustee and, if applicable, such authenticating agent such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and, in case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any paying agent or conversion agent of the destruction, loss or theft of such Note and of the ownership thereof. Every substitute Note issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment or conversion of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment or conversion of negotiable instruments or other securities without their surrender. Section 2.7 Temporary Notes. Pending the preparation of definitive Notes, the Company may execute, and the Trustee or an authenticating agent appointed by the Trustee shall, upon the Company's written request, authenticate and deliver, temporary Notes (printed or lithographed). Temporary Notes shall be issuable in any authorized denomination, and substantially in the form of the definitive Notes but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be executed by the Company and authenticated by the Trustee or such authenticating agent upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Notes. Without unreasonable delay, the Company shall execute and deliver to the Trustee or such authenticating agent definitive Notes (other than in the case of Notes in global form) and thereupon any or all temporary Notes (other than any such Note in global form) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 5.2 and the Trustee or such authenticating agent shall authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of definitive Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this 21 27 Indenture as definitive Notes authenticated and delivered hereunder. Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for the purpose of payment, redemption, repurchase, conversion, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent or any Note Registrar or any conversion agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. Upon the Company's written instructions, the Trustee shall destroy canceled Notes and, after such destruction, shall deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are delivered to the Trustee for cancellation. ARTICLE III REDEMPTION OF NOTES Section 3.1 Redemption Prices. The Company may, at its option, redeem all or from time to time any part of the Notes on any date prior to maturity, upon notice as set forth in Section 3.2, and at the optional redemption prices set forth in the form of Note attached as Exhibit A hereto, together with accrued interest, if any, to the date fixed for redemption; provided, however, that no such redemption shall be effected before June 16, 1998. Section 3.2 Notice of Redemption; Selection of Notes. If the Company desires to exercise the right to redeem all or, as the case may be, any part of the Notes pursuant to Section 3.1, it shall fix a date for redemption and it or, at its request (which must be received by the Trustee at least ten (10) Business Days prior to the date the Trustee is requested to give notice as described below unless a shorter period is agreed to by the Trustee), the Trustee, in the name of and at the expense of the Company, shall mail or cause to be mailed a notice of such redemption at least thirty (30) and not more than sixty (60) days prior to the date fixed for redemption to the Holders so to be redeemed as a whole or in part at their last addresses as the same appear on the Note Register (provided that if the Company gives such notice, it shall also give such notice, and notice of the Notes to be redeemed, to the Trustee). Such mailing shall be by first class mail. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any 22 28 Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Each such notice of redemption shall specify the aggregate principal amount of Notes to be redeemed, the date fixed for redemption, the redemption price at which Notes are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Notes, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portion thereof to be redeemed will cease to accrue. Such notice shall also state the current Conversion Price and the date on which the right to convert such Notes or portions thereof into Common Stock will expire. If fewer than all the Notes are to be redeemed, the notice of redemption shall identify the Notes to be redeemed. In case any Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued. On or prior to the last Business Day prior to the redemption date specified in the notice of redemption given as provided in this Section 3.2, the Company shall deposit with the Trustee or with one or more paying agents (or, if the Company is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 5.4) an amount of money sufficient to redeem on the redemption date all the Notes (or portions thereof) so called for redemption (other than those theretofore surrendered for conversion into Common Stock) at the appropriate redemption price, together with accrued interest to the date fixed for redemption. If any Note called for redemption is converted pursuant hereto, any money deposited with the Trustee or any paying agent or so segregated and held in trust for the redemption of such Note shall be paid to the Company upon its request, or, if then held by the Company, shall be discharged from such trust. If fewer than all the Notes are to be redeemed, the Company shall give the Trustee written notice in the form of an Officers' Certificate not fewer than forty-five (45) days (or such shorter period of time as may be acceptable to the Trustee) prior to the redemption date as to the aggregate principal amount of Notes to be redeemed. If fewer than all the Notes are to be redeemed, the Trustee shall select the Notes or portions thereof to be redeemed (in principal amounts of One Thousand Dollars ($1,000) or integral multiples thereof), by lot or, in its sole discretion, on a pro rata basis. If any Note selected for partial redemption is converted in part after such selection, the converted portion of such Note shall be deemed (so far as may be) to be the portion to be selected for redemption. The Notes (or portions thereof) so 23 29 selected shall be deemed duly selected for redemption for all purposes hereof, notwithstanding that any such Note is converted as a whole or in part before the mailing of the notice of redemption. Upon any redemption of less than all Notes, the Company and the Trustee may (but need not) treat as Outstanding any Notes surrendered for conversion during the period of fifteen (15) days next preceding the mailing of a notice of redemption and may (but need not) treat as not Outstanding any Note authenticated and delivered during such period in exchange for the unconverted portion of any Note converted in part during such period. Section 3.3 Payment of Notes Called for Redemption. If notice of redemption has been given as above provided, the Notes or portion of Notes with respect to which such notice has been given shall, unless converted into Common Stock pursuant to the terms hereof, become due and payable on the date and at the place or places stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Company shall default in the payment of such Notes at the redemption price, together with interest accrued to said date) interest on the Notes or portion of Notes so called for redemption shall cease to accrue and such Notes shall cease after the close of business on the Business Day next preceding the date fixed for redemption to be convertible into Common Stock and, except as provided in Sections 8.5 and 13.4, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Notes except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Notes at a place of payment in said notice specified, such Notes or the specified portions thereof to be redeemed shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption; provided that any semi-annual payment of interest becoming due on the date fixed for redemption shall be payable to the Holders of such Notes registered as such on the relevant record date subject to the terms and provisions of Section 2.3 hereof. Upon presentation of any Note redeemed in part only, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder thereof, at the Company's expense, a new Note or Notes, of authorized denominations, in the principal amount equal to the unredeemed portion of the Notes so presented. Notwithstanding the foregoing, the Trustee shall not redeem any Notes or mail any notice of optional redemption during the continuance of a default in payment of interest or premium on the Notes or of any Event of Default of which, in the case of any Event of Default, other than under Section 7.1(a), (b) or 7.1(c), a Responsible Officer has knowledge. If any Note called for 24 30 redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate borne by the Note and such Note shall remain convertible into Common Stock until the principal and premium, if any, shall have been paid or duly provided for. Section 3.4 Conversion Arrangement on Call for Redemption. In connection with any redemption of Notes, the Company may arrange for the purchase and conversion of any Notes by an agreement with one or more investment bankers or other purchasers to purchase such Notes by paying to the Trustee in trust for the Noteholders, on or before the date fixed for redemption, an amount not less than the applicable redemption price, together with interest accrued to the date fixed for redemption, of such Notes. Notwithstanding anything to the contrary contained in this Article III, the Company's obligation to pay the redemption price of such Notes, together with interest accrued to the date fixed for redemption, 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 will be filed with the Trustee prior to the date fixed for redemption, any Notes not duly surrendered for conversion by the Holders thereof may, at the Company's option, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article XV) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the date fixed for redemption (and the right to convert any such Notes shall be deemed to have been extended through such time), subject to payment of the above amount as aforesaid. At the Company's direction, the Trustee shall hold and dispose of any such amount paid to it in the same manner as it would monies deposited with it by the Company for the redemption of Notes. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Notes 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 Notes between the Company and such purchasers to which the Trustee has not consented in writing, including the costs and expenses 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. 25 31 ARTICLE IV SUBORDINATION OF NOTES Section 4.1 Agreement of Subordination. The Company covenants and agrees, and each Holder of Notes by his acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article IV; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees to be bound by such provisions. The payment of the principal of, premium, if any, and interest on all Notes (including, but not limited to, the redemption price or Repurchase Price with respect to the Notes to be redeemed or repurchased, as provided in this Indenture) hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article IV shall prevent the occurrence of any default or Event of Default hereunder. Section 4.2 Payments to Noteholders. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness (or, in the case of Senior Indebtedness 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 Indebtedness), then, unless and until such default shall have been cured or waived or shall have ceased to exist, no payment shall be made by the Company with respect to the principal of, or premium, if any, or interest on the Notes (including, but not limited to, the redemption price or Repurchase Price with respect to the Notes to be redeemed or repurchased, as provided in this Indenture) except payments made pursuant to Article XIII from monies deposited with the Trustee pursuant thereto prior to the happening of such default. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made on account of the principal (and premium, if any) or interest on the Notes (except payments made pursuant to Article XIII from monies deposited with the Trustee 26 32 pursuant thereto prior to the happening of such dissolution, winding-up, liquidation or reorganization or bankruptcy, insolvency, receivership or other such proceedings); and upon any such dissolution or winding-up or liquidation or reorganization or bankruptcy, insolvency, receivership or other such proceedings, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee under this Indenture would be entitled, except for the provision of this Article IV, shall (except as aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, or as otherwise required by law or a court order) or their respective representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the Holders or to the Trustee under this Indenture. If, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of set-off or otherwise), prohibited by the foregoing, shall be received by the Trustee under this Indenture or by any Holders before all Senior Indebtedness is paid in full, or provision is made for such payment in accordance with its terms, such payment or distribution shall be held by the recipient or recipients in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution (or provision therefor) to or for the holders of such Senior Indebtedness. For purposes of this Article IV, 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, the payment of which is subordinated (at least to the extent provided in this Article IV with respect to the Notes) to the payment of all Senior Indebtedness which may at the time be 27 33 outstanding; provided that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from such reorganization or adjustment, and (ii) the rights of the holders of Senior Indebtedness (other than leases which are not assumed by the Company or by the new corporation, as the case may be) are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XII shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 4.2 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XII. Nothing in this Section 4.2 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to the further provisions of Section 4.5. Section 4.3 Subrogation of Notes. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article IV (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to other indebtedness of the Company to substantially the same extent as the Notes are subordinated and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders or the Trustee would be entitled except for the provisions of this Article IV, and no payment over pursuant to the provisions of this Article IV, to or for the benefit of the holders of Senior Indebtedness by Holders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness and the Holders, be deemed to be a payment by the Company to or on account of the Senior Indebtedness; and no payments or distributions of cash, property or securities to or for the benefit of the Holders pursuant to the subrogation provisions of this Article IV, which would otherwise have been paid to the holders of Senior Indebtedness shall be deemed to be a payment by the Company to or for the account of the Notes. It is understood that the provisions of this Article IV are and are intended solely for the purposes of defining the relative rights of the Holders, on the one hand, and the holders of the Senior Indebtedness, on the other hand. 28 34 Nothing contained in this Article IV or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among the Company and its creditors, other than the holders of Senior Indebtedness and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the Holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or any Noteholder from exercising all remedies otherwise permitted by applicable law upon an Event of Default, subject to the rights, if any, under this Article IV of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article IV, the Trustee, subject to the provisions of Section 8.1, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness 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 IV. Section 4.4 Authorization by Noteholders. Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article IV and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 4.5 Notice to Trustee. The Company shall give prompt written notice in the form of an Officers' Certificate to a Responsible Officer and to any paying agent of any fact known to the Company which would prohibit the making of any payment of monies to or by the Trustee or any paying agent in respect of the Notes pursuant to the provisions of this Article IV. Notwithstanding the provisions of this Article IV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any Senior Indebtedness or of any default or event of default with respect to any Senior Indebtedness or of any other facts which would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article IV, unless and until a Responsible Officer shall have received written notice thereof at 29 35 the Corporate Trust Office from the Company (in the form of an Officers' Certificate) or a holder or holders of Senior Indebtedness or from any trustee thereof who shall have been certified by the Company or otherwise established to the reasonable satisfaction of the Trustee to be such holder or trustee; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 8.1, shall be entitled in all respects to assume that no such facts exist; provided that if on a date at least two (2) Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of the principal of, or premium, if any, or interest on any Note), the Trustee shall not have received with respect to such monies the notice provided for in this Section 4.5, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Notwithstanding anything to the contrary hereinbefore set forth, nothing shall prevent (a) any payment by the Company or the Trustee to the Noteholders of amounts in connection with a redemption of Notes if (i) notice of such redemption has been given pursuant to Article III prior to the Trustee's receipt of written notice as aforesaid, and (ii) such notice of redemption is given not earlier than sixty (60) days before the redemption date, (b) any payment by the Company or the Trustee to the Noteholders of amounts in connection with a repurchase of Notes if (i) notice of such repurchase has been given pursuant to Article XVI prior to the Trustee's receipt of written notice as aforesaid, and (ii) such notice of repurchase is given not earlier than thirty (30) days before the repurchase date, or (c) any payment by the Trustee to the Noteholders of monies deposited with it pursuant to Section 13.1. The Trustee, subject to the provisions of Section 8.1, 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 Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. If the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article IV, the Trustee may request such Person to furnish evidence to the Trustee's reasonable satisfaction as to the amount of Senior Indebtedness 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 IV, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial 30 36 determination as to the right of such Person to receive such payment. Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee and any agent of the Company or the Trustee in its individual capacity shall be entitled to all the rights set forth in this Article IV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. Nothing in this Article IV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.6. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article IV, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to Noteholders, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise. Section 4.7 No Impairment of Subordination. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Section 4.8 Certain Conversions Deemed Payment. For the purposes of this Article IV only, (1) the issuance and delivery of junior securities upon conversion of Notes in accordance with Article XV shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest on Notes or on account of the purchase or other acquisition of Notes, and (2) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion of a Note shall be deemed to constitute payment on account of the principal of such Note. For the purposes of this Section 4.8, the term "junior securities" means (a) shares of any stock of any class of the Company and (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or delivery of such 31 37 securities to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article IV. Nothing contained in this Article IV or elsewhere in this Indenture or in the Notes is intended to, or shall, impair, as among the Company and its creditors, other than holders of Senior Indebtedness and the Holders, the right, which is absolute and unconditional, of the Holder of any Note to convert such Note in accordance with Article XV. ARTICLE V PARTICULAR COVENANTS OF THE COMPANY Section 5.1 Payment of Principal, Premium and Interest. The Company covenants and agrees that it will duly and punctually pay, or cause to be paid, the principal of and premium, if any, and interest on each of the Notes at the places, at the respective times and in the manner provided herein and in the Notes. Each installment of interest on the Notes due on any semi-annual interest payment date may be paid by mailing checks for the interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the registry books of the Company, provided that, (i) with respect to any Holder of Notes with an aggregate principal amount equal to or in excess of Five Million Dollars ($5,000,000), at the request of such Holder in writing to the Company, interest on such Holder's Notes shall be paid by wire transfer in immediately available funds in accordance with the wire transfer instructions supplied by such Holder to the Trustee and paying agent (if different from Trustee), and (ii) with respect to any Note in global form, interest on such Note shall be made to the Holder of such Note by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by the Holder of such Note to the Trustee and paying agent (if different from the Trustee). Section 5.2 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or for conversion or redemption and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company fails to maintain any such required office or agency or fails 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 of the Trustee in the Borough of Manhattan, The City of New York. 32 38 The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Trustee as paying agent, Note Registrar, custodian and conversion agent and each of the Corporate Trust Office and the office of BancBoston Trust Company of New York, an Affiliate of the Trustee, located at 55 Broadway, Third Floor, New York, New York 10006, as one such office or agency of the Company for each of the aforesaid purposes. So long as the Trustee is the Note Registrar, the Trustee agrees to mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the third paragraph of Section 8.11. Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, shall appoint, in the manner provided in Section 8.10, a Trustee, so that there shall at all times be a Trustee hereunder. Section 5.4 Provisions as to Paying Agent. (a) If the Company appoints a paying agent other than the Trustee, or if the Trustee appoints such a paying agent, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 5.4: (1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor on the Notes) in trust for the benefit of the Holders of the Notes; (2) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Notes) to make any payment of the principal of and premium, if any, or interest on the Notes when the same shall be due and payable; and (3) that at any time during the continuance of an Event of Default, upon the Trustee's request, it will forthwith pay to the Trustee all sums so held in trust. 33 39 The Company shall, on or before each due date of the principal of, premium, if any, or interest on the Notes, deposit with the paying agent a sum sufficient to pay 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 to take such action. (b) If the Company acts as its own paying agent, it shall, on or before each due date of the principal of, premium, if any, or interest on the Notes, set aside, segregate and hold in trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal, premium, if any, or interest so becoming due and shall notify the Trustee of any failure to take such action and of any failure by the Company (or any other obligor under the Notes) to make any payment of the principal of, premium, if any, or interest on the Notes when the same shall become due and payable. (c) Anything in this Section 5.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay, or cause to be paid, to the Trustee all sums held in trust by the Company or any paying agent hereunder as required by this Section 5.4, such sums to be held by the Trustee upon the trusts herein contained and upon such payment by the Company or any paying agent to the Trustee, the Company or such paying agent shall be released from all further liability with respect to such sums. (d) Anything in this Section 5.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 5.4 is subject to Sections 13.3 and 13.4. Section 5.5 Existence. Subject to Article XII, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if it determines that the preservation thereof is no longer desirable in the conduct of the Company's business and that the loss thereof would not be disadvantageous in any material respect to the Holders. Section 5.6 Rule 144A Information Requirement. During the period beginning on the latest date of the original issuance of any of the Notes and ending on the date that is three years from such date, the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, make available to any Holder or beneficial Holder of Notes which continue to be Restricted Securities or any Common Stock issued upon conversion thereof in connection with any sale 34 40 thereof and any prospective purchaser of Notes or such Common Stock from such Holder or beneficial Holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any Holder or beneficial Holder of the Notes or such Common Stock and that it shall take such further action as any holder or beneficial holder of such Notes or such Common Stock may reasonably request, all to the extent required from time to time to enable such holder or beneficial holder to sell its Notes or Common Stock without registration under the Securities Act within the limitation of the exemption provided by Rule 144A, as such rule may be amended from time to time. Upon the request of any holder or any beneficial holder of the Notes or such Common Stock, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. Section 5.7 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of and premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. Section 5.8 Compliance Certificate. The Company shall deliver to the Trustee within one hundred twenty (120) days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 1995) an Officers' Certificate stating whether or not the signers know of any Event of Default that occurred during such period. If they do, such Officers' Certificate shall describe the Event of Default and its status. Section 5.9 Further Instruments and Acts. Upon the Trustee's request, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. ARTICLE VI NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY Section 6.1 Noteholders' Lists. The Company covenants and agrees to furnish, or cause to be furnished, to the Trustee, semi- 35 41 annually, not more than fifteen (15) days after each December 15 and June 15 in each year beginning with December 15, 1995, and at such other times as the Trustee may request in writing, within thirty (30) days after the Company's receipt of any such request (or such lesser time as the Trustee may reasonably request in order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of Notes as of a date not more than fifteen (15) days (or such other date as the Trustee may reasonably request in order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as the Trustee is acting as Note Registrar or co-registrar. Section 6.2 Reports by Company. The Company shall file with the Trustee (and the Commission if at any time this Indenture becomes qualified under the Trust Indenture Act), and transmit to Holders of Notes, such information, documents and 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 fifteen (15) days after the same is so required to be filed with the Commission. ARTICLE VII DEFAULTS AND REMEDIES Section 7.1 Events of Default. In case one or more of the following events of default ("Events of Default")(whatever the reason for such Event of Default and whether it shall 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) shall have occurred and be continuing, whether or not payment is prohibited by the provisions of Article IV: (a) default in the payment of any installment of interest upon any of the Notes as and when the same shall become due and payable, and continuance of such default for a period of thirty (30) days; or (b) default in the payment of the principal of and premium, if any, on any of the Notes as and when the same shall become due and payable either at maturity or in connection with any redemption, by declaration or otherwise; or 36 42 (c) default in the payment of the Repurchase Price in respect of any Note on the repurchase date therefor in accordance with the provisions of Article XVI; or (d) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes or in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section 7.1 specifically dealt with) continued for a period of sixty (60) days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee, or to the Company and a Responsible Officer by the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Notes at the time Outstanding determined in accordance with Section 9.4; or (e) failure by the Company or any Significant Subsidiary to make any payment at maturity, including any applicable grace period, in respect of indebtedness, which term as used herein means obligations (other than the Notes or non-recourse obligations) of, or guaranteed or assumed by, the Company or any Significant Subsidiary, for borrowed money or evidenced by bonds, debentures, notes or other similar instruments ("Indebtedness") in an amount in excess of Twenty-Five Million Dollars ($25,000,000) or the equivalent thereof in any other currency or composite currency and such failure shall have continued for thirty (30) days after written notice thereof shall have been given to the Company by the Trustee or to the Company and a Responsible Officer by the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Notes at the time Outstanding determined in accordance with Section 9.4; or (f) default by the Company or any Significant Subsidiary with respect to any Indebtedness, which default results in the acceleration of Indebtedness in an amount in excess of Twenty-Five Million Dollars ($25,000,000) or the equivalent thereof in any other currency or composite currency without such Indebtedness having been discharged or such acceleration having been cured, waived, rescinded or annulled for a period of thirty (30) days after written notice thereof shall have been given to the Company by the Trustee or to the Company and a Responsible Officer by the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Outstanding Notes at the time Outstanding determined in accordance with Section 9.4; or (g) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar 37 43 law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or (h) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of ninety (90) consecutive days; or (i) failure by the Company or the Trustee, at the Company's request, to give notice of a Designated Event to all Holders in accordance with Section 16.2; then, and in each and every such case (other than an Event of Default specified in Section 7.1(g) or (h)), unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding hereunder determined in accordance with Section 9.4, by notice in writing to the Company (and to the Trustee if given by Noteholders), may declare the principal of and premium, if any, on all the Notes and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default specified in Section 7.1(g) or (h) occurs and is continuing, the principal of all the Notes and premium, if any, and the interest accrued thereon shall be immediately due and payable. This provision, however, is subject to the conditions that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due has been obtained or entered as hereinafter provided, the Company pays, or deposits with the Trustee a sum sufficient to pay, all matured installments of interest upon all Notes and the principal of and premium, if any, on any and all Notes which have become due otherwise than by acceleration (with interest on overdue installments of interest (to the extent that payment of such interest is enforceable under applicable law) and on such principal and premium, if any, at the rate borne by the Notes, to the date of such payment or deposit) and amounts due to the Trustee pursuant to 38 44 Section 8.6, and if all defaults under this Indenture, other than the nonpayment of principal of and premium, if any, and accrued interest on Notes which become due by acceleration, shall have been cured or waived pursuant to Section 7.7, then and in every such case the Holders of a majority in aggregate principal amount of the Notes then Outstanding, by written notice to the Company and the Trustee, may waive all defaults or Events of Default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or Event of Default, or shall impair any right consequent thereon. The Company shall notify a Responsible Officer, promptly upon becoming aware thereof, of any Event of Default. If the Trustee has proceeded to enforce any right under this Indenture and such proceedings are discontinued or abandoned because of such waiver or rescission and annulment or for any other reason or are determined adversely to the Trustee, then, and in every such case, the Company, the Holders, and the Trustee shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been instituted. Section 7.2 Payments of Notes on Default; Suit Therefor. The Company covenants that (a) in case default shall be made in the payment by the Company of any installment of interest upon any of the Notes as and when the same shall become due and payable, and such default shall have continued for a period of thirty (30) days, or (b) in case default shall be made in the payment of the principal of or premium, if any, on any of the Notes as and when the same shall have become due and payable, whether at maturity of the Notes or in connection with any redemption or repurchase, by declaration under this Indenture or otherwise, then, upon the Trustee's demand, the Company shall pay to the Trustee, for the Holders' benefit, the whole amount that then shall have become due and payable on all such Notes for principal and premium, if any, or interest, or both, as the case may be, with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest at the rate borne by the Notes; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith. Until such demand by the Trustee, the Company may pay the principal of and premium, if any, and interest on the Notes to the registered Holders, whether or not the Notes are overdue. If the Company fails forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express 39 45 trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on the Notes and collect in the manner provided by law out of the property of the Company or any other obligor on the Notes wherever situated the monies adjudged or decreed to be payable. If there are pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Notes under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official has been appointed for or taken possession of the Company or such other obligor, the property of the Company or such other obligor, or in the case of any other judicial proceedings relative to the Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes is then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee has made any demand pursuant to the provisions of this Section 7.2, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Noteholders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due the Trustee under Section 8.6; and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Noteholders to make such payments to the Trustee, and, if the Trustee consents to the making of such payments directly to the Noteholders, to pay to the Trustee any amount due it for reasonable compensation, expenses, advances and disbursements, including counsel fees incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses, advances and disbursements out of the estate in any such proceedings is denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the Holders may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or adopt on behalf of any 40 46 Noteholder any plan of reorganization or arrangement affecting the Notes or the rights of any Noteholder, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding. All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof on any trial or other proceeding relative thereto, and any such suit or 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. In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders, and it shall not be necessary to make any Holders parties to any such proceedings. Section 7.3 Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article VII shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping thereon 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 8.6; Second: Subject to the provisions of Article IV, in case the principal of the Outstanding Notes has not become due and be unpaid, to the payment of interest on the Notes in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by the Notes, such payments to be made ratably to the Persons entitled thereto; Third: Subject to the provisions of Article IV, in case the principal of the Outstanding Notes has become due, by declaration or otherwise, and is unpaid, to the payment of the whole amount then owing and unpaid upon the Notes for principal and premium, if any, and interest, with interest on the overdue principal and premium, if any, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by the Notes; and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of such principal and premium, if any, and 41 47 interest without preference or priority of principal and premium, if any, over interest, or of interest over principal and premium, if any, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal and premium, if any, and accrued and unpaid interest; and Fourth: Subject to the provisions of Article IV, to the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. Section 7.4 Proceedings by Noteholder. No Holder shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 7.7; it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and Holder and the Trustee, that no one or more 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 Holder, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section 7.4, each and every Noteholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Holder to receive payment of the principal of and premium, if any, and interest on such Holder's Note, on or after the respective due dates expressed in such Note, or to institute suit for the enforcement of any such payment on or after such respective dates against the Company shall not be impaired or affected without such Holder's consent. 42 48 Anything in this Indenture or the Notes to the contrary notwithstanding, the Holder of any Note, without the consent of either the Trustee or the Holder of any other Note, in his own behalf and for his own benefit, may enforce, and may institute and maintain any proceeding suitable to enforce, his rights of conversion as provided herein. Section 7.5 Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Section 7.6 Remedies Cumulative and Continuing. Except as provided in Section 2.6, all powers and remedies given by this Article VII to the Trustee or to the Noteholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Noteholders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Noteholder to exercise any right or power accruing upon any default or Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or any acquiescence therein; and, subject to the provisions of Section 7.4, every power and remedy given by this Article VII or by law to the Trustee or the Noteholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or the Noteholders. Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of Noteholders. The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding determined in accordance with Section 9.4 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, however, that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding determined in accordance with Section 9.4 may on behalf of all the Noteholders waive any past default or Event of Default hereunder and its consequences except (i) a default in the payment of interest or premium, if any, on, or the principal of, 43 49 the Notes, (ii) a failure by the Company to convert any Notes into Common Stock, or (iii) a default in respect of a covenant or provision hereof which under Article XI cannot be modified or amended without the consent of all the Holders of Notes then Outstanding. Upon any such waiver the Company, the Trustee and the Holders shall be restored to their former positions and rights hereunder; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder has been waived as permitted by this Section 7.7, such default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90) days after the occurrence of a default or an Event of Default, mail to all Noteholders, as the names and addresses of such Holders appear upon the Note Register, notice of all defaults and Events of Default known to a Responsible Officer, unless such defaults and Events of Default have been cured or waived before the giving of such notice; and provided that, except in the case of default in the payment of the principal of, or premium, if any, or interest on any of the Notes, the Trustee shall be protected in withholding such notice if and so long as a trust committee of directors of the Trustee and/or Responsible Officers in good faith determine that the withholding of such notice is in the Noteholders' interests. Section 7.9 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note 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 in any suit against the Trustee for any action taken 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; provided that the provisions of this Section 7.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than ten percent (10%) in principal amount of the Notes at the time Outstanding determined in accordance with Section 9.4, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of or premium, if any, or interest on any Note on or after the due date expressed in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Article XV. 44 50 Section 7.10 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder 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 VII or by law to the Trustee or the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or the Holders, as the case may be. ARTICLE VIII CONCERNING THE TRUSTEE Section 8.1 Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. If an Event of Default has occurred (which has not been cured or waived) 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. 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: (a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred: (1) the Trustee's duties and obligations shall be determined solely by the express provisions of this Indenture and the Trust Indenture Act, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture and the Trust Indenture Act against the Trustee; and (2) in the absence of bad faith and willful misconduct on the Trustee's part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any 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 provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a 45 51 duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (c) the Trustee shall not be liable to any Noteholder 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 not less than a majority in principal amount of the Notes at the time Outstanding determined as provided in Section 9.4 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 (d) whether or not therein 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 8.1. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise provided in Section 8.1: (a) the Trustee may rely and shall be protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, coupon or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it 46 52 hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) 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 or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee determines 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; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the Trustee's opinion, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity from the Noteholders against such expenses or liability as a condition to so proceeding; the reasonable expenses of every such examination shall be paid by the Company or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Company upon demand; and (f) 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 by it with due care hereunder. Section 8.3 No Responsibility for Recitals, Etc. The recitals contained herein and in the Notes (except in the Trustee's certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in conformity with the provisions of this Indenture. 47 53 Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes. The Trustee, any paying agent, any conversion agent or any Note Registrar, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not Trustee, paying agent, conversion agent or Note Registrar. Section 8.5 Monies to Be Held in Trust. Subject to the provisions of Section 13.4, all monies received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. 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 may be agreed from time to time in writing by the Company and the Trustee. Section 8.6 Compensation and Expenses of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder in any capacity (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee in any capacity under this Indenture and its agents and any authenticating agent for, and to hold them harmless against, any loss, liability or expense incurred without negligence, willful misconduct, recklessness or bad faith on the part of the Trustee or such agent or authenticating agent, as the case may be, and arising out of or in connection with the acceptance or administration of this trust or in any other capacity hereunder, including the costs and expenses of defending themselves against any claim of liability in the premises. The Company's obligations under this Section 8.6 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Notes. The Company's obligation under this Section 8.6 shall survive the satisfaction and discharge of this Indenture. When the Trustee and its agents and any authenticating agent incur expenses or render services after an Event of Default specified in Section 7.1(g) or (h) occurs, the expenses and the 48 54 compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws. Section 8.7 Officers' Certificate as Evidence. Except as otherwise provided in Section 8.1, whenever in the administration of the provisions of this Indenture the Trustee deems it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence, willful misconduct, recklessness and bad faith on the Trustee's part, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such Officers' Certificate, in the absence of negligence, willful misconduct, recklessness and bad faith on the Trustee's part, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof. Section 8.8 Conflicting Interests of Trustee. If the Trustee has or acquires 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 8.9 Eligibility of Trustee. 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 and has a combined capital and surplus of at least Fifty Million Dollars ($50,000,000). If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for the purposes of this Section 8.9, the combined capital and surplus of such Person 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 ceases to be eligible in accordance with the provisions of this Section 8.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. Section 8.10 Resignation or Removal of Trustee. (a) The Trustee may at any time resign by giving written notice of such resignation to the Company and the Company shall mail, or cause to be mailed, notice thereof to the Holders at their addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee has been so appointed and has accepted appointment sixty (60) days after the mailing of such notice 49 55 of resignation to the Noteholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Noteholder who has been a bona fide Holder of a Note or Notes for at least six (6) months may, subject to the provisions of Section 7.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) If at any time any of the following occur: (1) the Trustee fails to comply with Section 8.8 after written request therefor by the Company or any Noteholder who has been a bona fide Holder of a Note or Notes for at least six (6) months, or (2) the Trustee ceases to be eligible in accordance with the provisions of Section 8.9 and fails to resign after written request therefor by the Company or any such Noteholder, or (3) the Trustee becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property is appointed, or any public officer takes 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, the Company may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.9, any Noteholder who has been a bona fide Holder of a Note or Notes for at least six (6) months 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. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding may at any time remove the Trustee and nominate a successor trustee which shall be deemed appointed as successor trustee unless within ten (10) days after notice to the Company of such nomination the Company objects thereto, in which case the Trustee so removed or any Noteholder, upon the terms and conditions and otherwise as in Section 8.10(a) provided, may petition any 50 56 court of competent jurisdiction for an appointment of a successor trustee. (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 8.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 8.11. Section 8.11 Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 8.10 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 8.6, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon all property and funds held or collected by such trustee as such, except for funds held in trust for the benefit of Holders of particular Notes, to secure any amounts then due it pursuant to Section 8.6. No successor trustee shall accept appointment as provided in this Section 8.11 unless at the time of such acceptance such successor trustee is qualified under Section 8.8 and is eligible under Section 8.9. Upon acceptance of appointment by a successor trustee as provided in this Section 8.11, each of the Company and the former trustee shall mail, or cause to be mailed, notice of the succession of such trustee hereunder to the Holders at their addresses as they appear on the Note Register. If the Company fails to mail such notice within ten (10) days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the Company's expense. Section 8.12 Succession by Merger, Etc. 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 is a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor to the 51 57 Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that in the case of any corporation succeeding to all or substantially all of the corporate trust business of the Trustee such corporation shall be qualified under Section 8.8 and eligible under Section 8.9. If at the time such successor to the Trustee succeeds to the trusts created by this Indenture, any of the Notes have been authenticated but not delivered, such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee or authenticating agent appointed by such predecessor trustee, and deliver such Notes so authenticated; and if at that time any of the Notes have not been authenticated, any successor to the Trustee or an authenticating agent appointed by such successor trustee may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the successor trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 8.13 Limitation on Rights of Trustee as Creditor. If and when the Trustee is or becomes a creditor of the Company (or any other obligor upon the Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of the claims against the Company (or any such other obligor). ARTICLE IX CONCERNING THE NOTEHOLDERS Section 9.1 Action by Noteholders. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Noteholders in person or by agent or proxy appointed in writing, or (b) by the record of the Holders voting in favor thereof at any meeting of Noteholders duly called and held in accordance with the provisions of Article X, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Noteholders. Whenever the Company or the Trustee solicits the taking of any action by the Holders, the Company or the Trustee may fix in advance of such solicitation a 52 58 date as the record date for determining Holders entitled to take such action. The record date shall be not more than fifteen (15) days prior to the date of commencement of solicitation of such action. Section 9.2 Proof of Execution by Noteholders. Subject to the provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any instrument by a Noteholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be proved by the Note Register or by a certificate of the Note Registrar. The record of any Noteholders' meeting shall be proved in the manner provided in Section 10.6. Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any paying agent, any conversion agent and any Note Registrar may deem the Person in whose name such Note shall be registered upon the Note Register to be, and may treat him as, the absolute owner of such Note (whether or not such Note is overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on such Note, for conversion of such Note and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any conversion agent nor any Note Registrar shall be affected by any notice to the contrary. All such payments so made to any Holder for the time being, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon any such Note. Section 9.4 Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes which are owned by the Company or any other obligor on the Notes or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor on the Notes shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action only Notes which a Responsible Officer knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 9.4 if the pledgee establishs to the Trustee's satisfaction the pledgee's right to vote such Notes and that the pledgee is not the Company, any other obligor on the Notes or a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any 53 59 such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon the Trustee's request, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above described Persons; and, subject to Section 8.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are Outstanding for the purpose of any such determination. Section 9.5 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 9.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note which is shown by the evidence to be included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 9.2, revoke such action so far as it concerns such Note. Except as aforesaid, any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Notes issued in exchange or substitution therefor, irrespective of whether any notation in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor. ARTICLE X NOTEHOLDERS' MEETINGS Section 10.1 Purpose of Meetings. A meeting of Noteholders may be called at any time and from time to time pursuant to the provisions of this Article X for any of the following purposes: (1) to give any notice to the Company or the Trustee or to give any directions to the Trustee permitted under this Indenture, or to consent to the waiving of any default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Noteholders pursuant to any of the provisions of Article VII; (2) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VIII; (3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 11.2; 54 60 (4) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Notes under any other provision of this Indenture or under applicable law; or (5) to take any other action authorized by this Indenture or under applicable law. Section 10.2 Call of Meetings by Trustee. The Trustee may at any time call a meeting of Noteholders to take any action specified in Section 10.1, to be held at such time and at such place in Boston, Massachusetts or the Borough of Manhattan, The City of New York, as the Trustee determines. Notice of every meeting of the Noteholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting and the establishment of any record date pursuant to Section 9.1, shall be mailed to Holders at their addresses as they appear on the Note Register. Such notice shall also be mailed to the Company. Such notices shall be mailed not less than twenty (20) nor more than ninety (90) days prior to the date fixed for the meeting. Any meeting of Noteholders shall be valid without notice if the Holders of all Notes then Outstanding are present in person or by proxy or if notice is waived before or after the meeting by the Holders of all Notes Outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice. Section 10.3 Call of Meetings by Company or Noteholders. If at any time the Company, pursuant to a resolution of its Board of Directors, or the Holders of at least ten percent (10%) in aggregate principal amount of the Notes then Outstanding, have requested the Trustee to call a meeting of Noteholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee has not mailed the notice of such meeting within twenty (20) days after receipt of such request, then the Company or such Noteholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 10.1, by mailing notice thereof as provided in Section 10.2. Section 10.4 Qualifications for Voting. To be entitled to vote at any meeting of Noteholders a Person shall (a) be a Holder of one or more Notes on the record date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a Holder of one or more Notes. The only Persons who shall be entitled to be present or to speak at any meeting of Noteholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. 55 61 Section 10.5 Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Noteholders, in regard to proof of the holding of Notes 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 thinks fit. The Trustee shall, by an instrument, appoint a temporary chairman of the meeting, unless the meeting has been called by the Company or Noteholders as provided in Section 10.3, in which case the Company or the Noteholders 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 Holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the meeting. Subject to Section 9.4, at any meeting each Noteholder or proxyholder shall be entitled to one vote for each One Thousand Dollars ($1,000) principal amount of Notes held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note 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 other than by virtue of Notes held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other Noteholders. Any meeting of NoteHolders duly called pursuant to the provisions of Section 10.2 or Section 10.3 may be adjourned from time to time by the Holders of a majority of the aggregate principal amount of Notes represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. Section 10.6 Voting. The vote upon any resolution submitted to any meeting of Noteholders shall be by written ballot on which shall be subscribed the signatures of the Holders or their representatives by proxy and the principal amount of the Notes 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 in duplicate of the proceedings of each meeting of Noteholders 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 mailed as provided in Section 10.2. The record 56 62 shall show the principal amount of the Notes voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other 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. Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Noteholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or the Noteholders under any of the provisions of this Indenture or of the Notes. ARTICLE XI SUPPLEMENTAL INDENTURES Section 11.1 Supplemental Indentures Without Consent of Noteholders. The Company, when authorized by the resolutions of the Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to make provision with respect to the conversion rights of the Holders pursuant to the requirements of Section 15.6; (b) subject to Article IV, to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Notes, any property or assets; (c) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article XII; (d) to add to the covenants of the Company such further covenants, restrictions or conditions as the Board of Directors and the Trustee consider to be for the Holders' benefit, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth;provided, however, that in respect of any such additional covenant, restriction or condition, such supplemental indenture may provide for a particular period of grace after 57 63 default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default; (e) to provide for the issuance under this Indenture of Notes in coupon form (including Notes registrable as to principal only) and to provide for exchangeability of such Notes with the Notes issued hereunder in fully registered form and to make all appropriate changes for such purpose; (f) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture which shall not materially adversely affect the interests of the Holders; (g) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes; or (h) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualifications of this Indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 11.1 may be executed by the Company and the Trustee without the consent of any of the Holders at the time Outstanding, notwithstanding any of the provisions of Section 11.2. Section 11.2 Supplemental Indentures with Consent of Noteholders. With the consent (evidenced as provided in Article IX) of the Holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Notes at the time Outstanding (determined in accordance with Section 9.4), the Company, when authorized by the resolutions of the Board of Directors, and the Trustee may from time to time and at any time 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 58 64 or any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof or premium, if any, thereon, or reduce any amount payable on redemption or repurchase thereof, change the obligation of the Company to repurchase any Note at the option of the Holder thereof upon the happening of a Designated Event, or impair or affect the right of any Noteholder to institute suit for the payment thereof, or make the principal thereof or interest or premium, if any, thereon payable in any coin or currency other than that provided in the Notes, or impair the right to convert the Notes into Common Stock subject to the terms set forth herein, including Section 15.6, or modify the provisions of this Indenture with respect to the subordination of the Notes in a manner adverse to the Noteholders, without the consent of the Holder of each Note so affected, or (ii) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of all Notes then Outstanding. Upon the Company's request, accompanied by a copy of the resolutions of the Board of Directors certified by its Secretary or Assistant Secretary authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may, in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Noteholders under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Section 11.3 Effect of Supplemental Indentures. Any supplemental indenture executed pursuant to this Article XI shall comply with the Trust Indenture Act, as then in effect. Upon the execution of any supplemental indenture pursuant to this Article XI, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. 59 65 Section 11.4 Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article XI may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company's expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 17.11), and delivered in exchange for the Notes then Outstanding, upon surrender of such Notes then Outstanding. Section 11.5 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee. The Trustee, subject to Sections 8.1 and 8.2, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article XI. ARTICLE XII CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE Section 12.1 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 12.2, nothing contained in this Indenture or in any of the Notes shall prevent, without the Noteholders' consent, any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors are a party or parties, or shall prevent any sale, conveyance or lease (or successive sales, conveyances or leases) of all or substantially all of the property of the Company, to any other corporation (whether or not affiliated with the Company), authorized to acquire and operate the same and which is organized under the laws of the United States of America, any state thereof or the District of Columbia; provided, however, and the Company hereby covenants and agrees, that upon any such consolidation, merger, sale, conveyance or lease, the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company, shall be expressly assumed, by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee by the corporation (if other than the Company) formed by such consolidation, or into which the Company shall have been merged, or by the corporation which shall have acquired or leased such property, and such supplemental indenture shall provide for the applicable conversion rights set forth in Section 15.6. 60 66 Section 12.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance or lease and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of Altera Corporation any or all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes which previously have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Notes which such successor corporation thereafter causes to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, conveyance or lease, the Person named as the "Company" in the first paragraph of this Indenture or any successor which shall thereafter have become such in the manner prescribed in this Article XII may be dissolved, wound up and liquidated at any time thereafter and such Person shall be released from its liabilities as obligor and maker of the Notes and from its obligations under this Indenture. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate. Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee, subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance or lease and any such assumption complies with this Article XII. 61 67 ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE Section 13.1 Discharge of Indenture. When (a) the Company delivers to the Trustee for cancellation all Notes theretofore authenticated (other than any Notes which have been destroyed, lost or stolen and in lieu of or in substitution for which other Notes have been authenticated and delivered) and not theretofore canceled, or (b) all the Notes not theretofore canceled or delivered to the Trustee for cancellation have become due and payable, or are by their terms to become due and payable within one (1) year or are to be called for redemption within one (1) year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company deposits with the Trustee, in trust, funds sufficient to pay at maturity or upon redemption of all of the Notes (other than any Notes which have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Notes have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, and if in either case the Company also pays, or causes to be paid, all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange and conversion of Notes, (ii) rights hereunder of Noteholders to receive payments of principal of and premium, if any, and interest on, the Notes and the other rights, duties and obligations of Noteholders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee and (iii) the rights, obligations and immunities of the Trustee hereunder), and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel as required by Section 17.5 and at the Company's cost and expense, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Notes. Section 13.2 Deposited Monies to Be Held in Trust by Trustee. Subject to Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1 shall be held in trust and applied by it to the payment, notwithstanding Article IV, either directly or through any paying agent (including the Company, if acting as its own paying agent), to the Holders of the particular Notes for the payment or redemption of which such monies have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest and premium, if any. 62 68 Section 13.3 Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any paying agent (other than the Trustee) shall, upon the Company's demand, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such monies. Section 13.4 Return of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of, premium, if any, or interest on Notes and not applied but remaining unclaimed by the Holders for two (2) years after the date upon which the principal of, premium, if any, or interest on such Notes, as the case may be, have become due and payable, shall be repaid to the Company by the Trustee on demand and all liability of the Trustee shall thereupon cease with respect to such monies; and the Holder of any of the Notes shall thereafter look only to the Company for any payment which such Holder may be entitled to collect unless an applicable abandoned property law designates another Person. Section 13.5 Reinstatement. If (i) the Trustee or the paying agent is unable to apply any money in accordance with Section 13.2 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the Holders of at least fifty-one percent (51%) in principal amount of the then Outstanding Notes so request by written notice to the Trustee, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.1 until such time as the Trustee or the paying agent is permitted to apply all such money in accordance with Section 13.2; provided, however, that if the Company makes any payment of interest on or principal of any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders to receive such payment from the money held by the Trustee or paying agent. ARTICLE XIV IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS Section 14.1 Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of or premium, if any, or interest on any Note, or for any claim based thereon or otherwise in respect thereof, 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 Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, shareholder, employee, agent, officer or director or subsidiary, as such, past, present or 63 69 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; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. ARTICLE XV CONVERSION OF NOTES Section 15.1 Right to Convert. Subject to and upon compliance with the provisions of this Indenture, each Holder shall have the right, at his option, at any time after sixty (60) days following the latest date of original issuance of the Notes and prior to the close of business on June 15, 2002 (except that, with respect to any Note or portion of a Note which is called for redemption, such right shall terminate, except as provided in the fourth paragraph of Section 15.2, at the close of business on the last Trading Day prior to the date fixed for redemption of such Note or portion of a Note unless the Company defaults in the payment due upon redemption thereof and such right shall terminate with respect to any Note or portion thereof subject to a duly completed election for repurchase unless the Company defaults in the payment due upon repurchase) to convert the principal amount of any Note held by such Holder, or any portion of such principal amount which is One Thousand Dollars ($1,000) or an integral multiple thereof, into that number of fully paid and non-assessable shares of Common Stock (as such shares shall then be constituted) obtained by dividing the principal amount of the Note or portion thereof surrendered for conversion by the Conversion Price in effect at such time, by surrender of the Note so to be converted in whole or in part in the manner provided in Section 15.2. A Holder is not entitled to any rights of a holder of Common Stock until such Holder has converted his Notes to Common Stock, and only to the extent such Notes are deemed to have been converted to Common Stock under this Article XV. Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends. To exercise, in whole or in part, the conversion privilege with respect to any Note in definitive form, the Holder of such Note shall surrender such Note, duly endorsed, at an office or agency maintained by the Company pursuant to Section 5.2, accompanied by the funds, if any, required by the penultimate paragraph of this Section 15.2, and shall give written notice of conversion in the form provided on the Notes (or such other notice which is acceptable to the Company) to the office or agency that the Holder elects to convert such Note or such portion thereof 64 70 specified in said notice. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock which are issuable on such conversion shall be issued, and shall be accompanied by transfer taxes, if required pursuant to Section 15.7. Each such Note surrendered for conversion shall, unless the shares issuable on conversion are to be issued in the same name as the registration of such Note, be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the Holder or his duly authorized attorney. To exercise the conversion privilege with respect to any interest in a Note in global form, the beneficial holder must complete the appropriate instruction form for conversion pursuant to the Depositary's book-entry conversion program, deliver by book-entry delivery an interest in such Note in global form, furnish appropriate endorsements and transfer documents if required by the Company or the Trustee or conversion agent, and pay the funds, if any, required by the penultimate paragraph of this Section 15.2 and any transfer taxes, if required pursuant to Section 15.7. As promptly as practicable after satisfaction of the requirements for conversion set forth above, and subject to compliance with any restrictions on transfer if shares issuable on conversion are to be issued in a name other than that of the Noteholder (as if such transfer were a transfer of the Note or Notes (or portion thereof) so converted), the Company shall issue and shall deliver to such Holder at the office or agency maintained by the Company for such purpose pursuant to Section 5.2, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such Note or portion thereof in accordance with the provisions of this Article XV and a check or cash in respect of any fractional interest in respect of a share of Common Stock arising upon such conversion, as provided in Section 15.3 (which payment, if any, shall be paid no later than five (5) Business Days after satisfaction of the requirements for conversion set forth above). In case any Note of a denomination greater than One Thousand Dollars ($1,000) is surrendered for partial conversion, and subject to Section 2.3, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of the Note so surrendered, without charge to him, a new Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note. Each conversion shall be deemed to have been effected as to any such Note (or portion thereof) on the date on which the requirements set forth above in this Section 15.2 have been satisfied as to such Note (or portion thereof), and the Person in whose name any certificate or certificates for shares of Common Stock are issuable upon such conversion shall be deemed to have become on said date the holder of record of the shares represented thereby; provided, however, that any such surrender on any date 65 71 when the Company's stock transfer books are closed shall constitute the Person in whose name the certificates are to be issued as the record holder thereof for all purposes on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such Note is surrendered. Any Note or portion thereof surrendered for conversion during the period from the close of business on the record date for any interest payment through the close of business on the Trading Day next preceding such interest payment date shall (unless such Note or portion thereof being converted has been called for redemption on a date in such period) be accompanied by payment, in funds acceptable to the Company, of an amount equal to the interest otherwise payable on such interest payment date on the principal amount being converted; provided, however, that no such payment need be made if there exists at the time of conversion a default in the payment of interest on the Notes. An amount equal to such payment shall be paid by the Company on such interest payment date to the Holder of such Note at the close of business on such record date; provided, however, that if the Company defaults in the payment of interest on such interest payment date, such amount shall be paid to the Person who made such required payment. Except as provided above in this Section 15.2, no adjustment shall be made for interest accrued on any Note converted or for dividends on any shares issued upon the conversion of such Note as provided in this Article XV. Upon the conversion of an interest in a Note in global form, the Trustee, or the Custodian, at the Trustee's direction, shall make a notation on such Note in global form as to the reduction in the principal amount represented thereby. Section 15.3 Cash Payments in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon conversion of Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered for conversion. If any fractional share of stock otherwise would be issuable upon the conversion of any Note or Notes, the Company shall make an adjustment therefor in cash at the current market value thereof to the Holder of the Notes. The current market value of a share of Common Stock shall be the Closing Price on the first Trading Day immediately preceding the day on which the Notes (or specified portions thereof) are deemed to have been converted and such Closing Price shall be determined as provided in Section 15.5(g). 66 72 Section 15.4 Conversion Price. The conversion price shall be as specified in the form of Note (herein called the "Conversion Price") attached as Exhibit A hereto, subject to adjustment as provided in this Article XV. Section 15.5 Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time by the Company as follows: (a) If the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 15.5(g)) fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 15.5(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (b) If the Company shall issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them (for a period expiring within forty-five (45) days after the date fixed for the determination of shareholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 15.5(g)) on the Record Date fixed for the determination of shareholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record Date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price, and of which the denominator shall be the number of shares of Common Stock outstanding on the close of business on the Record Date plus the total number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of 67 73 shareholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of shareholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, with the value of such consideration, if other than cash, to be determined by the Board of Directors. (c) If the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 15.5(a) applies) or evidences of its indebtedness, cash or other assets (including securities, but excluding any rights or warrants referred to in Section 15.5(b) and dividends and distributions paid exclusively in cash and excluding any capital stock, evidences of indebtedness, cash or assets distributed upon a merger or consolidation to which Section 15.6 applies) (the foregoing hereinafter in this Section 15.5(d) called the "Securities")), then, in each such case, the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date (as defined in Section 15.5(g)) with respect to such 68 74 distribution by a fraction of which the numerator shall be the Current Market Price (determined as provided in Section 15.5(g)) on such date less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) on such date of the portion of the Securities so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price, such reduction to become effective immediately prior to the opening of business on the day following the Record Date;provided, however, that in the event the then fair market value (as so determined) of the portion of the Securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right to receive upon conversion of a Note (or any portion thereof) the amount of Securities such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 15.5(d) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price pursuant to Section 15.5(g) to the extent possible. 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 be deemed not to have been distributed for purposes of this Section 15.5(d) (and no adjustment to the Conversion Price under this Section 15.5(d) shall be required) until the occurrence of the earliest Trigger Event. If such right or warrant is subject to subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different securities, evidences of indebtedness or other assets or entitle the holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be deemed to be the date of issuance and record date with respect to a new right or warrant (and a termination or expiration of the existing right 69 75 or warrant without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Conversion Price under this Section 15.5(d), (1) in the case of any such rights or warrants which are all redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase 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 such rights or warrants all of which have expired or been terminated without exercise, the Conversion Price shall be readjusted as if such rights and warrants had never been issued. Notwithstanding any other provision of this Section 15.5(d) to the contrary, rights, warrants, evidences of indebtedness, other securities, cash or other assets shall be deemed not to have been distributed for purposes of this Section 15.5(d) if the Company makes proper provision so that each Holder who converts a Note (or any portion thereof) after the date fixed for determination of shareholders entitled to receive such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of such distributions that such Holder would have been entitled to receive if such Holder had, immediately prior to such determination date, converted such Note into Common Stock; provided that, with respect to any rights, warrants or other securities ("Securities") that are convertible, exchangeable or exercisable, the foregoing provision shall only apply to the extent (and so long as) the Securities receivable upon conversion of such Note would be convertible, exchangeable or exercisable, as applicable, without any loss of rights or privileges, for a period of at least sixty (60) days following conversion of such Note. For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any dividend or distribution to which this Section 15.5(d) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 15.5(b) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock or rights or warrants to which 70 76 Section 15.5(b) applies (and any Conversion Price reduction required by this Section 15.5(d) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Conversion Price reduction required by Sections 15.5(a) and (b) with respect to such dividend or distribution shall then be made, except that (A) the Record Date of such dividend or distribution shall be substituted as "the date fixed for the determination of shareholders entitled to receive such dividend or other distribution", "Record Date fixed for such determination" and "Record Date" within the meaning of Section 15.5(a) and as "the date fixed for the determination of shareholders entitled to receive such rights or warrants", "the Record Date fixed for the determination of the shareholders entitled to receive such rights or warrants" and "such Record Date" within the meaning of Section 15.5(b) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of Section 15.5(a). (e) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a merger or consolidation to which Section 15.6 applies or as part of a distribution referred to in Section 15.5(d)) in an aggregate amount that, combined together with (1) the aggregate amount of any other such distributions to all holders of its Common Stock made exclusively in cash within the twelve (12) months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to this Section 15.5(e) has been made, and (2) 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 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 (12) months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to Section 15.5(f) has been made, exceeds ten percent (10%) of the product of the Current Market Price (determined as provided in Section 15.5(g)) on the Record Date with respect to such distribution times the number of shares of Common Stock outstanding on such date, then, and in each such case, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction (i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) the excess of such combined amount over such ten percent (10%) and (y) the number 71 77 of shares of Common Stock outstanding on the Record Date and (ii) the denominator of which shall be equal to the Current Market Price on such Record Date;provided, however, that if the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right to receive upon conversion of a Note (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. Any cash distribution to all holders of Common Stock as to which the Company makes the election permitted by Section 15.5(m) and as to which the Company has complied with the requirements of such Section shall be treated as not having been made for all purposes of this Section 15.5(e). (f) If a tender offer made by the Company or any of its subsidiaries for all or any portion of the Common Stock expires and such tender offer (as amended upon the expiration thereof) requires the payment to shareholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) that, combined together with (1) 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 consideration payable in respect of any other tender offers, by the Company or any of its subsidiaries for all or any portion of the Common Stock expiring within the twelve (12) months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 15.5(f) has been made and (2) the aggregate amount of any distributions to all holders of the Common Stock made exclusively in cash within twelve (12) months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to Section 15.5(e) has been made, exceeds ten percent (10%) of the product of the Current Market Price (determined as provided in Section 15.5(g)) 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) on 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 72 78 Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to close of business on the date of the Expiration Time by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction (if any) to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 15.5(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 15.5(f). (g) For purposes of this Section 15.5, the following terms shall have the meaning indicated: (1) "Closing Price" with respect to any securities on any day means the closing sale price regular way on such day or, if no such sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in each case on The Nasdaq Stock Market or New York Stock Exchange, as applicable, or, if such security is not listed or admitted to trading on such national market or exchange, on the principal national security exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security on the over-the- counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or, if not so available, in such manner as furnished by any New York Stock Exchange member firm 73 79 selected from time to time by the Board of Directors for that purpose, or a price determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution. (2) "Current Market Price" means the average of the daily Closing Prices per share of Common Stock for the ten (10) consecutive Trading Days immediately prior to the date in question; provided, however, that (1) if the "ex" date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e) or (f) occurs during such ten (10) consecutive Trading Days, the Closing Price for each Trading Day prior to the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event, (2) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event, and (3) if the "ex" date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 15.5(d) or (f), whose determination shall be conclusive and described in a Board Resolution) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For purposes of any computation under Section 15.5(f), the Current Market Price on any date shall be deemed to be the average of the daily Closing Prices per share of Common Stock for such day and the next two (2) succeeding Trading Days; provided, however, that if the "ex" date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant 74 80 to Section 15.5(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution, (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective, and (3) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 15.5, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 15.5 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. (3) "fair market value" shall mean the amount which a willing buyer would pay a willing seller in an arm's length transaction. (4) "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). (5) "Trading Day" shall mean (x) if the applicable security is listed or admitted for trading on the New York Stock Exchange or another national security exchange, a day on which the New York Stock Exchange or another national security exchange is open for business 75 81 or (y) if the applicable security is quoted on The Nasdaq Stock Market, a day on which trades may be made thereon or (z) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (h) The Company may make such reductions in the Conversion Price, in addition to those required by Sections 15.5(a), (b), (c), (d), (e) and (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least twenty (20) days, the reduction is irrevocable during the period and the Board of Directors has made a determination that such reduction would be in the Company's best interests, which determination shall be conclusive and described in a Board Resolution. