-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IYGm23V1H4N1wmUzz0sJBONC51RrfdFFpPVjqqkMp26KBA84URZIy8j/slkHR9GY 6ghCi+i6AQrcKmf6Ozi0ZQ== 0000950130-01-503245.txt : 20010726 0000950130-01-503245.hdr.sgml : 20010726 ACCESSION NUMBER: 0000950130-01-503245 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALASSIS COMMUNICATIONS INC CENTRAL INDEX KEY: 0000883293 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 382760940 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-65824 FILM NUMBER: 1689011 BUSINESS ADDRESS: STREET 1: 19975 VICTOR PARKWAY CITY: LIVONIA STATE: MI ZIP: 48152 BUSINESS PHONE: 3135913000 MAIL ADDRESS: STREET 1: 19975 VICTOR PARKWAY CITY: LIVONIA STATE: MI ZIP: 48152 S-3 1 ds3.txt S-3 As filed with the Securities and Exchange Commission on July 25, 2001 Registration No. 333-_____ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ______________ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ______________ VALASSIS COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware 7310 38-2760940 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification No.)
______________ 19975 Victor Parkway Livonia, Michigan 48152 (734) 591-3000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ______________ Barry P. Hoffman, Esq. Secretary and General Counsel 19975 Victor Parkway Livonia, Michigan 48152 (734) 591-3000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ______________ Copies to: Amy S. Leder, Esq. McDermott, Will & Emery 50 Rockefeller Plaza New York, New York 10020 (212) 547-5400 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] Calculation Of Registration Fee
Title of Each Class of Securities To Be Proposed Maximum Offering Proposed Maximum Aggregate Amount of Registered Amount To Be Registered Price Per Security(1) Offering Price(1) Registration Fee - ------------------------------------------------------------------------------------------------------------------------------------ Zero Coupon Convertible Senior Notes due 2021 $272,100,000(2) 53.625% $145,913,625 $36,478.41 - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.01 per share 3,219,378(3) (3) (3) (3)(4) - ------------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933 (the "Securities Act"), based on the average of the bid and asked price of the notes in secondary market transactions executed by Bear Stearns & Co. Inc., the initial purchaser of the notes, on July 23, 2001, as reported to the registrant by the initial purchaser. (2) The notes were initially issued at a price of $551.26 per $1,000 principal amount at maturity, which represents an aggregate principal amount at maturity of $272,100,000. (3) The 3,219,378 shares of common stock being registered are issuable upon conversion of the notes at the rate of 11.8316 shares of common stock per $1,000 principal amount at maturity of notes. Pursuant to Rule 416 under the Securities Act, this registration statement also registers an indeterminate number of shares of common stock that may be issued upon conversion as a result of a stock split, stock dividend, recapitalization or similar event. (4) Pursuant to Rule 457(i) under the Securities Act, there is no additional filing fee with respect to the shares of common stock issuable upon conversion of the notes because no additional consideration will be received in connection with the exercise of the conversion privilege. The Registrant hereby amends this registration statement on the date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall then become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION, DATED JULY 25, 2001. The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities nor may they accept offers to buy these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state in which the offer or sale is not permitted. PROSPECTUS $272,100,000 [Valassis. logo] Zero Coupon Convertible Senior Notes due 2021 and Common Stock Issuable upon Conversion of the Notes ___________________________ The Offering We issued the notes in a private placement at an issue price of $551.26 per note (55.126% of the principal amount at maturity). Selling securityholders will use this prospectus to resell their notes and the shares of common stock issuable upon conversion of their notes. We will not pay interest on the notes prior to maturity unless contingent interest becomes payable. Instead, on June 6, 2021, the maturity date of the notes, noteholders will receive $1,000 per note. The issue price of each note represents a yield to maturity of 3.0% per year calculated from June 6, 2001. The notes are unsecured and will rank equally in right of payment with all of our other senior unsecured indebtedness. Convertibility of the Notes After September 4, 2001, noteholders may convert their notes into 11.8316 shares of our common stock: (1) after the first time that the closing sale price of our common stock for at least 20 trading days in any period of 30 consecutive trading days is more than 120% of the accreted conversion price per share (defined below) of our common stock, (2) during the five business day period following any 10 consecutive trading day period in which the average of the trading prices for the notes for that period was less than 105% of the average conversion value for the notes during that period, (3) during any period that the notes (or if the notes are not rated, our other senior unsecured indebtedness) are rated below Baa3 or BBB- by either Moody's Investors Service, Inc. or Standard & Poor's Rating Group, respectively, or if none of our senior unsecured indebtedness is rated by either of such agencies, (4) if their notes have been called for redemption, and (5) upon the occurrence of specified corporate transactions described in this prospectus. Conversion value is the product of the closing price on any day times the number of shares then issuable upon conversion. The accreted conversion price per share as of any day will equal the issue price of a note plus the accrued original issue discount to that day, divided by the number of shares of common stock issuable upon conversion of the note. The conversion rate may be adjusted for certain reasons, but will not be adjusted for accrued original issue discount. Our common stock is listed on the New York Stock Exchange under the symbol "VCI." On July 23, 2001, the last reported sale price of our common stock on the NYSE was $33.00. Contingent Interest We will pay contingent interest to noteholders during any six-month period beginning after June 6, 2006 if the average market price of a note during the five trading days ending on the second trading day immediately preceding such six-month period is at least 120% of the issue price plus the accrued original issue discount for such note. The contingent interest payable per note during any six-month period will equal the greater of (a) cash dividends, if any, paid by us per share of our common stock during that period multiplied by the applicable conversion rate or (b) the conversion value of the note multiplied by one-half of the annual rate of 0.30%. For United States federal income tax purposes, noteholders will agree pursuant to the indenture covering the notes to treat the notes as indebtedness that is subject to the regulations governing contingent payment debt instruments. You should read the discussion of certain United States federal income tax consequences relevant to the notes beginning on page 38. Purchase of the Notes by Valassis at the Option of Noteholder Noteholders may require us to purchase all or a portion of their notes on June 6, 2004, 2006, 2011 and 2016, for a purchase price equal to the issue price of a note plus the accrued original issue discount to the date of purchase. On June 6, 2004 and June 6, 2006, we will pay the purchase price in common stock unless we decide to pay the purchase price in cash or a combination of cash and common stock. In addition, upon a change in control of Valassis occurring on or before June 6, 2006, noteholders may require us to purchase all or a portion of their notes for cash. Redemption of the Notes at the Option of Valassis We may redeem all or a portion of the notes for cash at any time on or after June 6, 2006 for a purchase price equal to the issue price of a note plus the accrued original issue discount to the date of redemption. The notes issued in the initial private placement and the shares of common stock issuable upon conversion of the notes are eligible for trading in the PORTAL system. However, notes and shares of common stock sold using this prospectus will no longer be eligible for trading in the PORTAL system. We do not intend to list the notes on any other national securities exchange or automated quotation system. Investing in the notes and our common stock involves risks, which are described under "Risk Factors" beginning on page 6. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ___________________________ The date of this prospectus is July ___, 2001. TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENT......... i OWNERSHIP OF NAMES....................................... i WHERE YOU CAN FIND MORE INFORMATION...................... ii INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......... ii SUMMARY.................................................. 1 RISK FACTORS............................................. 6 RATIO OF EARNINGS TO FIXED CHARGES....................... 9 USE OF PROCEEDS.......................................... 9 PRICE RANGE OF COMMON STOCK.............................. 9 DIVIDEND POLICY.......................................... 9 CAPITALIZATION........................................... 10 DESCRIPTION OF OUR CAPITAL STOCK......................... 11 DESCRIPTION OF OTHER INDEBTEDNESS........................ 13 DESCRIPTION OF THE NOTES................................. 15 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.. 38 SELLING SECURITYHOLDERS.................................. 45 PLAN OF DISTRIBUTION..................................... 47 LEGAL MATTERS............................................ 49 EXPERTS.................................................. 49
________________________ You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. The selling securityholders are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information provided by this prospectus is accurate as of any date other than the date of this prospectus. In this prospectus, "Valassis," the "Company," "we," "our," "ours," and "us" each refers to Valassis Communications, Inc. and its consolidated subsidiaries, unless otherwise specifically indicated. ________________________ SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains certain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including statements regarding, among other things, our business and operating strategy, operations, economic performance and financial condition. When used in this prospectus, the words "estimate," "project," "believe," "anticipate," "intend," "expect," "plan" and similar expressions identify forward-looking statements. These forward- looking statements reflect our current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in these forward-looking statements, including those risks discussed in this prospectus under "Risk Factors." OWNERSHIP OF NAMES The names Valassis and Connective Media are trademarks that belong to us. This prospectus also contains and incorporates by reference other names that belong to their respective owners. i WHERE YOU CAN FIND MORE INFORMATION Valassis files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). You may read and copy this information at the following locations of the SEC:
Public Reference Room North East Regional Office Midwest Regional Office 450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street Room 1024 Suite 1300 Suite 1400 Washington, D.C. New York, New York 10048 Chicago, Illinois 60661
You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC 20549, at prescribed rates. The SEC also maintains a Web site that contains reports, proxy statements and other information about issuers, like Valassis, who file electronically with the SEC. The address of that site is www.sec.gov. You can also inspect reports, proxy statements and other information about Valassis at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE We "incorporate by reference" information into this prospectus, which means that we disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. These documents contain important information about Valassis and our business. The following documents filed by us with the SEC (File No. 1-10991) are incorporated into this prospectus by reference and made a part hereof: (i) Annual Report on Form 10-K for the year ended December 31, 2000; (ii) Quarterly Report on Form 10-Q for the period ended March 31, 2001; (iii) Proxy Statement for the annual meeting of our stockholders filed with the SEC on April 16, 2001; (iv) Current Report on Form 8-K filed with the SEC on May 24, 2001; and (v) Current Report on Form 8-K filed with the SEC on July 25, 2001. All documents filed by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus to the end of the offering of the notes and shares under this document shall also be deemed to be incorporated into this prospectus by reference. You may obtain without charge, upon oral or written request, a copy of these filings. Requests should be directed to Valassis Communications, Inc., Attention: General Counsel, 19975 Victor Parkway, Livonia, Michigan 48152, telephone number (734) 591-3000. Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference into this prospectus. ii SUMMARY The following summary may not contain all of the information that you should consider before investing in the notes or our common stock. For a more complete discussion of the information you should consider before investing in the notes or our common stock, we encourage you to read this entire prospectus and the documents incorporated by reference in this prospectus which contain important information about our business, operations, prospects and financial results. In this prospectus, "Valassis," the "Company," "we," "our," "ours," and "us" each refers to Valassis Communications, Inc. and its consolidated subsidiaries, unless otherwise specifically indicated. The Company We are a leading provider of Connective Media(TM) solutions, which connect people to brands through our wide range of marketing services programs, including mass distributed, cluster-targeted and one-to-one communications. We offer these services to a variety of premier manufacturers and retailers. Our unique portfolio of products include newspaper-delivered cooperative and specialty inserts, product sampling, direct mail, direct to door, on-line promotions and customer relationship marketing programs - all of which build relationships with consumers on behalf of a brand. We divide our products and services into the following categories: . Mass Distributed Products - products which provide mass reach at low cost, including: - Free-standing inserts ("FSIs") - four color booklets containing promotions for multiple advertisers distributed through Sunday newspapers, and - Run-of-press ("ROP") - on-page newspaper promotions; . Cluster-Targeted Products - products targeted around geographic and demographic clusters, including: - Targeted Print and Media Solutions (formerly Valassis Impact Promotions) - solo specialized promotional programs for single advertisers, and - Targeted Sampling and Media Solutions - product sampling and advertising; . One-to-One Products - products and services that pinpoint individuals to build loyalty to a brand, including: - Customer Relationship Marketing - targeted promotions based on consumer purchase behavior; and - Promotion Watch - security consulting services. We produced our first FSI in 1972. Currently, we insert our cooperative FSIs in the Sunday edition of newspapers with a combined average circulation of over 60 million. By comparison, there were approximately 105.5 million total households in the United States according to the U.S. Census Bureau, Census 2000. ------------------ Our principal executive offices are located at 19975 Victor Parkway, Livonia, Michigan 48152, and our telephone number is (734) 591-3000. 1 The Offering Issuer..................... Valassis Communications, Inc. Notes...................... $272,100,000 aggregate principal amount at maturity. Issue Date................. The date of original issuance of the notes, and the commencement of accrual of original discount, was June 6, 2001. Maturity................... June 6, 2021. Yield to Maturity.......... 3.0% per year, computed on a semiannual bond equivalent basis, calculated from June 6, 2001, excluding any contingent interest. Conversion Rights.......... The notes are convertible at the option of the holder only upon the events set forth below. For each $1,000 note converted, we will deliver 11.8316 shares of our common stock, subject to adjustment upon certain events and subject to the following: . On or after September 4, 2001, noteholders may surrender notes for conversion into common stock at any time after a market price trigger occurs. A market price trigger occurs the first time that the closing sale price per share of our common stock for at least 20 trading days in any period of 30 consecutive trading days is more than 120% of the accreted conversion price per share of common stock. The accreted conversion price per share as of any day will equal the issue price of a note plus the accrued original issue discount to that day, divided by the number of shares issuable upon the conversion of the note. . On or after September 4, 2001, the notes will become convertible during the five business day period following any consecutive 10 day trading period in which the average of the trading prices for the notes for that period was less than 105% of the average conversion value for the notes during that period. Conversion value is the product of the closing price on any day times the number of shares then issuable upon conversion. . The notes will become convertible if called for redemption. . On or after September 4, 2001, the notes will be convertible during any period that the notes (or if the notes are not rated, our other senior unsecured indebtedness) are rated below Baa3 or BBB- by either Moody's Investors Service, Inc. or Standard & Poor's Rating Group, respectively, or if none of our senior unsecured indebtedness is rated by either of such agencies. . On or after September 4, 2001, the notes will become convertible at any time if we make certain distributions on our common stock, such as rights to purchase common stock at a below market price, distribution of assets, or if 2 we make cash distributions in excess of 10% of the value of the common stock. . The notes will become convertible in the event of any transaction, such as a merger or share exchange, whereby our common stock becomes convertible into securities, property or cash. Ranking.................... The notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness, including: . our revolving credit facility; . our 9.55% senior notes due 2003; and . our 6 5/8% senior notes due 2009. Use of Proceeds............ We will not receive any of the proceeds from the sales by the selling securityholders of the notes or the shares of common stock issuable upon the conversion of the notes. Sinking Fund............... None. Initial Conversion Price... Each $1,000 principal amount at maturity of notes will be initially convertible, subject to adjustment as described below, into 11.8316 shares of common stock, subject to the conditions to conversion set forth above. Adjustment of Conversion Rate..................... The conversion rate is subject to customary antidilution and other significant corporate transaction adjustment provisions. The conversion rate will not be adjusted for accrued original issue discount. Contingent Interest........ We will pay contingent interest to noteholders during any six-month period from June 6 to December 5 and from December 6 to June 5, commencing after June 6, 2006, if the average market price of a note during the five trading days ending on the second trading day immediately preceding such six-month period is at least 120% of the issue price plus the accrued original issue discount for such note. The contingent interest payable per note during any six-month period will be equal to the greater of (a) cash dividends, if any, paid by us per share on our common stock during that period multiplied by the applicable conversion rate or (b) the conversion value of the note multiplied by one-half of the annual rate of 0.30%. Redemption of Notes at the Option of Valassis....... We may redeem all or a portion of the notes for cash at any time on or after June 6, 2006 at the redemption price set forth in this prospectus. Purchase of Notes by Valassis at the Option of Noteholder............ On June 6 of each of 2004, 2006, 2011 and 2016 noteholders may put the notes to us, and we will be required to purchase the notes, at the issue price plus the accrued original issue discount. Noteholders must submit their notes for purchase on any of the 20 business days prior to each such put date in order to exercise this right. We will pay the amounts due on June 6, 2004 and 2006 in common stock or, at our option, in cash or a combination of 3 cash and common stock. All other amounts must be paid in cash. If we pay the purchase price, in whole or part, in common stock, the number of shares will be equal to the accreted value divided by 95% of the average closing share price for the 10 consecutive trading days ending on the third business day prior to the repurchase date. Our right to purchase notes with common stock is subject to satisfying any state or federal requirements, including registration of the issuance of such shares under the Securities Act and listing the shares on the New York Stock Exchange. We will be required to give notice not less than 20 business days prior to each put date of whether we will settle in cash or common stock or any combination thereof. Change in Control.......... Upon a change in control of Valassis occurring on or before June 6, 2006, noteholders may require us to purchase all or a portion of their notes for cash at a price equal to the issue price plus accrued original issue discount. A change in control is deemed to occur if: . any person other than us, our subsidiaries, or any permitted holder discloses that such person has become the direct or beneficial owner of 50% or more of the voting power of all of our outstanding common stock; . there shall be consummated a consolidation or merger pursuant to which the common stock would be converted into cash, securities, or other property and holders of common stock no longer have a majority of the voting power of all the outstanding successor securities; or . there shall have been a sale, transfer or disposition of all or substantially all of the assets of Valassis and its subsidiaries taken together. Registration Rights........ This prospectus is part of a registration statement filed pursuant to a registration rights agreement entered into between Valassis and the initial purchaser of the notes for the benefit of holders of the notes. In the event the registration statement is not kept effective for a specified period of time, liquidated damages will be due equal to 0.25% per annum of the accreted value of the notes (whether or not converted) increasing to 0.50% per annum after 90 days. DTC Eligibility............ The notes were issued in book-entry form and are represented by one or more permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company ("DTC") (with links to Euroclear and Clearstream) in New York, New York. Beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants, and any such interest may not be exchanged for certificated securities, except in limited circumstances. 4 Trading.................... The notes issued in the initial private placement and the shares of common stock issuable upon conversion of the notes are eligible for trading in the PORTAL system. However, notes and shares of common stock sold using this prospectus will no longer be eligible for trading in the PORTAL system. We do not intend to list the notes on any other national securities exchange or automated quotation system. Our common stock is traded on the New York Stock Exchange under the symbol "VCI." Taxation................... The notes and the shares issuable upon conversion of the notes are subject to special and complex United States federal income tax rules. You are strongly urged to consult your own tax advisors with respect to the federal, state, local and foreign tax consequences of purchasing, owning and disposing of the notes and shares. See "Certain United States Federal Income Tax Considerations." Risk Factors You should consider carefully all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors under "Risk Factors." 5 RISK FACTORS You should consider carefully the following risks before investing in the notes or the shares issuable upon conversion of the notes. The risks described below are not the only ones that we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. Our business, operating results or financial condition could be materially adversely affected by any of the following risks. You should also refer to the other information contained and incorporated by reference in this prospectus, including our financial statements and the related notes. Risk Factors Relating to Valassis Increased competition could reduce the demand for our products and services, which could have a material adverse effect on our business, financial condition, results of operations and business prospects Our mass-distributed products compete in the cooperative FSI business principally with News America FSI, Inc., a company owned by The News Corporation Limited. We compete for business primarily on the basis of the following: . client service and sales relationships; . price; and . category availability. Our mass-distributed products also compete with several newspaper network groups in the ROP market. As there is no significant capital investment associated with our ROP business, other competitors could easily enter the ROP market. An increase in the number of ROP competitors could result in a loss of market share. We also compete with in-store marketing and other forms of promotional strategies or coupon delivery, and may compete with any new technology or products in the sales promotion field. In the past, new competitors have tried to establish themselves in the FSI market. During such times, the number of FSI programs increased, which led to a meaningful decrease in the number of pages per FSI program. As a result, we experienced periods of intense price competition. These events had a material adverse effect on our financial performance. If new competitors enter the FSI market or our existing principal competitor tries to increase market share by reducing prices, our financial performance could be materially adversely affected. Although we believe that cooperative FSIs are currently the most efficient means of distributing coupons to the public, we compete with other media for the promotion and marketing dollars of our customers. It is possible that alternative media or changes in promotional strategies could make FSIs less attractive to our customers or could cause a shift in their preference to different promotional materials or coupon delivery modes. Our cluster-targeted products division competes in solo specialized promotional programs for single advertisers for package goods and fast food business with News America FSI, Inc. and commercial printers and also competes with Sunflower Marketing for polybag advertising and sampling. Significant increases in the cost of paper (which we cannot control) could adversely affect our financial health and prevent us from fulfilling our obligations under these notes Our paper prices have historically experienced dramatic fluctuations. We have a limited ability to protect ourselves from these fluctuations or to pass increased costs along to our customers. We maintain on average less than 30 days of paper inventory. Significant increases in the cost of paper could have a material adverse effect on our financial performance. 6 Our revolving credit facility imposes restrictions on our ability to conduct business and may not be sufficient to satisfy our capital and operating requirements Our revolving credit facility contains covenants that, among other things, restrict our ability to transfer assets, merge, incur debt, create liens and enter into transactions with affiliates. In addition, the revolving credit facility requires us to maintain specified financial ratios including, fixed charge coverage and funded debt to EBITDA. Our ability to comply with such provisions may be affected by events beyond our control. The breach of any of these covenants would result in default under the revolving credit facility. In the event of any such default, lenders party to the revolving credit facility could elect to declare all amounts borrowed under the revolving credit facility, together with accrued interest and other fees, to be due and payable. If any indebtedness under the revolving credit facility is accelerated, we may not have sufficient assets to repay such indebtedness in full. For a description of our revolving credit facility, see "Description of Other Indebtedness -- Description of Revolving Credit Facility" below. We have a significant number of authorized but unissued shares that, if issued, could dilute the equity interests of our existing stockholders and have an adverse effect on our earnings per share We are authorized to issue 100,000,000 shares of common stock. As of March 31, 2001, there were 62,981,528 shares of our common stock issued and 53,405,102 shares of our common stock outstanding. Subject to applicable legal, stock exchange and other regulatory requirements, our board of directors has full discretion to issue shares of our common stock. If we issue more shares of our common stock after this offering, your equity interests in us (upon conversion, in the case of the notes) will be diluted and your earnings per share of our common stock will be adversely affected. Risk Factors Relating to the Notes and the Shares Issuable Upon Conversion of the Notes You should consider the special United States federal income tax consequences of owning the notes and the shares issuable upon conversion of the notes Noteholders will be deemed to have agreed, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the regulations governing contingent payment debt instruments, and to treat the amount of cash and the fair market value of any of the shares issuable upon conversion of the notes as a contingent payment. Therefore, noteholders will be required, in general, to accrue interest based on the rate at which we would issue a fixed rate nonconvertible debt instrument with terms and conditions similar to the notes (7.13%) for federal income tax purposes, rather than at the yield to maturity of the notes, regardless of whether noteholders use the cash or accrual method of tax accounting. Accordingly, noteholders will be required to include interest in taxable income in each year in excess of the accruals on the notes for non-tax purposes. Furthermore, upon a sale, exchange, conversion or redemption of a note, noteholders will recognize gain or loss equal to the difference between their amount realized and their adjusted tax basis in the notes. The amount realized by noteholders effectively will include, in the case of a conversion, the amount of cash and the fair market value of the shares issuable upon conversion of the notes that they receive. Any gain on the sale, exchange, conversion or redemption of a note will be treated as ordinary interest income. Noteholders are strongly urged to consult their own tax advisors as to the United States federal, state, local or other tax consequences of acquiring, owning and disposing of the notes and the shares issuable upon conversion of the notes. For a summary of certain United States federal income tax consequences of the purchase, ownership and disposition of the notes and the shares issuable upon conversion of the notes, see "Certain United States Federal Income Tax Considerations." 7 Our subsidiaries are not guarantors - Your right to receive payments on these notes could be adversely affected if any of our subsidiaries declares bankruptcy, liquidates, or reorganizes None of our subsidiaries will guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. An active trading market for the notes may not develop Prior to the initial private placement, there was no public market for these notes. The notes issued in the initial private placement and the shares of common stock issuable upon conversion of the notes are eligible for trading in the PORTAL system. However, the notes and the shares sold using this prospectus will no longer be eligible for trading in the PORTAL system. We do not intend to list the notes on any other national securities exchange or automated quotation system. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the price of our common stock, our performance and other factors. The price at which noteholders may be able to sell the notes, if at all, may be less than the price they pay for them, particularly if an active trading market does not develop. We have been advised by Bear Stearns & Co. Inc., the initial purchaser of the notes, that it intends to make a market in the notes. However, Bear Stearns is not obligated to do so, and any such market-making activities may be discontinued at any time. In addition, such market-making activity will be subject to the terms imposed by the Securities Act and the Exchange Act. We may not have the funds necessary to purchase the notes after noteholders exercise their put option or upon a change in control On June 6 of each of 2004, 2006, 2011 and 2016, and upon the occurrence of specific kinds of change in control events occurring on or before June 6, 2006, noteholders may require us to purchase their notes. We will pay the amounts due on June 6, 2004 and 2006 in shares of our common stock unless we decide to pay such amounts in cash or a combination of cash and common stock. All other amounts must be paid by us in cash. It is possible that we will not have sufficient funds at the time of an applicable put by the noteholders to make the required purchase of the notes in cash, and thus, with respect to a put that occurs on June 6, 2004 or June 6, 2006, may pay all or a portion of the purchase price in shares of our common stock, subject to satisfying the conditions in the indenture covering the notes for making such payments. If we are unable to satisfy the conditions in the indenture to use our common stock to pay the purchase price or do not have sufficient cash to satisfy the put in the event that we are not permitted to pay in common stock, we could be in default of our obligations on the notes. In addition, if we fail to deliver shares issuable upon conversion of the notes, as applicable, and thereafter become the subject of bankruptcy proceedings, a holder's claim for damages arising from such failure could be subordinated to all of our existing and future obligations. See "Description of the Notes -- Purchase of the Notes by Valassis at the Option of a Noteholder." 8 RATIO OF EARNINGS TO FIXED CHARGES The following table shows our ratio of earnings to fixed charges for the three months ended March 31, 2001 and March 31, 2000 and each of the five most recent fiscal years. 3 months ended March 31, Year ended December 31, - -------------------------- --------------------------------------------------- 2001 2000 2000 1999 1998 1997 1996 9.65 16.40 9.44 7.98 4.83 3.92 2.61 The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings before income taxes plus fixed charges. Fixed charges consist of interest expense and that portion of net rental expense deemed representative of interest. USE OF PROCEEDS We will not receive any of the proceeds from the sales by the selling securityholders of the notes or the shares issuable upon conversion of the notes. PRICE RANGE OF COMMON STOCK Our common stock is listed and traded on the New York Stock Exchange. The following table sets forth the high and low sales prices per share of our common stock on the New York Stock Exchange for the quarterly periods presented below:
2000 2001 Sales Price Sales Price ------------------------------ -------------------------------- Quarter Ended High Low High Low March 31 $42.6250 $25.2500 $34.4063 $28.7031 June 30 39.2500 29.6250 37.3438 28.1250 September 30 39.0625 20.5000 36.6093/(1)/ 32.7969/(1)/ December 31 32.6875 21.2500 -- --
/(1)/ July 1, 2001 through July 23, 2001. DIVIDEND POLICY We currently have no plans to pay cash dividends on our common stock. Any future determination as to the payment of dividends will be at the discretion of our board of directors, and will depend on our future earnings, capital requirements and other alternate uses of cash, as well as the covenants prescribed in our revolving credit agreement and other debt instruments, and such other factors as our board of directors deem relevant. 9 CAPITALIZATION The following table sets forth our unaudited capitalization at March 31, 2001 and as adjusted to reflect the issuance of the notes in the quarter ending June 30, 2001. This table should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements and related notes contained in documents incorporated by reference into this prospectus.