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the Holder of each Note at his last address appearing on the Note Register a notice of the reduction at least fifteen (15) days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect. (i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by reason of this Section 15.5(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article XV shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Common Stock. (j) Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Trustee and any conversion agent other than the Trustee an Officers' Certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such 76 82 adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each Holder at his last address appearing on the Note Register within twenty (20) days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. (k) In any case in which this Section 15.5 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Note converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such Holder any amount in cash in lieu of any fraction pursuant to Section 15.3. (l) For purposes of this Section 15.5, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (m) In lieu of making any adjustment to the Conversion Price pursuant to Section 15.5(e), the Company may elect to reserve an amount of cash for distribution to the Holders upon the conversion of the Notes so that any such Holder converting Notes will receive upon such conversion, in addition to the shares of Common Stock and other items to which such Holder is entitled, the full amount of cash which such Holder would have received if such Holder had, immediately prior to the Record Date for such distribution of cash, converted its Notes into Common Stock, together with any interest accrued with respect to such amount, in accordance with this Section 15.5(m). The Company may make such election by providing an Officers' Certificate to the Trustee to such effect on or prior to the payment date for any such distribution and depositing with the Trustee on or prior to such date an amount of cash equal to the aggregate amount that the Holders would have received if such Holders had, immediately prior to the Record Date for such distribution, converted all of the Notes into Common Stock. Any such funds so deposited by the Company with the Trustee shall be invested by the Trustee in marketable obligations issued or fully guaranteed by the United States government with a maturity not more than three (3) months from the date of issuance. Upon conversion of Notes by a Holder, such Holder shall be entitled to receive, in addition to the 77 83 Common Stock issuable upon conversion, an amount of cash equal to the amount such Holder would have received if such Holder had, immediately prior to the Record Date for such distribution, converted its Note into Common Stock, along with such Holder's pro-rata share of any accrued interest earned as a consequence of the investment of such funds. Promptly after making an election pursuant to this Section 15.5(m), the Company shall give or shall cause to be given notice to all Noteholders of such election, which notice shall state the amount of cash per One Thousand Dollars ($1,000) principal amount of Notes such Holders shall be entitled to receive (excluding interest) upon conversion of the Notes as a consequence of the Company having made such election. Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale. If any of the following events occur: (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or combination of the Company with another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, or (iii) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing corporation, as the case may be, shall execute with 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 if such supplemental indenture is then required to so comply) providing that the Notes shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of the Notes (assuming, for such purposes, a sufficient number of authorized shares of Common Stock available to convert all such Notes) immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance assuming such holder of Common Stock did not exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance (provided that, if the kind or amount of securities, cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election have not been exercised ("non-electing share"), then, for the purposes of this Section 15.6, the kind and amount of securities, 78 84 cash or other property receivable upon such consolidation, merger, statutory exchange, sale or conveyance for 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 which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article XV. If, in the case of any such reclassification, change, consolidation, merger, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder at his address appearing on the Note Register within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture. The above provisions of this Section 15.6 shall similarly apply to successive reclassifications, changes, consolidations, mergers, combinations, sales and conveyances. If this Section 15.6 applies to any event or occurrence, Section 15.5 shall not apply. Section 15.7 Taxes on Shares Issued. The issue of stock certificates on conversions of Notes shall be made without charge to the converting Noteholder for any tax in respect of the issue thereof. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of the Holder of any Note converted, and the Company shall not be required to issue or deliver any such stock certificate unless and until the Person or Persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock. The Company shall provide, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, sufficient shares to provide for the conversion of the Notes from time to time as such Notes are presented for conversion. 79 85 Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value, if any, of the shares of Common Stock issuable upon conversion of the Notes, the Company shall take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue shares of such Common Stock at such adjusted Conversion Price. The Company covenants that all shares of Common Stock issued upon conversion of Notes will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof. The Company further covenants that if at any time the Common Stock is listed on the New York Stock Exchange or any other national securities exchange the Company shall, if permitted by the rules of such exchange, list and keep listed, so long as the Common Stock shall be so listed on such exchange, all Common Stock issuable upon conversion of the Notes. Section 15.9 Responsibility of Trustee. The Trustee and any other conversion agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other conversion agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Note; and the Trustee and any other conversion agent make no representations with respect thereto. Subject to the provisions of Section 8.1, neither the Trustee nor any conversion agent shall be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any note for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article XV. Without limiting the generality of the foregoing, neither the Trustee nor any conversion agent shall have any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 15.6 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Noteholders upon the conversion of their Notes after any event referred to in such Section 15.6 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 8.1, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers' Certificate (which the Company shall be obligated to file 80 86 with the Trustee prior to the execution of any such supplemental indenture) with respect thereto. Section 15.10 Notice to Holders Prior to Certain Actions. If: (a) the Company declares a dividend (or any other distribution) on its Common Stock (other than in cash out of retained earnings or other than a dividend that results in an adjustment in the Conversion Price pursuant to Section 15.5 as to which the Company has made an election in accordance with Section 15.5(m)); or (b) the Company authorizes the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any share of any class or any other rights or warrants; or (c) there is any reclassification of the Common Stock (other than a subdivision or combination of outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (d) there is any voluntary or involuntary dissolution, liquidation or winding-up of the Company; then the Company shall cause to be filed with the Trustee and to be mailed to each Holder at his address appearing on the Note Register as promptly as possible but in any event at least fifteen (15) days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. 81 87 ARTICLE XVI REPURCHASE UPON A DESIGNATED EVENT Section 16.1 Repurchase Right. (a) If, at any time prior to June 15, 2002, a Designated Event occurs, then each Holder shall have the right, at such Holder's option, to require the Company to repurchase all of such Holder's Notes, or any portion thereof (in principal amounts of One Thousand Dollars ($1,000) or integral multiples thereof), on the repurchase date that is thirty (30) days after the date of the Company Notice (as defined in Section 16.2) of such Designated Event (or, if such 30th day is not a Business Day, the next succeeding Business Day). Such repayment shall be made in cash at a price equal to one hundred percent (100%) of the principal amount of Notes such Holder elects to have the Company repurchase (the "Repurchase Price");provided that if such repurchase date is a June 15 or a December 15, then the interest payable on such date shall be paid to the Holder of record of the Note on the next preceding June 1 or December 1, respectively. In each case, the Company shall also pay to such Holders accrued interest to the repurchase date on the redeemed Notes. No Notes may be redeemed at the option of Holders upon a Designated Event if an Event of Default has occurred and is continuing, other than a default in the giving of the Company Notice or a default in the payment of the Repurchase Price with respect to such Notes on the repurchase date. Section 16.2 Notices; Method of Exercising Repurchase Right, Etc. (a) Unless the Company has theretofore called for redemption all of the Outstanding Notes, on or before the fifteenth (15th) calendar day after the occurrence of a Designated Event, the Company or, at the Company's request, the Trustee, shall mail to all Holders a notice (the "Company Notice") of the occurrence of the Designated Event and of the repurchase right set forth herein arising as a result thereof. The Company shall also deliver a copy of such notice of a repurchase right to the Trustee and cause a copy of such notice of a repurchase right, or a summary of the information contained therein, to be published in a newspaper of general circulation in The City of New York. The Company Notice shall contain the following information: (1) the repurchase date, (2) the date by which the repurchase right must be exercised, 82 88 (3) the Repurchase Price, (4) a description of the procedure which a Holder must follow to exercise the repurchase right, and (5) the Conversion Price then in effect, the date on which the right to convert the principal amount of the Notes to be repurchased will terminate and the place or places where Notes may be surrendered for conversion. No failure of the Company to give the foregoing notices or any defect therein shall limit any Holder's right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Notes. If any of the foregoing provisions are inconsistent with applicable law, such law shall govern. (b) To exercise a repurchase right, a Holder shall deliver to the Trustee on or before the thirtieth (30th) day after the Company Notice (i) irrevocable written notice to the Company (or an agent designated by the Company for such purpose) of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Notes to be repurchased, and a statement that an election to exercise the repurchase right is being made thereby, and (ii) the Notes with respect to which the repurchase right is being exercised, duly endorsed for transfer to the Company. Such written notice shall be irrevocable, and, subject to Section 16.2(c), upon the exercise of the repurchase right in accordance with this Section 16.2(b), the Holder's right to convert the Notes (or portion thereof) as to which the repurchase right has been exercised shall terminate. (c) If the Company fails to repurchase on the repurchase date any Notes (or portions thereof) as to which the repurchase right has been properly exercised, then the principal of such Notes shall, until paid, bear interest to the extent permitted by applicable law from the repurchase date at the rate borne by the Notes and each such Note shall be convertible into Common Stock in accordance with this Indenture (without giving effect to Section 16.2(b)) until the principal of such Note has been paid or duly provided for. (d) Any Note which 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 deliver to the 83 89 Holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, of any authorized denomination as requested by such Holder in an aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Note so surrendered. (e) On or prior to the repurchase date, the Company shall deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust as provided in Section 5.4) an amount of money sufficient to pay the Repurchase Price of the Notes that are to be repurchased on the repurchase date. Section 16.3 Certain Definitions. For purposes of this Article XVI: (a) the term "beneficial owner" shall be determined in accordance with Rule 13d-3 and 13d-5, as in effect on the date of the original execution of this Indenture, promulgated by the Commission pursuant to the Exchange Act; (b) the term "person" or "group" shall include any syndicate or group which would be deemed to be a "person" under Section 13(d)(3) and 14(d) of the Exchange Act, as in effect on the date of the original execution of this Indenture; and (c) the term "Continuing Director" means at any date a member of the Company's Board of Directors (i) who was a member of such board on June 16, 1995, or (ii) who was nominated or elected by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Company's Board of Directors was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election. (Under this definition, if the Company's current Board of Directors were to approve a new director or directors and then resign, no Change in Control would occur even though the current Board of Directors would thereafter cease to be in office). (d) the term "Designated Event" means a Change in Control or a Termination of Trading: (e) the term "Change in Control" means an event or series of events as a result of which (i) any person or group is or becomes the beneficial owner of shares representing more than fifty percent (50%) of the combined voting power of the then outstanding securities entitled to vote generally in elections of directors of the Company (the "Voting Stock"), (ii) the Company consolidates with or merges into any other 84 90 corporation, or conveys, transfers or leases all or substantially all of its assets to any person, or any other corporation merges into the Company, and, in the case of any such transaction, the outstanding common stock of the Company is changed or exchanged as a result, unless the shareholders of the Company immediately before such transaction own, directly or indirectly, immediately following such transaction, at least fifty-one percent (51%) of the combined voting power of the outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership of the Voting Stock immediately before such transaction, or (iii) Continuing Directors do not constitute a majority of the Board of Directors of the Company (or, if applicable, a successor corporation to the Company); provided that a Change in Control shall not be deemed to have occurred if either (x) the Closing Price of the Common Stock for any five (5) Trading Days during the ten (10) Trading Days immediately preceding the Change in Control is at least equal to one hundred five percent (105%) of the Conversion Price in effect on the date on which the Change of Control occurs or (y) at least ninety percent (90%) of the consideration (excluding cash payments for fractional shares) in the transaction or transactions constituting the Change in Control consists of common stock that is, 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 (f) "Termination of Trading" shall have occurred if the Common Stock (or other common stock into which the Notes are then convertible) is neither listed for trading on a United States national securities exchange nor approved for trading on an established automated over-the-counter trading market in the United States. ARTICLE XVII MISCELLANEOUS PROVISIONS Section 17.1 Provisions Binding on Company's Successors. All the Company's covenants, stipulations, promises and agreements contained herein shall bind its successors and assigns whether so expressed or not. Section 17.2 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corpo- 85 91 ration that at the time is the lawful sole successor of the Company. Section 17.3 Addresses for Notices, Etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or the Holders on the Company shall be deemed to have been sufficiently given or made for all purposes if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee) to Altera Corporation, 2610 Orchard Parkway, San Jose, California, 95134-2020, Attention: Chief Financial Officer. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box addressed to the Corporate Trust Office, which office is, at the date as of which this Indenture is dated, located at Blue Hills Office Park, 150 Royall Street, Canton, Massachusetts 02021, Attention: Corporate Trust Division (Altera Corporation 5.75% Convertible Subordinated Notes due 2002). The Trustee, by written notice to the Company, and the Company, by written notice to the Trustee, may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail, postage prepaid, at his address as it appears on the Note Register and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 17.4 Governing Law. This Indenture and each Note shall be deemed to be a contract made under the laws of New York, and for all purposes shall be construed in accordance with the laws of New York. Section 17.5 Evidence of Compliance with Conditions Precedent; Certificates to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions 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 have been complied with. 86 92 Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (3) a statement that, in the opinion of such Person, 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 or not, in the opinion of such Person, such condition or covenant has been complied with. Section 17.6 Legal Holidays. If the date of maturity of interest on or principal of the Notes or the date fixed for redemption of any Note will not be a Business Day, then payment of such interest on or principal of the Notes need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period from and after such date. Section 17.7 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction. Section 17.8 Trust Indenture Act. This Indenture is hereby made subject to, and shall be governed by, the provisions of the Trust Indenture Act required to be part of and to govern indentures qualified under the Trust Indenture Act, provided that this Section 17.8 shall not require that this Indenture or the Trustee be qualified under the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party hereto that any such qualification is required. Section 17.9 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto, any paying agent, any authenticating agent, any Note Registrar and their successors hereunder, the Holders and the holders of Senior Indebtedness, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 17.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. 87 93 Section 17.11 Authenticating Agent. The Trustee may appoint an authenticating agent which shall be authorized to act on its behalf and subject to its direction in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Notes. For all purposes of this Indenture, the authentication and delivery of Notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes "by the Trustee" and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee's certificate of authentication. Such authenticating agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 8.9. Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section 17.11, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation. Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and the Company. Upon receiving such a notice of resignation or upon such a termination, or if at any time any authenticating agent ceases to be eligible under this Section 17.11, the Trustee shall promptly appoint a successor authenticating agent (which may be the Trustee), shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Holders as the names and addresses of such Holders appear on the Note Register. The Trustee agrees to pay to the authenticating agent from time to time reasonable compensation for its services (to the extent pre-approved by the Company in writing), and the Trustee shall be entitled to be reimbursed for such pre-approved payments, subject to Section 8.6. The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall be applicable to any authenticating agent. 88 94 Section 17.12 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The First National Bank of Boston hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions hereinabove set forth. 89 95 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly signed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first written above. ALTERA CORPORATION By: /s/ Paul Newhagen ---------------------------------- Title: Vice President ------------------------------- Attest: /s/ Martin R. Baker ---------------------------------- THE FIRST NATIONAL BANK OF BOSTON, as Trustee By: /s/ Traci Martin ---------------------------------- Title: Senior Account Administrator ------------------------------- Attest: /s/ Kecia R. Banks ---------------------------------- 90 EX-4.3 4 FORM OF CONVERTIBLE NOTE DUE 2002 1 EXHIBIT 4.3 ALTERA CORPORATION 5-3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2002 THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE 2(C), 2(D) OR 2(E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. CUSIP 021441 AA 8 ALTERA CORPORATION, a corporation duly organized and validly existing under the laws of the State of California (herein called the "Company", which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to , or registered assigns, the principal sum of Dollars 2 on June 15, 2002, and to pay interest on said principal sum semi-annually on June 15 and December 15 of each year, commencing December 15, 1995, at the rate per annum specified in the title of this Note, accrued from the June 1 or December 1 as the case may be, next preceding the date of this Note to which interest has been paid or duly provided for, unless the date of this Note is a date to which interest has been paid or duly provided for, in which case interest shall accrue from the date of this Note, or unless no interest has been paid or duly provided for on this Note, in which case interest shall accrue from June 21, 1995, until payment of said principal sum has been made or duly provided for. Notwithstanding the foregoing, if the date hereof is after any June 1 or December 1, as the case may be, and before the following June 15 or December 15, this Note shall bear interest from such June 15 or December 15, respectively; provided, however, that if the Company shall default in the payment of interest due on such June 15 or December 15, then this Note shall bear interest from the next preceding June 15 or December 15 to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for on this Note, from June 21, 1995. The interest so payable on any June 15 or December 15 will be paid to the person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the record date, which shall be the June 1 or December 1 (whether or not a Business Day) next preceding such June 15 or December 15, respectively; provided that any such interest not punctually paid or duly provided for shall be payable as provided in the indenture. Payment of the principal of and interest accrued on this Note shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or, at the option of the Holder of this Note, at the Corporate Trust Office, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, provided however, that at the Company's option, payment of interest may be made by check mailed to the registered address of the person entitled thereto. Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions subordinating the payment of principal of and premium, if any, and interest on this Note to the prior payment in full of all Senior Indebtedness, as defined in the Indenture, and provisions giving the Holder of this Note the right to convert this Note into Common Stock on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with and governed by the laws of said State. This note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. Dated: ALTERA CORPORATION TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes described in the within-named indenture. Attest: By: THE FIRST NATIONAL BANK OF BOSTON, as Trustee
By: AUTHORIZED SIGNATORY ASSISTANT SECRETARY PRESIDENT -2- 3 ALTERA CORPORATION 5-3/4% CONVERTIBLE SUBORDINATED NOTE DUE 2002 This Note is one of a duly authorized issue of Notes of the Company, designated as its 5-3/4% Convertible Subordinated Notes due 2002 (herein called the "Notes"), limited to the aggregate principal amount of $230,000,000, all issued or to be issued under and pursuant to an indenture, dated as of June 15, 1995 (herein called the "Indenture"), between the Company and The First National Bank of Boston (herein called the "Trustee"), to which the Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of and accrued interest on all Notes may be declared, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than sixty-six and two-thirds percent (66-2/3%) of the aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (1) extend the fixed maturity of any Note, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof or premium, if any thereon, or reduce any amount payable on redemption or repurchase thereof, change or impair the obligation of the Company to repurchase any Note at the option of the Holder upon the happening of a Designated Event, or impair or affect the right of any Noteholder to institute suit for the payment thereof, or make the principal thereof of interest or premium, if any, thereon payable in any coin or currency other than that provided in the Notes, or modify the provisions of the Indenture with respect to the subordination of the Notes in manner adverse to the Noteholders, or impair the right to convert the Notes into Common Stock subject to the terms set forth in the Indenture, including Section 15.6 thereof, without the consent of the Holder of each Note so affected, or (ii) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of all Notes then outstanding. It is also provided in the Indenture that, prior to any declaration accelerating the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past default or Event of Default under the Indenture and its consequences expect a default in the payment of interest or any premium on or the principal of or any redemption price or Repurchase Price of any of the Notes or the company's failure to convert any Notes into Common Stock. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof, irrespective of whether or not any notion thereof is made upon this Note or such other Notes. The indebtedness evidenced by the Notes is, to the extent and in the manner provided in the Indenture, expressly subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, as defined in the Indenture, whether outstanding at the date of the Indenture or thereafter incurred, and this Note is issued subject to the provisions of the Indenture with respect to such subordination. Each Holder of this Note, by accepting the same, agrees to and shall be bound by such provisions and authorizes the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and appoints the Trustee his attorney in fact for such purpose. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the Company's obligation, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note at the place, at the respective times, at the rate and in the coin or currency herein prescribed. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes are issuable in registered form without coupons in denominations of One Thousand Dollars ($1,000) principal amount and integral multiples thereof. At the office or agency of the Company, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment -3- 4 of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations. The Notes will not be redeemable at the Company's option prior to June 16, 1998. On or after such date and prior to maturity the Notes may be redeemed at the Company's option as a whole, or from time to time in part, upon mailing a notice of such redemption not less than thirty (30) nor more than sixty (60) days before the date fixed for redemption to the Holders of Notes at their last registered addresses, all as provided in the Indenture, at the following redemption prices (expressed as percentages of the principal amount), together in each case with accrued interest to, but excluding, the date fixed for redemption. If redeemed during the 12-month period beginning June 15 (or June 16, in the case of 1998):
Year Percentage Year Percentage ---- ---------- ---- ---------- 1998 103.29% 2000 101.64% 1999 102.46 2001 100.82
and one hundred percent (100%) at June 15, 2002; provided that if the date fixed for redemption is a June 15 or December 15, then the interest payable on such date shall be paid to the Holder of record on the next preceding June 1 or December 1, respectively. The Notes are not subject to redemption through the operation of any sinking fund. Upon the occurrence of a "Designated Event" prior to June 15, 2002, the Noteholder has the right, at such Holder's option, to require the Company to repurchase all or any portion of such Holders' Notes on the thirtieth (30th) day after notice of such Designated Event at a price equal to one hundred percent (100%) of the principal amount of the Notes, together in each case with accrued interest to the date fixed for redemption; provided that if such repurchase date is June 15 or December 15, then the interest payable on such date shall be paid to the Holder of record of the Note on the next preceding June 1 or December 1, respectively. The Company shall mail to all Holders of record of the Notes a notice of the occurrence of a Designated Event and of the repurchase right arising as a result thereof on or before fifteen (15) calendar days after the occurrence of such Designated Event. Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, at any time after sixty (60) days following the latest date of original issuance of the Notes and prior to the close of business on June 15, 2002, or, as to all or any portion hereof called for redemption, prior to the close of business on the Trading Day next preceding the date fixed for redemption (unless the Company shall default in payment due upon redemption), to convert the principal hereof or any portion of such principal which is One Thousand Dollars ($1,000) or an integral multiple thereof, into that number of fully paid and non-assessable shares of Company's Common Stock, as said shares shall be constituted at the date of conversion, obtained by dividing the principal amount of this Note or portion thereof to be converted by the Conversion Price of $51.17 or such Conversion Price as adjusted from time to time as provided in the Indenture, upon surrender of this Note, together with a conversion notice as provided in the Indenture and this Note, to the Company at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, or at the option of such Holder, the Corporate Trust Office, and, unless the shares issuable on conversion are to be issued in the same name as this Note, duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the company duly executed by, the Holder or by his duly authorized attorney. No adjustment in respect of interest or dividends will be made upon any conversion; provided, however, that if this Note shall be surrendered for conversion during the period from the close of business on any record date for the payment of interest through the close of business on the Trading Day next preceding the following interest payment date, this Note (unless it or the portion being converted shall have been called for redemption on a date in such period) must be accompanied by an amount, in funds acceptable to the Company, equal to the interest otherwise payable on such interest payment date on the principal amount being converted. No fractional shares of Common Stock will be issued upon conversion, but an adjustment in cash will be paid to the Holder, as provided in the Indenture, in respect of any fraction of a share which would otherwise be issuable upon the surrender of any Note or Notes for conversion. -4- 5 Any Notes called for redemption, unless surrendered for conversion on or before the close of business on the date fixed for redemption, may be deemed to be purchased from the Holder of such Notes at an amount equal to the applicable redemption price, together with accrued interest to the date fixed for redemption, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Notes from the Holders thereof and convert them into Common Stock and to make payment for such Notes as aforesaid to the Trustee in trust for such Holders. Upon due presentment for registration of transfer of this Note at the office or agency of the Company in the Borough of Manhattan, The City of New York, or at the option of the Holder of this Note, at the Corporate Trust Office, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith. The Company, the Trustee, any authenticating agent, any paying agent, any conversion agent and any Note Register may deem and treat the registered Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Company or any Note Registrar), for the purpose of receiving payment hereof, or on account hereof, for the conversion hereof and for all purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any paying agent nor any other conversion agent nor any Note Registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum paid, satisfy and discharge liability for monies payable on this Note. No recourse for the payment of the principal of or any premium or interest on this Note, or for any claim based hereon or otherwise in respect hereof, 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 Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer, 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 the consideration for the issue hereof, expressly waived and released. Terms used in this Note and defined in the Indenture are used herein as therein defined. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT-- TEN ENT - as tenants by entireties _____________________ Custodian JT TEN - as tenants with right of (Cust) survivorship and not as _____________________ under tenants in common (Minor) Uniform Gifts to Minors Act ____________________ (State) Additional abbreviations may also be used though not in the above list. -5- 6 CONVERSION NOTICE To: Altera Corporation: The undersigned registered owner of this Note hereby irrevocably exercises the option to convert this Note, or the portion hereof (which is One Thousand Dollars ($1,000) principal amount or an integral multiple thereof) below designated, into shares of Common Stock in accordance with the terms of the indenture referred to in this Note, and directs that the shares issuable and deliverable upon such conversion, together with any check in payment for fractional shares and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If shares or any portion of this Note not converted are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest accompanies this Note. Dated: ________________________________ ____________________________________ Fill in for registration of shares to be issued, and Notes if to be delivered, ____________________________________ other than to and in the name of the (Signatures) registered Holder: Signature(s) must be guaranteed by _______________________________________ an eligible Guarantor Institution (Name) (banks, stock, brokers, savings and loan associations and credit _______________________________________ unions) with membership in an (Street Address) approved signature guarantee medallion program pursuant to _______________________________________ Securities and Exchange Commission (City, State and Zip Code) Rule 17Ad-15 if shares of Common Please print name and address Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered Holder. ____________________________________ Signature Guaranteed Principal amount to be converted (if less than all): $_________________,000 ____________________________________ Social Security or Other Taxpayer Identification Number -6- 7 OPTION TO ELECT REPURCHASE UPON A DESIGNATED EVENT To: Altera Corporation The undersigned registered new owner of this Note hereby irrevocably acknowledges receipt of a notice from Altera Corporation (the "Company") as to the occurrence of a Designated Event with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is One Thousand Dollars ($1,000) principal amount or an integral multiple thereof) below designated, in accordance with the terms of the indenture referred to in this Note, together with accrued interest to such date, to the registered Holder hereof. Dated: ________________________________ ____________________________________ ____________________________________ (Signatures) NOTICE: The above signatures of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. Principal amount to be repaid (if less than all): $_________________,000 ____________________________________ Social Security or Other Taxpayer Identification Number -7- 8 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 Note, and hereby irrevocably constitutes and appoints ________________________________________________________________________________ attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the within Note occurring within three years of the original issuance of such Note, the undersigned confirms that such Note is being transferred: [ ] To Altera Corporation or a subsidiary thereof; or [ ] Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or [ ] To an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or [ ] Pursuant to and in compliance with Regulation S under the Securities Act of 1933, as amended; and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): [ ] The transferee is an Affiliate of the Company. Dated: ________________________________ ____________________________________ ____________________________________ (Signatures) Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered Holder. ____________________________________ Signature Guaranteed NOTICE: The signature on the conversion notice, the option to elect repurchase upon a Designated Event or the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. -8- EX-10.39 5 WAFER SUPPLY AGREEMENT JUNE 26, 1995 1 EXHIBIT 10.39 WAFER SUPPLY AGREEMENT BETWEEN ALTERA CORPORATION AND TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. JUNE 26, 1995 2 WAFER SUPPLY AGREEMENT PREAMBLE This agreement ("Agreement") is entered into effective June 26, 1995 (the "Effective Date") by and between the following parties (the "Parties"): TAIWAN SEMICONDUCTOR MANUFACTURING CO. LTD, a corporation organized under the laws of Taiwan, with its principal place of business located at the following address: No. 121, Park Avenue 3 Science Based Industrial Park Hsin-Chu, Taiwan, R.O.C. (hereinafter referred to as "TSMC"); and ALTERA CORPORATION, a corporation organized under the laws of the State of California U.S.A., with its principal place of business located at the following address: 2610 Orchard Parkway San Jose, California 95134-2020 (hereinafter referred to as "Altera"). RECITALS A. Altera designs and markets integrated circuit products, and desires to obtain an additional manufacturing source for certain of its products. B. TSMC manufactures integrated circuits designed and marketed by other parties and possesses wafer fabrication facilities suitable for manufacturing the Altera products. TSMC desires to manufacture and supply these products to Altera. AGREEMENT Now, therefore, the Parties agree as follows: 1.0 Definitions 1.1 "Device" shall mean good die of Altera integrated circuits meeting the parametric and electrical specifications set forth in Exhibit 1.1. Good die are those which meet agreed to specifications. 3 1.2 "Packaged Devices" shall mean Devices packaged and tested in accordance with Altera specifications. 1.3 "TSMC Processes" shall mean TSMC's 0.6um SPDM, 0.6um SPTM and 0.5um SPTM processes, and/or such other processes or successor processes as may be mutually acceptable. 1.4 "Device Family" shall mean any group of products using the same base layers. 1.5 "Wafers" shall mean 6-inch, 8-inch, and other sized silicon wafers manufactured by TSMC using any of the TSMC Processes and an Altera design and mask set (or database tape) for integrated circuits. 1.6 "Proprietary Information" shall mean (i) this Agreement, including all exhibits; and any technical specifications, prices, schedules, specifications and the like negotiated in implementation of this Agreement, and (ii) any information including but not limited to technical information, database tapes, specifications, test tapes, masks and supporting documentation provided either orally, in writing or in machine readable format and masks or reticles generated by or for TSMC using Altera's database tapes, provided that all such information is marked "Confidential" or similarly, or, if oral, identified as proprietary at the time of disclosure. Notwithstanding the foregoing, Proprietary Information does not include information generally available to the public, information independently developed or known by the receiving Party without reference to information disclosed hereunder, provided that the receiving Party can demonstrate such independent development or knowledge by substantial documentation, information rightfully received from a third party without confidentiality obligations, information authorized in writing for release by the disclosing Party hereunder, or information required to be disclosed pursuant to law or governmental regulation provided that the disclosing Party is given reasonable notice prior to any such disclosure. 1.7 "Code Layer" shall mean mask layers which make a device unique to a custom requirement and different from others of the same device family. 1.8 "Altera Products" shall mean the products listed in Exhibit 1.1 as modified from time to time by agreement between Altera and TSMC. 2.0 Process Technology 2.1 TSMC will transfer to Altera the process design rules and related information, as more fully described in Exhibit 2.1.1., to enable Altera to design products to be manufactured by TSMC. Altera will transfer to TSMC product design files and related information, as more fully described in Exhibit 2.1.2. It is understood that the information of each disclosing Party is the Proprietary Information of the disclosing Party and will remain the property of the disclosing Party. -2- 4 2.2 TSMC will run the TSMC Processes pursuant to this Agreement for the purpose of manufacturing Wafers exclusively for Altera in accordance with the qualification plan described in Exhibit 2.2.1. All Wafers shall meet the reliability and quality specifications described in Exhibit 2.2.2. 