March 31, 2001 (dollars in thousands) ------------------------------------------------------ Historical As Adjusted ---------- ----------- Cash and cash equivalents........................... $ 9,496 $ 9,496 ========= ========= Long-term debt (net of current portion): Revolving credit facility.......................... 188,700 41,700 6 5/8% Senior Notes due 2009....................... 99,727 99,727 9.55% Senior Notes due 2003........................ 15,772 15,772 Zero Coupon Convertible Senior Notes due 2021......................................... -- 150,000 --------- --------- Total long-term debt........................... 304,199 307,199 ========= ========= Stockholders' equity: Preferred Stock, $0.01 par value; 25,000,000 shares authorized; no preferred shares issued or outstanding at March 31, 2001 Common Stock, $0.01 par value, 100,000,000 shares authorized, 62,981,528 shares issued, and 53,405,102 shares outstanding at March 31, 2001/(1)/...................................... 630 630 Deferred compensation.............................. (1,983) (1,983) Additional paid-in capital......................... 88,720 88,720 Retained earnings.................................. 106,421 106,421 Foreign currency translations...................... (595) (595) ========= ========= Treasury Stock, at cost (9,576,426 shares at March 31, 2001).................................. (339,305) (339,305) --------- --------- Total stockholders deficit..................... (146,112) (146,112) --------- --------- Total capitalization....................... $ 158,087 $ 161,087 ========= =========
- ----------- /(1)/ Does not include 3,219,378 shares of our common stock reserved for issuance upon conversion of the notes. 10 DESCRIPTION OF OUR CAPITAL STOCK Our authorized capital stock consists of 100,000,000 shares of common stock, $0.01 par value per share, and 25,000,000 shares of preferred stock, $0.01 par value per share. Common Stock At March 31, 2001, there were 53,405,102 shares of common stock issued and outstanding. Holders of shares of common stock are entitled to one vote per share on all matters to be voted upon by our stockholders. Holders of common stock are entitled to receive dividends when, as and if declared by our board of directors out of funds legally available therefor, and to share ratably in our assets legally available for distribution to stockholders in the event of liquidation or dissolution. Holders of common stock have no preemptive rights and no subscription or redemption privileges. Our common stock does not have cumulative voting rights, which means that the holder or holders of more than half of the shares voting for the election of directors can elect all the directors then being elected. All of our outstanding shares of common stock are fully paid and non-assessable. Stockholder Rights Plan On September 1, 1999, our board adopted a stockholder rights plan. Under the rights plan, the board declared a dividend of one preferred stock purchase right for each outstanding share of our common stock. The dividend was paid on September 27, 1999 to the stockholders of record on September 15, 1999. The rights are attached to and automatically trade with all of our outstanding shares of common stock. The rights will become exercisable only in the event that any person or group of persons not approved by the board acquires 15% or more of our common stock or commences a tender offer for 15% or more of our common stock. Once the rights become exercisable, they entitle the stockholder to purchase one one-hundredth of one share of our Junior Preferred Stock, Series A at an exercise price of $1.70. The rights expire on September 1, 2009. We are entitled to redeem the rights at $0.01 per right at any time prior to the expiration of the rights, before a person or group acquires 15% or more of our common stock. The rights plan, and any issuances of Junior Preferred Stock, Series A under the rights plan, could have an adverse effect on holders of common stock by delaying or preventing a change in control of Valassis. Each Share will include a right issued under our existing stockholder rights plan, if the rights plan is outstanding at the time of conversion. Preferred Stock At March 31, 2001, there were no shares of preferred stock issued and outstanding. Preferred stock may be issued from time to time in one or more series, and our board of directors is authorized to fix the dividend rights, dividend rates, any conversion rights or rights of exchange, any voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, the liquidation preferences and any other rights, preferences, privileges and restrictions of any series of preferred stock and the number of shares constituting such series and the designation thereof. In connection with the adoption of the rights plan, our board of directors designated 1 million shares of preferred stock as "Junior Preferred Stock, Series A." Shares of Junior Preferred Stock, Series A are subject to the rights, privileges, preferences and restrictions set forth in the Certificate of Designations of Preferred Stock of Valassis Communications, Inc. filed with the office of the Secretary of State of Delaware on September 21, 1999, which is hereby incorporated by reference into this prospectus. Anti-takeover effects of certain provisions of Delaware law and our certificate of incorporation and bylaws We are subject to the provisions of Section 203 of the Delaware General Corporation Law. Generally, Section 203 prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an 11 "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the interested stockholder attained that status with the approval of the board of directors or unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Generally, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of a corporation's voting stock. This statute could prohibit or delay the accomplishment of mergers or other takeovers or changes in control with respect to us and, accordingly, may discourage attempts to acquire us. Our restated certificate of incorporation authorizes the board of directors to fill vacant directorships or increase the size of the board of directors. This may prevent a stockholder from removing incumbent directors and simultaneously gaining control of the board of directors by filling the resulting vacancies created by such removal with its own nominees. Our bylaws provide that special meetings of our stockholders may be called only by the board of directors, the chairman of the board, the president, the secretary or any assistant secretary, and any such officer at the request in writing of stockholders holding together at least a majority of all of the shares of the Company issued and outstanding and entitled to vote at the meeting. In addition to issuances under the rights plan, our board of directors can in the future issue the authorized but unissued shares of common stock and preferred stock, and fix the rights and preferences of the preferred stock, without stockholder approval, subject to the limitations imposed by any market on which our stock is listed for trading. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise. The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of stockholder derivative litigation against directors and officers, even though a derivative action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers under these indemnification provisions. Presently, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, nor are we aware of any threatened litigation that my result in claims for indemnification. Transfer Agent and Registrar The Transfer Agent and Registrar for our common stock is American Stock Transfer & Trust Company. Quotation of Common Stock Our common stock is listed on the New York Stock Exchange under the symbol "VCI." 12 DESCRIPTION OF OTHER INDEBTEDNESS Description of Revolving Credit Facility We are party to a Credit Agreement, dated as of November 16, 1998, as amended by Amendment No. 1 thereto, dated as of November 25, 1998, Amendment No. 2 thereto, dated as of August 19, 1999, and Amendment No. 3 thereto, dated as of August 9, 2000, with several financial institutions and Comerica Bank, as agent for such financial institutions (the "Credit Agreement"). This description of the general terms of our revolving credit facility is qualified in its entirety by reference to the complete text of the Credit Agreement. At March 31, 2001, there was approximately $188.7 million outstanding under this credit facility. In connection with our issuance of the notes, we agreed to reduce the revolving credit aggregate commitment under the Credit Agreement from $230.0 million to $125.0 million. At June 30, 2001, there was approximately $46.15 million outstanding under this credit facility. The Credit Agreement matures on October 31, 2002. The Credit Agreement is unsecured. The floating- rate interest is calculated on either a Eurocurrency-based rate or a prime rate. The Credit Agreement requires us to meet certain financial covenants such as a fixed charge coverage ratio and funded debt to EBITDA ratio. In addition, the Credit Agreement contains certain restrictive covenants that prescribe limits on our ability to, among other things, create or incur additional indebtedness, make certain investments and other restricted payments, incur liens, purchase or redeem its capital stock, pay dividends and make other distributions, make acquisitions, engage in transaction with affiliates, enter into mergers or consolidations, liquidate, sell, lease, or otherwise transfer our business or property to another entity, engage in any business other than the business engaged in by us or substantially similar lines of business, and to enter into certain sales and leaseback transactions. Description of Other Senior Notes 2003 Senior Notes In November 1994, we completed the sale of $255.0 million in aggregate principal amount of our 9.55% Senior Notes due 2003 (the "2003 Senior Notes"). These notes are general unsecured obligations and rank equal in right of payment with our other senior indebtedness, including the notes covered by this prospectus. As of March 31, 2001, approximately $15.8 million in aggregate principal amount of the 2003 Senior Notes was outstanding. The 2003 Senior Notes mature on December 1, 2003 and bear interest at the rate per annum of 9.55%. Interest on the 2003 Senior Notes is payable semiannually on June 1 and December 1 of each year. The 2003 Senior Notes were issued under an indenture between us and The Bank of New York, as Trustee (the "2003 Senior Notes Indenture"). The terms of the 2003 Senior Notes include those stated in the 2003 Senior Notes Indenture and those made a part of the 2003 Senior Notes Indenture by reference to the Trust Indenture Act of 1939 as in effect on the date of the 2003 Senior Notes Indenture (the "Trust Indenture Act"). The 2003 Senior Notes are subject to all such terms, and holders of the notes are referred to the 2003 Senior Notes Indenture and the Trust Indenture Act for a statement of such terms. The statements below relating to the 2003 Senior Notes are summaries and do not purport to be complete and are qualified in their entirety by express reference to the 2003 Senior Notes Indenture which can be obtained as provided under the section in this prospectus entitled "Where You Can Find More Information." The 2003 Senior Notes are not redeemable by us prior to maturity. The 2003 Senior Notes Indenture contains certain covenants that affect, and in certain cases significantly limit or prohibit: . liens; . sale and leaseback transactions; . restricted payments; 13 . indebtedness; . subsidiary indebtedness; . transactions with affiliates; and . asset sales, mergers and consolidations. In addition, the 2003 Senior Notes Indenture provides that upon a Change of Control of Valassis (as defined in the 2003 Senior Notes Indenture), we will be required to make an offer to purchase the 2003 Senior Notes at a purchase price equal to 101% of their principal amount, plus accrued interest. 2009 Senior Notes In January 1999, we completed the sale of $100.0 million in aggregate principal amount of our 6 5/8% Senior Notes due 2009 (the "2009 Senior Notes"). Such notes are general unsecured obligations and rank equal in right of payment with our other senior indebtedness, including the notes covered by this prospectus. As of March 31, 2001, approximately $99.7 million in aggregate principal amount of the 2009 Senior Notes was outstanding. The 2009 Senior Notes mature on January 15, 2009 and bear interest at the rate per annum of 6 5/8%. Interest on the 2009 Senior Notes is payable semiannually on January 15 and July 15 of each year. The 2009 Senior Notes were issued under an indenture between us and The Bank of New York, as Trustee (the "2009 Senior Notes Indenture"). The terms of the 2009 Senior Notes include those stated in the 2009 Senior Notes Indenture and those made a part of the 2009 Senior Notes Indenture by reference to the Trust Indenture Act. The 2009 Senior Notes are subject to all such terms, and holders of the notes are referred to the 2009 Senior Notes Indenture and the Trust Indenture Act for a statement of such terms. The statements below relating to the 2009 Senior Notes are summaries and do not purport to be complete and are qualified in their entirety by express reference to the 2009 Senior Notes Indenture which can be obtained as provided under the section in this prospectus entitled "Where You Can Find More Information." The 2009 Senior Notes are redeemable at any time. The 2009 Senior Notes Indenture contains certain covenants that affect, and in certain cases significantly limit or prohibit: . asset sales, mergers and consolidations; . liens that will secure debt; . sale and leaseback transactions; and . redemptions or repurchases of our capital stock. The covenants contained in our revolving credit facility and in both the 2003 Senior Notes and the 2009 Senior Notes thereunder are for the benefit solely of the lenders, in the case of the revolving credit facility, and for the holders thereof in the case of the 2003 Senior Notes and the 2009 Senior Notes and each may be amended or waived at any time by those lenders or holders without consideration of the holders of the notes. The covenants contained in the notes are substantially similar to those contained in the 2009 Senior Notes. See "Description of the Notes." 14 DESCRIPTION OF THE NOTES We issued the notes under the indenture described below, dated June 6, 2001, between Valassis and The Bank of New York, as trustee. The following summary of certain provisions of the indenture does not purport to be complete and is qualified in its entirety by reference to the indenture, copies of which are available as set forth above under "Where You Can Find More Information." All capitalized terms have the meanings specified in the indenture unless otherwise defined herein. Brief Description of the Notes The notes are: . limited in aggregate principal amount at maturity to $272,100,000; . unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness; . convertible into Shares as described below under "-- Conversion Rights;" . redeemable at our option on or after June 6, 2006, upon the terms and at the redemption prices set forth below under "-- Optional Redemption by Valassis;" . subject to purchase by us at the noteholder's option upon the terms and at the repurchase prices set forth below under "-- Purchase of the Notes by Valassis at the Option of a Noteholder" and "-- Purchase of the Notes by Valassis at the Option of a Noteholder Upon Change in Control;" and . due on June 6, 2021, the maturity date, unless earlier converted, redeemed by us at our option or purchased by us at the holder's option. The notes were offered at a substantial discount from their $1,000 principal amount at maturity. Each note was issued at a price of $551.26 per $1,000 note. Except as described below under "-- Contingent Interest," we will not make periodic payments of interest on the notes. However, original issue discount will accrue on the notes while they remain outstanding. Original issue discount is the difference between the issue price and the principal amount at maturity of a note, which will be $1,000. Original issue discount will accrue at a rate of 3.0% per annum for all notes from the date of original issuance of any note and will be calculated on a semi-annual bond equivalent basis, using a 360-day year composed of twelve 30-day months. The date of original issuance of the notes and the commencement of accrual of original issue discount was June 6, 2001. Original issue discount will cease to accrue on a note upon its maturity, conversion, and purchase by us at the option of a noteholder or redemption. We cannot reissue a note that has matured or been converted, purchased by us at the option of a noteholder, redeemed or otherwise cancelled except for registration of transfer, exchange or replacement of such note. Under the indenture governing the notes, we agreed, and by acceptance of a beneficial interest in the notes each beneficial owner of a note will be deemed to have agreed, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the regulations governing contingent payment debt instruments and, for purposes of those regulations, to treat, without limitation, the amount of cash and the fair market value of any shares of common stock received upon a conversion of a note as a contingent payment. In accordance with the foregoing, beneficial owners are required, in general, to accrue interest based on the rate at which we would issue a fixed rate nonconvertible debt instrument with terms and conditions similar to the notes (7.13%), rather than at a lower rate based on the accruals on the notes for non- tax purposes. Accordingly, owners of the notes by acceptance of a note agree, and are required, to include interest in taxable income in each year in excess of the accruals on the notes for non-tax purposes. See "Certain United States Federal Income Tax Considerations." 15 Except for the limitations on liens, sale and leaseback transactions, limitations on stock redemptions and stock repurchases and consolidation, merger and sale of assets of Valassis described below, the indenture and the terms of the notes do not contain any covenants or other provisions designed to afford holders of notes protection in the event of a highly leveraged transaction involving Valassis. For information regarding conversion, registration of transfer and exchange of global notes, see "--Global Notes; Book Entry Form" below. Noteholders may not sell or otherwise transfer the notes or the shares of common stock issuable on conversion of the notes (the "Shares") except in compliance with the provisions set forth below under "Notice to Investors." Ranking The notes are unsecured and rank equally in right of payment with all our existing and future senior unsecured indebtedness. The notes are effectively subordinated to all existing and future obligations of our subsidiaries. See "Risk Factors -- Our subsidiaries are not guarantors -- Your right to receive payments on these notes could be adversely affected if any of our subsidiaries declares bankruptcy, liquidates or reorganizes." As of March 31, 2001, on a pro forma basis after giving effect to the notes and the anticipated use of proceeds, we had approximately $307.2 million in aggregate principal amount of senior indebtedness outstanding. Without giving effect to the notes and the anticipated use of proceeds, we had, as of March 31, 2001, approximately $304.2 million in aggregate principal amount of senior indebtedness outstanding. See "--Capitalization." Conversion Rights Noteholders may convert any outstanding notes (or portions of outstanding notes) into 11.8316 shares of common stock per $1,000 principal amount at maturity of notes. The conversion rate is, however, subject to adjustment upon occurrence of the events described below. We will not issue fractional shares upon conversion of notes. Instead, we will pay a cash adjustment based upon the closing sale price of the shares of our common stock on the trading day immediately preceding the conversion date. Noteholders may convert notes only in denominations of $1,000 and integral multiples of $1,000. Conversion Upon Satisfaction of Market Price Conditions On or after September 4, 2001, but prior to the maturity date, a noteholder may surrender any of its notes for conversion into Shares at any time after the occurrence of a market price trigger event. A market price trigger event occurs the first time that the closing sale price per share of common stock on the principal national securities exchange on which our common stock is listed, for at least 20 trading days in any period of 30 consecutive trading days, is more than 120% of the accreted conversion price per share of common stock on that thirtieth trading day. The term accreted conversion price per share of common stock is described in more detail under "--Conversion Procedures." The conversion agent, which currently is the trustee, will, on our behalf, determine if the notes are convertible as a result of the market price of the common stock and notify us. In addition, on or after September 4, 2001, but prior to the maturity date, a noteholder may surrender its notes for conversion into shares of common stock during the five business day period following any 10 consecutive trading day period in which the average of the trading prices for the notes for that period was less than 105% of the average conversion value for the notes during that period. The conversion value as of any date for any note is the product of the closing price of a share of our common stock on the principal exchange on which our common stock is traded as of such date times the number of shares of common stock. 16 The market price of a note on any date of determination means the average of the secondary market bid quotations per note obtained by the bid solicitation agent for $10 million principal amount at maturity of notes at approximately 4:00 p.m., New York City time, on such determination date from two unaffiliated securities dealers we select, provided that if . at least two such bids are not obtained by the bid solicitation agent, or . in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the notes, then the market price of a note will equal (a) the then applicable conversion rate of such note multiplied by (b) the average closing price of the common stock on the five trading days ending on such determination date, appropriately adjusted. The bid solicitation agent is currently the trustee. We may change the bid solicitation agent, but the bid solicitation agent will not be our affiliate. The bid solicitation agent will solicit bids from securities dealers that are believed by us to be willing to bid for the notes. Conversion Upon Notice of Redemption A noteholder may surrender for conversion any note called for redemption at any time prior to the close of business on the day that is two business days prior to the redemption date, even if it is not otherwise convertible at such time. We will give notice of the redemption to the holders not less than 30 and not more than 60 days prior to the redemption date. If a noteholder has already delivered a purchase notice or a change in control purchase notice with respect to a note, however, the noteholder may not surrender that note for conversion until the noteholder has withdrawn the notice in accordance with the indenture. Conversion Upon Credit Rating Event On or after September 4, 2001, but prior to the maturity date, a noteholder may surrender any of its notes for conversion during any period in which the credit rating assigned to the notes, or if the notes are not rated, to any of our other senior unsecured indebtedness, by either Moody's Investors Service, Inc. or Standard & Poor's Rating Group, is below Baa3 or BBB-, respectively, or, if neither rating agency is rating any of our senior unsecured indebtedness. Conversion Upon Specified Corporate Transactions Even if none of the conditions described above have occurred, if we elect to . distribute to all holders of shares of common stock certain rights entitling them to purchase, for a period expiring within 60 days of such distribution at less than the market price at the time, or . distribute to all holders of shares of common stock our assets, debt securities or certain rights to purchase our securities, which distribution has a per share value exceeding 10% of the closing price per share of common stock on the day preceding the declaration for such distribution, we must notify the holders of notes at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, noteholders may surrender their notes for conversion at any time on or after September 4, 2001 until the earlier of the close of business on the business day prior to the ex- dividend date or our announcement that such distribution will not take place. No adjustment to the ability of a noteholder to convert will be made if the noteholder will otherwise participate in the distribution without conversion. In addition, if we are party to a consolidation, merger or binding share exchange pursuant to which our common stock would be converted into cash, securities or other property, a noteholder may surrender notes for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction. If we are a party to a consolidation, merger or binding share exchange pursuant to which our common stock is converted into cash, securities or other property, 17 then at the effective time of the transaction, the right to convert a note into shares of common stock will be changed into a right to convert it into the kind and amount of cash, securities or other property which the noteholder would have received if the noteholder had converted its note immediately prior to the transaction. If the transaction also constitutes a "change in control," as defined below, the noteholder can require us to purchase all or a portion of its notes as described under "--Purchase of the Notes by Valassis at the Option of a Noteholder Upon Change in Control." Conversion Procedures The accreted conversion price per Share as of any day will equal the sum of the issue price of a note plus the accrued original issue discount for such note, with that sum divided by the number of Shares issuable on that day. On conversion of a note, a noteholder will not receive any cash payment in respect of accrued original issue discount. By delivering to the noteholder the Shares issuable upon conversion, together with a cash payment, if any, in lieu of fractional Shares, we will satisfy our obligation to pay the principal amount at maturity of the notes and to pay accrued original issue discount with respect to the notes. That is, accrued but unpaid original issue discount or other interest, if any, will be deemed to be paid in full rather than canceled, extinguished or forfeited. As of the date of conversion of a note, contingent interest, if any, and liquidated damages, if any, will cease to accrue on such note. Noteholders will not be required to pay any transfer taxes or duties relating to the issuance or delivery of the Shares if they exercise their conversion rights, but noteholders will be required to pay any transfer taxes or duties which may be payable relating to any transfer involved in the issuance or delivery of the Shares in a name other than theirs. Certificates representing shares of common stock will be issued or delivered in a name other than theirs only after all applicable transfer taxes and duties, if any, payable by a noteholder have been paid. To convert a global note, a noteholder must deliver to DTC the appropriate instruction form for conversion pursuant to DTC's conversion program. To convert a definitive note, a noteholder must: . complete the conversion notice on the back of the note (or a facsimile thereof); . deliver the completed conversion notice and the note to be converted to the specified office of the conversion agent; . pay all funds required, if any, relating to interest on the note to be converted to which the noteholder is not entitled; and . pay all transfer taxes or duties, if any, as described in the preceding paragraph. The conversion date will be the date on which all the foregoing requirements have been satisfied. The note will be deemed to have been converted immediately prior to the close of business on the conversion date. A certificate for the number of Shares into which notes are converted (and cash in lieu of fractional Shares) will be delivered as soon as practicable on or after the conversion date. Adjustments to the Conversion Rate The conversion rate will not be adjusted for accrued original issue discount. We will adjust the initial conversion rate for the following events: . dividends or distributions to the holders of our common stock payable in common stock or other capital stock of Valassis; . subdivisions, combinations or certain reclassifications of our common stock (or any component of common stock); 18 . distributions to all holders of our common stock of certain rights to purchase common stock for a period expiring within 60 days at less than the market price at the time; and . distributions to such holders of our common stock of our assets, debt securities or certain rights to purchase our securities (excluding cash dividends or other cash distributions from current or retained earnings unless the amount thereof, together with any cash distributions paid in the preceding one year period exceeds 10% of the closing price per share of common stock on the day preceding the date of declaration of such dividend or other distribution). However, no adjustment will be made if the holders of the note participate in the transaction or in certain other cases. In cases where the fair market value of assets, debt securities or certain rights, warrants or options to purchase our securities, applicable to one share of common stock, distributed to the stockholders . equals or exceeds the average quoted price of the share of common stock, or . such average quoted price exceeds the fair market value of such assets, debt securities or rights, warrants or options so distributed by less than $1.00, rather than being entitled to an adjustment in the conversion rate, the noteholder will be entitled to receive upon conversion, in addition to the Shares, the kind and amount of assets, debt securities or rights, warrants or options comprising the distribution that such holder noteholder would have received if such noteholder had converted such note immediately prior to the record date for determining stockholders entitled to receive the distribution. We will not make an adjustment in the conversion rate unless the adjustment would require a change of at least 1% in the conversion price in effect at that time. We will carry forward and take into account in any subsequent adjustment any adjustment that we would otherwise be required to be made. In the event that we distribute shares of capital stock of a subsidiary of ours, the conversion rate will be adjusted, if at all, based on the market value of the subsidiary stock so distributed relative to the market value of our common stock, in each case over a measurement period following the distribution. The indenture permits us to increase the conversion rate from time to time. In the event of . a taxable distribution to stockholders which results in an adjustment of the conversion rate, or . an increase in the conversion rate at our discretion, the holders of the notes may, in certain circumstances, be deemed to have received a distribution subject to federal income tax as a dividend. See "Certain United States Federal Income Tax Considerations --United States Securityholders -- Constructive Distributions." Each Share will include a right issued under our existing stockholder rights plan, if the rights plan is outstanding at the time of conversion. See "Description of Our Capital Stock -- Stockholder Rights Plan." Contingent Interest Subject to the accrual and record date provisions described below, we will pay contingent interest to the noteholders, during any six-month period from June 6 to December 5 and from December 6 to June 5, commencing June 6, 2006, if, on the day immediately preceding the relevant six-month period, the average market price of a note for the five trading days ending on the second trading day immediately preceding the relevant six-month period equals 120% or more of the issue price plus accrued original issue discount to such date. See "--Optional Redemption by Valassis" for some of these values. The amount of contingent interest payable per note in respect of any six- month period will equal the greater of (i) the cash dividends, if any, payable on the Shares with respect to any record date for such dividend 19 that occurs during that period or (ii) the conversion value of the notes multiplied by one-half of the annual rate of 0.30%, which will be computed on the basis of a 360-day year comprised of twelve 30-day months. Contingent interest, if any, will accrue and is payable to noteholders as of the 15th day preceding the last day of the relevant six-month period. Such payments will be paid on the 15th day after the relevant six-month period. The original issue discount will continue to accrue at the original yield to maturity whether or not contingent interest is paid. Upon determination that the noteholders will be entitled to receive contingent interest which may become payable during a relevant six-month period, on or prior to the start of such six-month period, we will issue a press release and publish such information on our web site which, as of the date hereof, is at www.valassis.com. In the event contingent interest is payable, we will not pay interest accrued and unpaid on any note that is converted into Shares, except under certain limited circumstances. See "-- Conversion Rights" above. If a noteholder converts after a record date for an interest payment but prior to the corresponding interest payment date, it will receive on the interest payment date contingent interest accrued and paid on such notes, notwithstanding the conversion of such notes prior to such interest payment date, because such noteholder will have been the holder of record on the corresponding record date. However, at the time such noteholder surrenders such notes for conversion, it must pay us an amount equal to the contingent interest that has accrued and will be paid on the interest payment date. The preceding sentence does not apply, however, to a noteholder that converts, after a record date for an interest payment but prior to the corresponding interest payment date, notes that are called by us for redemption. Accordingly, if we redeem notes on a date after a record date for an interest payment but prior to the corresponding contingent interest payment date, and prior to the redemption date the holder of such notes chooses to convert such notes, the noteholder will not be required to pay us, at the time it surrenders such notes for conversion, the amount of interest on such notes it will receive on the interest payment date. We will not pay contingent interest, if any, to a person other than the noteholder of record on the record date if we redeem the notes on a date that is after the record date and prior to the corresponding interest payment date. In this instance, we will pay interest accrued and unpaid on the notes being redeemed to but not including the redemption date to the same person to whom we will pay the principal of such notes. Except as provided below, we will pay contingent interest on: . the global notes to DTC in immediately available funds; . definitive notes having an aggregate principal amount of $5,000,000 or less by check mailed to the holders of these notes; and . definitive notes having an aggregate principal amount of more than $5,000,000 by wire transfer in immediately available funds at the election of the holders of these notes. Optional Redemption by Valassis No sinking fund is provided for the notes. Prior to June 6, 2006, the notes will not be redeemable at our option. Beginning on June 6, 2006, we may redeem the notes for cash as a whole at any time, or from time to time in part, as more specifically set forth below. We will give not less than 30 days or more than 60 days notice of redemption by mail to noteholders. Notes or portions of notes called for redemption will be convertible by the noteholder, until the close of business on the second business day prior to the redemption date. If we redeem less than all the outstanding notes, the trustee shall select the notes to be redeemed on a pro rata basis in principal amounts at maturity of $1,000 or integral multiples of $1,000. If a portion of a noteholder's notes is selected for partial redemption and the noteholder converts a portion of the notes, the converted portion shall be deemed to be the portion selected for redemption. 20 The table below shows redemption prices of a note on June 6, 2006, at each June 6 thereafter prior to maturity and the price at maturity on June 6, 2021. These prices reflect the issue price plus accrued original issue discount to the redemption date or to maturity (the "accreted value" of a note). The redemption price of a note redeemed between such dates would include an additional amount reflecting the additional discount accrued since the next preceding date in the table. In addition to the amounts indicated below, the redemption price will also include accrued and unpaid contingent interest, if any, and liquidated damages, if any.