2.3 TSMC will provide Altera with a list of TSMC's acceptable mask vendors. Altera will provide one of these mask vendors, as mutually agreed, with device database tapes. TSMC will provide the mask vendor with mask alignment and test structure database, and oversee merging of device and mask alignment databases by the mask vendor. Altera will bear the cost of original mask sets, subject to its advance approval of the cost. 2.4 After TSMC has provided Altera with sufficient Wafers for qualification, but prior to completion of full qualification, Altera may request that TSMC provide a mutually agreed quantity of additional Wafers or "risk starts." TSMC will provide these additional Wafers to Altera at the prices determined pursuant to Article 8.0. 2.5 During qualification, Altera may stop production of Wafers for any or all Altera integrated circuits by giving notice to TSMC. TSMC will stop production following completion of the process steps at which Wafers reside at the time of notification. Altera will pay TSMC for all Wafers started prior to TSMC receiving such notice. Prices for such Wafers will be equitably prorated based on the stage of production of the Wafers. 2.6 Wafers delivered for qualification must meet all agreed Altera standards, specifications and requirements. If TSMC successfully completes qualification, then upon written notice from Altera of successful completion, TSMC will proceed to manufacture and deliver Wafers in accordance with Article 3.0, at a rate which is agreed upon by TSMC and Altera. 2.7 During qualification, TSMC and Altera will agree upon parametric and process flow specifications, which will be finalized before TSMC begins production. TSMC will not modify agreed upon specifications in any way without the prior written consent of Altera. 3.0 Production 3.1 Product Identification. TSMC will manufacture the Altera Products with the TSMC Processes. Any Altera Products requiring a unique parametric specification shall be listed separately. 3.2 Capacity Guaranty. Subject to Altera's qualification of TSMC Processes, TSMC will produce wafers to fill Altera's orders for Wafers and Devices up to a maximum per-month production capacity, as determined pursuant to the procedure set forth below in this Article 3.0. 3.3 Production Purchase Orders. Orders shall be provided to TSMC by Altera as follows: -3- 5 3.3.1 As soon as practicable following the Effective Date and updated each six months thereafter, Altera and TSMC shall agree on a business commitment under which TSMC will attempt in good faith to reserve a maximum capacity for the next 12 months and Altera will forecast minimum monthly loadings which Altera will attempt in good faith to use. 3.3.2 It is agreed and understood that the purchase of Wafers and/or Devices pursuant to this Agreement shall be accomplished by means of Altera individual purchase orders and/or other release documents hereinafter collectively referred to as "purchase orders." The purchase orders placed by Altera will be open purchase orders for a fixed quantity of wafers based upon the Altera forecast. 3.3.3 To determine release schedules, Altera will provide TSMC, on a monthly basis, with a rolling six-month forecast of Altera requirements for Wafers. The first two months of this forecast shall be firm, and covered by released purchase orders, unless this procedure is modified as mutually agreed by the Parties. 3.4 Partial Shipments. Altera will accept deliveries made in timely installments from TSMC. Such partial shipments will be billed as made; and payments therefor are subject to the terms of payment noted below. 3.5 Quantity Variance. If the monthly quantity shipped by TSMC of each product ordered by Altera is within =/- 5 percent of the quantity ordered, such quantity shall constitute compliance with Altera's order. Larger overshipments or undershipments may be accepted at Altera's discretion, in which case the respective quantity of such overshipment or undershipment may be subtracted or added to the following months' quantity at Altera's discretion even if this results in quantities below or above respective minimum or maximum quantities. Billing for partial orders shipped as described in this Section 3.5 will be at the established purchase price per wafer times the total quantity of wafers delivered. 3.6 Modifications. If Altera determines that modifications to the specifications are required, including modifications to mask tooling, process or testing, TSMC agrees to make such modifications within a reasonable period of time after notification in writing by Altera. The Parties will negotiate adjustment to price and delivery schedule as well as charges for retooling costs if warranted by such modifications. 3.7 Substitutions. Altera may add or substitute product types using the process flow approved by Altera and TSMC for existing production at any time, provided that the agreed upon quantities of Wafer shipments required by Altera will not be in excess; of those determined pursuant to Section 3.2 except with the consent of TSMC. Such product types are ones which can be manufactured using the same process and in accordance with the same qualification plan as Altera Wafers currently manufactured by TSMC under this Agreement. TSMC will provide Devices and Wafers of such similar product types under the same terms as specified herein. -4- 6 3.8 Parametric Failure. If Wafers or Devices fail to meet the agreed upon parametric specifications, and in Altera's reasonable opinion such failure appears material, Altera may request TSMC to stop production. If TSMC is unable to correct such failures within a reasonable time, Altera may cancel such particular orders. Altera will notify TSMC in writing of its intention to suspend or cancel such orders and will include any substantiating data. 3.9 Reports. TSMC shall provide Altera with a report of wafer fabrication work in process for each product weekly unless otherwise mutually agreed, the details to be as agreed upon by the Parties. To enable Altera to track process control, TSMC shall periodically provide, at least quarterly, data summarizing the history of the DC parametric measurements for TSMC's manufacturing process. Altera shall be provided continuous modem access to the computer database maintained by TSMC for purposes of these reports. 3.10 Requalifications. With respect to any material change which TSMC makes in its manufacturing process which affects the performance, yield, and/or physical structure of the devices within the wafers, TSMC shall notify Altera in writing of each such change at least ninety (90) days in advance of the implementation of such change in the production of the wafers to allow Altera to impose reasonable requirements for requalifying the wafers for acceptance hereunder. 3.11 Order Cancellation. 3.11.1 If Altera fails to make any material payment hereunder when due or fails to accept any material value of product properly furnished hereunder, and such default is not cured within thirty (30) days after TSMC gives Altera written notice thereof, TSMC may decline to make further shipments and/or may terminate Altera's order without affecting any other rights or remedies available to TSMC. If TSMC continues to make shipments after such default, TSMC's actions shall not constitute a waiver nor affect TSMC's remedies for such default. 3.11.2 If Altera cancels an order that is firm pursuant to Section 3.3, Altera shall pay in full and complete satisfaction of any claim arising therefrom, a cancellation charge per wafer equal to: (number of mask steps completed) ------------------------------------ x (wafer price), (total number of mask steps) unless the parties mutually agree to a rescheduling of the order, in which case no claim shall arise unless the order as rescheduled is cancelled. Claims for the cancelling of rescheduled orders shall also be governed as set forth above on the new date of cancellation. 3.11.3 Altera may cancel any purchase order in whole or in part if TSMC fails to deliver products as covered by such purchase order placed hereunder by Altera, which failure is not corrected within sixty (60) days after written notice thereof. If such failure is not corrected within the above sixty-day period and is not excused pursuant to Article 10.0, -5- 7 Altera shall have the rights of cover as provided by the California Uniform Commercial Code with respect to the reprocurement of all products that Altera would have been entitled to buy from TSMC pursuant to this Agreement. The foregoing shall not affect any other rights or remedies available to Altera. If Altera continues to maintain or place orders after such default, Altera's actions shall not constitute a waiver nor affect Altera's remedies for such default. 4.0 On-Site Inspection and Vendor Information 4.1 Altera representatives shall be allowed to visit TSMC's wafer fabrication and test facilities during normal working hours upon reasonable notice to TSMC. 4.2 Upon Altera's request, TSMC will allow Altera to perform an audit of TSMC's manufacturing facility, and TSMC will provide Altera with process control information, including but not limited to: process and electrical test yield results, current process specifications and conformance to specifications; calibration schedules and logs for equipment; environmental monitor information for air, gases and DI water; documentation of operator qualification and training; documentation of traceability through TSMC's operation, TSMC process verification information, and TSMC's trouble reports. The foregoing shall be in accordance with the format of Exhibit 4.2. 5.0 Term and Termination 5.1 The term of this Agreement shall continue in effect through December 31, 1999, subject to automatic extension under Section 5.3, unless sooner terminated pursuant to Section 5.2. 5.2 This Agreement may be terminated immediately by either Party if the other Party (i) breaches any material provision of this Agreement and does not remedy such breach within sixty (60) days of notice of breach; or (ii) becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if that petition or proceeding is not dismissed within sixty (60) days after filing. 5.3 Automatic Extension 5.3.1 On January 1, 1998, and on each anniversary thereof, this Agreement shall be automatically extended for an additional one year (thereby constituting an annually rolling three year agreement), unless either Party gives the other Party prior written notice (i.e., on or before such date or anniversary thereof) that such Party is terminating the Agreement effective at the end of two years following such date or anniversary thereof. If such prior notice is given, the Agreement shall so terminate at the end of such two year period. -6- 8 5.3.2 The following examples illustrate the operation of Section 5.3.1. If a Party desires to terminate the Agreement on December 31, 1999, such Party must give notice thereof prior to January 1, 1998; otherwise the Agreement will automatically extend to December 31, 2000. Then if a Party desires to terminate the Agreement on December 31, 2000, such Party must give notice thereof prior to January 1, 1999; otherwise the Agreement will automatically extend to December 31, 2001. The Agreement will continue, in this manner, to extend in one year increments until two years prior notice is given by either Party. 5.3.3 In the event of termination as provided in this Section 5.3, Altera will have the right for "last time buy," time and volume to be mutually agreed to up to a maximum of twice the previous six (6) months' order quantity. 6.0 Proprietary Information 6.1 Both TSMC and Altera agree that Proprietary Information of the other will be used by them solely for the purpose of manufacturing Wafers hereunder and will not be disclosed to any third party without the prior written permission of the disclosing Party. 6.2 Upon termination or expiration of this Agreement for whatever reason, the receiving Party must (i) return to the other Party the original and all copies of any Proprietary Information of the disclosing Party and (ii) at the disclosing Party's request, have one of its officers certify in writing that it will not make any further disclosure or use of such Proprietary Information and specifically will not manufacture or have manufactured for it any product incorporating such Proprietary Information. 6.3 These confidentiality provisions as to any item of Proprietary Information shall survive the termination of this Agreement for a period of five (5) years from the date of disclosure of such item of Proprietary Information. 6.4 TSMC retains the right to incorporate into its generic manufacturing process any and all process developments made by TSMC in the course of its performance under this Agreement, provided that no Altera Proprietary Information is thereby used or disclosed. Altera retains the right to incorporate into its generic device design methodology any and all device design methodology developments made by Altera in the course of its performance under this Agreement, provided no TSMC Proprietary Information is thereby used or disclosed. 7.0 Warranty/Acceptance Testing. 7.1 TSMC warrants that Wafers and/or Devices delivered hereunder will meet the mutually agreed specifications and shall be free from defects in material and workmanship under normal use and service for a period of one (1) year from the date of receipt from TSMC's facility. If, during such one year period (i) TSMC is notified with reasonable promptness in writing upon discovery of any defect in the Wafers and/or Devices, including a reasonably detailed description of such defect; (ii) such Wafers and/or Devices are returned to TSMC's facility, transportation prepaid; -7- 9 and (iii) TSMC's reasonable examination of such Wafers and/or Devices discloses that such Wafers and/or Devices are defective and such defects are not caused by accident, abuse, misuse, neglect, improper installation, repair or alteration not authorized by TSMC, improper testing or use contrary to any reasonable instructions issued by TSMC, then within a reasonable time TSMC shall, as mutually agreed, either repair, replace, or credit Altera for such Wafers and/or Devices. TSMC shall return any Wafers and/or Devices repaired or replaced under this warranty to Altera transportation prepaid, and reimburse Altera for the transportation charges paid by Altera for such Wafers and/or Devices. The performance of this warranty does not extend the warranty period for any Wafers and/or Devices beyond that period applicable to the Wafers and/or Devices originally delivered. 7.1.1 The foregoing warranty constitutes TSMC's exclusive liability, and the exclusive remedy of Altera, for any breach of any warranty or other nonconformity of the Wafers and/or Devices. This warranty is exclusive and in lieu of all other warranties, express, implied or statutory, including but not limited to the warranties for merchantability and fitness for a particular purpose, which are hereby expressly disclaimed. 7.1.2 Prior to any return of Wafers and/or Devices by Altera pursuant to this paragraph, Altera shall afford TSMC the opportunity to inspect such Wafers and/or Devices at Altera's location. Upon verification of defects by TSMC, any such Wafers and/or Devices so inspected shall be returned to TSMC. TSMC shall make any such inspection with reasonable promptness. 7.2 TSMC shall immediately advise Altera whenever TSMC has reason to believe that wafers and/or Devices may not conform to the applicable specifications. 7.3 Altera may carry out acceptance testing of Wafers and/or Devices at Altera's facilities. Acceptance tests shall be performed under conditions as described in Exhibit 7.3 attached hereto. If any Wafers and/or Devices are not either accepted or rejected by Altera within forty-five (45) days of receipt of such Wafers and/or Devices, then such shipments of the Wafers and/or Devices shall be deemed accepted. Neither acceptance nor such deemed acceptance shall constitute a waiver of the requirements of Section 7.1. 8.0 Prices/Payment 8.1 Prices in U.S. dollars will be negotiated annually in coordination with the business commitment referred to in Section 3.3.1, and taking into consideration any material fluctuations in the currency exchange rate that may have occurred. It is the expectation of both Parties that prices for Wafers and Devices using a given Process will decrease from year to year. 8.2 Prices do not include customs, duties or sales, use, excise or other similar taxes. Altera shall pay, in addition to these prices, the amount of any present or future customs duties or sale, use, excise, or other similar tax applicable to the sale of goods or performance of services covered by this Agreement, or in lieu thereof Altera shall supply TSMC with an appropriate tax exemption certificate. -8- 10 8.3 Payment terms shall be net due 30 days after receipt of a valid invoice by Altera. 8.4 If following the effective date of any price determination pursuant to Section 8.1 (but prior to the next determination), the number N(2) of Taiwan dollars per U.S. dollar, as quoted in the Wall Street Journal, at the end of any month has changed from the corresponding Number N(1) on the effective date by five percent (5%) or more, the U.S. dollar price P(2) for payment of invoices rendered in the following months shall be adjusted with respect to the existing price P(1), according to the following formula (under which each Party bears one-half of the currency fluctuation): [ (N(1) - N(2)) ] P(2) + P(1) [ 1 + ------------- ] [ 2N(1) ] (For example, if N(1) = 26.0 Taiwan dollars per U.S. dollar, and it decreased 5% to N(2) = 24.7, P(2) would be 1.025 P(1). If it increased 5% to N(2) = 27.3, P(2) would be .975 P(1).) If at the end of any subsequent month following such price adjustment (but prior to the next price determination under Section 8.1), the number of Taiwan dollars N(3) has changed from N(2) by 5% or more, the price P(3) for payment of invoices rendered in the following months shall be adjusted again in accordance with the preceding formula (with all subscripts being increased by one), and so forth for any additional 5% or more change. 9.0 Delivery 9.1 Unless otherwise provided herein, title to the Wafers and/or Devices and liability for loss or damage thereto shall pass to Altera upon TSMC's tender of delivery of such Wafers and/or Devices to a carrier for shipment to Altera pursuant to Altera's instructions, and any loss or damage thereafter shall not relieve Altera from any obligation hereunder. Delivery may be made in installments in accordance with Section 3.4. The date of the bill of lading or any receipt issued by the carrier, or the date of the Delivery Order shall be presumptive proof of the date of such shipment or delivery to Altera. 9.2 Subject to Section 3.11.3 and Article 10.0, default or delay by TSMC in shipping or delivering the whole or any part or installment of the Wafers and/or Devices under the purchase orders shall not affect any other portion thereof nor shall it affect any other purchase order between Altera and TSMC. Any delivery or shipment of the whole or any part of installment made within seven (7) calendar days before or after the date(s) specified therefor shall constitute timely delivery or shipment. 10.0 Contingencies Neither Party shall be in breach hereunder for any failure to perform due to unforeseen circumstances or to causes beyond its reasonable control, including but not limited to acts of God, -9- 11 war, riot, embargoes, labor stoppages, acts of civil and military authorities, fire, floods, earthquakes or accidents. However, Altera shall have the right to cancel any order as to which delivery is delayed by such causes for a period of more than 60 days. 11.0 Title to Proprietary Information All Proprietary Information and any copies thereof are and will remain the property of the disclosing Party. Any masks generated from Altera database tapes by TSMC, or the third party vendors under Section 2.3, shall be the property of Altera, will be returned to Altera on Altera's request, and will be used only to produce Wafers and/or Devices for Altera. All rights to improvements or modifications made by TSMC to the test tape are hereby assigned to Altera. 12.0 Intellectual Property Indemnity 12.1 Altera will, at its sole cost and expense, indemnify, defend, and hold TSMC harmless from and against any cost, loss, expense, or liability arising from any actual or alleged infringement of any patent, mask work right, copyright, trademark, or other intellectual property right to the extent such actual or alleged infringement arises from TSMC's compliance with any of Altera's designs, specifications, instructions, or other contribution of Altera to the design or TSMC's manufacture or sale of product for Altera. 12.2 TSMC will, at its sole cost and expense, indemnify, defend, and hold Altera harmless from and against any cost, loss, expense, or liability arising from any actual or alleged infringement of any patent, mask work right, copyright, trademark, or other intellectual property right to the extent such actual or alleged infringement arises from TSMC processes. 12.3 The indemnifying Party will defend, at its sole costs and expense, including attorneys' fees, any action brought against the indemnified Party alleging any such infringement, and the indemnified Party agrees (i) to give prompt notice of any such action to the indemnifying Party, (ii) to allow the indemnifying Party, through competent counsel of its choice, to defend such action, and (iii) to provide the indemnifying Party all reasonable information, assistance, and authority requested by the indemnifying Party, at the indemnifying Party's expense, for the indemnifying Party to defend such action. 12.4 In the event that an injunction is issued in support of the infringement claim or the indemnified Party otherwise reasonably believes that the infringement claim is likely to be upheld, the indemnifying Party shall, at its expense, exercise commercially reasonable efforts to avoid the infringement claim, either by modifying its technology and/or design or by obtaining a license or nonassertion covenant from the claimant. If Altera is the indemnified Party, it shall have the right to return any allegedly infringing products to TSMC and receive a full refund therefor. If TSMC is the indemnified Party, it shall have the right to stop production for any allegedly infringing products by giving written notice to Altera and Altera shall pay TSMC for all Wafers started prior to such notice at the established purchase price. -10- 12 12.5 The foregoing states the entire obligation and the exclusive remedy of each Party with respect to any alleged infringement of intellectual property rights by any product furnished hereunder. 13.0 Limitation of Liability In no event shall either Party be liable for any indirect, special, incidental or consequential damages resulting from such Party's performance or failure to perform under this Agreement, or the furnishing, performance, or use of any goods or services sold pursuant hereto, whether due to a breach of contract, breach of warranty, negligence, or otherwise. ALL IMPLIED WARRANTIES, WHETHER OF MERCHANTABILITY, FITNESS, OR OTHERWISE ARE EXPRESSLY DISCLAIMED. 14.0 Export Controls TSMC will not transmit, directly or indirectly, any "technical information" acquired hereunder, or any direct product of such information to Afghanistan, the Peoples Republic of China, or any "Q, S, W, Y, or Z" country, as such terms are defined in the Export Administration Regulations of the U.S. Department of Commerce. This Agreement is subject to compliance with all applicable export and import laws and regulations and the Parties agree to cooperate in complying therewith. 15.0 Shipment TSMC will deliver Wafers to Altera F.O.B. TSMC Taiwan as requested by Altera. TSMC will package all such Wafers for secure shipment according to good manufacturing practices in consideration of the method of shipment chosen. 16.0 Publicity Both Parties agree that the details of this Agreement will not be published or disclosed without the other Party's written permission. The foregoing shall not prohibit a Party from making any disclosure required by law or governmental regulation provided that the other Party is given reasonable notice prior to any such disclosure. 17.0 Assignment Neither Party shall delegate any obligations under this Agreement or assign this Agreement or any interest or rights hereunder without the prior written consent of the other Party, except incident to the sale or transfer of all or substantially all of such Party's business. 18.0 Controlling Law This Agreement will be governed by the laws of the State of California, U.S.A., as applied to agreements wholly negotiated and performed in the State by its residences, and litigation concerning -11- 13 this Agreement shall be brought exclusively in courts located in Santa Clara County, California, U.S.A. The Parties expressly reject any application of the United Nations Convention on Contracts for the International Sale of Goods. 19.0 Notices All notices required to be sent by either Party under this Agreement will be effective when received by the notified Party if delivered to the addresses set forth in the Preamble, attention General Counsel if to Altera and attention Legal Counsel if to TSMC, or to such other address and/or attention as may subsequently be designated in writing by notice complying with and specifically referring to this Article 19.0. 20.0 Dispute Resolution Process Should any dispute not be resolved within thirty (30) days to the satisfaction of both Parties, both Parties agree to elevate the issue to a senior executive officer of the respective Parties prior to initiating any litigation with respect to such issue. 21.0 Entire Agreement This document, including the exhibits, is the entire understanding between Altera and TSMC with respect to the subject matter hereof and merges all prior agreements, dealings, and negotiations. The terms of this Agreement shall govern the contract between the Parties for the sale and purchase of wafers (the "Sales Contract"). Any terms or conditions printed on the face or reverse side of any purchase order form and/or any acknowledgment or acceptance form shall not be part of this Agreement nor shall constitute the terms and conditions of the Sales Contract, even in case such form as provided by one Party is signed and returned by the other Party, unless both Parties hereto expressly agree in writing to include. any terms or conditions in this Agreement or the Sales Contract. No modification, alteration, or amendment shall be effective unless in writing and signed by a duly authorized representative of each Party. No waiver of any breach shall be held to be a waiver of any other or subsequent breach. 22.0 Exhibits The following exhibits attached hereto are incorporated herein by reference: Exhibit 1.l Altera parametric Test Specifications and Procedures Exhibit 2.1.1 TSMC Process Design Information Exhibit 2.1.2 Altera Product Design Information Exhibit 2.2.1 Process/Product Qualification Plan Exhibit 2.2.2 Reliability and Quality Specifications Exhibit 4.2 Audit Procedures Exhibit 7.3 Device Acceptance Testing Criteria
-12- 14 Authorized Signatures For the purpose of binding the Parties to the terms and conditions of this Agreement as of the Effective Date, the duly authorized representatives of the Parties have signed their names on the indicated dates. TAIWAN SEMICONDUCTOR ALTERA CORPORATION MANUFACTURING CO., LTD. By: /S/DONALD BROOKS By: /S/RODNEY SMITH ---------------------------------- ---------------------------------- Donald Brooks Rodney Smith President President -13- 15 EXHIBIT 1.1 *** CONFIDENTIAL TREATMENT REQUESTED *** 16 EXHIBITS [TO BE PREPARED] 2.1 DESIGN RULE AND PARAMETRIC 2.2.1 PROCESS AND PRODUCT QUALIFICATION PLAN 2.2.2 RELIABILITY AND QUALITY SPECIFICATIONS
17 EXHIBIT 4.2 *** CONFIDENTIAL TREATEMENT REQUESTED *** 18 EXHIBIT 7.3 *** CONFIDENTIAL TREATMENT REQUESTED *** EX-10.40 6 OPTION AGREEMENT JUNE 26, 1995 1 EXHIBIT 10.40 OPTION AGREEMENT BETWEEN ALTERA CORPORATION AND TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD. JUNE 26, 1995 2 OPTION AGREEMENT THIS AGREEMENT is made and becomes effective as of June 26, 3995 (the "Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC"), a company organized under the laws of the Republic of China, with its registered address at No. 121, Park Ave. 3, Science Based Industrial Park, Hsinchu, Taiwan, and Altera Corporation, a company organized under the laws of California, with its registered address at 2610 Orchard Parkway, San Jose, California 95134-2020 ("Customer"). RECITALS WHEREAS, TSMC will supply Customer with wafers pursuant to the Wafer Supply Agreement between TSMC and Customer dated June 26, 1995, (the "Supply Agreement"), and Customer wishes to increase the volume of wafers to be purchased from TSMC; WHEREAS, in order to increase its output, TSMC must accelerate its ramp up in Fab 3 and advance the start of Fab 4; WHEREAS, as a condition to TSMC's acceleration of these facilities, TSMC has asked that Customer make a capacity commitment and advance payment for the right to buy additional capacity, and Customer is willing to do so: AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties agree as follows: 1. DEFINITIONS (a) "Base Capacity" used in this Agreement shall mean the annualized run rate that TSMC has previously committed to Customer, as set forth in Exhibit B. (b) "Customer Committed Capacity" used in this Agreement shall mean the total capacity that Customer agrees to purchase from TSMC pursuant to this Agreement, as set forth in Exhibit B, subject to the applicable provisions of this Agreement and the Supply Agreement. (c) "Option Capacity" used in this Agreement shall mean the firm capacity commitment made by Customer pursuant to this Agreement, for which capacity Customer agrees to pay the Option Fee as defined in Section 1(d) below. (d) "Option Fee" used in this Agreement shall mean the deposit that Customer agrees to place with TSMC as the advance payment for the Option Capacity. 3 (e) "TSMC committed capacity" used in this Agreement shall mean the total capacity that TSMC agrees to provide to Customer pursuant to this Agreement, and as set forth in Exhibit B. (f) "Wafer Equivalent" used in this Agreement shall mean the number of six-inch wafers based on the equivalency factor for TSMC's 0.5 micron, single poly, triple level metal process. For details of the equivalency factor, please refer to Exhibit A. Any and all capacity commitments referred to in this Agreement shall be measured in Wafer Equivalent. For an example of the application of the equivalency factor refer to Exhibit A-1. 2. VOLUME COMMITMENT (a) Subject to the applicable provisions of this Agreement and the Supply Agreement, Customer agrees to purchase from TSMC, and TSMC agrees to supply, the Customer Committed Capacity, and subject to the payment of the Option Fee by Customer under Section 5 below, TSMC agrees to provide to Customer the TSMC Committed Capacity, as set forth in Exhibit B. In any calendar year, the orders placed by Customer shall first apply to fulfill the Base Capacity portion of the Customer Committed Capacity, and then the Option Capacity. (b) Each month, Customer agrees to provide to TSMC a six-month rolling forecast of the number of wafers that Customer expects to purchase, with the volume for the first twelve weeks being frozen (i.e., Customer must purchase all of the quantity forecast for delivery in the first twelve weeks of the forecast). The forecast must be based on wafers out or deliveries expected to be made by TSMC. (c) TSMC will use its reasonable effort to cause its fabs to be capable of producing wafers of more advanced specifications, as set forth in the TSMC Technology Road Map attached as Exhibit C. 3. WAFER PRICE (a) The wafer price for the Customer Committed Capacity shall not be more than TSMC's average wafer prices to optionees (i.e., customers that are parties to option agreements similar to this Agreement) for the same or comparable technology, same wafer fab and the same period of time. Customer shall have the right at any time, but no more frequently than once per year, on at least thirty days prior written notice, to have an independent party acceptable to TSMC (such acceptance not to be unreasonably delayed or withheld) examine TSMC's records relating to the above pricing. Any price change will apply to unfilled or future orders only. (b) The parties shall negotiate in good faith each year the wafer prices for the Customer Committed Capacity of the following year in coordination with the annual negotiation under the Supply Agreement. In the course of such negotiations, TSMC shall make available relevant information in its possession regarding wafer market prices and TSMC's average wafer prices for the same or comparable technology in the same fab. If no agreement on these prices is reached by the -2- 4 parties within three months following written notice of request for negotiation by either party (the "Negotiation Request"), the parties agree to submit the dispute to the binding arbitration pursuant to Section 13 below, and under such circumstances, neither party shall have the right to terminate this Agreement under Section 7 below. 4. OTHER PURCHASE TERMS AND CONDITIONS The Supply Agreement will apply to all purchases of wafers by Customer from TSMC, except that the provisions of this Agreement will supersede the Supply Agreement with respect to the subject matter hereof. 5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY (a) Customer agrees to pay to TSMC the Option Fee in the amount of *** *** for the right to purchase the Option Capacity pursuant to this Agreement, which TSMC hereby agrees to supply. The Option Fee is set forth in Exhibit D, and shall be paid in cash by no later than every June 30 during the term of this Agreement for the Option Capacity of the following year. Except that TSMC exercises its first right of refusal or Customer assigns its purchase rights and obligations, pursuant to Section 6 below, the Option Fee, once paid, shall be non-refundable except as provided in Section 7(d), but will be credited against payments due for wafers purchased by Customer from the Option Capacity provided by TSMC under this Agreement. (b) Customer further agrees to deliver to TSMC, within seven (7) days following the Effective Date, four (4) promissory notes each in an amount of the Option Fee due every year, and payable to TSMC or order on each June 30, which promissory notes are in the form of Exhibit E. The promissory notes shall be returned by TSMC to Customer within seven (7) days upon receipt of the corresponding Option Fee by TSMC. (c) Neither the payment of the Option Fee nor the delivery of the promissory notes shall prejudice Customer's right to any damages or other remedy to which Customer may be entitled by law. 6. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF REFUSAL. (a) If in any calendar year, for any reason, Customer is not able to use or purchase all or a portion of the Customer Committed Capacity of that year, or any other year(s) during the term of this Agreement, Customer shall promptly notify TSMC of such in writing and first offer TSMC such Capacity or portion thereof for sales to any third parties. TSMC may, at its option, accept such offer, in whole or in part, within thirty (30) days following Customer's notification, and if TSMC so accepts, or if TSMC, in fact, sells such Capacity or portion thereof to-third parties, the corresponding Option Fee, if paid, will be returned without interest (notwithstanding Section 6(b)). ***CONFIDENTIAL TREATMENT REQUESTED -3- 5 In the event that TSMC decides not to accept such offer, Customer may assign its right to purchase the Option Capacity or portion thereof for all or part of the remaining term of this Agreement to any third parties acceptable to TSMC (such acceptance not to be unreasonably delayed or withheld), within two months upon TSMC's written notice that it will not accept such offer, and if Customer fails to do so, Customer shall remain liable for the Option Fee for the remaining term of this Agreement under Section 5 above, and so long as Customer continues to pay the Option Fee it shall (regardless of any prior notification) retain the right to purchase the Option Capacity pursuant to this Agreement. (b) Any of Customer's rights or obligations set forth in Section 6(a) shall not affect its obligation to pay the Option Fee pursuant to Section 5 above, except that if the right to purchase all or part of the Option Capacity is assigned to any third parties acceptable to TSMC pursuant to Section 6(a) above, such third parties shall then have the exclusive obligation to pay the corresponding Option Fee and abide by the applicable terms and conditions of this Agreement. 7. TERM AND TERMINATION (a) The term of this Agreement shall commence from the Effective Date, and continue until December 31, 1999. (b) Termination by TSMC for Customer's Failure to Pay the Option Fee. TSMC may terminate this Agreement if Customer fails to pay the Option Fee pursuant to Section 5 above, and does not cure or remedy such breach within thirty (30) days of receiving written notice of such breach. (c) Termination for Other Breach or for Bankruptcy. Either party may terminate this Agreement if, (i) the other party breaches any material provisions of this Agreement (other than the breach of Section 5 above), and does not cure or remedy such breach within sixty (60) days of receiving written notice of such breach, or (ii) becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership or liquidation, if such petition or proceeding is not dismissed with prejudice within sixty (60) days after filing. (d) Effect of Termination. Both parties shall remain liable to the other party for any outstanding and matured rights and obligations at the time of termination, including all outstanding payments of the Option Fee applicable to the used Option Capacity and for the wafers already ordered and/or shipped to customer. In the event Altera terminates this Agreement pursuant to Section 7(c) or Section 16, any advance payment of the Option Fee applicable to the unused and/or unprovided Option Capacity shall be refunded and any promissory notes therefor shall be returned. 8. LIMITATION OF LIABILITY In no event shall either party be liable for any indirect, special, incidental or consequential damages (including loss of profits and loss of use) resulting from, arising out of or in connection with its performance or failure to perform under this Agreement, or resulting from, arising out of or in -4- 6 connection with the production, supply, and/or purchase and sale of the wafers, whether due to a breach of contract, breach of warranty, tort, or negligence, or otherwise. 9. BOARD APPROVAL Customer shall obtain the approval of its Board of Directors of this Agreement, and submit to TSMC, at the time of executing this Agreement, an authentic copy of its Board resolution authorizing the representative designated below to execute this Agreement. 10. NOTICE All notices required or permitted to be sent by either party to the other party under this Agreement shall be sent by registered mail postage prepaid, or by personal delivery, or by fax. Any notice given by fax shall be followed by a confirmation copy within ten (10) days. Unless changed by written notice given by either party to the other, the addresses and fax numbers of the respective parties shall be as follows: To TSMC: TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD. No. 121, Park Avenue 3 Science-Based Industrial Park Hsinchu, Taiwan Republic of China FAX: 886-35-781545 To Customer: ALTERA CORPORATION 2610 Orchard Parkway San Jose, California 95134-2020 USA FAX: 408-894-8000 11. ENTIRE AGREEMENT This Agreement, including Exhibits A-E, constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes and replaces all prior or contemporaneous understandings, agreements, dealings and negotiations, oral or written, regarding the subject matter hereof. No modification, alteration or amendment of this Agreement shall be effective unless in writing and signed by both parties. No waiver of any breach or failure by either party to enforce any provision of this Agreement shall be deemed a waiver of any other or subsequent breach, or a waiver of future enforcement of that or any other provision. -5- 7 12. GOVERNING LAW This Agreement will be governed and interpreted as set forth in Section 18.0 of the Supply Agreement. 13. ARBITRATION If the parties fail to agree on wafer prices within three months of any Negotiation Request given pursuant to Section 3, each party shall submit a written proposal to the other within 15 days following said three month period setting forth proposed prices and reasons in support thereof. If upon a review of these proposals, the parties are unable to reach agreement on the prices within 30 days following said three month period, the matter will be submitted to arbitration under the rules of the American Arbitration Association, but subject to the following special provisions. The arbitration shall be conducted by a panel of three arbitrators, one appointed by each party, and the third selected by the two appointed arbitrators. The arbitrators shall decide which proposal is the most reasonable and the selected proposal shall thereupon become binding on both parties. The arbitrators shall not select any other prices nor decide any other issue, unless otherwise agreed in writing by both parties. All other disputes shall be resolved in accordance with Section 20.0 of the Supply Agreement. 14. ASSIGNMENT This Agreement shall be binding on and inure to the benefit of each party and its successors, and except that Customer may assign its purchase rights and obligations under this Agreement pursuant to Section 6 above, neither party shall assign any of its rights hereunder, nor delegate its obligations hereunder, to any third party, without the prior written consent of the other. 15. CONFIDENTIALITY Neither party shall disclose the existence or contents of this Agreement except as required by Customer's assignment of rights and obligations under this Agreement to any third parties pursuant to Section 6 above, in confidence to its advisers, as required by applicable law, or otherwise with the prior written consent of the other party. 16. FORCE MAJEURE Neither party shall be responsible for delays or failure in performance resulting from acts beyond the reasonable control of such party. Such acts shall include but not be limited to acts of God, war, riot, labor stoppages, governmental actions, fires, floods, and earthquakes. If such delays or failures on the part of either party continue for a period of more than one hundred twenty (120) days, the other party may terminate this Agreement upon written notice, subject to Section 7(d). -6- 8 IN WITNESS WHEREOF, the parties, have executed this Agreement as of the date first stated above. TAIWAN SEMICONDUCTOR ALTERA CORPORATION MANUFACTURING CO., LTD. By: /S/DONALD BROOKS By: /S/RODNEY SMITH ---------------------------------- ---------------------------------- Donald Brooks Rodney Smith President President -7- 9 EXHIBIT A ***CONFIDENTIAL TREATMENT REQUESTED*** 10 EXHIBIT A-1 *** CONFIDENTIAL TREATMENT REQUESTED *** 11 EXHIBIT B CUSTOMER/TSMC COMMITTED CAPACITY Unit: Wafer Equivalent
1996 1997 1998 1999 ---- ---- ---- ---- Base Capacity *** *** *** *** X% of Base Capacity *** *** *** *** X = Option Capacity *** *** *** *** TSMC Committed Capacity *** *** *** *** (Base Capacity + Option Capacity) Customer Committed Capacity *** *** *** *** (X% Base Capacity + Option Capacity)
* *** *** CONFIDENTIAL TREATMENT REQUESTED 12 EXHIBIT C *** CONFIDENTIAL TREATEMENT REQUESTED *** 13 EXHIBIT D OPTION FEE
OPTION CAPACITY OPTION FEE YEAR (UNIT: WAFER EQUIVALENT) (UNIT: US$) DUE DATE -------------------------------------------------------------------------------- 1996 *** *** June 30, 1995 1997 *** *** June 30, 1996 1998 *** *** June 30, 1997 1999 *** *** June 30, 1998
*** CONFIDENTIAL TREATMENT REQUESTED *** 14 EXHIBIT E STANDARD FORM OF PROMISSORY NOTE Amount US$ __________________ Due Date __________________ The undersigned ________________________ (the "Maker"), unconditionally (except as otherwise provided in the Option Agreement between TSMC and Maker dated __________________) promises to pay to Taiwan Semiconductor Manufacturing Co., Ltd. or its order the sum of U.S. Dollars ________________________ ($_________________), plus interest calculated from the due date stated herein to the date of full payment at the rate of 10% per annum on any unpaid portion of the principal amount stated herein, and said payment will be made at ______________________ (Place of Payment). This Note shall be governed in all respects by the laws of the State of California, U.S.A. The Maker of this Note agrees to waive protests and notice of whatever kind. Issuer Date __________________ Issuer Date __________________ Maker's Signature: ____________________________ Maker's Address: ______________________________ _______________________________________________ _______________________________________________ EX-27 7 FINANCIAL DATA SECHDULE
5 1,000 3-MOS DEC-31-1995 APR-01-1995 JUN-30-1995 53,954 269,699 52,903 895 38,283 435,758 79,660 35,180 503,839 78,486 230,000 75,751 0 0 119,602 503,839 92,165 92,165 37,489 37,489 24,691 0 (1,177) 31,162 11,530 0 0 0 0 19,632 .43 0