Accrued Original Issue Note Issue ---------------- Redemption Redemption Date Price Discount Price - --------------- ---------- ---------------- ---------- June 6: 2006...................................................... $551.26 $ 88.50 $ 639.76 2007...................................................... 551.26 107.84 659.10 2008...................................................... 551.26 127.76 679.02 2009...................................................... 551.26 148.28 699.54 2010...................................................... 551.26 169.43 720.69 2011...................................................... 551.26 191.21 742.47 2012...................................................... 551.26 213.65 764.91 2013...................................................... 551.26 236.77 788.03 2014...................................................... 551.26 260.59 811.85 2015...................................................... 551.26 285.13 836.39 2016...................................................... 551.26 310.41 861.67 2017...................................................... 551.26 336.45 887.71 2018...................................................... 551.26 363.28 914.54 2019...................................................... 551.26 390.92 942.18 2020...................................................... 551.26 419.40 970.66 At stated maturity........................................ 551.26 448.74 1,000.00
Purchase of the Notes by Valassis at the Option of a Noteholder On June 6 of each of 2004, 2006, 2011 and 2016, each noteholder may require us to purchase any outstanding note held by the noteholder for which the noteholder has properly delivered and not withdrawn a written purchase notice, subject to certain additional conditions. Noteholders may submit their notes for purchase to the paying agent at any time from the opening of business on the date that is 20 business days prior to the purchase date until the close of business on the third business day prior to the purchase date. The purchase price of the notes will be: $602.77 per note on June 6, 2004; $639.76 per note on June 6, 2006; $742.47 per note on June 6, 2011; and $861.67 per note on June 6, 2016. 21 The purchase prices shown above are equal to the issue price plus accrued original issue discount to the purchase date. In addition to the amounts indicated above, the purchase price will also include accrued and unpaid contingent interest, if any, and liquidated damages, if any. We will pay the purchase price due on June 6, 2004 and on June 6, 2006 in common stock or, at our option, in cash or any combination of cash and common stock. All other amounts must be paid in cash. If we pay the purchase price due on June 6, 2004 and on June 6, 2006, in whole or in part, in common stock, the number of shares of common stock will be equal to the issue price plus accrued original issue discount to the purchase date divided by 95% of the average closing share price per share of common stock for the 10 consecutive trading days ending on the third business day prior to the purchase date. We will adjust the average closing share price for the 10 consecutive trading days ending on the third business day prior to the purchase date to take into account the occurrence, during the period commencing on the first of such trading days during such 10-day trading period and ending on such purchase date, of certain events that would result in an adjustment of the conversion rate with respect to the shares of common stock. The "closing share price" of the shares of common stock on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which the common stock is traded or, if the common stock is not listed on a United States national or regional securities exchange, as reported by Nasdaq. We will be required to give notice on a date not less than 20 business days prior to each purchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, stating among other things: . whether we will pay the purchase price due on June 6, 2004 and on June 6, 2006, in cash or common stock or any combination thereof, specifying the percentages of each; and . the procedures that noteholders must follow to require us to purchase their notes, as described below. The purchase notice given by each noteholder electing to require us to purchase notes shall be given so as to be received by the paying agent no later than the close of business on the third business day prior to the purchase date and must state: . the certificate numbers of the noteholder's notes to be delivered for purchase; . the portion of the principal amount at maturity of notes to be purchased, which must be $1,000 or an integral multiple of $1,000; . that the notes are to be purchased by us pursuant to the applicable provisions of the indenture; and . in the event we determine, pursuant to the notice that we are required to give, to pay the purchase price due on June 6, 2004 and on June 6, 2006, in whole or in part, in common stock, but the purchase price is ultimately to be paid to the noteholder entirely in cash because any of the conditions to payment of the purchase price or portion of the purchase price in common stock is not satisfied prior to the close of business on the purchase date, as described below, whether the noteholder elects: (i) to withdraw the purchase notice as to some or all the notes to which it relates; or (ii) to receive cash in such event in respect of the entire purchase price for all notes or portions of notes subject to such purchase notice. 22 If the noteholder fails to indicate the noteholder's choice with respect to the election described in the final bullet point above, the noteholder shall be deemed to have elected to receive cash in respect of the entire purchase price for all notes subject to the purchase notice in these circumstances. A noteholder may withdraw any purchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the purchase date. The notice of withdrawal shall state: . the principal amount at maturity being withdrawn; . the certificate numbers of the notes being withdrawn; and . the principal amount at maturity, if any, of the notes that remain subject to the purchase notice. Because the market price of our common stock is determined prior to the applicable purchase date, noteholders bear the market risk with respect to the value of our common stock to be received from the date such market price is determined to such purchase date. We may pay the purchase price or any portion of the purchase price due on June 6, 2004 and on June 6, 2006 in common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation. In addition to the above conditions, our right to purchase notes, on June 6, 2004 and on June 6, 2006, in whole or in part, with common stock is subject to our satisfying the following conditions: . listing such common stock on the principal United States securities exchange on which then-listed common stock is listed or, if not so listed, on Nasdaq; . registering the issuance of our common stock under the Securities Act and the Exchange Act; . qualifying or registering under applicable state securities law or availing ourselves of an exemption from such qualification and registration; and . ensuring that the common stock is duly authorized, fully paid and non- assessable. If these conditions are not satisfied with respect to a noteholder prior to the close of business on the purchase date, we will pay the purchase price of the notes to the holder entirely in cash. See "Certain United States Federal Income Tax Considerations." We may not change the form or components or percentages of components of consideration to be paid for the notes once we have given the notice that we are required to give to noteholders, except as described in the first sentence of this paragraph. In connection with any purchase offer, we will: . comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and . file a Schedule TO, if required, or any other required schedule under the Exchange Act. Our obligation to pay the purchase price for a note for which a purchase notice has been delivered and not validly withdrawn is conditioned upon the noteholder delivering the note, together with necessary endorsements, to the paying agent at any time after delivery of the purchase notice. We will cause the purchase price for the note to be paid promptly following the later of the purchase date and the time of delivery of the note. The purchase price will also include accrued and unpaid contingent interest, if any, and liquidated damages, if any. If the paying agent holds money or securities sufficient to pay the purchase price of the note on the business day following the purchase date in accordance with the terms of the indenture, then, immediately after the purchase date, the note will cease to be outstanding and original issue discount on such note and contingent interest, if any, and liquidated damages, if any, will cease to accrue, whether or not the note is delivered to the paying agent. Thereafter, all other rights of the noteholder shall terminate, other than the right to receive the purchase price upon delivery of the note. 23 Our ability to purchase notes with cash may be limited by the terms of our then existing borrowing agreements. We may not purchase any notes at the option of noteholders if an event of default with respect to the notes has occurred and is continuing, other than a default in the payment of the purchase price with respect to such notes. Purchase of the Notes by Valassis at the Option of a Noteholder Upon Change in Control In the event of a change in control occurring on or prior to June 6, 2006, each noteholder will have the right, at the noteholder's option, subject to the terms and conditions of the indenture, to require us to purchase for cash all or any portion of the noteholder's notes in integral multiples of $1,000 principal amount at maturity, at a price for each $1,000 principal amount at maturity of such notes equal to the accreted value of the note on the purchase date. We will be required to purchase the notes no later than 35 business days after the occurrence of such change in control. We refer to this date in this prospectus as the "change in control purchase date." Under the indenture, a "change in control" of Valassis is deemed to have occurred at such time as: . any person, including its affiliates and associates, other than us, our subsidiaries or our or their employee benefit plans, files a Schedule TO (or any schedule, form or report under the Exchange Act) disclosing that such person has become the direct or indirect beneficial owner of 50% or more of the voting power of our common stock or other capital stock into which the common stock is reclassified or changed, with certain exceptions; or . there shall be consummated any share exchange, consolidation or merger of Valassis pursuant to which our common stock will be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of Valassis in which the holders of common stock immediately prior to the share exchange, consolidation or merger of Valassis have, directly or indirectly, 50% or more of the total voting power in the aggregate of all classes of capital stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger. See "--Certain Covenants -- Limitation on Consolidation, Merger or Sale;" or . there shall have been a sale, transfer or disposition of all or substantially all of the assets of Valassis and its subsidiaries taken together. Within 15 business days after the occurrence of a change in control, we must mail to the trustee, to all noteholders at their addresses shown in the register of the registrar and to beneficial owners, as required by applicable law, a notice regarding the change in control, which notice must state, among other things: . the events causing a change in control; . the date of such change in control; . the last date on which a noteholder may exercise the purchase right; . the change in control purchase price; . the change in control purchase date; . the name and address of the paying agent and the conversion agent; . the conversion rate and any adjustments to the conversion rate; . that notes with respect to which a change in control purchase notice is given by the noteholder may be converted, if otherwise convertible, only if the change in control purchase notice has been withdrawn in accordance with the terms of the indenture; and . the procedures that noteholders must follow to exercise these rights. 24 To exercise this right, the noteholder must deliver a written notice so as to be received by the paying agent no later than the close of business on the third business day prior to the change in control purchase date. The required purchase notice upon a change in control must state: . the certificate numbers of the notes to be delivered by the noteholder; . the portion of the principal amount at maturity of notes to be purchased, which portion must be $1,000 or an integral multiple of $1,000; and . that we are to purchase such notes pursuant to the applicable provisions of the notes. A noteholder may withdraw any change in control purchase notice by delivering to the paying agent a written notice of withdrawal prior to the close of business on the change in control purchase date. The notice of withdrawal must state: . the principal amount at maturity of the notes being withdrawn; . the certificate numbers of the notes being withdrawn; and . the principal amount at maturity, if any, of the notes that remain subject to a change in control purchase notice. Our obligation to pay the change in control purchase price for a note for which a change in control purchase notice has been delivered and not validly withdrawn is conditioned upon delivery of the note, together with necessary endorsements, to the paying agent at any time after the delivery of such change in control purchase notice. We will cause the change in control purchase price for such note to be paid in cash promptly following the later of the change in control purchase date and the time of delivery of such note. The change in control purchase price will also include accrued and unpaid contingent interest, if any, and liquidated damages, if any. If the paying agent holds money sufficient to pay the change in control purchase price of the note on the change in control purchase date in accordance with the terms of the indenture, then, immediately after the change in control purchase date, the original issue discount on such note and contingent interest, if any, and liquidated damages, if any, will cease to accrue, whether or not the note is delivered to the paying agent, and all other rights of the noteholder shall terminate, other than the right to receive the change in control purchase price upon delivery of the note. The indenture does not permit our board of directors to waive our obligation to purchase notes at the option of noteholders in the event of a change in control. In connection with any purchase offer in the event of a change in control, we will: . comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and . file Schedule TO, if required, or any other required schedule under the Exchange Act. The change in control purchase feature of the notes may in certain circumstances make more difficult or discourage a takeover of Valassis. The change in control purchase feature, however, is not the result of our knowledge of any specific effort: . to accumulate shares of our common stock; . to obtain control of Valassis by means of a merger, tender offer, solicitation or otherwise; or . part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature is a standard term contained in securities similar to the notes. 25 Our ability to purchase notes with cash may be limited by the terms of our then existing borrowing agreements. We could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a change in control with respect to the change in control purchase feature of the notes but that would increase the amount of our (or our subsidiaries') outstanding indebtedness. We may not purchase notes at the option of noteholders upon a change in control if there has occurred and is continuing an event of default with respect to the notes, other than a default in the payment of the change in control purchase price with respect to the notes. Certain Covenants The indenture requires Valassis to comply with certain restrictive covenants as described below. Certain Definitions Used In the Covenants. Set forth below are certain definitions used in the indenture. Other definitions used and not defined in this section shall have the definitions given them in the indenture. "Asset Sale" will be defined to mean, with respect to any Person, any sale, transfer or other disposition (including, without limitation, dispositions pursuant to any merger, consolidation or Sale and Leaseback Transaction (as defined below)) by such Person or any of its subsidiaries to any Person other than such Person or one of its subsidiaries in any single transaction or series of transactions of (i) any or all of the Capital Stock in any of the subsidiaries of such Person or (ii) any other Property (as defined below) of such Person or any other Property of its subsidiaries outside the ordinary course of business of such Person or such subsidiary. "Attributable Debt" will be defined to mean, in respect of a Sale and Leaseback Transaction, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended; such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Board of Directors" will be defined to mean either the board of directors of the Company, or any duly authorized committee of such board. "Capital Lease Obligation" will be defined to mean, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP. "Capital Stock" in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights, warrants or options to acquire an equity interest in such Person. "Company" will be defined to mean the Person named as the "Company" in the first paragraph of the indenture until a successor Person shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "Company" shall mean such successor Person. "Consolidated Interest Expense" will be defined to mean, with respect to any Person, for any period, the aggregate interest expense of such Person and its subsidiaries for such period on a consolidated basis, determined in accordance with GAAP, plus, to the extent not included in such interest expense, and to the extent incurred by such Person and such subsidiaries, without duplication, (i) interest expense attributable to capital leases and the interest expense attributable to leases constituting part of a Sale and Leaseback Transaction, (ii) amortization of debt discount and debt issuance costs, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, 26 discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financings, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) dividends payable on shares of preferred stock issued by such Person or its subsidiaries, other than shares of such preferred stock held by such Person or its subsidiaries, (viii) interest accruing on the Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by such Person or such subsidiaries, and (ix) cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any other Person in connection with Indebtedness incurred by such plan or trust. "Consolidated Net Income" will be defined to mean, with respect to any Person, for any period, the aggregate net income (or net loss, as the case may be) of such Person and its subsidiaries for such period on a consolidated basis, determined in accordance with GAAP, provided that there shall be excluded therefrom (i) gains and losses from Asset Sales or reserves relating thereto, (ii) items classified as extraordinary or nonrecurring (other than the tax benefit of the utilization of net operating loss carryforwards) and gains from discontinued operations, (iii) except to the extent of the amount of dividends or distributions paid to such Person by any other Person during such period, the net income (or loss) of (a) such other Person other than a subsidiary of such Person and (b) any subsidiary of such Person to the extent that the payment of the net income of such other Person as a dividend or other distribution to such Person is restricted by contract or otherwise and (iv) except to the extent includable pursuant to clause (iii) hereof, the income (or loss) of any other Person accrued or attributable to any period prior to the date it becomes a subsidiary of such Person or is merged into or consolidated with such Person or any of such Person's subsidiaries or all or substantially all of such other Person's Property is acquired by such Person or any of its subsidiaries. "Consolidated Tangible Assets" will be defined to mean, as of any date, the sum of the Property and assets of Valassis and its Subsidiaries on a consolidated basis at such date, after eliminating intercompany items, after deducting from such total all Property and assets that would be classified as intangibles under GAAP (including, without limitation, goodwill, organizational expenses, trademarks, trade names, copyrights, patents, licenses and any rights in any thereof), all reserves and prepaid expenses, deferred charges or authorized debt discount and expense, each such item determined in accordance with Valassis's most recently published consolidated balance sheet prepared in accordance with GAAP. "Default" will be defined to mean any event, act or condition that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "EBITDA" for any period will be defined to mean the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (i) all income tax expense of the Company and its consolidated Subsidiaries, (ii) depreciation expense of the Company and its consolidated Subsidiaries, (iii) amortization expense of the Company and its consolidated Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), and (iv) all other non-cash charges of the Company and its consolidated Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), in each case for such period. "Funded Debt" of any Person will be defined to mean, as at any date as of which any determination thereof is being or is to be made, any Indebtedness of such person that by its terms (i) will mature more than one year after the date it was issued, incurred, assumed or Guaranteed by such Person, or (ii) will mature one year or less after the date it was issued, incurred, assumed or Guaranteed by such Person which Indebtedness at such date of determination, may be renewed or extended at the election or option of such Person so as to mature more than one year after such date of determination. "Funded Debt to EBITDA Ratio" as of any date of determination will be defined to mean the ratio of (i) Funded Debt to (ii) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters prior to the date of determination for which internal financial statements are available; provided, however, that if the Company or any Subsidiary shall have made an acquisition of assets which constitutes all or 27 substantially all of the assets of a business, EBITDA for such period shall be calculated after giving pro forma effect to such acquisition as if such acquisition occurred on the first day of such period. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Guarantee" will be defined to mean any direct or indirect obligation, contingent or otherwise, of a Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person in any manner. "Hedging Obligations" will be defined to mean, with respect to any Person, the Obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indebtedness" will be defined to mean, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of (i) borrowed money; (ii) evidenced by bonds, notes (as used in the indenture), debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (iii) banker's acceptances; (iv) representing Capital Lease Obligations; (v) the balance deferred and unpaid of the purchase price of any property under conditional sales or other similar agreements which provide for the deferral of the payment of the purchase price for a period in excess of one year following the date of such Person's receipt and acceptance of complete delivery of such property; and (vi) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding (other than Capital Lease Obligations) as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Lien" will be defined to mean, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Obligations" will be defined to mean any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Person" will be defined to mean any individual, corporation, partnership, limited liability company, joint venture, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof. "Property" will be defined to mean, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock in any other Person. "Sale and Leaseback Transaction" will be defined to mean any arrangement with any Person providing for the leasing by the Company of any Property now owned or hereafter acquired which has been or is to be sold or transferred by the Company to such Person with the intention of taking back a lease of such Property. 28 "Subsidiary" will be defined to mean a Person (other than an individual or a government or any agency or political subdivision thereof) more than 50% of the outstanding interest of which is owned, directly or indirectly, by Valassis or by one or more other Subsidiaries, or which Valassis, in accordance with GAAP, otherwise consolidates as a Subsidiary of Valassis. Limitation on Sale and Leaseback The indenture provides that Valassis will not, nor will it permit any Subsidiary to, enter into any Sale and Leaseback Transaction, unless either: . after giving effect to the Sale and Leaseback Transaction, the aggregate outstanding amount of all Attributable Debt resulting from all Sale and Leaseback Transactions of Valassis does not exceed the greater of $50.0 million or 15% of Consolidated Tangible Assets, determined in accordance with Valassis's most recent published consolidated balance sheet in accordance with GAAP; or . Valassis applies, within 12 months after the sale or transfer, an amount equal to the net proceeds of the assets sold in the Sale and Leaseback Transaction to the voluntary covenant defeasance or retirement of Indebtedness (other than Indebtedness of Valassis that is subordinate in right of payment to the notes), which amount will not be less than the fair value (in the opinion of an executive officer of Valassis) of such assets less an amount equal to the principal amount of such Indebtedness voluntarily defeased or retired by Valassis within such twelve-month period; provided that no retirement referred to in this second clause may be made by payment at maturity or pursuant to any mandatory sinking fund payment or mandatory payment provision. Limitation on Liens The indenture prohibits Valassis and any Subsidiary from, directly or indirectly, creating, incurring, assuming or suffering to exist any Lien of any kind on or with respect to any asset owned or thereafter acquired securing Indebtedness without making effective provision to secure all the notes then outstanding by such Lien, equally and ratably with (or, in the event that such other Indebtedness is subordinated in right of payment to the notes, prior to) any and all other such Indebtedness thereby secured, so long as such other Indebtedness is so secured, with the following exceptions: (1) Liens in favor of Valassis or any Subsidiary; (2) Liens on Property of a Person existing at the time such Person is merged with or into or consolidated with Valassis or any Subsidiary; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Valassis or any Subsidiary; (3) Liens on Property existing immediately prior to the time of acquisition thereof by Valassis or any Subsidiary of Valassis; provided that such Liens were in existence prior to the contemplation of such acquisition; (4) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (5) Liens arising out of judgments or awards against Valassis or any Subsidiary with respect to which Valassis or such Subsidiary shall in good faith be prosecuting an appeal or proceedings for review or Liens incurred by Valassis or any Subsidiary for the purpose of obtaining a stay or discharge in the course of any legal proceeding to which Valassis or any Subsidiary is a party; (6) Liens to secure Capital Lease Obligations; 29 (7) Liens existing on the date of the indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently pursued, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (9) mechanics', materialmen's, carriers', warehousemen's and similar Liens arising in the ordinary course of business and securing Obligations of Valassis or any Subsidiary that are not overdue for a period of more than 60 days or are being contested in good faith by appropriate legal proceedings diligently pursued; provided that in the case of any such contest (i) any levy, execution or other enforcement of such Liens shall have been duly suspended; and (ii) the provision for the payment of such Liens shall have been made on the books of Valassis or the Subsidiary as may be required by GAAP; (10) Liens arising in connection with worker's compensation, unemployment insurance, old age pensions and social security benefits and other forms of governmental insurance or similar benefits which are not overdue or are being contested in good faith by appropriate proceedings diligently pursued; provided that in the case of any such contest (i) any levy, execution or other enforcement of such Liens shall have been duly suspended; and (ii) the provision for the payment of such Liens has been made on the books of Valassis or the Subsidiary as may be required by GAAP; (11) Liens in the nature of any minor imperfections of title, including, but not limited to, easements, covenants, rights-of-way or other similar restrictions, which, either individually or in the aggregate would not (i) materially adversely affect the present or future use of the Property to which they relate, (ii) have a material adverse effect on the sale or lease of such Property, or (iii) render title thereto unmarketable; (12) any interest or title of a lessor under any lease of Property to, or of any consignor of goods consigned to, or of any creditor of any consignee in goods consigned to such consignee by, Valassis or any Subsidiary; (13) Liens incurred in the ordinary course of business by Valassis, other than in connection with Indebtedness for borrowed money; (14) Liens extending, renewing or replacing any Lien listed in paragraphs (1) through (17) of this section; (15) Liens securing only the notes; (16) Liens on assets of Valassis's Subsidiaries to secure Obligations of such Subsidiaries to Valassis; (17) Liens attributable to Sale and Leaseback Transactions; and (18) other Liens, if after giving effect thereto, the aggregate outstanding amount of all Indebtedness secured by such Liens (other than Liens listed in paragraphs (1) through (17) above) shall not exceed the greater of $50,000,000 or 15% of Consolidated Tangible Assets determined in accordance with Valassis's most recent published consolidated balance sheet prepared in accordance with GAAP. Limitation on Consolidation, Merger or Sale The indenture provides that Valassis may, directly or indirectly, consolidate with or merge into any other corporation or convey or transfer substantially all of its Property to any Person, if, a. either (1) Valassis is the surviving corporation or (2) the Person formed by or surviving any such consolidation or merger (if other than Valassis) or to which such sale, assignment, transfer, 30 conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; b. the Person formed by or surviving any such consolidation or merger (if other than Valassis) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all of the obligations of Valassis under the notes and the indenture pursuant to agreements reasonably satisfactory to the trustee; and c. immediately after such transaction no Default or Event of Default exists. The indenture provides that these restrictions shall not apply to any sale, assignment, transfer, conveyance or other disposition of assets between or among Valassis and any of its wholly owned Subsidiaries. The indenture also provides that Valassis will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. Limitations on Stock Redemptions and Stock Repurchases The indenture provides that Valassis will not, and will not permit any Subsidiary to make payments to redeem or repurchase any of the Company's or a Subsidiary's Capital Stock (a "Redemption Payment") if at the time of such Redemption Payment (a) a Default has occurred and is continuing or would result from such Redemption Payment and (b) the aggregate amount of such Redemption Payment and all other Redemption Payments since the date of the indenture would exceed the sum of (i) $75.0 million, plus (ii) 50% of Valassis's Consolidated Net Income from November 16, 1998 through the date of determination, plus (iii) any proceeds from the sale or issuance of shares of Valassis's Capital Stock or securities convertible into shares of Valassis's Capital Stock (other than an issuance or sale to a Subsidiary) and, without duplication, proceeds received upon the exercise of options, warrants and other rights to acquire shares of Valassis's Capital Stock. The above restrictions do not restrict the ability of Valassis and its Subsidiaries' ability to (i) make any Redemption Payment if, pro forma for such Redemption Payment, the Funded Debt to EBITDA Ratio would have been equal to or less than 1.0; (ii) repurchase or otherwise acquire shares of, or options or warrants to purchase shares of, the Company's Capital Stock or any Subsidiary's Capital Stock from employees, former employees, directors or former directors of the Company or any Subsidiary (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) or other arrangements approved by the Board of Directors or the board of directors of any Subsidiary under which such individuals purchase or sell or are granted the option to purchase or sell shares of Capital Stock; provided, however, that the aggregate amount of such repurchases and other acquisitions described in this clause (ii) shall not exceed $5,000,000 in any calendar year; provided further, however, that such repurchases and other acquisitions described in this clause (ii) shall be excluded in the calculation of the amount of Redemption Payments; (iii) repurchase or otherwise acquire shares of the Company's Capital Stock solely in exchange for other shares of the Company's Capital Stock; provided, further however, that such issuance of shares of the Company's Capital Stock shall not be included in the calculation of proceeds from the issuance of shares of the Company's Capital Stock in clause (b)(iii) above; provided further, however, that such repurchases and other acquisitions described in this clause (iii) shall be excluded in the calculation of the amount of Redemption Payments; or (iv) repurchase or otherwise acquire solely odd lots of the Company's Capital Stock. Amendment, Supplement and Waiver Valassis may (pursuant to a board resolution) enter into supplements to the indenture with the trustee without the consent of the noteholders, for certain purposes, including: . to evidence the succession of another Person to Valassis and the assumption by such successor of the covenants of Valassis herein and contained in the notes; . to add to the covenants and agreements of Valassis for the protection or benefit of the noteholders; 31 . to add any additional Events of Default; . to provide for uncertificated notes in addition to or in place of certificated notes; . to evidence and provide for the acceptance of appointment under the indenture by a successor trustee with respect to the notes; . to secure the notes; . to cure ambiguities or inconsistencies in the indenture or to make any other provisions with respect to matters or questions arising under the indenture; provided such actions shall not materially adversely affect the interests of the noteholders; or . to comply with the requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act. With the consent of not less than a majority in aggregate principal amount at maturity of the noteholders at the time outstanding, we also may (pursuant to a board resolution), enter into supplemental indentures with the trustee to add to, change or eliminate any provisions of the indenture or to modify the rights of the noteholders, or waive any past default by us. However, no such supplemental indenture or waiver shall, without the consent of each holder of each note outstanding at the time affected thereby: . reduce the stated maturity of such note; . reduce the principal amount at maturity, issue price, redemption price or purchase price (including change in control purchase price) on such note; . change the currency of payment of such note or interest thereon; . alter the manner of calculation or rate of accrual of original issue discount or interest (including contingent interest) on such note or extend the time of payment of any such amount; . except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase option of such holder, or adversely affect the conversion rights of such noteholder; . reduce the percentage in aggregate principal amount at maturity of any note outstanding necessary to modify or amend the indenture or to waive any past default; or . impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, such note. Events of Default The indenture provides that the following are "Events of Default" thereunder with respect to the notes (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law, pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): . default in the payment of principal of, or any redemption or repurchase price for, any notes when and as the same shall be due and payable; . default for 30 days in the payment of any installment of contingent or other interest or liquidated damages on the notes; . default for 30 days after notice in the performance, or breach, of certain covenants or warranties of Valassis with respect to the notes, including but not limited to those covenants listed under "--Certain Covenants" above; 32 . default for 60 days after notice in the performance, or breach, of any covenant or warranty of Valassis with respect to the notes specified in the indenture (except for any covenant or warranty a default in which or breach of which is specifically dealt with elsewhere in the indenture); . default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Valassis (or the payment of which is Guaranteed by Valassis), resulting in the acceleration of more than $25,000,000 (or the equivalent in foreign currency) in aggregate amount of such Indebtedness prior to its express maturity, which acceleration shall have not been rescinded or annulled within 30 days after notice; . failure by Valassis to pay final judgments aggregating in excess of $25,000,000 which judgments are not paid, discharged or stayed for a period of 60 days; or . certain events in bankruptcy, insolvency or reorganization of Valassis. A Default due to the events specified in the third, fourth or sixth bullet points above will not constitute an Event of Default unless there has been given, by registered or certified mail, to Valassis by the trustee or to Valassis and the trustee by holders of at least 25% in principal amount at maturity of the notes then outstanding, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" under the indenture and the Company has not cured such default within the specified time period following such notice. If an Event of Default specified in the last bullet point above occurs, the principal of all notes then outstanding will become immediately due and payable without any declaration or other act on the part of the trustee or any noteholders. Except for Defaults specified under the last bullet point above, if an Event of Default shall have occurred and be continuing, the trustee or the holders of not less than 25% in principal amount at maturity of the notes then outstanding may declare the principal of all the notes, any accrued and unpaid contingent interest, if any, and liquidated damages, if any, to be immediately due and payable; provided that, subject to certain conditions, any such declaration and its consequences may be rescinded and annulled by written notice to Valassis and the trustee by the holders of not less than a majority in principal amount at maturity of the notes then outstanding. The indenture requires that the trustee shall within 90 days after the occurrence of any Default known to the trustee with respect to the notes transmit a notice to all holders of notes then outstanding of such Default, unless the Default has been cured or waived; provided that in the case of any Default of the type indicated in the third bullet point above, the trustee shall not provide such notice until at least 30 or 60 days, as applicable, after the occurrence thereof. Except in the case of a Default in the payment of any principal of, redemption or repurchase price for, any premium or any installment of contingent or other interest on, the notes, the trustee may withhold such notice if it in good faith determines that the withholding of such notice is in the interest of the noteholders. The holders of not less than a majority in principal amount at maturity of the notes then outstanding may on behalf of the holders of all such notes waive any past Default under the indenture and its consequences, except in the case of a Default (i) in the payment of any principal of, redemption or repurchase price for, any premium or any installment of contingent or other interest on, the notes or (ii) in respect of a covenant or other provision of the indenture which cannot be modified or amended without the consent of each holder of each note then outstanding affected thereby. The indenture requires Valassis to file annually with the trustee a certificate, signed by a specified officer, stating whether or not, to the best knowledge of such officer, Valassis has complied with all conditions and covenants under the indenture and specifying and describing any Defaults of which the officer may have knowledge. 33 The trustee shall be under no obligation to exercise any of the rights or powers vested in it by the indenture at the request or direction of any of the noteholders, unless such noteholders shall have offered to the trustee security or indemnity satisfactory to it. Subject to certain conditions including indemnification, the holders of a majority in principal amount at maturity of the notes at the time outstanding 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. Additional Information Anyone who properly receives this prospectus may obtain a copy of the indenture and the registration rights agreement without charge by writing to Valassis Communications, Inc., 19975 Victor Parkway, Livonia, MI 48152, Attention: General Counsel. Governing Law The indenture and the notes are governed by, and will be construed in accordance with, the laws of the State of New York. Information Concerning the Trustee The Bank of New York, as trustee under the indenture, has been appointed by us as bid solicitation agent, paying agent, conversion agent, registrar and custodian with regard to the notes. The trustee or its affiliates may from time to time in the future provide banking and other services to us in the ordinary course of their business. Global Notes; Book Entry Form Notes sold in the United States in reliance on Rule 144A or in offshore transactions in reliance on Regulation S are represented by one or more permanent global notes in definitive, fully-registered form without interest coupons. Each global note has been deposited with the trustee as custodian for DTC, and registered in the name of a nominee of DTC in New York, New York for the accounts of participants in DTC. Investors who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) and who purchase notes in reliance on Rule 144A under the Securities Act may hold their interests in a global note directly through DTC if they are DTC participants, or indirectly through organizations that are DTC participants. Investors who purchase notes in offshore transactions in reliance on Regulation S under the Securities Act may hold their interests in a global note directly through Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream"), if they are participants in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold interests in a global note on behalf of their participants through their respective depositaries, which in turn will hold such interests in the global note in customers' securities accounts in the depositaries' names on the books of DTC. Notes transferred to institutional "accredited investors" (as defined in Rule 501 (a) under the Securities Act) or other transferees that are not "qualified institutional buyers" will be issued and physically delivered in fully-registered, definitive form and may not be represented by interests in a global note. Otherwise, except in the limited circumstances described below, holders of notes represented by interests in a global note will not be entitled to receive definitive notes. Upon transfer of a definitive note to a "qualified institutional buyer" pursuant to Rule 144A or in an offshore transaction pursuant to Regulation S, the definitive note will be exchanged for an interest in a global 34 note, and the transferee will be required to hold its interest through a participant in DTC, Euroclear or Clearstream, as applicable. DTC has advised us that it is a limited-purpose trust company organized under New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of institutions that have accounts with DTC ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates, DTC's participants include securities brokers and dealers (which includes Bear Stearns), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. Upon the issuance of each global note, DTC will credit, on its book-entry registration and transfer system, the respective principal amount of the individual beneficial interests represented by the global note to the accounts of participants. Ownership of beneficial interests in each global note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in each global note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by DTC (with respect to participants' interests) and such participants (with respect to the owners of beneficial interests in the global note other than participants). So long as DTC or its nominee is the registered holder and owner of a global note, DTC or such nominee, as the case may be, will be considered the sole legal owner of the notes represented by the global note for all purposes under the indenture, the notes and applicable law. Except as set forth below, owners of beneficial interests in a global note will not be entitled to receive definitive notes and will not be considered to be the owners or holders of any notes under the global note. We understand that under existing industry practice, in the event an owner of a beneficial interest in a global note desires to take any actions that DTC, as the holder of the global note, is entitled to take, DTC would authorize the participants to take such action, and that participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. No beneficial owner of an interest in a global note will be able to transfer the interest except in accordance with DTC's applicable procedures, in addition to those provided for under the indenture and, if applicable, those of Euroclear and Clearstream. Because DTC can only act on behalf of participants, who in turn act on behalf of others, the ability of a person having a beneficial interest in a global note to pledge that interest to persons that do not participate in the DTC system, or otherwise to take actions in respect of that interest, may be impaired by the lack of a physical certificate of that interest. All payments on the notes represented by a global note registered in the name of and held by DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner and holder of the global note. We expect that DTC or its nominee, upon receipt of any payment in respect of a global note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount at maturity of the global note as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global note held through such participants will be governed by standing instructions and customary practices as is now the case with securities held for accounts of customers registered in the names of nominees for such customers. Such payments, however, will be the responsibility of such participants and indirect participants, and neither we, Bear Stearns, the trustee nor any paying agent will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in any global note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and its participants or the relationship between such participants and the owners of beneficial interests in the global note. 35 Unless and until it is exchanged in whole or in part for definitive notes in definitive form, each global note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. If a holder requires physical delivery of a definitive note for any reason, including to sell notes to persons in jurisdictions that require such delivery of such notes or to pledge such notes, such holder must transfer its interest in the relevant global note in accordance with the normal procedures of DTC and the procedures set forth in the indenture. Cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depository; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the global note for a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream, as the case may be) immediately following the DTC settlement date, and such credit of any transactions interests in the global note settled during such processing day will be reported to the relevant Euroclear or Clearstream participant on such date. Cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC. We expect that DTC will take any action permitted to be taken by a holder of notes (including the presentation of notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a global note is credited and only in respect of such portion of the aggregate principal amount at maturity of the notes as to which such participant or participants has or have given such direction. Although we expect that DTC, Euroclear and Clearstream will agree to the foregoing procedures in order to facilitate transfers of interests in each global note among participants of DTC, Euroclear and Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we, Bear Stearns, nor the trustee will have any responsibility for the performance or nonperformance by DTC, Euroclear or Clearstream or their participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling to continue as a depository for any global note and a successor depository is not appointed by us within 90 days, we will issue definitive notes in exchange for the global note that will be subject to certain restrictions on registration of transfers and will bear the legend set forth thereunder. We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, certificates representing the notes will be printed and delivered. 36 The information in this section concerning DTC, Clearstream, Euroclear and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we do not take responsibility for the accuracy thereof. Same-Day Settlement and Payment So long as DTC continues to make its settlement system available to us, all payments on the notes will be made by us in immediately available funds. Discharge of the Indenture We may satisfy and discharge our obligations under the indenture by delivering to the trustee for cancellation all outstanding notes or by depositing with the trustee, the paying agent, the conversion agent or bid solicitation agent, if applicable, after the notes have become due and payable, whether at stated maturity, or any redemption date, or any purchase date, or a change in control purchase date, or upon conversion or otherwise, cash or shares of common stock (as applicable under the terms of the indenture) sufficient to pay all of the outstanding notes and paying all other sums payable under the indenture by us. Calculations in Respect of Notes We will be responsible for making all calculations called for under the notes. These calculations include, but are not limited to, determination of the market prices of the notes and of the shares of common stock and amounts of contingent interest payments and liquidated damages, if any, payable on the notes. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of notes. We will provide a schedule of our calculations to the trustee, and the trustee is entitled to rely upon the accuracy of our calculations without independent verification. Limitations of Claims in Bankruptcy If a bankruptcy proceeding is commenced with respect to Valassis, the claim of the holder of a note is, under Title 11 of the United States Code, limited to the issue price of the note plus that portion of the original issue discount that has accrued from the date of issue to the commencement of the proceeding. In addition, the noteholders will be effectively subordinated to the indebtedness and other obligations of our subsidiaries. See "Risk Factors -- Risk Factors Relating to the Notes -- Our subsidiaries are not guarantors - Your right to receive payments on these notes could be adversely affected if any of our subsidiaries declares bankruptcy, liquidates, or reorganizes." 37 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of certain United States federal income tax consequences of the purchase, ownership, and disposition of notes and the Shares. Except where noted, this summary deals only with notes and Shares held as a capital asset by a beneficial owner of the notes or Shares (a "securityholder" or "holder"). This summary deals only with a securityholder who purchases the notes on original issue at their issue price, and it does not deal with special situations. For example, this summary does not address: . tax consequences to securityholders who may be subject to special tax treatment, such as dealers in securities or currencies, traders in securities that elect to use the mark-to-market method of accounting for their securities, financial institutions, regulated investment companies, real estate investment trusts, tax-exempt entities or insurance companies; . tax consequences to securityholders who own notes or Shares as part of a hedging, constructive sale, conversion, straddle or other risk- reducing transaction; . tax consequences to holders of notes or Shares whose "functional currency" is not the United States dollar; . tax consequences, if any, under the alternative minimum tax rules; or . tax consequences under any state, local or foreign tax law. The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions as of the date of this prospectus, all of which are subject to change (perhaps retroactively) so as to result in United States federal income tax consequences different from those discussed below. Certain conclusions are based on an opinion of McDermott, Will & Emery, counsel to Valassis. If a partnership holds notes or Shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the notes, it is particularly important that you consult your own tax advisors. If you are considering the purchase of notes, you should consult your own tax advisors concerning the United States federal income tax consequences to you of the purchase in light of your particular situation and any consequences arising under the laws of any other taxing jurisdiction. Classification of the Notes Under the indenture governing the notes, we have agreed, and by acceptance of a beneficial interest in the notes, each securityholder will be deemed to have agreed, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the regulations governing contingent payment debt instruments (the "Contingent Debt Regulations") and, for purposes of the Contingent Debt Regulations, to treat, without limitation, the amount of cash and the fair market value of any Shares received upon a conversion of a note as a contingent payment. The remainder of this discussion assumes that such treatment is correct and does not address any possible differing treatment of the notes. However, the characterization of the notes and the application of the Contingent Debt Regulations to the notes are uncertain in several respects, and no rulings have been sought from the Internal Revenue Service with respect to any of the tax consequences discussed below. There is no authority under United States federal income tax law directly addressing the United States federal income tax treatment of instruments such as the notes. Accordingly, no assurance can be given that the Internal Revenue Service or a court will agree with the treatment described herein. Any treatment different than that described herein could affect the amount, timing, character and treatment of income, gain or loss in respect of an investment in the notes. In particular, a securityholder might be required to accrue interest income at a lower rate, might not recognize income, gain or loss upon conversion or other exchange of notes to Shares, and might recognize capital gain or 38 loss upon a taxable disposition of its notes. Securityholders should consult their tax advisors concerning the tax classification of, and the treatment of securityholders holding and disposing of, the notes. United States Securityholders The following discussion is a summary of certain United States federal income tax consequences that will apply to you if you are a United States Securityholder of notes or Shares. For purposes of this discussion, a "United States Securityholder" is a beneficial owner of a note or Share, as the case may be, who or which is, for United States federal income tax purposes: . a citizen or resident of the United States; . a corporation or partnership created or organized in or under the laws of the United States or any political subdivision of the United States; . an estate the income of which is subject to United States federal income taxation regardless of its source; or . a trust described in Section 7701(a)(30) of the Code (taking into account any applicable transition rules and elections). Accrual of Interest Income As stated above under "-- Classification of the Notes," we have agreed, and by acceptance of a beneficial interest in the notes each holder of the notes will be deemed to have agreed, for United States federal income tax purposes, to treat the notes as indebtedness that is subject to the Contingent Debt Regulations and, for purposes of the Contingent Debt Regulations, to treat, without limitation, the amount of cash and the fair market value of any Shares received upon a conversion of a note as a contingent payment. In accordance with such treatment, the Contingent Debt Regulations will generally require a United States Securityholder to accrue interest income on the notes in the amounts described below, regardless of whether such securityholder uses the cash or accrual method of tax accounting. Furthermore, United States Securityholders of notes will be required to accrue interest based on the rate, as of the initial issue date of the notes, at which we would have issued a fixed rate non- convertible debt instrument with terms and conditions similar to the notes (the so-called "comparable yield," as discussed more fully below), rather than at a lower rate based on the accruals on the notes for non-tax purposes. Accordingly, United States Securityholders of notes will be required to include interest in taxable income in each year in excess of the accruals on the notes for non-tax purposes and generally in excess of any contingent interest payments received in the year. More specifically, United States Securityholders will generally accrue an amount of interest for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the notes, that equals: . the product of the "adjusted issue price" (as defined below) of the notes as of the beginning of the accrual period and the "comparable yield" (as defined below) of the notes, adjusted for the length of the accrual period; . divided by the number of days in the accrual period; and . multiplied by the number of days during the accrual period that you held the notes. The "adjusted issue price" of a note will be its original issue price increased by any interest previously accrued under the foregoing rules (determined without regard to any adjustments to interest accruals described below) and decreased by the projected amounts of any payments (in accordance with the projected payment schedule described below) previously made with respect to the notes. The original issue price of a note is the first price at which a substantial amount of the notes is sold to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. As referred to 39 above, the "comparable yield" is generally the rate, as of the original issue date of the notes, at which we would have issued a fixed rate non-convertible debt instrument with terms and conditions similar to the notes. We have determined that the comparable yield of the notes, based on the annual rate, as of the initial issue date, at which we would issue a fixed rate non-convertible debt instrument with terms and conditions similar to the notes, is an annual rate of 7.13% compounded semi-annually. If our determination of the comparable yield were successfully challenged by the Internal Revenue Service, the redetermined yield could be materially greater or less than the comparable yield determined by us. We are required to furnish to the Internal Revenue Service and to United States Securityholders the comparable yield. We are also required to furnish to the Internal Revenue Service and to United States Securityholders, solely for tax purposes, a "projected payment schedule" that estimates the amount and timing of contingent interest payments and payment upon maturity on the notes, taking into account as a payment the fair market value of any stock that might be paid upon a conversion of the notes. The projected payment schedule must produce the comparable yield. The comparable yield and projected payment schedule are included in the indenture relating to the notes, or you may obtain the comparable yield and projected payment schedule by submitting a written request for it to us at the following address: Valassis Communications, Inc., 19975 Victor Parkway, Livonia, MI 48152, Attn: General Counsel. Under the indenture governing the notes, we agreed, and by acceptance of a beneficial interest in the notes, that each United States Securityholder of the notes will be deemed to have agreed, for United States federal income tax purposes, to be bound by our determination of the comparable yield and projected payment schedule. The comparable yield and the projected payment schedule are not provided for any purpose other than the determination, for United States federal income tax purposes, of your interest income and adjustments thereof in respect of the notes and do not constitute a representation regarding the actual amount of the payment on a note. Adjustment to Interest Accruals on the Notes If the actual contingent payments made on the notes (i.e., the contingent interest payments and amounts payable at maturity, taking into account as a payment the amount of cash and the fair market value of any Shares that might be paid upon any conversion, redemption or retirement of a note) differ from the projected contingent payments, adjustments will be made for the difference. A positive adjustment for a taxable year, which is the net amount by which actual payments in that year exceed the projected payments in that year, will be treated as additional interest income in the current year. For this purpose, the payments in a taxable year include the fair market value of stock or property received in that year. A negative adjustment for a taxable year, which is the net amount by which the projected payments in that year exceed the actual payments in that year, will be treated in the following manner: . first, it will reduce the amount of interest required to be accrued in the current year (determined before any adjustment); . second, any remaining negative adjustment will be treated as ordinary loss to the extent that, with respect to prior years, your total interest income with respect to the notes exceeds net negative adjustments treated as ordinary loss; and . third, any remaining negative adjustments generally will be treated as a regular negative adjustment in the following taxable year (with any net negative adjustment in the taxable year of a disposition of a note reducing the holder's amount realized). By acceptance of a beneficial interest in the notes, United States Securityholders will be deemed to have agreed, for United States federal income tax purposes, to treat, without limitation, the amount of cash and the fair market value of any Shares received upon a conversion of a note as a contingent payment. Under such treatment, the actual contingent payments realized by you for purposes of the rule stated above will include the amount of cash and the fair market value of the Shares you receive upon conversion at the note's maturity. Therefore, to the extent you do not convert your note, or to the extent you convert a note at its maturity and the actual amount 40 realized by you upon conversion differs from the amount reflected on the projected payment schedule, adjustments under the foregoing rules would generally be required. Sale, Exchange or Conversion of a Note Upon the sale, exchange, redemption or retirement of a note, United States Securityholders will recognize gain or loss equal to the difference between such securityholder's amount realized and such securityholder's adjusted tax basis in the notes. In addition, as described above, the calculation of the comparable yield and the schedule of projected payments for the notes will include the receipt of Shares upon conversion of notes into Shares, and as a result, securityholders will also recognize gain or loss upon conversion. Any gain on a note generally will be treated as ordinary interest income. Loss from the disposition of a note will be treated as ordinary loss to the extent of such securityholder's prior interest income on the notes in excess of negative adjustments treated as ordinary loss. Any loss in excess of that amount will be treated as capital loss. Upon a conversion, redemption or retirement of a note at the note's maturity United States Securityholders will be treated as receiving the amount projected to be received at such time (rather than the amount actually received) and if the amount of cash and the fair market value of Shares actually received by such securityholder is different from the projected amount, such difference will be subject to the rules summarized under "--Adjustment to Interest Accruals on the Notes." Upon a conversion, redemption or retirement of a note other than at the note's maturity, in computing the amount received in the sale or exchange transaction United States Securityholders will take into account the amount of cash and the fair market of Shares actually received at such time. Special rules apply in determining the tax basis of a note. A United States Securityholder's basis in a note is generally increased by interest it previously accrued on the notes (before taking into account any adjustments), and reduced by the projected amount of any payments previously scheduled to be made. Under the treatment described above, a United States Securityholder's tax basis in the Shares received upon any put, conversion or redemption of a note will equal the then current fair market value of such Shares. Such securityholder's holding period for the Shares received will commence on the day after such put, conversion, or redemption. Given the uncertain tax treatment of instruments such as notes, you should contact your tax advisors concerning the tax treatment on a sale, exchange, conversion or redemption of a note. Constructive Distributions The conversion price of the notes will be adjusted in certain circumstances. Under section 305(b) of the Code, adjustments (or failures to make adjustments) that have the effect of increasing your proportionate interest in the assets or earnings of Valassis may in some circumstances result in a deemed distribution to you. Any deemed distributions will be taxable as a dividend, return of capital, or capital gain in accordance with the earnings and profits rules under the Code. Shares Distributions made to a United States Securityholder with respect to Shares up to the amount of our current or accumulated earnings and profits, as determined for United States federal income tax purposes, will be taxable as ordinary dividend income. Provided certain conditions are met, United States Securityholders that are corporations should be entitled to the dividends- received deduction with respect to amounts treated as ordinary dividend income. To the extent in excess of our current or accumulated earnings and profits, such distributions will first be treated as a tax-free return of capital to the extent of the United States Securityholder's tax basis in the Shares with respect to which the distribution was made, and thereafter as gain from the sale or exchange of such Shares. In general, a United States Securityholder will recognize capital gain or loss on the disposition of Shares in an amount equal to the difference between the amount realized on such disposition and the United States 41 Securityholder's adjusted basis in the Shares. The gain or loss generally will constitute long-term capital gain or loss if the United States Securityholder's holding period for the Shares is more than one year. The rate of federal income tax on long-term capital gains of an individual is less than the rate of federal income tax on most other kinds of income. The deductibility of net capital losses by individuals and corporations is subject to limitations. Non-U.S. Securityholders The following is a summary of the United States federal tax consequences that will apply to you if you are a Non-U.S. Securityholder of notes or Shares. The term "Non-U.S. Securityholder" means a holder of a note or Share that is not a United States Securityholder. Special rules may apply to certain Non-U.S. Securityholders such as "controlled foreign corporations," "passive foreign investment companies" and "foreign person holding companies." Such entities should consult their own tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to them. Payments Made with Respect to the Notes Although the applicable rules are not entirely clear, we intend to take a position that the payment of contingent interest that is payable when certain conditions are met will not be exempt from the 30% United States federal withholding tax, and, therefore, Non-U.S. Securityholders will be subject to withholding on such payments of contingent interest (including receipt of a portion of proceeds upon a sale, disposition or redemption attributable to such contingent interest) at a rate of 30%, subject to reduction by an applicable treaty or upon the receipt of an IRS Form W-8ECI claiming that the payments are effectively connected with the conduct of a United States trade or business. A Non-U.S. Securityholder should consult its own tax advisors as to whether it can obtain a refund of such withholding tax, either on the grounds that some portion of the contingent interest represent a payment of principal or on some other grounds. Subject to the foregoing, the 30% United States federal withholding tax will not apply to payment of principal or interest to you on the notes, provided that: . the Non-U.S. Securityholder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock that are entitled to vote within the meaning of Section 871(h)(3) of the Code; . the Non-U.S. Securityholder is not a controlled foreign corporation that is related to us through stock ownership; . the Non-U.S. Securityholder is not a bank whose receipt of interest on a Note is described in section 881(c)(3)(A) of the Code; . Shares continue to be actively traded (within the meaning of Section 1092(d) of the Code) and our company is not a United States real property holding corporation ("USRPHC"); and . either the Non-U.S. Securityholder provides its name and address, and certifies, under penalties of perjury, that it is a Non-U.S. Securityholder (which certification may be made on an IRS Form W- 8BEN or successor form) or it holds the notes through certain foreign intermediaries or certain foreign partnerships, and it and the intermediary or partnership satisfy the certification requirements of applicable United States Treasury Regulations. We believe that our company is not currently a USRPHC and will not become a USRPHC in the near future. If under the foregoing rules a Non-U.S. Securityholder is otherwise subject to the 30% United States federal withholding tax, the 30% United States federal withholding tax can be reduced or eliminated if it provides us with a properly executed (1) IRS Form W-8BEN (or successor form) claiming an exemption from or reduction 42 in withholding under the benefit of an applicable tax treaty or (2) IRS Form W- 8ECI (or successor form) stating that amounts paid on the notes are not subject to withholding tax because such amounts are effectively connected with its conduct of a trade or business in the United States. Any gain realized by a Non-U.S. Securityholder upon the sale or disposition of a note generally will not be subject to United States federal income tax unless: . that gain is effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Securityholder; . the Non-U.S. Securityholder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or . at the time of the sale or disposition, the note constitutes a United States real property interest because of the reason that our company is a USRPHC. If a Non-U.S. Securityholder of the notes is engaged in a trade or business in the United States, and if interest on the notes is effectively connected with the conduct of such trade or business, the Non-U.S. Securityholder, although exempt from the withholding tax discussed above, will generally be subject to regular United States federal income tax on interest and on any gain realized on the sale or exchange of the notes in the same manner as if it were a United States Securityholder and will be required to provide to the withholding agent a properly executed IRS Form W-8ECI (or successor from) in order to claim an exemption from withholding tax. In addition, if such a Non-U.S. Securityholder is a foreign corporation, such securityholder may be subject to a branch profit tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. Shares Distributions made to a Non-U.S. Securityholder with respect to Shares up to the amount of our current or accumulated earnings and profits, as determined for United States federal income tax purposes, will be taxable as ordinary dividend income. We will, in accordance with applicable Treasury Regulations, withhold United States income tax at the rate of 30% on the gross amount of any such distributions made to a Non-U.S. Securityholder unless (i) a lower rate is provided for under an applicable tax treaty and the Non-U.S. Securityholder files the required form evidencing eligibility for that reduced rate with the Corporation, or (ii) the Non-U.S. Securityholder files an IRS Form W-8ECI with the Corporation claiming that the distribution is effectively connected with the conduct of a United States trade or business. If a Non-U.S. Securityholder is subject to special rules under applicable tax treaties, then any gain realized by the Non-U.S. Securityholder upon the sale, exchange, redemption or other disposition of Shares generally will not be subject to United States federal income tax unless: . that gain is effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Securityholder; . the Non-U.S. Securityholder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or . the Non-U.S. Securityholder is or has been during the shorter of the five-year period ending on the date of disposition and its holding period, a USRPHC for United States federal income tax purposes. We believe we are not a USRPHC currently and will not become a USRPHC in the future. Information Reporting and Backup Withholding Information reporting requirements will generally apply to all payments we make to a Non-U.S. Securityholder and the proceeds from a sale of a note made to a Non-U.S. Securityholder, unless the Non-U.S. Securityholder is an exempt recipient such as a corporation. A backup withholding tax will apply to those 43 payments if the Non-U.S. Securityholder fails to provide a taxpayer identification number, or a certification of exempt status, or if the Non-U.S. Securityholder fails to report in full interest income. The rate of backup withholding tax is currently 31%, will be reduced to 30.5% effective August 7, 2001, and is scheduled to be further reduced gradually to 28% by the year 2006. In general, a Non-U.S. Securityholder will not be subject to backup withholding and information reporting with respect to payments that we make to it provided that we do not have actual knowledge that it is a United States Securityholder and the Non-U.S. Securityholder has given us the statement described above under "-- Payments Made with Respect to the Notes." In addition, a Non-U.S. Securityholder will not be subject to backup withholding or information reporting with respect to the proceeds of the sale of a note within the United States or conducted through certain United States- related financial intermediaries, if the payor receives the statement described above and does not have actual knowledge that it is a U.S. person, as defined under the Code, or you otherwise establish an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service. 44 SELLING SECURITYHOLDERS We originally issued and sold the notes to Bear, Stearns & Co. Inc. in a transaction exempt from the registration requirements of the Securities Act. Bear Stearns resold some of the notes within the United States to persons it believed to be "qualified institutional buyers" ("QIBs") as defined in Rule 144A under the Securities Act and outside the United States to certain persons in reliance on Regulation S under the Securities Act. The following table sets forth information as of July 24, 2001 about the principal amount at maturity of notes and the underlying common stock beneficially owned by each selling securityholder that may be offered using this prospectus. We prepared this table based on the information supplied to us by the selling securityholders named in the table. The selling securityholders listed in the table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their notes since the date on which the information is presented in the table. Information about the selling securityholders may change over time. Any changed information will be set forth in a prospectus supplement, if required. In addition, the names of other selling securityholders, the principal amount of notes that may be offered by such selling securityholders pursuant to this prospectus and the number of shares of common stock into which such notes are convertible will be set forth in a prospectus supplement, if required. The selling securityholders may from time to time offer and sell pursuant to this prospectus some or all of the notes and the shares of common stock issuable upon conversion and/or redemption of the notes. Accordingly, we cannot estimate the amounts of notes or common stock that will be held by the selling securityholders upon consummation of any such sales. Unless described in this prospectus or in a prospectus supplement, none of the selling securityholders has had a material relationship with us or any of our predecessors or affiliates within the past three years.
Principal Amount at Maturity of Notes Percentage of Notes Number of Shares of Percentage of Common Name and Address Beneficially Owned Outstanding Common Stock That Stock Outstanding(2) That May Be Sold May Be Sold(1) - --------------------------------------------------------------------------------------------------------------------------- Arbitex Master Fund L.P. c/o HW Capital L.P. 1601 Elm Street $14,400,000 5.29% 170,375 * Suite 4000 Dallas, TX 75201 Bear Stearns & Co. Inc.(3) Attn: Convertible Bond Dept., 2nd Floor $50,000,000 18.38% 591,580 1.11% 245 Park Avenue New York, NY 10167 Global Bermuda Limited Partnership c/o Goldman Sachs & Company $900,000 * 10,648 * 601 Carlson Parkway Suite 200 Minnesota, MN 55305 Lakeshore International Ltd. c/o Goldman Sachs & Company 600 Carlson Parkway $2,000,000 * 23,663 * Suite 200 Minnesota, MN 55305 Lyxor Master Fund $3,600,000 1.32% 42,594 *
45
c/o HW Capital L.P. 1601 Elm Street Suite 4000 Dallas, TX 75201 Merrill Lynch Investment Managers - QA Advisors Two World Financial $54,400,000 19.99% 643,639 1.20% Center, 16th Floor New York, NY 10281-1008 RAM Trading Ltd. 210 East State Street $5,000,000 1.84% 59,158 * Batavia, IL 60510 Any other holder of notes or future transferee, pledgee, donee or $141,800,000 52.11% 1,677,721 3.14% successor of any holder(4)(5)
* Less than 1%. (1) Assumes conversion of all of the holder's notes at a conversion rate of 11.8316 shares of common stock per $1,000 principal amount at maturity of the notes. However, this conversion rate will be subject to adjustment as described under "Description of the Notes -- Conversion Rights." As a result, the amount of common stock issuable upon conversion of the notes may increase or decrease in the future. (2) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act using 53,470,108 shares of common stock outstanding as of July 24, 2001. In calculating the percentage of common stock outstanding for each holder, we treated as outstanding that number of shares of common stock issuable upon conversion of all of that particular holder's notes. However, we did not assume the conversion of any other holder's notes. (3) Bear Stearns lead managed the offering of the notes. Bear Stearns also lead managed the offering of Valassis's 6 5/8% Senior Notes due 2009, which were issued on January 7, 1999. (4) Information about other selling securityholders will be set forth in prospectus supplements, if required. (5) Assumes that any other holders of notes, or any future transferees, pledgees, donees or successors of or from any such other holders of notes do not beneficially own any common stock other than the common stock issuable upon conversion of the notes at the initial conversion rate. 46 PLAN OF DISTRIBUTION We will not receive any of the proceeds of the sale of the notes and the underlying common stock offered by this prospectus. The selling securityholders may sell their notes and the underlying common stock from time to time directly to purchasers. Alternatively, the selling securityholders may from time to time offer their notes and underlying common stock through underwriters, broker- dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders and/or the purchasers of the notes and the underlying common stock for whom they may act as agent. The selling securityholders and any such broker-dealers or agents who participate in the distribution of the notes and the underlying common stock may be deemed to be "underwriters." As a result, any profits on the sale of the underlying common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to certain statutory liabilities, including, but not limited to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. If the notes and the underlying common stock are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions. The notes and the underlying common stock may be sold in one or more transactions at: . fixed prices; . prevailing market prices at the time of sale; . varying prices determined at the time of sale; or . negotiated prices. Sales of the notes and the underlying common stock may be effected in transactions: . on any national securities exchange or quotation service on which the underlying common stock may be listed or quoted at the time of the sale, including the New York Stock Exchange, in the case of the common stock; . in the over-the-counter market; . in transactions otherwise than on such exchanges or services or in the over- the-counter market; . through the writing of options; or . a combination of any of the above. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with the sales of the notes and the underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the notes and the underlying common stock in the course of hedging their positions. The selling securityholders may also sell the notes and the underlying common stock short and deliver notes and the underlying common stock to close out short positions, or loan or pledge notes and the underlying common stock to broker-dealers that in turn may sell the notes and the underlying common stock. 47 To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker- dealer or agent regarding the sale of the notes and the underlying common stock by the selling securityholders. Selling securityholders may not sell any or all of the notes and the underlying common stock offered by them pursuant to this prospectus. In addition, we cannot assure you that any such selling securityholder will not transfer, devise or gift the notes and the underlying common stock by other means not described in this prospectus. Our common stock trades on the New York Stock Exchange under the symbol "VCI." We do not intend to apply for listing of the notes on any securities exchange or for quotation through Nasdaq. Accordingly, no assurance can be given as to the development of liquidity or any trading market for the notes. There can be no assurance that any selling securityholder will sell any or all of the notes or the underlying common stock pursuant to this prospectus. In addition, any notes or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. The selling securityholders and any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the underlying common stock by the selling securityholders and any such other person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the notes and the underling common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the notes and the underlying common stock and the ability of any person or entity to engage in market-making activities with respect to the notes and the underlying common stock. Pursuant to the registration rights agreement that has been filed as an exhibit to the registration statement of which this prospectus is a part, we and the selling securityholders will be indemnified by each other against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with these liabilities. We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the notes and the underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents. 48 LEGAL MATTERS The validity of the issuance of the notes and the shares of common stock issuable upon conversion of the notes has been passed upon for us by McDermott, Will & Emery, New York, New York. EXPERTS The consolidated financial statements and the related financial statement schedule incorporated in this prospectus by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 49 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Our estimated expenses in connection with the issuance and distribution of the securities being offered hereby are as follows: Securities and Exchange Commission Registration Fee.... $36,478.41 Legal Fees and Expenses................................ $300,000 Printing Fees.......................................... $ 25,000 Accounting Fees and Expenses........................... $ 40,000 Blue Sky and Other Fees................................ $ 0 Rating Agency and Trustee Fees......................... $ 11,000 Miscellaneous.......................................... $ 0 ----------- Total............................................... $412,478.41
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify the person serving in that capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which the person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which the action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for the expenses which the Court of Chancery or such other court shall deem proper. The provisions regarding indemnification and advancement of expenses under Section 145 of the DGCL shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, stockholders' or disinterested directors' vote or otherwise. As permitted by Section 102(b)(7) of the DGCL, our Restated Certificate of Incorporation includes a provision, in substance, eliminating the personal liability of a director of the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except: (i) for any breach of the director's duty of loyalty to the Company or our stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL (relating to unlawful II-1 payment of dividends and unlawful stock purchase and redemption); or (iv) for any transaction from which the director derived an improper personal benefit. As permitted by Section 145(e) of the DGCL, our Restated Certificate of Incorporation and our Amended and Restated Bylaws provide, in substance, that we shall indemnify our directors and officers, and, to the extent our board at any time authorizes, incorporators, employees or agents, as such, to the fullest extent permitted by applicable law, and that expenses reasonably incurred by any officer or director or other person entitled to indemnification in connection with a threatened or actual action or proceeding shall be advanced or promptly reimbursed by us in advance of the final disposition of the action or proceeding, provided that, if required to do so under the DGCL, we receive an undertaking by or on behalf of the officer or director or other person to repay the amount if and to the extent that it is ultimately determined by final judicial decision from which there is no further right of appeal that the officer or director or other person is not entitled to indemnification. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. EXHIBIT INDEX
Exhibit Number Description of Exhibit - ------- ---------------------- 3.1(a) Restated Certificate of Incorporation (incorporated by reference to Valassis Communications, Inc.'s Registration Statement No. 33-45189). 3.2 Amended and Restated Bylaws (incorporated by reference to Valassis Communications, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999). 4.1 Indenture between Valassis Communications, Inc. and The Bank of New York. 4.2 Form of Zero Coupon Convertible Senior Note due 2021 (included in Exhibit 4.1). 4.3 Registration Rights Agreement, dated June 6, 2001, between Valassis Communications, Inc. and Bear, Stearns & Co. Inc. 5.1 Opinion of McDermott, Will & Emery. 8.1 Opinion of McDermott, Will & Emery as to certain U.S. federal income tax considerations. 12.1 Computation of Ratio of Earnings to Fixed Charges. 23.2 Consent of McDermott, Will & Emery (included in Exhibit 5.1). 23.3 Consent of Deloitte & Touche LLP. 24.1 Power of Attorney (included on signature pages of this Registration Statement). 25.1 Form T-1 Statement of Eligibility of the Trustee under the Indenture.
ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: II-2 (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of Securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in this registration statement. Provided that, however, paragraphs (1)(a) and (1)(b) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by us pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered, which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act, each filing of our annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (5) Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers or persons controlling us, pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission the indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, on July 24, 2001. VALASSIS COMMUNICATIONS, INC. By: /s/ Alan F. Schultz -------------------- Alan F. Schultz Chief Executive Officer, President and Chairman of the Board POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Alan F. Schultz, Robert L. Recchia and Barry P. Hoffman, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution for each such person and in such person's name, in any and all capacities, (A) to sign all amendments (including pre-effective and post- effective amendments) to this registration statement; (B) to file such amendments with all exhibits and other related documents with the Securities and Exchange Commission; and (C) to perform every act necessary in connection with (A) or (B), granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated. Date: July 24, 2001 /s/ Alan F. Schultz ----------------------- Alan F. Schultz Chief Executive Officer, President and Chairman of the Board (principal executive officer) Date: July 23, 2001 /s/ Robert A. Recchia ----------------------- Robert A. Recchia Executive Vice President and Chief Financial Officer (principal financial and accounting officer) Date: July 23, 2001 /s/ Richard N. Anderson ----------------------- Richard N. Anderson Director Date: July 23, 2001 /s/ Patrick F. Brennan ----------------------- Patrick F. Brennan Director II-4 Date: July 14, 2001 /s/ Kenneth V. Darish ----------------------- Kenneth V. Darish Director Date: July 17, 2001 /s/ Seth Goldstein ----------------------- Seth Goldstein Director Date: July 23, 2001 /s/ Brian J. Husselbee ----------------------- Brian J. Husselbee Director Date: July 12, 2001 /s/ Marcella A. Sampson ----------------------- Marcella A. Sampson Director Date: July 23, 2001 /s/ Faith Whittlesey ------------------------ Faith Whittlesey Director II-5 EX-4.1 2 dex41.txt INDENTURE BETWEEN VALASSIS & THE BANK OF NEW YORK EXHIBIT 4.1 VALASSIS COMMUNICATIONS, INC. Company THE BANK OF NEW YORK, Trustee --------------------- INDENTURE Dated as of June 6, 2001 --------------------- $272,100,000 Zero Coupon Convertible Senior Notes due 2021/1/ - ------------- /1/ Plus an option to purchase up to $27,210,000 additional Principal Amount at Maturity of such Zero Coupon Convertible Senior Notes due 2021 from the Company to cover over-allotments. ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Page SECTION 1.01. Definitions....................................... 1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act. 12 SECTION 1.03. Rules of Construction............................. 12 ARTICLE 2 THE NOTES SECTION 2.01. Form of Notes..................................... 13 SECTION 2.02. Title and Terms................................... 13 SECTION 2.03. Denominations..................................... 14 SECTION 2.04. Forms Generally................................... 14 SECTION 2.05. Execution, Authentication and Delivery............ 14 SECTION 2.06. Registrar and Paying Agent........................ 15 SECTION 2.07. Transfer and Exchange............................. 15 SECTION 2.08. Replacement Notes................................. 16 SECTION 2.09. Outstanding Notes................................. 17 SECTION 2.10. Temporary Notes; Exchange of Global Note for Definitive Notes.................................. 17 SECTION 2.11. Book-entry Provisions for Global Notes............ 18 SECTION 2.12. Cancellation...................................... 18 SECTION 2.13. Special Transfer Provisions....................... 19 SECTION 2.14. CUSIP Numbers..................................... 22 SECTION 2.15. Legend on Restricted Notes........................ 22 SECTION 2.16. Tax Treatment of Notes............................ 22 ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee................................ 22 SECTION 3.02. Selection of Notes to be Redeemed................. 23 SECTION 3.03. Notice of Redemption.............................. 23 SECTION 3.04. Effect of Notice of Redemption.................... 24 SECTION 3.05. Deposit of Redemption Price....................... 24 SECTION 3.06. Notes Redeemed in Part............................ 24 SECTION 3.07. Purchase of Notes at Option of the Holder......... 24 SECTION 3.08. Purchase of Notes at Option of the Holder upon Change in Control................................. 30 SECTION 3.09. Effect of Purchase Notice or Change in Control Purchase Notice................................... 32 SECTION 3.10. Deposit of Purchase Price or Change in Control Purchase Price.................................... 34 SECTION 3.11. Notes Purchased in Part........................... 34 SECTION 3.12. Covenant to Comply With Notes Laws Upon Purchase of Notes.......................................... 34 SECTION 3.13. Repayment to the Company.......................... 34 i TABLE OF CONTENTS ARTICLE 4 COVENANTS Page SECTION 4.01. Payment of Notes...................................... 35 SECTION 4.02. Calculation of Original Issue Discount................ 35 SECTION 4.03. Maintenance of Office or Agency....................... 35 SECTION 4.04. Money for Note Payments to be Held in Trust........... 35 SECTION 4.05. Corporate Existence................................... 36 SECTION 4.06. Maintenance of Property............................... 36 SECTION 4.07. Payment of Taxes and Other Claims..................... 36 SECTION 4.08. Limitation on Sale and Leaseback Transactions......... 36 SECTION 4.09. Limitation on Liens................................... 37 SECTION 4.10. Limitation on Stock Redemptions and Stock Repurchases. 37 SECTION 4.11. Certificate as to Default............................. 38 ARTICLE 5 CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER SECTION 5.01. Company May Consolidate, etc., Only on Certain Terms... 38 SECTION 5.02. Successor Corporation Substituted...................... 39 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default.................................... 39 SECTION 6.02. Acceleration......................................... 41 SECTION 6.03. Other Remedies....................................... 41 SECTION 6.04. Waiver of Past Defaults.............................. 42 SECTION 6.05. Control by Majority.................................. 42 SECTION 6.06. Limitation on Suits.................................. 42 SECTION 6.07. Rights of Holders to Receive Payment................. 43 SECTION 6.08. Collection Suit by Trustee........................... 43 SECTION 6.09. Trustee May File Proofs of Claim..................... 43 SECTION 6.10. Priorities........................................... 44 SECTION 6.11. Undertaking for Costs................................ 44 SECTION 6.12. Waiver of Stay or Extension Laws..................... 44 ARTICLE 7 TRUSTEE SECTION 7.01. Certain Duties and Responsibilities.................. 44 SECTION 7.02. Notice of Defaults................................... 45 SECTION 7.03. Certain Rights of Trustee............................ 46 SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.... 47 SECTION 7.05. May Hold Notes....................................... 47 SECTION 7.06. Money Held in Trust.................................. 47 ii TABLE OF CONTENTS Page SECTION 7.07. Compensation and Reimbursement....................... 48 SECTION 7.08. Disqualification; Conflicting Interests.............. 48 SECTION 7.09. Corporate Trustee Required; Eligibility.............. 49 SECTION 7.10. Resignation and Removal; Appointment of Successor.... 49 SECTION 7.11. Acceptance of Appointment by Successor............... 51 SECTION 7.12. Merger, Conversion, Consolidation or Succession to Business............................................. 51 SECTION 7.13. Preferential Collection of Claims Against Company.... 51 SECTION 7.14. Appointment of Authenticating Agent.................. 52 ARTICLE 8 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 8.01. Company to Furnish Trustee Names and Addresses of Holders........................................... 53 SECTION 8.02. Preservation of Information; Communications to Holders........................................... 53 SECTION 8.03. Reports by the Trustee............................... 54 SECTION 8.04. Reports by the Company............................... 54 ARTICLE 9 DISCHARGE OF INDENTURE SECTION 9.01. Discharge of Liability on Notes..................... 55 SECTION 9.02. Application of Trust Money.......................... 55 SECTION 9.03. Repayment to Company................................ 55 ARTICLE 10 SUPPLEMENTAL INDENTURES SECTION 10.01. Supplemental Indentures Without Consent of Holders. 56 SECTION 10.02. Supplemental Indentures With Consent of Holders.... 56 SECTION 10.03. Execution of Supplemental Indentures............... 57 SECTION 10.04. Effect of Supplemental Indentures.................. 57 SECTION 10.05. Conformity with Trust Indenture Act................ 57 SECTION 10.06. Reference in Notes to Supplemental Indentures...... 57 ARTICLE 11 CONVERSION SECTION 11.01. Conversion Privilege............................... 58 SECTION 11.02. Conversion Procedure............................... 60 SECTION 11.03. Fractional Shares.................................. 61 SECTION 11.04. Taxes on Conversion................................ 61 SECTION 11.05. Company to Provide Stock........................... 62 SECTION 11.06. Adjustment for Change in Capital Stock............. 62 SECTION 11.07. Adjustment for Rights Issue........................ 63 SECTION 11.08. Adjustment for Other Distributions................. 63 SECTION 11.09. When Adjustment May Be Deferred or Not Made........ 64 SECTION 11.10. When No Adjustment Required........................ 65 iii TABLE OF CONTENTS Page SECTION 11.11. Notice of Adjustment............................... 65 SECTION 11.12. Voluntary Increase................................. 65 SECTION 11.13. Notice of Certain Transactions..................... 65 SECTION 11.14. Reorganization of Company; Special Distributions... 66 SECTION 11.15. Company Determination Final........................ 66 SECTION 11.16. Trustee's Adjustment Disclaimer.................... 66 SECTION 11.17. Simultaneous Adjustments........................... 67 SECTION 11.18. Successive Adjustments............................. 67 SECTION 11.19. Rights Issued in Respect of Shares Issued Upon Conversion......................................... 67 SECTION 11.20. Restriction on Shares Issued Upon Conversion....... 67 ARTICLE 12 MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls....................... 69 SECTION 12.02. Notices............................................ 69 SECTION 12.03. Communication by Holders with Other Holders........ 70 SECTION 12.04. Certificate and Opinion as to Conditions Precedent.......................................... 70 SECTION 12.05. Statements Required in Certificate or Opinion...... 71 SECTION 12.06. When Notes Disregarded............................. 71 SECTION 12.07. Acts of Holders.................................... 71 SECTION 12.08. Rules by Trustee, Paying Agent and Registrar....... 72 SECTION 12.09. Legal Holidays..................................... 72 SECTION 12.10. Governing Law...................................... 72 SECTION 12.11. No Recourse Against Others......................... 72 SECTION 12.12. Successors......................................... 73 SECTION 12.13. Multiple Originals................................. 73 SECTION 12.14. Table of Contents; Headings........................ 73 SECTION 12.15. Severability....................................... 73 EXHIBIT A: FORM OF NOTE.............................................. A-1 EXHIBIT B: FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL NOTE OR DEFINITIVE NOTE TO DEFINITIVE NOTE........... B-1 EXHIBIT C: FORM OF NON-DISTRIBUTION LETTER FOR INSTITUTIONAL ACCREDITED INVESTORS............................................. C-1 EXHIBIT D: FORM OF PURCHASE NOTICE.................................... D-1 EXHIBIT E: FORM OF CHANGE IN CONTROL PURCHASE NOTICE.................. E-1 EXHIBIT F: FORM OF TRANSFER CERTIFICATE FOR TRANSFER OF RESTRICTED COMMON STOCK....................................... F-1 EXHIBIT G: PROJECTED PAYMENT SCHEDULE................................. G-1 iv INDENTURE dated as of June 6, 2001, between VALASSIS COMMUNICATIONS, INC., a Delaware corporation, having its principal office at 19975 Victor Parkway, Livonia, Michigan 48152, and THE BANK OF NEW YORK, a New York banking corporation, having its Corporate Trust Office at 101 Barclay Street, Floor 21 West, New York, New York 10286. RECITALS OF THE COMPANY The Company has duly authorized the creation of its Zero Coupon Convertible Senior Notes due 2021 (herein called the "Notes") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. NOW, THEREFORE, THIS INDENTURE WITNESSETH: The parties hereto, intending to be legally bound, agree that, in consideration of the acceptance and purchase of the Notes by the holders thereof, the Company covenants and agrees with the Trustee, for the equal benefit of all the holders from time to time of the Notes, without preference, priority or distinction of any thereof over any other thereof by reason of priority in time of issuance or negotiation, or otherwise, as follows: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ----------- "Accreted Conversion Price" means with respect to a Note with $1,000 of Principal Amount at Maturity, as of the date of determination, the quotient of (i) the sum of the Issue Price plus Original Issue Discount accrued to such date divided by (ii) the Conversion Rate in effect on such date. "Affiliate" of any specified Person means any other Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such specified Person or (iii) of which 10% or more of the voting stock is beneficially owned or held by such specified Person or a subsidiary of such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of voting stock, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Sale" means, with respect to any Person, any sale, transfer or other disposition (including, without limitation, dispositions pursuant to any merger, consolidation or Sale and Leaseback Transaction) by such Person or any of its subsidiaries to any Person other than such Person or one of its subsidiaries in any single transaction or series of transactions of (i) any or all of the Capital Stock in any of the subsidiaries of such Person or (ii) any other Property 1 of such Person or any other Property of its subsidiaries outside the ordinary course of business of such Person or such subsidiary. "Attributable Debt" in respect of a Sale and Leaseback Transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended; such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Agent Members" has the meaning specified in Section 2.11. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Notes. "Average Conversion Value" means the product of the Sale Price times the number of Shares. "Average Quoted Price" has the meaning specified in Section 11.01. "Bid Solicitation Agent" means a bid solicitation agent appointed by the Company to act in such capacity pursuant to the paragraph entitled "Security Market Price" of the Notes, which initially shall be the Trustee. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Board Resolution" means a copy of a resolution certified by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP. "Capital Stock" in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights, warrants or options to acquire an equity interest in such Person. "Change in Control" has the meaning specified in Section 3.08. "Change in Control Notice" has the meaning specified in Section 3.08. "Change in Control Notice Date" has the meaning specified in Section 3.08. 2 "Change in Control Purchase Date" has the meaning specified in Section 3.08. "Change in Control Purchase Notice" has the meaning specified in Section 3.08. "Change in Control Purchase Price" has the meaning specified in Section 3.08. "Clearstream" has the meaning specified in Section 2.01. "Closing Date" means the date of this Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means Valassis Communications, Inc., a Delaware corporation, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall instead mean such successor Person. "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President, its Chief Financial Officer, a Vice Chairman, a Vice President or its Treasurer. "Company's Notice" has the meaning specified in Section 3.07. "Company's Notice Date" has the meaning specified in Section 3.07. "Consolidated Interest Expense" of any Person means, for any period, the aggregate interest expense of such Person and its subsidiaries for such period on a consolidated basis, determined in accordance with GAAP, plus, to the extent not included in such interest expense, and to the extent incurred by such Person and such subsidiaries, without duplication, (i) interest expense attributable to capital leases and the interest expense attributable to leases constituting part of a Sale and Leaseback Transaction, (ii) amortization of debt discount and debt issuance costs, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financings, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) dividends payable on shares of preferred stock issued by such Person or its subsidiaries, other than shares of such preferred stock held by such Person or its subsidiaries, (viii) interest accruing on the Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by such Person or such subsidiaries, and (ix) cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any other Person in connection with Indebtedness incurred by such plan or trust. "Consolidated Net Income" of any Person means, for any period, the aggregate net income (or net loss, as the case may be) of such Person and its subsidiaries for such period on a consolidated basis, determined in accordance with GAAP, provided that there shall be excluded therefrom (i) gains and losses from Asset Sales or reserves relating thereto, (ii) items classified as extraordinary or nonrecurring (other than the tax benefit of the utilization of net operating loss carryforwards) and gains from discontinued operations, (iii) except to the extent of the amount of dividends or distributions paid to such Person by any other Person during such 3 period, the net income (or loss) of (a) such other Person other than a subsidiary of such Person and (b) any subsidiary of such Person to the extent that the payment of the net income of such other Person as a dividend or other distribution to such Person is restricted by contract or otherwise and (iv) except to the extent includable pursuant to clause (iii) hereof, the income (or loss) of any other Person accrued or attributable to any period prior to the date it becomes a subsidiary of such Person or is merged into or consolidated with such Person or any of such Person's subsidiaries or all or substantially all of such other Person's Property is acquired by such Person or any of its subsidiaries. "Consolidated Tangible Assets" means, as of any date, the sum of the Property and assets of the Company and its Subsidiaries on a consolidated basis at such date, after eliminating intercompany items, after deducting from such total all Property and assets that would be classified as intangibles under GAAP (including, without limitation, goodwill, organizational expenses, trademarks, trade names, copyrights, patents, licenses and any rights in any thereof), all reserves and prepaid expenses, deferred charges or authorized debt discount and expense, each such item determining in accordance with the Company's most recently published consolidated balance sheet prepared in accordance with GAAP. "Contingent Debt Regulations" has the meaning specified in Section 2.16. "Contingent Interest" has the meaning specified in the paragraph entitled "Contingent Interest" of the Notes. "Conversion Agent" means the Trustee or such other office or agency designated by the Company where Notes may be presented for conversion. "Conversion Date" has the meaning specified in Section 11.02. "Conversion Rate" has the meaning specified in Section 11.01. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as successor Trustee may designate from time to time by notice to the Holders and the Company). "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Definitive Notes" has the meaning specified in Section 2.01. "Depositary" means, with respect to the Notes issuable in whole or in part in global form, the Person specified pursuant to Section 2.01 hereof as the initial Depositary with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall instead mean or include such successor. 4 "Dollar" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debt. "EBITDA" for any period means the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (i) all income tax expense of the Company and its consolidated Subsidiaries, (ii) depreciation expense of the Company and its consolidated Subsidiaries, (iii) amortization expense of the Company and its consolidated Subsidiaries (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), and (iv) all other non-cash charges of the Company and its consolidated Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), in each case for such period. "Euroclear" has the meaning specified in Section 2.01. "Event of Default" has the meaning specified in Section 6.01. "Ex-Dividend Date" has the meaning specified in Section 11.01. "Ex-Dividend Time" has the meaning specified in Section 11.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. "Extraordinary Cash Dividend" has the meaning specified in Section 11.08. "Funded Debt" of any Person means, as at any date as of which any determination thereof is being or is to be made, any Indebtedness of such person that by its terms (i) will mature more than one year after the date it was issued, incurred, assumed or guaranteed by such Person, or (ii) will mature one year or less after the date it was issued, incurred, assumed or guaranteed by such Person which at such date of determination may be renewed or extended at the election or option of such Person so as to mature more than one year after such date of determination. "Funded Debt to EBITDA Ratio" as of any date of determination means the ratio of (i) Funded Debt to (ii) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters prior to the date of determination for which internal financial statements are available; provided, however, that if the Company or any Subsidiary shall have made an acquisition of assets which constitutes all or substantially all of the assets of a business, EBITDA for such period shall be calculated after giving pro forma effect thereto as if such acquisition occurred on the first day of such period. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, including those principles set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, and (iii) such other statements by such other entity as approved by a significant segment of the 5 accounting profession. All computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "Global Note" has the meaning specified in Section 2.01. "Global Notes Legend" means the legend to be included for Global Notes that is set forth in Exhibit A hereto. "Guarantee" means any direct or indirect obligation, contingent or otherwise, of a Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person in any manner. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of (i) borrowed money; (ii) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (iii) banker's acceptances; (iv) representing Capital Lease Obligations; (v) the balance deferred and unpaid of the purchase price of any property under conditional sales or other similar agreements which provide for the deferral of the payment of the purchase price for a period in excess of one year following the date of such Person's receipt and acceptance of complete delivery of such property; and (vi) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding (other than Capital Lease Obligations) as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture as amended or supplemented from time to time and includes the terms of Notes established as contemplated by Section 2.01. "Initial Purchaser" means Bear, Stearns & Co. Inc. "Issue Date" means the date the Notes are originally issued or deemed issued as set forth on the face of the Note under this Indenture. 6 "Issue Price" of any Note means, in connection with the original issuance of such Note, the issue price as set forth on the face of the Note. "Legal Holiday" has the meaning specified in Section 12.09. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Liquidated Damages" has the meaning specified in the Registration Rights Agreement. "Market Price" has the meaning specified in Section 3.07. "Maturity", when used with respect to any Note, means the date on which the principal, Purchase Price or Change in Control Purchase Price of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity, on a Redemption Date, Purchase Date or Change in Control Purchase Date, or by declaration of acceleration or otherwise. "Non-Global Purchasers" has the meaning specified in Section 2.01. "Noteholder Act" has the meaning specified in Section 12.07. "Notes" has the meaning specified in the second paragraph of this Indenture. "Notes Custodian" means the custodian with respect to a Global Note (as appointed by the Depositary) or any successor thereto, who shall initially be the Trustee. "Notice of Default" has the meaning specified in Section 6.01. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means the offering memorandum relating to the Notes dated May 23, 2001. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, an Assistant or Deputy Treasurer or the Secretary or an Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, a Vice Chairman or a Vice President, and by the Treasurer, an Assistant Treasurer, 7 the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee, which shall comply with Section 12.04. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee. "Original Issue Discount" of any Note means the difference between the Issue Price and the Principal Amount at Maturity of the Note as set forth on the face of the Note, which shall accrue as set forth in the form of Note. "Outstanding," when used as of any particular time with reference to Notes, means all Notes outstanding in accordance with Section 2.09 hereof; provided, however, that in determining whether the Holders of the requisite Principal Amount at Maturity of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer actually knows to be so owned shall be so disregarded. "Paying Agent" has the meaning specified in Section 2.06. "Permitted Liens" means: (1) Liens in favor of the Company or any Subsidiary; (2) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Subsidiary; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or any Subsidiary; (3) Liens on property existing immediately prior to the time of acquisition thereof by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (4) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (5) Liens arising out of judgments or awards against the Company or any Subsidiary with respect to which the Company or Subsidiary shall in good faith be prosecuting an appeal or proceedings for review or Liens incurred by the Company or any Subsidiary for the purpose of obtaining a stay or discharge in the course of any legal proceeding to which the Company or any Subsidiary is a party; (6) Liens to secure Capital Lease Obligations; 8 (7) Liens existing on the date of the Indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (9) mechanics', materialmen's, carrier's, warehousemen's and similar Liens arising in the ordinary course of business and securing Obligations of the Company or any Subsidiary that are not overdue for a period of more than 60 days or are being contested in good faith by appropriate legal proceedings diligently pursued; provided that in the case of any such contest (i) any levy, execution or other enforcement of such Liens shall have been duly suspended; and (ii) such provision for the payment of such Liens shall have been made on the books of the Company or the Subsidiary as may be required by GAAP; (10) Liens arising in connection with worker's compensation, unemployment insurance, old age pensions and social security benefits and other forms of governmental insurance or similar benefits which are not overdue or are being contested in good faith by appropriate proceedings diligently pursued; provided that in the case of any such contest (i) any levy, execution or other enforcement of such Liens shall have been duly suspended; and (ii) such provision for the payment of such Liens has been made on the books of the Company or the Subsidiary as may be required by GAAP; (11) Liens in the nature of any minor imperfections of title, including, but not limited to, easements, covenants, rights-of-way or other similar restrictions, which, either individually or in the aggregate would not (i) materially adversely affect the present or future use of the property to which they relate, (ii) have a material adverse effect on the sale or lease of such property, or (iii) render title thereto unmarketable; (12) any interest or title of a lessor under any lease of property to, or of any consignor of goods consigned to, or of any creditor of any consignee in goods consigned to such consignee by, the Company or any Subsidiary; (13) Liens incurred in the ordinary course of business of the Company, other than in connection with Indebtedness for borrowed money; (14) any Lien extending, renewing or replacing any Permitted Lien; (15) Liens securing only the Notes; (16) Liens on assets of the Company's Subsidiaries to secure Obligations of such Subsidiaries to the Company; and (17) Liens attributable to Sale and Leaseback Transactions. "Person" means any individual, corporation, partnership, limited liability company, joint venture, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof. 9 "Principal Amount at Maturity" of any Note means the principal amount at maturity as set forth on the face of the Note. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock in any other Person. "Purchase Agreement" means the Purchase Agreement dated May 23, 2001, between the Company and the Initial Purchaser. "Purchase Date" has the meaning specified in Section 3.07. "Purchase Notice" has the meaning specified in Section 3.07. "Purchase Price" has the meaning specified in Section 3.07. "QIBs" has the meaning specified in Section 2.01. "Redemption Date" means the date specified for redemption of the Notes in accordance with the terms of the Notes and Article 3 hereof. "Registrar" has the meaning specified in Section 2.06. "Registration Rights Agreement" means the Registration Rights Agreement dated June 6, 2001 and as it may be amended from time to time, between the Company and the Initial Purchaser. "Regulation S" has the meaning specified in Section 2.01. "Responsible Officer" when used with respect to the Trustee, means any vice president, any assistant vice president, any senior trust officer or assistant trust officer, any trust officer, or any other officer associated with the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of such person's knowledge of and familiarity with the particular subject. "Restricted Note" has the meaning specified in Section 2.15. "Restricted Notes Legend" means the legend to be included for Restricted Notes that is set forth in Exhibit A hereto. "Rights" has the meaning specified in Section 11.19. "Rights Agreement" has the meaning specified in Section 11.19. "Rule 144A" means Rule 144A promulgated under the Securities Act. 10 "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Company of any Property now owned or hereafter acquired which has been or is to be sold or transferred by the Company to such Person with the intention of taking back a lease of such Property. "Sale Price" has the meaning specified in Section 3.07. "Schedule TO" means the Schedule TO specified in the Exchange Act. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder. "Security Register" has the meaning specified in Section 2.06. "Senior Credit Facility" means the Credit Agreement, dated as of November 16, 1998, among the Company, Comerica Bank and the other financial institutions from time to time party thereto as lenders and Comerica Bank as agent, as such agreement has been or hereafter may be amended in accordance with its terms. "Shares" means the shares of common stock of the Company, par value $0.01 per share. "Shelf Registration" has the meaning specified in the Registration Rights Agreement. "Significant Subsidiary" means any subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Stated Maturity," when used with respect to any Note, means the date specified in such Note as the fixed date on which an amount equal to the Principal Amount at Maturity of such Note is due and payable. "Subsidiary" means a Person (other than an individual or a government or any agency or political subdivision thereof) more than 50% of the outstanding interest of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or which the Company, in accordance with GAAP, otherwise consolidates as a Subsidiary of the Company. "trading day" has the meaning specified in Section 11.01. "Time of Determination" has the meaning specified in Section 11.01. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, instead means the successor. 11 "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bb), as amended, in effect on the Closing Date. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "United States National Securities Exchange" means the Nasdaq National Market System, the New York Stock Exchange or the American Stock Exchange, or any successor securities exchange thereto. "2004 and 2006 Purchase Dates" has the meaning specified in Section 3.07. SECTION 1.02. Incorporation by Reference of Trust Indenture Act. This ------------------------------------------------- Indenture is subject to the mandatory provisions of the Trust Indenture Act, which are incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the Notes. All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.03. Rules of Construction. Unless the context otherwise --------------------- requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; and (6) Section references are to Sections of this Indenture unless the context otherwise requires; and 12 (7) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP. ARTICLE 2 THE NOTES SECTION 2.01. Form of Notes. The Notes and the Trustee's certificate ------------- of authentication shall be substantially in the form of Exhibit A which is hereby incorporated in and expressly made a part of this Indenture. The Notes offered and sold (i) in reliance on Regulation S under the Securities Act ("Regulation S") or (ii) to "qualified institutional buyers" as defined in Rule 144A ("QIBs") in reliance on Rule 144A, in each case as provided in the Purchase Agreement, shall be issued in the form of one or more permanent global notes in definitive, fully registered form without interest coupons with the Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto (each, a "Global Note"). Any Global Note shall be deposited on behalf of the purchasers of the Notes represented thereby with the Notes Custodian, and registered in the name of the Depositary or a nominee of the Depositary for the accounts of participants in the Depositary (and, in the case of Notes held in accordance with Regulation S, registered with the Depositary for the accounts of designated agents holding on behalf of the Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") or Clearstream Banking, societe anonyme ("Clearstream")), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate Principal Amount at Maturity of a Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. The initial Depositary shall be the Depositary Trust Company. Successor Depositaries may be appointed by the Trustee. Except as provided in Section 2.10 and 2.13, owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of Notes in definitive form. Transferees of Notes who are not QIBs and did not purchase Notes sold in reliance on Regulation S under the Securities Act (referred to herein as the "Non-Global Purchasers") will receive certificated Notes in definitive form bearing the Restricted Notes Legend set forth in Exhibit A hereto ("Definitive Notes"). Definitive Notes will bear the Restricted Notes Legend set forth on Exhibit A unless removed in accordance with Section 2.13(b). SECTION 2.02. Title and Terms. The aggregate Principal Amount at --------------- Maturity of Notes which may be Outstanding at any time is limited to $272,100,000 (subject to increase to $299,310,000 in the event the Initial Purchaser exercises the over-allotment option under the Purchase Agreement). Except as provided for in the Notes, there shall be no periodic payments of interest on the Notes. The calculation of the accrual of Original Issue Discount in the period during which each Note remains Outstanding shall be on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months, and such accrual shall commence on the Issue Date of the Notes. In the event of the maturity, conversion, purchase by the Company 13 at the option of a Holder or redemption of a Note, Original Issue Discount, if any, shall cease to accrue on such Note, under the terms and subject to the conditions of this Indenture. The Notes shall be known and designated as the "Zero Coupon Convertible Senior Notes due 2021" of the Company, with a Stated Maturity on June 6, 2021. The Issue Price and Original Issue Discount accrued on the Notes when due shall be payable at (i) the office or agency of the Company in the City of New York maintained for such purpose, which initially shall be the principal corporate trust office of the Trustee in the City of New York, (ii) the Corporate Trust Office and (iii) at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company payments may be made by wire transfer or by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. The Notes shall not have the benefit of a sinking fund. The Notes shall be unsecured senior obligations of the Company and will rank equally with the Company's existing and future senior unsecured Indebtedness. SECTION 2.03. Denominations. The Notes shall be issuable only in ------------- registered form without coupons and in denominations of $1,000 Principal Amount at Maturity and any integral multiple of $1,000 above that amount. SECTION 2.04. Forms Generally. The Notes may have such letters, --------------- notations, numbers or other marks of identification and such legends or endorsements placed thereon as may be required by law, securities exchange rule, the Code and regulations thereunder, agreements to which the Company is subject, if any, or usage (provided that any such notation legend or endorsement is in a form acceptable to the Company). Each Note shall be dated the date of its authentication. The definitive Notes shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the Officers executing such Notes, as evidenced by their execution thereof. SECTION 2.05. Execution, Authentication and Delivery. One or more -------------------------------------- Officers of the Company shall sign the Notes on behalf of the Company by manual or facsimile signature. The Company's seal, if any, may, but need not, be impressed, affixed, imprinted or reproduced on the Notes and, if it is, then it may be in facsimile form. If an Officer of the Company whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. The Trustee shall, upon a Company Order, authenticate Notes for original issue up to the aggregate Principal Amount at Maturity stated in Section 2.02. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. 14 The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Any such appointment shall be evidenced by an instrument signed by a Responsible Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.06. Registrar and Paying Agent. The Company shall maintain -------------------------- an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes (the "Security Register") and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent, and the term "Registrar" includes any co-registrars. The Company initially appoints the Trustee as (i) Registrar and Paying Agent in connection with the Notes and (ii) the Notes Custodian with respect to the Global Notes. The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act. The agency agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically organized Subsidiaries may act as Paying Agent or Registrar. The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (1) above. The Registrar or Paying Agent may resign at any time upon written notice; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08. SECTION 2.07. Transfer and Exchange. The Notes shall be issued in --------------------- registered form and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with this Indenture. When a Note is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8- 401(a)(1) of the Uniform Commercial Code are met. When Notes are presented to the Registrar with a request to exchange them for Notes of other denominations and of a like aggregate Principal Amount at Maturity and tenor, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other 15 governmental charges in connection with any such transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of Notes under Section 3.03 hereof and ending at the close of business on the day of such mailing. Prior to the due presentation for registration of transfer of any Note, the Company, the Trustee, the Paying Agent and the Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving any payment on such Note (including Contingent Interest, if any, and Liquidated Damages, if any) and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary. Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of a beneficial interest in such Global Note may be effected only through a book-entry system maintained by (i) the Holder of such Global Note (or its agent) or (ii) any Holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book-entry. All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange. SECTION 2.08. Replacement Notes. If a mutilated Note is surrendered to ----------------- the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i) satisfies the Company or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking, and the Registrar does not register a transfer prior to receiving such notification, (ii) requests the Company or the Trustee to issue a new replacement Note, prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code and (iii) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for the costs and expenses they incur in replacing a Note. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable or has been called for redemption in full, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Every replacement Note is an additional obligation of the Company. The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes. 16 SECTION 2.09. Outstanding Notes. Notes Outstanding at any time are all ----------------- Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not Outstanding. Subject to Section 12.06, a Note does not cease to be Outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.08, the Note so replaced ceases to be Outstanding unless and until the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a protected purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, at Maturity, money or cash equivalents sufficient to pay all amounts payable on that date with respect to the Notes (or portions thereof) to be redeemed, purchased or repurchased or maturing, as the case may be, then on and after that date, such Notes (or portions thereof) shall cease to be outstanding and Original Issue Discount on them or Contingent Interest, if any, and Liquidated Damages, if any, shall cease to accrue. SECTION 2.10. Temporary Notes; Exchange of Global Note for Definitive ------------------------------------------------------- Notes. - ----- (a) In the event that Definitive Notes are to be issued under the terms of this Indenture, until such Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes and deliver them in exchange for temporary Notes upon surrender of such temporary Notes at the office or agency of the Company, without charge to the Holder. (b) Except for transfers made in accordance with Section 2.13(a), a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.11 shall be transferred to the beneficial owners thereof in the form of certificated Notes in definitive form only if such transfer complies with Section 2.13 and if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the events described in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. (c) Any Global Note or interest thereon that is transferable to the beneficial owners thereof in the form of certificated Notes in definitive form shall, if held by the Depository, be surrendered by the Depositary to the Trustee, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate Principal Amount at Maturity of Notes of authorized denominations in the form of certificated Notes in definitive form. Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any 17 integral multiple thereof and registered in such names as the Depositary shall direct. Any Notes in the form of certificated Notes in definitive form delivered in exchange for an interest in the Global Note shall, except as otherwise provided by Section 2.13(b), bear the Restricted Notes Legend set forth in Exhibit A hereto. (d) Prior to any transfer pursuant to Section 2.10(b), the Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. The Company will make available to the Trustee a reasonable supply of Definitive Notes. SECTION 2.11. Book-entry Provisions for Global Notes. This Section -------------------------------------- 2.11 shall apply only to a Global Note deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.11 and a Company Order, authenticate and deliver initially one or more Global Notes that (i) shall be registered in the name of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary pursuant to a FAST Balance Certificate Agreement between the Depositary and the Trustee. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "Management Regulations and Instructions to Participants" of Clearstream shall be applicable to interests in any Global Notes that are held by participants through Euroclear or Clearstream. The Trustee shall have no obligation to notify Holders of any such procedures or to monitor or enforce compliance with the same. SECTION 2.12. Cancellation. The Company at any time may deliver Notes ------------ to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, purchase, repurchase, redemption, conversion (pursuant to Article 10 hereof) or cancellation and deliver canceled Notes to the Company pursuant to written direction by an 18 Officer of the Company. In the absence of any such direction, the Trustee may dispose of all cancelled Notes in accordance with its customary procedures. The Company may not issue new Notes to replace Notes they have redeemed, paid in full or delivered to the Trustee for cancellation. The Trustee shall not authenticate Notes in place of canceled Notes other than pursuant to the terms of this Indenture. SECTION 2.13. Special Transfer Provisions. (a) Notwithstanding any --------------------------- provision to the contrary herein, so long as a Global Note remains Outstanding and is held by or on behalf of the Depositary, transfers of a Global Note, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Sections 2.10 and 2.11 and this Section 2.13(a); provided, however, that beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the Global Note in accordance with the transfer restrictions set forth under the heading "Notice to Investors" in the Offering Memorandum and, if applicable, in Exhibit C. Except for transfers or exchanges made in accordance with paragraphs (1) through (4) of this Section 2.13(a) and Section 2.10, transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (1) Global Note to Definitive Note. If an owner of a beneficial interest in a Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Note to a Person who is required to take delivery thereof in the form of a Definitive Note, such owner may, subject to the rules and procedures of Euroclear or Clearstream, if applicable, and the Depositary, cause the exchange of such interest for one or more Definitive Notes of any authorized denomination or denominations and of the same aggregate Principal Amount at Maturity. Upon receipt by the Registrar of (A) instructions from Euroclear or Clearstream, if applicable, and the Depositary directing the Trustee to authenticate and deliver one or more Definitive Notes of the same aggregate Principal Amount at Maturity as the beneficial interest in the Global Note to be exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Definitive Notes to be so issued and appropriate delivery instructions, (B) a certificate substantially in the form of Exhibit B attached hereto given by the owner of such beneficial interest, (C) a certificate substantially in the form of Exhibit C attached hereto given by the person acquiring the Definitive Notes for which such interest is being exchanged, to the effect set forth therein, and (D) such other certifications or other information and, in the case of transfers pursuant to Rule 144 under the Securities Act, legal opinions as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then Euroclear or Clearstream, if applicable, or the Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Note by the aggregate Principal Amount at Maturity of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Global Note that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Notes of the same aggregate Principal Amount at Maturity in accordance with the instructions referred to above. 19 (2) Definitive Note to Definitive Note. If a holder of a Definitive Note wishes at any time to transfer such Definitive Note (or portion thereof) to a Person who is required to take delivery thereof in the form of a Definitive Note, such holder may, subject to the restrictions on transfer set forth herein and in such Definitive Note, cause the transfer of such Definitive Note (or any portion thereof in a Principal Amount at Maturity equal to an authorized denomination) to such transferee. Upon receipt by the Registrar of (A) such Definitive Note, duly endorsed as provided herein, (B) instructions from such holder directing the Trustee to authenticate and deliver one or more Definitive Notes of the same aggregate Principal Amount at Maturity as the Definitive Note (or portion thereof) to be transferred, such instruction to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Definitive Notes to be so issued and appropriate delivery instructions, (C) a certificate from the holder of the Definitive Note to be transferred in substantially the form of Exhibit B attached hereto, (D) a certificate substantially in the form of Exhibit C attached hereto given by the person acquiring the Definitive Notes (or portion thereof), to the effect set forth therein, and (E) such other certifications or other information and, in the case of transfers pursuant to Rule 144 under the Securities Act, legal opinions as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Registrar shall cancel or cause to be canceled such Definitive Note and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Notes in the appropriate aggregate Principal Amount at Maturity in accordance with the instructions referred to above and, if only a portion of a Definitive Note is transferred as aforesaid, concurrently therewith the Company shall execute and the Trustee shall authenticate and deliver to the transferor a Definitive Note in a Principal Amount at Maturity equal to the principal amount which has not been transferred. A holder of a Definitive Note may at any time exchange such Definitive Note for one or more Definitive Notes of other authorized denominations and in the same aggregate Principal Amount at Maturity and registered in the same name by delivering such Definitive Note, duly endorsed as provided herein, to the Trustee together with instructions directing the Trustee to authenticate and deliver one or more Definitive Notes in the same aggregate Principal Amount at Maturity and registered in the same name as the Definitive Note to be exchanged, and the Registrar thereupon shall cancel or caused to be canceled such Definitive Note and concurrently therewith the Company shall execute and the Trustee shall authenticate and deliver, one or more Definitive Notes in the same aggregate Principal Amount at Maturity and registered in the same name as the Definitive Note being exchanged. (3) Definitive Note to Global Note. If a holder of a Definitive Note wishes at any time to transfer such Definitive Note (or portion thereof) to a Person who is not required to take delivery thereof in the form of a Definitive Note, such holder shall, subject to the restrictions on transfer set forth herein and in such Definitive Note and the rules of the Depositary and Euroclear and Clearstream, as applicable, cause the exchange of such Definitive Note for a beneficial interest in a Global Note. Upon receipt by the Registrar of (A) such Definitive Note, duly endorsed as provided herein, (B) instructions from such holder directing the Trustee to increase the aggregate Principal Amount at Maturity of the Global Note deposited with the Depository or with the Trustee as custodian for the Depository by the same aggregate Principal Amount at Maturity as the Definitive Note to be exchanged, such instructions to contain the name or names of a member of, or participant in, the Depository that is designated as the transferee, the account of such member or participant and other appropriate delivery 20 instructions, (C) the assignment form on the back of the Definitive Note completed in full (certifying in effect that such transfer complies with Rule 144A or Regulation S under the Securities Act or is otherwise being made to a Person who is not required to take delivery of the Notes in the form of a Definitive Note) and (D) such other certifications or other information and, in the case of transfers pursuant to Rule 144 under the Securities Act, legal opinions as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Trustee shall cancel or cause to be canceled such Definitive Note and concurrently therewith shall increase the aggregate Principal Amount at Maturity of the Global Note by the same aggregate Principal Amount at Maturity as the Definitive Note canceled. (4) Other Exchanges. In the event that a Global Note is exchanged for Notes in definitive registered form pursuant to Section 2.10 prior to the effectiveness of a Shelf Registration contemplated by and in accordance with the terms of the Registration Rights Agreement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (2) and (3) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A or Regulation S under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (b) Except in connection with a Shelf Registration contemplated by and in accordance with the terms of the Registration Rights Agreement, if Notes are issued upon the registration of transfer, exchange or replacement of Notes bearing a Restricted Notes Legend, or if a request is made to remove such a Restrictive Notes Legend on Notes, the Notes so issued shall bear the Restricted Notes Legend, or a Restricted Notes Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which, in the case of a transfer made pursuant to Rule 144 under the Securities Act, may include an opinion of counsel, as may be reasonably required by the Company, that neither the Restricted Notes Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities Act or that such Notes are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision to the Company of such satisfactory evidence, the Trustee, at the written direction of the Company, shall authenticate and deliver Notes that do not bear the Restrictive Notes Legend. The Company shall not otherwise be entitled to require the delivery of a legal opinion in connection with any transfer or exchange of Notes. (c) Neither the Trustee nor any Agent shall have any responsibility for any actions taken or not taken by the Depositary. (d) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Notes (including any transfers between or among the Depositary's participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation as is expressly required by, and to do so if and when expressly required by, the terms of this Indenture and to examine the same to determine substantial compliance as to form with the express requirements hereof. 21 SECTION 2.14. CUSIP Numbers. The Company in issuing the Notes may use ------------- "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.15. Legend on Restricted Notes. During the period beginning -------------------------- on June 6, 2001 (or such later date on which any Notes may be originally issued pursuant to the Initial Purchaser's exercise of the over-allotment option under the Purchase Agreement) and ending on the date two years from such date, any Note (including any Note issued in exchange therefor or in lieu thereof), shall be deemed a "Restricted Note" and shall be subject to the restrictions on transfer provided in the legends set forth on the face of the form of Note in Exhibit A; provided, however, that the term "Restricted Note" shall not include any Note as to which restrictions have been terminated in accordance with the terms of this Indenture, including, without limitation, Section 2.13(b). All Notes shall bear the applicable legends set forth on the face of the form of Note in Exhibit A. Except as provided in Section 2.13, the Trustee shall not issue any unlegended Note until it has received an Officers' Certificate from the Company directing it to do so. SECTION 2.16. Tax Treatment of Notes. The Company agrees, and by ---------------------- acceptance of a beneficial interest in the Notes, each beneficial holder of the Notes will be deemed to have agreed, for United States federal income tax purposes (1) to treat the Notes as indebtedness that is subject to Treas. Reg. Sec. 1.1275-4 (the "Contingent Debt Regulations") and, for purposes of the Contingent Debt Regulations, to treat, without limitation, the amount of cash and the fair market value of any Shares received by a beneficial holder upon any conversion of the Notes as a contingent payment and (2) to be bound by the Company's determination of the "comparable yield" and "projected payment schedule," within the meaning of the Contingent Debt Regulations, with respect to the Notes. For purposes of the foregoing, the Company's determination of the "comparable yield" is 7.13% per annum and the Company's determination of the "projected payment schedule" is as set forth in Exhibit G attached hereto. A Holder of Notes may also obtain the comparable yield and projected payment schedule by submitting a written request to the Company at the following address: Valassis Communications, Inc., 19975 Victor Parkway, Livonia, Michigan 48152, Attention: General Counsel. ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee. Beginning on June 6, 2006, the ------------------ Company, at its option, may elect to redeem Notes in accordance with the provisions of this Indenture. If the Company elects to redeem Notes, it shall notify the Trustee in writing of the date of redemption (the "Redemption Date"), the Principal Amount at Maturity of Notes to be redeemed and the Redemption Price. 22 The Company shall give each notice to the Trustee provided for in this Section at least 40 days but not more than 70 days before the Redemption Date. Such notice shall be accompanied by an Officers' Certificate from the Company to the effect that such redemption will comply with the conditions herein. If fewer than all the Notes are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not fewer than 15 days after the date of notice to the Trustee. Any such notice may be canceled by the Company at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all the --------------------------------- Notes held in definitive form are to be redeemed, the Trustee shall select the Notes to be redeemed on a pro rata basis in accordance with the Principal Amounts at Maturity. The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from Outstanding Notes not previously called for redemption. Notes and portions thereof that the Trustee selects shall be in Principal Amounts at Maturity of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall promptly notify the Company of the Notes or portions thereof to be redeemed. If any Note selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Note so selected, the converted portion of such Note shall be deemed (so far as may be) to be the portion selected for redemption. Notes which have been converted during a selection of Notes to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. SECTION 3.03. Notice of Redemption. At least 30 days but not more than -------------------- 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes to be redeemed at such Holder's registered address. The notice shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the Conversion Rate; (3) the name and address of the Paying Agent and Conversion Agent; (4) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (5) that Notes called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date; (6) that Holders who want to convert Notes must satisfy the requirements set forth therein and in this Indenture; (7) if fewer than all the Outstanding Notes are to be redeemed, the certificate numbers and Principal Amounts at Maturity of the particular Notes to be redeemed; 23 (8) that, unless the Company defaults in making payment of such Redemption Price or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, Original Issue Discount on Notes (or portions thereof) called for redemption, or interest (including Contingent Interest, if any, and Liquidated Damages, if any) will cease to accrue on and after the Redemption Date; (9) the CUSIP number, if any, printed on the Notes being redeemed; and (10) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------ redemption is mailed to the Holders, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice except for Notes which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Notes shall be paid at the Redemption Price stated in the notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to 11:00 a.m. (New --------------------------- York City time) on the Redemption Date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary or any of their respective Affiliates is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Notes to be redeemed on that date other than Notes or portions of Notes called for redemption that have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Notes pursuant to Article 10. If such money is held by the Company or a Subsidiary or any of their respective Affiliates in trust and is not required for such purpose it shall be discharged from such trust. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is ---------------------- redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Note equal in Principal Amount at Maturity to the unredeemed portion of the Note surrendered. SECTION 3.07. Purchase of Notes at Option of the Holder. ----------------------------------------- (a) General. Any Note or Notes shall be purchased by the Company from ------- the Holder thereof pursuant to the terms thereof as of June 6, 2004, June 6, 2006, June 6, 2011 and June, 2016 (each, a "Purchase Date"), at a purchase price equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date, which shall be of $602.77 per $1,000 of Principal 24 Amount at Maturity as of June 6, 2004, $639.76 per $1,000 of Principal Amount at Maturity as of June 6, 2006, $742.47 per $1,000 of Principal Amount at Maturity as of June 6, 2011 and $861.67 per $1,000 of Principal Amount at Maturity as of June 6, 2016 (each, a "Purchase Price", as applicable), at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice"), substantially in the form of Exhibit D hereto, at any time from the opening of business on the date that is at least 20 Business Days prior to a Purchase Date until the close of business on the third Business Day prior to the Purchase Date stating: (A) the certificate number of the Note which the Holder will deliver to be purchased, (B) the portion of the Principal Amount at Maturity of the Note which the Holder will deliver to be purchased, which portion must be in a Principal Amount at Maturity of $1,000 or integral multiples thereof, (C) that such Note shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in the Notes and in this Indenture, and (D) in the event the Company elects, pursuant to Section 3.07(b), to pay the Purchase Price to be paid as of an Elective Payment Purchase Date, in whole or in part, in Shares, but such portion of the Purchase Price shall ultimately be payable to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in Shares is not satisfied prior to the close of business on such Elective Payment Purchase Date, as set forth in Section 3.07(d), whether such Holder elects (i) to withdraw such Purchase Notice as to some or all of the Notes to which such Purchase Notice relates (stating the Principal Amount at Maturity and certificate numbers of the Notes as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Purchase Price for all Notes (or portions thereof) to which such Purchase Notice relates; and (2) delivery of such Note to the Paying Agent for cancellation prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.08 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice. In addition to the Purchase Price set forth above, for any purchase of Notes pursuant to this Section 3.07, the Company shall pay accrued and unpaid Contingent Interest, if any, and Liquidated Damages, if any, due on the Notes. If a Holder, in such Holder's Purchase Notice, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.07(a)(1), such Holder shall be deemed to have elected to receive cash in respect of the Purchase Price for all Notes subject to such Purchase Notice in the circumstances set forth in such clause (D). 25 The Company shall purchase from the Holder thereof, pursuant to this Section 3.07, a portion of a Note if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000 if so requested by the Holder. Provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.07 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Note. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.07(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.09. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price on --------------------------------------------------------------- Certain Purchase Dates. The Notes to be purchased pursuant to Section 3.07(a) on - ---------------------- June 6, 2004 and June 6, 2006 (the "2004 and 2006 Purchase Dates"), will be paid for in Shares valued as set forth in Section 3.07(d), or, at the election of the Company, in cash or in any combination of cash and Shares, subject to the conditions set forth in Sections 3.07(c) and (d). With respect to the 2004 and 2006 Purchase Dates, the Company shall designate, in the Company's Notice delivered pursuant to Section 3.07(e), whether the Company will purchase the Notes for cash or Shares, or, if a combination thereof, the percentages of the Purchase Price of Notes in respect of which it will pay in cash or Shares; provided that the Company shall pay cash for fractional Shares. For purposes of determining the existence of potential fractional Shares, all Notes subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Notes are purchased pursuant to this Section 3.07 shall receive the same percentage of cash or Shares in payment of the Purchase Price for such Notes, except (i) as provided in Section 3.07(d) with regard to the payment of cash in lieu of fractional Shares and (ii) in the event that the Company is unable to purchase the Notes of a Holder or Holders for Shares because any necessary qualifications or registrations of the Shares under applicable state or foreign securities laws cannot be obtained, the Company may purchase the Notes of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given the Company's Notice to Holders except pursuant to this Section 3.07(b) or pursuant to Section 3.07(d) in the event of a failure to satisfy, prior to the close of business on the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in Shares. With respect to the 2004 and 2006 Purchase Dates, if the Company elects to pay all or part of the Purchase Price on such Purchase Dates in Shares, the portion of accrued Original Issue Discount attributable to the period from the Issue Date through the Purchase Date and with respect to the surrendered Note and (except as provided in the Note) shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder 26 thereof through the delivery of the Shares (together with cash payment, if any, in lieu of fractional Shares) and cash, if any, in exchange for the Note being purchased pursuant to the terms hereof; and such cash and the fair market value of such Shares (together with any such cash payment in lieu of fractional Shares) shall be treated as delivered pro rata, to the extent thereof, first in exchange for Original Issue Discount accrued through the Purchase Date and the balance, if any, of such cash and the fair market value of such Shares (and any such cash payment) shall be treated as delivered in exchange for the Issue Price of the Note being purchased pursuant to the provisions hereof. (c) Purchase with Cash. At the option of the Company, on the 2004 and ------------------ 2006 Purchase Dates, the Purchase Price of Notes in respect of which a Purchase Notice pursuant to Section 3.07(a) has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Notes. (d) Payment by Issuance of Shares. On the 2004 and 2006 Purchase ----------------------------- Dates, if the Purchase Price of Notes in respect of which a Purchase Notice pursuant to Section 3.07(a) has been given, or a specified percentage thereof, is paid by the Company by the issuance of Shares, the number of Shares shall equal the quotient obtained by dividing (i) the amount of cash to which the Holders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Notes in cash by (ii) 95% of the Market Price of a Share, subject to the next succeeding paragraph. The Company may not issue a fractional Share in payment of the Purchase Price. Instead the Company shall pay cash for the current market value of the fractional Share. The current market value of a fraction of a Share shall be determined, to the nearest 1/1,000th of a Share, by multiplying the Market Price by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Note purchased, the number of Shares shall be based on the aggregate amount of Notes to be purchased. The Company's right to purchase the Notes on the 2004 and/or 2006 Purchase Dates pursuant to Section 3.07 through the issuance of Shares shall be conditioned upon: (i) the Company's not having given its Company's Notice of an election to pay entirely in cash and its giving of a timely Company's Notice of election to purchase all or a specified percentage of the Notes with Shares as provided herein; (ii) the listing of the Shares to be issued in respect of the payment of the Purchase Price on the principal United States National Securities Exchange on which the Shares are then listed or quoted; (iii) the registration of the Shares to be issued in respect of the payment of the Purchase Price under the Securities Act and the Exchange Act, if required; and (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration. The Company may pay the Purchase Price (or any portion thereof) in Shares on the 2004 and/or 2006 Purchase Dates only if the information necessary to calculate the Market 27 Price is published in a daily newspaper of national circulation. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the relevant Purchase Date and the Company has elected to purchase the Notes pursuant to this Section 3.07 through the issuance of Shares, the Company shall pay the entire Purchase Price of the Notes of such Holder or Holders in cash. The "Market Price" means the average of the Sale Prices of the Shares for the ten consecutive trading day period ending on the third Business Day prior to the applicable Purchase Date, Change in Control Purchase Date or Conversion Date, as the case may be, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such ten consecutive trading day period and ending on such Purchase Date, Change in Control Purchase Date or Conversion Date, as the case may be, of any event described in Section 11.06, 11.07 or 11.08; subject, however, to the conditions set forth in Sections 11.09 and 11.10. The "Sale Price" of the Shares on any date means the closing per Share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and average ask prices) on such date as reported in composite transactions for the principal United States National Securities Exchange on which the Shares are then listed or quoted. (e) Notice. The Company's notice of whether it intends to pay the ------ Purchase Price with cash or Shares or any combination thereof on the 2004 and 2006 Purchase Dates shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided herein (the "Company's Notice"). The Company's Notice shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company's Notice Date"). The Company's Notice shall state the manner of payment and shall contain the following information: In the event the Company has elected to pay the Purchase Price (or a specified percentage thereof) with Shares on the applicable Purchase Date, the Company's Notice shall: (1) state that each Holder will receive Shares in respect of the specified percentage of the Purchase Price of the Notes held by such Holder (except any cash amount to be paid in lieu of fractional Shares); (2) state that the total number of Shares to be issued to Holders will be equal to the quotient obtained by dividing (i) the amount of cash to which the Noteholders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Notes in cash by (ii) 95% of the Market Price of a Share; (3) set forth the method of calculating the Market Price of a Share; and (4) state that because the Market Price of a Share will be determined prior to the Purchase Date, Holders will bear the market risk with respect to the value of a Share to be received from the date such Market Price is determined to the Purchase Date. 28 In any case, each Company's Notice shall include a form of Purchase Notice to be completed by a Holder and shall state: (i) the Purchase Price and the Conversion Rate applicable on the Company's Notice Date; (ii) the name and address of the Paying Agent and the Conversion Agent; (iii) that Notes as to which a Purchase Notice has been given may be converted pursuant to Article 10 hereof only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Notes must be surrendered to the Paying Agent for cancellation to collect payment; (v) that the Purchase Price for any Note as to which a Purchase Notice has been given and not withdrawn will be paid promptly following the later of the Purchase Date and the time of surrender of such Note as described in (iv); (vi) the procedures the Holder must follow to exercise rights under Section 3.07 and a brief description of those rights; (vii) briefly, the conversion rights of the Notes; (viii) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.07(a)(1)(D) or Section 3.09); (ix) that, unless the Company defaults in making payment of such Purchase Price, Original Issue Discount on Notes covered by any Purchase Notice, Contingent Interest, if any, and Liquidated Damages, if any, will cease to accrue on and after the Purchase Date; and (x) the CUSIP number of the Notes, if applicable. At the Company's request, the Trustee shall give such Company's Notice in the name of the Company and at the Company's expense; provided, however, that, in all cases, the text of such Company's Notice shall be prepared by the Company. (f) Covenants of the Company. All Shares delivered upon purchase ------------------------ of the Notes shall be newly issued Shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. The Company shall use its best efforts to list or cause to have quoted any Shares to be issued to purchase Notes on each United States National Securities Exchange or automated over-the-counter trading market in the United States on which the Shares are then listed or quoted. 29 (g) Procedure upon Purchase. The Company shall deposit cash (in ----------------------- respect of a cash purchase under Section 3.07(c) or for fractional interests, as applicable) or Shares, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.10, sufficient to pay the aggregate Purchase Price of all Notes to be purchased pursuant to this Section 3.07. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Shares through its stock transfer agent, a certificate for the number of Shares issuable in payment of the Purchase Price. The Person in whose name the certificate for Shares is registered shall be treated as a holder of record of Shares on the Business Day following the Purchase Date. Subject to Section 3.07(d), no payment or adjustment will be made for dividends on any Shares delivered in payment of the Purchase Price the record date for which occurred on or prior to the Purchase Date. (h) Taxes. If a Holder is paid in Shares, the Company shall pay any ----- documentary, stamp or similar issue or transfer tax due on such issue of Shares. However, the Holder shall pay any such tax which is due because the Holder requests the Shares to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Shares being issued in a name other than the Holder's name until the Paying Agent receives a sum that the Company deems to be sufficient to pay any tax which will be due because the Shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 3.08. Purchase of Notes at Option of the Holder upon Change in -------------------------------------------------------- Control. - ------- (a) General. If on or prior to June 6, 2006 there shall have ------- occurred a Change in Control, Notes shall be purchased by the Company, at a purchase price specified in the Notes (the "Change in Control Purchase Price"), as of a date that is not later than 35 Business Days after the occurrence of the Change in Control (the "Change in Control Purchase Date"), at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Change in Control Purchase Notice"), substantially in the form of Exhibit E hereto, at any time until the close of business on the third Business Day prior to the Change in Control Purchase Date stating: (A) the certificate number of the Note or Notes which the Holder will deliver to be purchased, (B) the portion of the Principal Amount at Maturity of the Note which the Holder will deliver to be purchased, which portion must be in a Principal Amount at Maturity of $1,000 or integral multiples thereof, and (C) that such Note shall be purchased as of the Change in Control Purchase Date pursuant to the terms and conditions specified in the Notes and in this Indenture, and (2) delivery of such Note to the Paying Agent for cancellation prior to, on or after the Change in Control Purchase Date (together with all necessary endorsements) at the 30 offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.08 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Note if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000 if so requested by the Holder. Provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Change in Control Purchase Date and the time of delivery of the Note. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.08(a) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.09. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written notice of withdrawal thereof. A "Change in Control" shall be deemed to have occurred at such time as any of the following events shall occur: (i) any Person (including its Affiliates and associates), other than the Company and its Subsidiaries, Affiliates and associates, or its or their employee benefit plans, files a Schedule TO (or any schedule, form or report under the Exchange Act) disclosing that such Person has become the direct or indirect beneficial owner of 50% or more of the voting power of the Company's common stock or other Capital Stock into which the Company's common stock is reclassified or changed; or (ii) there shall be consummated any share exchange, consolidation or merger of the Company pursuant to which its common stock would be converted into cash, securities or other Property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of common stock immediately prior to the share exchange, consolidation or merger of the Company have, directly or indirectly, 50% or more of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger; or (iii) there shall have been a sale, transfer or disposition of all or substantially all of the assets of the Company and its Subsidiaries taken together. 31 (b) Purchase with Cash. On each Change in Control Purchase Date, the ------------------ Change in Control Purchase Price of Notes in respect of which a Change in Control Purchase Notice pursuant to Section 3.08(a) has been given shall be paid by the Company with cash equal to the aggregate Change in Control Purchase Price of such Notes. (c) Notice of Change in Control. Within 15 Business Days after the occurrence of a Change in Control, the Company shall mail notice of the Change in Control (the "Change in Control Notice") by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The Change in Control Notice shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Change in Control Purchase Date (the "Change in Control Notice Date"). The notice shall include a form of Change in Control Purchase Notice to be completed by the Noteholder and shall state: (1) briefly, the events causing a Change in Control and the date of such Change in Control; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.08 must be given; (3) the last day on which the holder may exercise its right under Section 3.08; (4) the Change in Control Purchase Price; (5) the Change in Control Purchase Date; (6) the name and address of the Paying Agent and the Conversion Agent; (7) the Conversion Rate applicable on the Change in Control Notice Date and any adjustments to the Conversion Rate; (8) that Notes as to which a Change in Control Purchase Notice has been given may be converted pursuant to Article 10 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; and (9) briefly, the procedures the Holder must follow to exercise rights under this Section 3.08. At the Company's request, the Trustee shall give such Change in Control Notice in the name of the Company and at the Company's expense; provided, however, that, in all cases, the text of such Change in Control Notice shall be prepared by the Company. (d) Procedure upon Purchase. The Company shall deposit cash at the ----------------------- time and in the manner as provided in Section 3.10, sufficient to pay the aggregate Change in Control Purchase Price of all Notes to be purchased pursuant to this Section 3.08. SECTION 3.09. Effect of Purchase Notice or Change in Control Purchase ------------------------------------------------------- Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in - ------ Control Purchase 32 Notice specified in Section 3.07(a) or Section 3.08(a), as applicable, the Holder of the Note in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Note. Such Purchase Price or Change in Control Purchase Price shall be paid to such Holder, subject to receipts of funds and/or cash equivalents by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Note (provided the conditions in Section 3.07(a) or Section 3.08(a), as applicable, have been satisfied) and (y) the time of delivery of such Note to the Paying Agent by the Holder thereof in the manner required by Section 3.07(a) or Section 3.08(a), as applicable. Notes in respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 11 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: (1) the certificate number of the Note in respect of which such notice of withdrawal is being submitted, (2) the Principal Amount at Maturity of the Note with respect to which such notice of withdrawal is being submitted, and (3) the Principal Amount at Maturity, if any, of such Note which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. A written notice of withdrawal of a Purchase Notice or Change in Control Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.07(a)(1)(D) or (ii) a conditional withdrawal containing the information set forth in Section 3.07(a)(1)(D) and the preceding paragraph and contained in a written notice of withdrawal delivered to the Paying Agent as set forth in the preceding paragraph. There shall be no purchase of any Notes pursuant to Section 3.07 or 3.08 (other than through the issuance of Shares in payment of the Purchase Price), including cash in lieu of fractional shares if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Notes, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Notes) and the Paying Agent shall promptly return to the respective Holders thereof any Notes 33 (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Notes) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. SECTION 3.10. Deposit of Purchase Price or Change in Control Purchase ------------------------------------------------------- Price. Prior to 11:00 a.m. (local time in the City of New York) on the Business - ----- Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or any of their respective Affiliates is the Paying Agent, shall segregate and hold in trust) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the cash portion of the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of all the Notes or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be, and shall instruct its stock transfer agent to deliver the number of Shares issuable in payment of the remaining portion of the aggregate Purchase Price. The Company shall promptly notify the Trustee in writing of the amount of any deposits of cash or deliveries of Shares made pursuant to this Section. SECTION 3.11. Notes Purchased in Part. Any Note which is to be ----------------------- purchased only in part shall be surrendered at the office of the Paying Agent (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 such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate Principal Amount at Maturity equal to, and in exchange for, the portion of the Principal Amount at Maturity of the Note so surrendered which is not purchased. SECTION 3.12. Covenant to Comply With Notes Laws Upon Purchase of --------------------------------------------------- Notes. In connection with any offer to purchase or purchase of Notes under - ----- Section 3.07 or 3.08 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Sections 3.07 and 3.08 to be exercised in the time and in the manner specified in Sections 3.07 and 3.08. SECTION 3.13. Repayment to the Company. The Trustee and the Paying ------------------------ Agent shall return to the Company any cash that remains unclaimed, together with interest or dividends, if any, thereon, held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.10 exceeds the cash portion of the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of the Notes or portions thereof which the Company is obligated to purchase as of the Purchase Date or 34 Change in Control Purchase Date, as the case may be, then on the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company. ARTICLE 4 COVENANTS SECTION 4.01. Payment of Notes. The Company shall promptly make all ---------------- payments in respect of the Notes on the dates and in the manner provided in the Notes and in this Indenture. Such payments shall be considered made on the date due if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, money sufficient to make all payments in respect of the Notes then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture. The Company shall pay all Liquidated Damages, if any, in the same manner and on the dates and amounts set forth in the Registration Rights Agreement. SECTION 4.02. Calculation of Original Issue Discount. The Company -------------------------------------- shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Original Issue Discount (including daily rates and accrual periods) accrued on the Outstanding Notes as of the end of such year and (ii) such other specific information relating to such Original Issue Discount as the Company believes is then relevant under the Code. SECTION 4.03. Maintenance of Office or Agency. The Company shall ------------------------------- maintain in the Borough of Manhattan, the City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange 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. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of the City of New York) where the Notes may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation and any change in the location of any such other office or agency. SECTION 4.04. Money for Note Payments to Be Held in Trust. If the ------------------------------------------- Company, any Subsidiary or any of their respective Affiliates shall at any time act as Paying Agent with respect to the Notes as described in Sections 3.05 and 3.10, such Paying Agent shall, at the times and on the dates specified in Sections 3.05 and 3.10, segregate and hold in trust for the benefit of 35 the Persons entitled thereto money sufficient to pay the Redemption Price, Purchase Price or Change of Control Purchase Price with respect to the Notes being redeemed or purchased, as the case may be, so becoming due until such money shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents with respect to the Notes, it shall, prior to 11:00 a.m. (New York time) on each due date of any redemption or purchase of the Notes, deposit with a Paying Agent a sum sufficient to pay such amounts so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such payments and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act. SECTION 4.05. Corporate Existence. Subject to Article Five, the ------------------- Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such corporate existence, rights or franchises if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 4.06. Maintenance of Property. The Company shall cause all ----------------------- Property used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.06 shall prevent the Company from discontinuing the operation or maintenance of any of such Property if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 4.07. Payment of Taxes and Other Claims. The Company shall pay --------------------------------- or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.08. Limitation on Sale and Leaseback Transactions. The --------------------------------------------- Company will not, nor will it permit any Subsidiary to, enter into any Sale and Leaseback Transaction; provided that the Company may enter into a Sale and Leaseback Transaction if: 36 (a) after giving effect to such Sale and Leaseback Transaction, the aggregate outstanding amount of all Attributable Debt resulting from all Sale and Leaseback Transactions does not exceed the greater of $50.0 million or 15% of Consolidated Tangible Assets, determined in accordance with the Company's most recent published consolidated balance sheet in accordance with GAAP; or (b) the Company applies, within twelve months after the sale or transfer, an amount equal to the net proceeds of the assets sold pursuant to the Sale and Leaseback Transaction to the voluntary covenant defeasance or retirement of Indebtedness (other than Indebtedness that is held by the Company or Indebtedness of the Company that is subordinate in right of payment to the Notes), which amount will not be less than the fair value (in the opinion of an Officer of the Company) of such assets less an amount equal to the principal amount of such Indebtedness voluntarily defeased or retired by the Company within such twelve-month period. Notwithstanding the foregoing, no retirement referred to in clause (b) above may be effected by the payment at Maturity or pursuant to any mandatory sinking fund payment or mandatory payment provision. SECTION 4.09. Limitation on Liens. The Company shall not, and shall ------------------- not permit any Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on or with respect to any asset owned or hereafter acquired securing Indebtedness without making effective provision to secure all the Notes then Outstanding by such Lien, equally and ratably with or, in the event that such other Indebtedness is subordinated in right of payment to the Notes, prior to any and all other such Indebtedness thereby secured, so long as such other Indebtedness is so secured, except that the foregoing restrictions shall not apply to (i) Permitted Liens, or (ii) other Liens, if after giving effect thereto, the aggregate outstanding amount of all such Indebtedness secured by Liens (other than Permitted Liens) shall not exceed the greater of $50,000,000 or 15% of Consolidated Tangible Assets determined in accordance with the Company's most recent published consolidated balance sheet prepared in accordance with GAAP. SECTION 4.10. Limitation on Stock Redemptions and Stock Repurchases. ----------------------------------------------------- The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, make any payments to redeem or repurchase any of the Company's or a Subsidiary's Capital Stock (a "Redemption Payment"), if at the time the Company or the Subsidiary makes such Redemption Payment: (a) a Default shall have occurred and be continuing (or would result from such Redemption Payment); and (b) the aggregate amount of such Redemption Payment and all other Redemption Payments since the date of the Indenture would exceed the sum of (i) $75.0 million, plus (ii) 50% of the Company's Consolidated Net Income from November 16, 1998 through the date of determination, plus (iii) any proceeds from the sale or issuance of shares of the Company's Capital Stock or securities convertible into shares of the Company's Capital Stock (other than an issuance or sale to a Subsidiary) and, without duplication, proceeds received upon 37 the exercise of options, warrants and other rights to acquire shares of the Company's Capital Stock. Notwithstanding anything to the contrary contained in this Section 4.10, the Company and its Subsidiaries may (i) make any Redemption Payment if, pro forma for such Redemption Payment, the Funded Debt to EBITDA Ratio would have been equal to or less than 1.0; (ii) repurchase or otherwise acquire shares of, or options or warrants to purchase shares of, the Company's Capital Stock or any Subsidiary's Capital Stock from employees, former employees, directors or former directors of the Company or any Subsidiary (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) or other arrangements approved by the Board of Directors or the board of directors of any Subsidiary under which such individuals purchase or sell or are granted the option to purchase or sell shares of Capital Stock; provided, however, that the aggregate amount of such repurchases and other acquisitions described in this clause (ii) shall not exceed $5,000,000 in any calendar year; provided further, however, that such repurchases and other acquisitions described in this clause (ii) shall be excluded in the calculation of the amount of Redemption Payments; (iii) repurchase or otherwise acquire shares of the Company's Capital Stock solely in exchange for other shares of the Company's Capital Stock; provided, however, that such issuance of shares of the Company's Capital Stock shall not be included in the calculation of proceeds from the issuance of shares of the Company's Capital Stock in clause (b)(iii) above; provided further, however, that such repurchases and other acquisitions described in this clause (iii) shall be excluded in the calculation of the amount of Redemption Payments; or (iv) repurchase or otherwise acquire odd lots of the Company's Capital Stock. SECTION 4.11. Certificate as to Default. The Company shall deliver to ------------------------- the Trustee within 120 days after the end of each fiscal year of the Company (which on the date hereof is December 31) ending after the date hereof, a certificate from the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not, to the best knowledge of such officer, the Company has complied with all conditions and covenants under this Indenture, and, if the Company shall be in Default, specifying all such Defaults and the nature thereof of which such officer may have knowledge. For the purposes of this Section 4.11, compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. The Company shall deliver written notice to the Trustee five days after any Officer of the Company has knowledge of the occurrence of any event which with the giving of notice or the lapse of time or both would become an Event of Default under Section 6.01(e). ARTICLE 5 CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER SECTION 5.01. Company May Consolidate, etc., Only on Certain Terms. ---------------------------------------------------- The Company shall not, directly or indirectly, consolidate with or merge into any other corporation or convey or transfer substantially all of its Property to any Person, unless: 38 (a) Either: (1) the Company is the surviving corporation; or (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (b) The Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all of the obligations of the Company under the Notes and the Indenture pursuant to agreements reasonably satisfactory to the Trustee; and (c) Immediately after such transaction no Default or Event of Default exist. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. The provisions of this Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its wholly owned Subsidiaries. SECTION 5.02. Successor Corporation Substituted. --------------------------------- Upon any consolidation with or merger by the Company into any other corporation, or any conveyance or transfer of the Property of the Company substantially as an entirety in accordance with Section 5.01, the successor corporation formed by such consolidation or into which the Company is merged or the successor Person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein, and thereafter the Company shall be relieved of all obligations and covenants under this Indenture and the Notes. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. ----------------- Except where otherwise indicated by the context or where the term is otherwise defined for a specific purpose, the term "Event of Default," wherever used herein with respect to the Notes, shall mean any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law, pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the Company defaults in any payment of the Principal Amount at Maturity, Redemption Price, Purchase Price or Change in Control Purchase Price on the Notes when it becomes due and payable; 39 (b) the Company defaults in the payment of Contingent Interest, if any, or Liquidated Damages, if any, on the Notes when such Contingent Interest or Liquidated Damages becomes due and payable, and such default continues for a period of 30 days; (c) default in the performance, or breach, of any covenant or warranty of the Company in Article Four of this Indenture, and continuance of such Default or breach for a period of 30 days after there has been given a Notice of Default; or (d) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture, including any indenture supplemental hereto, (other than a covenant or warranty, a default in whose performance or whose breach is elsewhere in this Section specifically dealt with) and continuance of such Default or breach for a period of 60 days after there has been given a Notice of Default; or (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company (or the payment of which is Guaranteed by the Company) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default results in the acceleration of such Indebtedness prior to its express maturity, and the principal amount of any such Indebtedness which has been so accelerated aggregates in excess of $25,000,000, or its foreign currency equivalent, without such indebtedness having been discharged or such acceleration having been rescinded or annulled within 30 days after notice; or (f) failure by the Company to pay final judgments aggregating in excess of $25,000,000 which judgments are not paid, discharged or stayed for a period of 60 days; or (g) the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case under the Bankruptcy Code, or any other Federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (h) the commencement by the Company of a voluntary case under the Bankruptcy Code, or any other applicable Federal or state bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company or of any substantial part of the property of the Company, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. Notwithstanding anything to the contrary contained herein, the events specified in clauses (c) (d) or (f) above shall not constitute an Event of Default unless there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in Principal Amount at Maturity of the Outstanding Notes, a written 40 notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder. SECTION 6.02. Acceleration. If an Event of Default with respect to the ------------ Notes (other than an Event of Default specified in Section 6.01(g) or (h)) occurs and is continuing, then and in every such case, the Trustee or the Holders of at least 25% in Principal Amount at Maturity of the Outstanding Notes may declare the Issue Price of and accrued Original Issue Discount, Contingent Interest, if any, and Liquidated Damages, if any, to the date of declaration on all such Notes to be immediately due and payable, by a notice in writing to the Company (and to the Trustee if given by Holders). Upon such a declaration, such Issue Price, Original Issue Discount, accrued Contingent Interest and Liquidated Damages shall be due and payable immediately. If an Event of Default specified in Section 6.01(g) or (h) occurs, the Issue Price of any accrued Original Issue Discount and accrued Contingent Interest, if any, and Liquidated Damages, if any, to the occurrence of such event on all the Outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Upon payment of such amounts with respect to all Outstanding Notes and all other obligations of the Company under this Indenture and all of the Outstanding Notes (including obligations under Section 7.07), all of the Company's obligations under this Indenture and the Notes shall terminate. At any time after a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in Principal Amount at Maturity of the Notes then Outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if all Events of Default with respect to the Notes, other than the non-payment of any amounts due in respect of the Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.04. No such rescission shall affect any subsequent Default or impair any right consequent thereon. SECTION 6.03. Other Remedies. If an Event of Default occurs and is -------------- continuing, the Trustee may pursue any available remedy to collect the payment of the Issue Price of or accrued Original Issue Discount or accrued Contingent Interest, if any, or Liquidated Damages, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may institute and maintain a suit or legal proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. 41 SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in ----------------------- Principal Amount at Maturity of the Outstanding Notes by notice to the Trustee may on behalf of the Holders of all such Notes waive any past Default hereunder and its consequences except (i) a Default in the payment of the Issue Price of, accrued Original Issue Discount on or accrued Contingent Interest, if any, or Liquidated Damages, if any, with respect to the Notes, (ii) a Default arising from the failure to redeem, purchase or repurchase any Note when required pursuant to the terms of this Indenture, or (iii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Noteholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in ------------------- Principal Amount at Maturity of the Outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee, and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would subject the Trustee to personal liability, unless the Trustee is offered indemnity reasonably satisfactory to it. SECTION 6.06. Limitation on Suits. Except as provided in Section 6.07, ------------------- no Holder may pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder previously gave the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25%, in Principal Amount at Maturity of the Outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable security or indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in Principal Amount at Maturity of the Outstanding Notes do not give the Trustee a direction inconsistent with the request during such 60-day period; it being understood and intended 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 such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. 42 SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding ------------------------------------ any other provision of this Indenture, the right of each Holder of a Note to receive payment of the Issue Price of, accrued Original Issue Discount and accrued Contingent Interest, if any, on, and Liquidated Damages, if any, with respect to the Notes held by such Holder, on or after the Maturity of such Note, or to bring suit for the enforcement of any such payment on or after Maturity or the right to convert the Notes as provided herein, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default -------------------------- specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid amounts (including Contingent Interest, if any, and Liquidated Damages, if any, to the extent lawful)) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. -------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceedings, or any voluntary or involuntary case under the Bankruptcy Code, relative to the Company or any other obligor upon the Notes or the Property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of such series of Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the entire Principal Amount at Maturity and any other amounts owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, custodian, liquidator, sequestrator (or other similar official) in any such proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote respect of the claim of any Holder in any such proceeding. 43 SECTION 6.10. Priorities. If the Trustee collects any money or ---------- property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Noteholders for amounts due and unpaid on any Notes for the Issue Price and accrued Original Issue Discount and accrued Contingent Interest, if any, and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for the Issue Price and accrued Original Issue Discount and accrued Contingent Interest, if any, and Liquidated Damages, if any; and THIRD: to the Company. The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Noteholder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement --------------------- of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing, by any party litigant in the suit, of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in Principal Amount at Maturity of the Notes. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the -------------------------------- extent it may lawfully do so) shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law, wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01. Certain Duties and Responsibilities. ----------------------------------- (a) Except during the continuance of an Event of Default, 44 (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his/her own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it with respect to any Notes in good faith in accordance with the direction of the Holders of a majority in the Principal Amount at Maturity of the Outstanding Notes 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. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 7.02. Notice of Defaults. ------------------ 45 Within 90 days after the occurrence of any Default hereunder with respect to the Notes, the Trustee shall transmit by mail to all Holders of such Notes, notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of (and premium, if any) or interest and Additional Interest, if any, on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders; and provided, further, that in the case of any Default of the character specified in Section 6.01(c) and 6.01(d), no notice of such Default to Holders as described therein shall be given until at least 30 and 60 days after the occurrence thereof, respectively. SECTION 7.03. Certain Rights of Trustee. ------------------------- Except as otherwise provided in Section 6.01: (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Indebtedness 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; if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and 46 premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry of investigation; (g) 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 reasonably acceptable to the Company and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its rights to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officer's Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. SECTION 7.04. Not Responsible for Recitals or Issuance of Notes. ------------------------------------------------- The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. Neither the Trustee nor any Authenticating Agent makes any representations as to the validity or sufficiency of this Indenture or of any Notes. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of any Notes or the proceeds thereof. SECTION 7.05. May Hold Notes. -------------- The Trustee, any Authenticating Agent, any Paying Agent, the Registrar or any other agent of the company, in its individual or any other capacity, may become the owner or pledgee of Notes, and, subject to Sections 7.08 and 7.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Registrar or such other agent. SECTION 7.06. Money Held in Trust. ------------------- 47 Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed to in writing with the Company. SECTION 7.07. Compensation and Reimbursement. ------------------------------ The Company agrees: (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree to in writing, for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based upon, or measured or determined by, the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or performance of its duties hereunder, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Company under this Section 7.07, the Trustee shall have a lien prior to the Notes upon all Property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on the Notes. If the Trustee incurs expenses or renders services in connection with an Event of Default under Section 6.01(g) or Section 6.01(h), the Trustee's expenses (including reasonable attorneys' fees and expenses) and its compensation for such services, are intended to constitute expenses of administration under applicable Federal or state bankruptcy, insolvency or other similar law. The provisions of this Section 7.07 shall survive the termination of this Indenture. SECTION 7.08. Disqualification; Conflicting Interests. --------------------------------------- If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. 48 SECTION 7.09. Corporate Trustee Required; Eligibility. --------------------------------------- There shall at all times be a Trustee hereunder which shall be: (a) a corporation organized and doing business under the laws of the United States of America, any state or territory thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by Federal, state, territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $150,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.09, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Neither the Company nor any Affiliate of the Company shall serve as Trustee hereunder. If at any time the Trustee shall cease to be eligible to serve as Trustee hereunder pursuant to the provisions of this Section 7.09, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 7.10. Resignation and Removal; Appointment of Successor. ------------------------------------------------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Noteholder Act (as defined in Section 12.07) of the Holders of a majority in Principal Amount at Maturity of the Outstanding Notes, delivered to the Trustee and to the Company. If any instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of notice of such removal, the Trustee being removed may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. (d) If at any time: (1) the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act pursuant to Section 7.08 hereof after written request therefor by the Company or by any 49 Holder who has been a bona fide Holder of any Note for at least six months, unless the Trustee's duty to resign is stayed in accordance with the provisions of Section 310(b) of the Trust Indenture Act; or (2) the Trustee shall cease to be eligible under Section 7.09 hereof and shall fail to resign after written request therefor by the Company or by any such Holder; or (3) the Trustee shall become incapable of acting or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Trustee in an involuntary case under the Bankruptcy Code, or any other applicable Federal or state bankruptcy, insolvency or similar law, or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or of its property or affairs, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation, winding up or liquidation; or (4) the Trustee shall commence a voluntary case under Bankruptcy Code, or any other applicable Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or its property or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, then, in any such case, (A) the company by a Board Resolution may remove the Trustee with respect to the Notes, or (B) subject to Section 6.11, any Holder who has been a bona fide Holder of any Note for at least six months may, on behalf of such Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee for the Notes. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Noteholder Act of the Holders of a majority in Principal Amount at Maturity of all the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 7.11, become the successor Trustee and to that extent replace the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and shall have accepted appointment in the manner hereinafter provided, any Holder that has been a bona fide Holder of a Note for at least six months may, subject to Section 6.11, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such resignation, removal and appointment by first-class mail, postage prepaid, to the Holders as their 50 names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Notes and the address of its Corporate Trust Office. SECTION 7.11. Acceptance of Appointment by Successor. -------------------------------------- (a) In the event of an appointment hereunder of a successor Trustee, each such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such former Trustee hereunder, subject to its lien, if any, provided for in Section 7.07. (b) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article and under the Trust Indenture Act. SECTION 7.12. Merger, Conversion, Consolidation or Succession to -------------------------------------------------- Business. - -------- Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be otherwise qualified and eligible under this Article and under the Trust Indenture Act, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. In the event that any Notes shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Notes, in either its own name or that of its predecessor Trustee, with the full force and effect which this Indenture provides for the certificate of authentication of the Trustee. SECTION 7.13. Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein. 51 SECTION 7.14. Appointment of Authenticating Agent. ----------------------------------- At any time when any of the Notes remain Outstanding, the Trustee may appoint an Authenticating Agent or Authenticating Agents with respect to one or more series of Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes and the Trustee shall give written notice of such appointment to all Holders of Notes with respect to which such Authenticating Agent will serve. Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, and a copy of such instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 7.14, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 7.14, it shall resign immediately in the manner and with the effect specified in this Section 7.14. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section 7.14, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 7.14, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give written notice of such appointment to all Holders of Notes with respect to which such Authenticating Agent will serve, in the manner provided for in this Section 7.14. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 7.14. 52 The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 7.14. If an appointment with respect to any Notes is made pursuant to this Section 7.14, such Notes may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Notes referred to in the within-mentioned Indenture. Dated: ___________________ The Bank of New York By: ______________________ as Authenticating Agent By: ______________________ Authorized Signatory ARTICLE 8 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 8.01. Company to Furnish Trustee Names and Addresses of ------------------------------------------------- Holders. - ------- The Company shall furnish or cause to be furnished to the Trustee: (a) not less than ten days prior to any Redemption Date, Purchase Date, Change of Control Purchase Date and at Stated Maturity of the Notes, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of any Notes for which such payment date applies, as of the record date pertains to such payment date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that if and so long as the Trustee may be the Registrar for any of the Notes, no such list need be furnished with respect to such Notes. SECTION 8.02. Preservation of Information; Communications to Holders. ------------------------------------------------------ (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 8.01 and the names and addresses of Holders received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 8.01 upon receipt of a new list so furnished. 53 (b) Holders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or under any Notes. (c) Each Holder of any Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 8.02(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 8.02(b). SECTION 8.03. Reports by the Trustee. ---------------------- (a) Within 60 days after June 6 of each year commencing with the year 2002, the Trustee shall transmit by mail to all Holders of Notes, as provided in Subsection (c) of this Section 8.03, a brief report dated as of such June 6 if and to the extent required under Section 313(a) of the Trust Indenture Act. (b) The Trustee shall comply with Sections 313(b) and 313(c) of the Trust Indenture Act. (c) A copy of each such report shall, at the time of its transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Notes are then listed, with the SEC and also with the Company. The Company shall promptly notify the Trustee of any stock exchange upon which any Notes are listed and of any delisting thereof. SECTION 8.04. Reports by the Company. ---------------------- The Company shall file with the Trustee, within 15 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act. The Company and any other obligor on any Notes shall also comply with the other provisions of Section 314(a) of the Trust Indenture Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). 54 ARTICLE 9 DISCHARGE OF INDENTURE SECTION 9.01. Discharge of Liability on Notes. This Indenture shall ------------------------------- cease to be of further effect, and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (1) all Notes theretofore authenticated and delivered (other than Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.08) have been delivered to the Trustee for cancellation; or (2) all such Notes not theretofore delivered to the Trustee for cancellation have become due and payable, whether at Stated Maturity or upon any Redemption Date, Change in Control Purchase Date, Purchase Date or Conversion Date, and the Company has deposited or caused to be deposited with the Trustee, the Paying Agent or the Conversion Agent, as applicable, as trust funds in trust an amount of money or cash equivalents sufficient to pay and discharge the entire Indebtedness evidenced by such Notes not theretofore delivered to the Trustee for cancellation; and (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company. Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07 and 7.10, if money or cash equivalents shall have been deposited with the Trustee pursuant to subclause (2) of clause (a) of this Section 9.01, shall survive until the Notes have been paid in full. Thereafter, the Company's obligations in Section 7.07 shall survive. Notwithstanding clauses (a) and (b) above, the Company's and each Holder's obligations under Section 2.16 shall survive the satisfaction and discharge of the Indenture. SECTION 9.02. Application of Trust Money. The Trustee shall hold in -------------------------- trust all money deposited with it pursuant to Section 9.01. It shall apply the deposited money through the Paying Agent and in accordance with this Indenture to the payment to the Persons entitled thereto . SECTION 9.03. Repayment to Company. Subject to any applicable -------------------- abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money or cash equivalents held by them that remains unclaimed for two years, and, thereafter, Noteholders entitled to the money or cash equivalents must look to the Company for payment as general creditors. 55 ARTICLE 10 SUPPLEMENTAL INDENTURES SECTION 10.01. Supplemental Indentures Without Consent of Holders. -------------------------------------------------- Without the consent of any of the Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by such successor of the covenants of the Company herein and contained in any Notes, including in accordance with Section 11.14; or (b) to add to the covenants and agreements of the Company for the protection or benefit of the Holders of the Notes; or (c) to add any additional Events of Default; or (d) to provide for uncertificated Notes in addition to or in place of certificated Notes; or (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 7.11(b); or (f) to secure the Notes; or (g) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Indenture; provided such actions shall not adversely affect the interests of the Holders in any material respect; or (h) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 10.02. Supplemental Indentures With Consent of Holders. ----------------------------------------------- With the consent of the Holders of not less than a majority in Principal Amount at Maturity of the Outstanding Notes which are affected by such indenture supplemental hereto, by Noteholder Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders; provided, however, that no such supplemental indenture shall, without the consent of each Holder of Outstanding Notes affected thereby: (1) change the Stated Maturity of the Notes; 56 (2) reduce the Principal Amount at Maturity, Issue Price, Redemption Price or Purchase Price (including Change in Control Purchase Price) on the Notes; (3) make any Note payable in money or cash equivalents other than that stated in such Note; (4) alter the manner of calculation or rate of accrual of Original Issue Discount or interest (including Contingent Interest, if any, and Liquidated Damages, if any) on the Notes or extend the time of payment of any interest of any such amount; (5) except as otherwise permitted or contemplated by Article Three or Article Eleven, (i) adversely affect the right to require the Company to purchase the Notes or (ii) adversely affect the right of any Holder to convert Notes; (6) reduce the percentage in aggregate Principal Amount at Maturity of the Outstanding Notes the consent of whose Holders is required to modify or amend this Indenture, or the consent of whose Holders is required to waive any past Default; or (7) impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the Notes. It shall not be necessary for the consent of the Holders of the Notes under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent approves the substance thereof. SECTION 10.03. Execution of Supplemental Indentures. In executing, ------------------------------------ or accepting the additional trusts created by, any supplemental indenture permitted by this Article Ten or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 10.04. Effect of Supplemental Indentures. --------------------------------- Upon the execution of any supplemental indenture under this Article Ten, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes, and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 10.05. Conformity with Trust Indenture Act. Every ----------------------------------- supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 10.06. Reference in Notes to Supplemental Indentures. Notes --------------------------------------------- authenticated and delivered after the execution of any supplemental indenture pursuant to this Article Ten may, and shall if required by the Trustee, bear a notation in form approved by the 57 Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for the Outstanding Notes. ARTICLE 11 CONVERSION SECTION 11.01. Conversion Privilege. Except as otherwise provided in -------------------- this Article 11, a Holder of a Note may convert such Note into Shares at any time if one of the following conditions is satisfied: (a) On or after September 4, 2001, but prior to the Maturity Date, a Holder may convert a Note into Shares (i) the first time that the Sale Price per Share on the principal national securities exchange on which the Shares are listed, for at least 20 trading days in any period of 30 consecutive trading days, exceeds 120% of the Accreted Conversion Price per Share on that thirtieth trading day; or (ii) during the five Business Day period following any 10 consecutive trading day period in which the average of the trading prices for the Notes for that period was less than 105% of the Average Conversion Value for the Notes during that 10 consecutive trading day period; (b) A Holder may convert a Note into Shares if the Note has been called for redemption by the Company pursuant to Section 3.01 at any time prior to the close of business two Business Days prior to the Redemption Date; (c) On or after September 4, 2001 , but prior to the Maturity Date, a Holder may convert Notes into Shares during any period in which the respective credit ratings assigned to the Notes, or, if the Notes are not rated, to any of the Company's other senior unsecured Indebtedness, by either Moody's Investor Service, Inc. or Standard & Poor's Rating Group, is below Baa3 or BBB-, respectively, or, if neither rating agency is rating any senior unsecured Indebtedness of the Company; or (d) Subject to the time limitations listed in the next paragraph, a Holder may convert Notes into Shares if (i) a distribution of Capital Stock referred to in Section 11.07 occurs or (ii) a distribution referred to in Section 11.08 occurs. In the case of the foregoing clauses (d)(i) and (ii), the Company must notify the Holders at least 20 days prior to the date on which the Ex-Dividend Time lapses (the "Ex-Dividend Date") for such distribution. Once the Company has given such notice, Holders may surrender their Notes for conversion at any time on or after September 4, 2001, but prior to the Maturity Date, until the earlier of the close of business on the Business Day prior to the Ex-Dividend Date or the Company's announcement that such distribution will not take place. In the event the Company is a party to a consolidation, merger or binding share exchange pursuant to which the Shares would be converted into cash, securities or other Property, a Holder of a Note may convert such Note at any time from and after the date which is 15 days prior to the 58 anticipated effective date of the transaction until 15 days after the actual effective date of such transaction. After the effective date of such transaction, the right to convert a Note into Shares will be changed into a right to convert such Note into the kind and amount of cash, securities or other Property which the Holder would have received if such Holder had converted its Note immediately prior to the transaction. If the Note is being called for redemption as described in clause (b) above, the Holder may convert it at any time before the close of business on the second Business Day immediately preceding the Redemption Date. A Note in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Note may be converted only if such Purchase Notice or Change in Control Purchase Notice is withdrawn in accordance with the terms of the Indenture. Subject to the next preceding paragraph, the Company shall deliver through the Conversion Agent to Holders surrendering Notes as soon as practicable after the Conversion Date Shares issuable upon conversion of such Notes. The number of Shares issuable upon conversion of a Note per $1,000 of Principal Amount at Maturity thereof (the "Conversion Rate") shall be that set forth in the Notes, subject to adjustment as herein set forth. A Holder may convert a portion of the Principal Amount at Maturity of a Note if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Note also apply to conversion of a portion of a Note. "Average Quoted Price" means the average of the Sale Prices of the Shares for the shorter of: (i) 30 consecutive trading days ending on the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Quoted Price is being calculated, or (ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the future issuance of rights, warrants or options or (b) the future distribution, in each case, in respect of which the Average Quoted Price is being calculated and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Quoted Price is being calculated (excluding days within such period, if any, which are not trading days), or (iii) the period, if any, (x) commencing on the later of (a) the date of this Indenture and (b) the date next succeeding the Ex-Dividend Time with respect to the next preceding issuance of rights, warrants or options or distribution, in each case, for which an adjustment is required by the provisions of Section 11.06(4), 11.07 or 11.08 and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Quoted Price is being calculated (excluding days within such period, if any, which are not trading days). 59 In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto), with respect to a dividend, subdivision, combination or reclassification to which Section 11.06(1), (2), (3) or (5) applies, occurs during the period applicable for calculating "Average Quoted Price" pursuant to the definition in the preceding sentence, "Average Quoted Price" shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Shares during such period. "Time of Determination" means the time and date of the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 11.07 or 11.08 applies and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on the New York Stock Exchange or such other national or regional exchange or market on which the Shares are then listed or quoted. The term "trading day" means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the applicable security is not listed on the New York Stock Exchange, on the Nasdaq National Market System, or if the applicable security is not quoted on the Nasdaq National Market System, on the principal other national or regional securities exchange on which the applicable security is then listed or, if the applicable security is not listed on a national or regional securities exchange, on the principal other market on which the applicable security is then traded. SECTION 11.02. Conversion Procedure. To convert a Note a Holder must -------------------- satisfy the requirements set forth herein and in the Notes. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). Except as otherwise provided below, the Company shall deliver to the Holder through the Conversion Agent as soon as practicable after the Conversion Date a certificate for the number of Shares issuable upon the conversion and cash in lieu of any fractional Share determined pursuant to Section 11.03. If the Company shall have notified the Holder that all of such Note shall be converted into Shares, the Company shall deliver to the Holder through the Conversion Agent no later than the fifth Business Day following the Conversion Date a certificate for the number of Shares issuable upon the conversion and cash in lieu of any fractional Share determined pursuant to Section 11.03. The Company shall deliver to the Holder surrendering such Note, together with a certificate for the number of Shares issuable upon the conversion the amount of cash payable in lieu of any fractional Share determined pursuant to Section 11.03. The Person in whose name the certificate representing the Shares issuable upon conversion is registered shall be treated as a stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the Shares upon such conversion as the record holder or holders of such Shares on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such Shares as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Note shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Note, such Person shall no longer be a Holder of such Note and such Note shall be cancelled and no longer Outstanding. 60 No payment or adjustment will be made for dividends on, or other distributions with respect to, any Shares except as provided in this Article 11. On conversion of a Note, that portion of accrued Original Issue Discount attributable to the period from the Issue Date through the Conversion Date with respect to the converted Note shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Shares (together with the cash payment, if any, in lieu of fractional Shares) in exchange for the Note being converted pursuant to the provisions hereof; and the fair market value of such Shares (together with any such cash payment in lieu of fractional Shares) shall be treated as delivered pro rata, to the extent thereof, first in exchange for Original Issue Discount accrued through the Conversion Date, and the balance, if any, of the fair market value of such Shares shall be treated as delivered in exchange for the Issue Price of the Note being converted pursuant to the provisions hereof. As of the Conversion Date, Contingent Interest, if any, and Liquidated Damages, if any, shall cease to accrue on such Note. If the Holder converts more than one Note at the same time, the number of Shares issuable or the amount of cash paid upon the conversion shall be based on the total Principal Amount at Maturity of the Notes converted. If the last day on which a Note may be converted is a Legal Holiday in a place where the Conversion Agent is located, the Note may be surrendered to such Conversion Agent on the next succeeding day that is not a Legal Holiday. Upon surrender of a Note that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Note in an authorized denomination equal in Principal Amount at Maturity to the unconverted portion of the Note surrendered. SECTION 11.03. Fractional Shares. The Company will not issue a ----------------- fractional Share upon conversion of a Note. Instead, the Company will deliver cash for the current market value of the fractional Share. The current market value of a fractional Share shall be determined, to the nearest 1/1,000th of a Share, by multiplying the last reported Sale Price on the last trading day prior to the Conversion Date by the fractional amount and rounding the product to the nearest whole cent. If the Holder converts more than one Note at the same time, the amount of cash paid for the current market value of the fractional Share upon the conversion shall be based on the total Principal Amount at Maturity of the Notes converted. SECTION 11.04. Taxes on Conversion. If a Holder converts a Note, the ------------------- Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Shares upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the Shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Shares being issued in a name other than the Holder's name until the Conversion Agent receives a sum that the Company deems to be sufficient to pay any tax which will be due because the Shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. 61 SECTION 11.05. Company to Provide Stock. The Company shall, prior to ------------------------ issuance of any Shares under this Article 11, and from time to time as may be necessary, reserve out of their authorized but unissued or treasury shares a sufficient number of Shares to permit the conversion of the Notes. All Shares delivered upon conversion of the Notes shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. The Company and the Trustee shall endeavor promptly to comply with all Federal and state securities laws regulating the offer and delivery of Shares upon conversion of Notes, if any, including the addition of any and all restrictive legends that are required to appear on the face of the Shares, and shall list or cause to have quoted such Shares on each United States National Securities Exchange or in the automated over-the-counter market in the United States on which the Shares are then listed or quoted. SECTION 11.06. Adjustment for Change In Capital Stock. If, after -------------------------------------- the Issue Date of the Notes, the Company: (1) pays a dividend or makes a distribution on its Shares (or any component of the Shares) payable in Shares of its Capital Stock; (2) subdivides its outstanding Shares (or any component of the Shares) into a greater number of Shares; (3) combines its outstanding Shares into a smaller number of Shares; (4) pays a dividend or makes a distribution on its Shares payable in Shares of its Capital Stock (other than Shares or rights, warrants or options for its Capital Stock); and (5) issues by reclassification of its Shares (or any component of the Shares) any Shares (other than rights, warrants or options for its Capital Stock), then the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Note thereafter converted may receive the number of Shares and/or Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Note into Shares immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Note upon conversion of such Note may receive Shares of two or more classes of Capital Stock, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article 11 with respect to the Shares, on terms comparable to those applicable to Shares in this Article 11. 62 SECTION 11.07. Adjustment for Rights Issue. If, after the Issue --------------------------- Date of the Notes, the Company distributes any rights, warrants or options to all holders of Shares entitling them, for a period expiring within 60 days after the record date for such distribution, to subscribe for or purchase Shares at a price per Share less than the Market Price as of the Time of Determination, the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 11.07, in accordance with the formula R x (O + N) R' = ---------------- O + (N x P) / M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of Shares outstanding on the record date for the distribution to which this Section 11.07 is being applied. N = the number of additional Shares offered pursuant to the distribution. P = the exercise price per share of such rights, warrants or options. (1) M = the Average Quoted Price. The Board of Directors shall determine fair market values for the purposes of this Section 11.07. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 11.07 applies. If all the Shares subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of Shares issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 11.07 if the application of the formula stated above in this Section 11.07 would result in a value of R' that is equal to or less than the value of R. SECTION 11.08. Adjustment for Other Distributions. If, after the ---------------------------------- Issue Date of the Notes, the Company distributes to all holders of Shares any of its assets or debt securities or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 11.06 and distributions of rights, warrants or options referred to in Section 11.07 and (y) cash dividends or other cash distributions that are paid out of current net earnings or earnings retained in the business as shown on the books of the Company unless such cash dividends or other cash 63 distributions are Extraordinary Cash Dividends), the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 11.08, in accordance with the formula: R x M R' = ----- M - F where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Quoted Price. F = the fair market value (on the record date for the distribution to which this Section 11.08 applies) of the assets or securities or rights, warrants or options to be distributed in respect of each Share in the distribution to which this Section 11.08 is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). The Board of Directors shall determine fair market values for the purposes of this Section 11.08. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 11.08 applies. For purposes of this Section 11.08, the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the Shares the amount of which, together with any cash dividends paid in the preceding year period, exceeds on a per share basis 10% of the Sale Price of the Shares on the last trading day preceding the date of declaration by the Board of Directors of the cash dividend with respect to which this provision is being applied, then such cash dividend, shall be deemed to be an Extraordinary Cash Dividend and for purposes of applying the formula set forth above in this Section 11.08, the value of "F" shall be equal to the aggregate amount of such cash dividends for the one year period. In making the determinations required above, the amount of cash dividends paid on a per Share basis shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 11.06. In the event that, with respect to any distribution to which this Section 11.08 would otherwise apply, the difference "M-F" as defined in the above formula is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by this Section 11.08 shall not be made and in lieu thereof the provisions of Section 11.14 shall apply to such distribution. SECTION 11.09. When Adjustment May Be Deferred or Not Made. No ------------------------------------------- adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. 64 All calculations under this Article 11 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be. SECTION 11.10. When No Adjustment Required. No adjustment need be --------------------------- made for a transaction referred to in Section 11.06, 11.07, 11.08 or 11.14 if Noteholders are to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Shares participate in the transaction. Such participation by Noteholders may include participation upon conversion provided that an adjustment shall be made at such time as the Noteholders are no longer entitled to participate. No adjustment need be made for rights to purchase Shares pursuant to an Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Shares and for accrued Original Issue Discount. SECTION 11.11. Notice of Adjustment. Whenever the Conversion Rate -------------------- is adjusted, the Company shall promptly mail to Noteholders by first-class mail a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. SECTION 11.12. Voluntary Increase. The Company from time to time ------------------ may increase the Conversion Rate by any amount for any period of time. Whenever the Conversion Rate is increased, the Company shall mail to Noteholders by first-class mail and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or 11.08. SECTION 11.13. Notice of Certain Transactions. If: ------------------------------ (1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 (unless no adjustment is to occur pursuant to Section 11.10); or (2) there is a liquidation or dissolution of the Company, then the Company shall mail to Noteholders by first-class mail and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution. The 65 Company shall file and mail the notice at least 20 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 11.14. Reorganization of Company; Special Distributions. If ------------------------------------------------ the Company is a party to a transaction subject to Section 5.01 (other than a transaction in which the Company is the surviving corporation) or a binding share exchange which reclassifies or changes its outstanding Shares, the Person obligated to deliver securities, cash or other assets upon conversion of Notes shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Notes is an Affiliate of the surviving corporation, that issuer shall join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Note may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange, conveyance, transfer or lease if such Holder had converted the Note into Shares immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent Person or an Affiliate of a constituent Person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non-electing Holders. The supplemental indenture shall include provisions for adjustments which shall be as nearly equivalent as may be practical to the provisions for adjustments included in this Article 11. The surviving corporation shall mail to Noteholders a notice briefly describing the supplemental indenture. In the event of a transaction subject to the last sentence of Section 5.01 in which the predecessor Company is not the Successor Company, the Notes shall remain convertible into Shares in accordance with this Article 11. If this Section 11.14 applies, neither Section 11.06 nor Section 11.07 applies. If the Company makes a distribution to all holders of Shares of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of the last paragraph of Section 11.08, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 11.08, then, from and after the record date for determining the holders of Shares entitled to receive the distribution, a Holder of a Note that converts such Note in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the Shares into which the Note is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Note into Shares immediately prior to the record date for determining the holders of Shares entitled to receive the distribution. SECTION 11.15. Company Determination Final. Any determination that --------------------------- the Company or the Board of Directors must make pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 is conclusive in the absence of manifest error. SECTION 11.16. Trustee's Adjustment Disclaimer. The Trustee has ------------------------------- no duty to determine when an adjustment under this Article 11 should be made, how it should be made or 66 what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 11.14 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes. The Trustee shall not be responsible for the Company's failure to comply with this Article 11. Each Conversion Agent shall have the same protection under this Section 11.16 as the Trustee. SECTION 11.17. Simultaneous Adjustments. In the event that this ------------------------ Article 11 requires adjustments to the Conversion Rate under more than one of Sections 11.06(4), 11.07 or 11.08, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 11.06, second, the provisions of Section 11.08 and, third, the provisions of Section 11.07. SECTION 11.18. Successive Adjustments. After an adjustment to the ---------------------- Conversion Rate under this Article 11, any subsequent event requiring an adjustment under this Article 11 shall cause an adjustment to the Conversion Rate as so adjusted. SECTION 11.19. Rights Issued in Respect of Shares Issued Upon ---------------------------------------------- Conversion. Each Share issued upon conversion of Notes pursuant to this Article - ---------- 11 shall be entitled to receive the appropriate number of common stock or preferred stock purchase rights, as the case may be (the "Rights"), if any, and the certificates representing the Shares issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any rights agreement adopted by the Company, as the same may be amended from time to time (in each case, a "Rights Agreement"). Provided that such Rights Agreement requires that each Share issued upon conversion of Notes at any time prior to the distribution of separate certificates representing the Rights be entitled to receive such Rights, then, notwithstanding anything else to the contrary in this Article 11, there shall not be any adjustment to the Conversion Rate as a result of the issuance of Rights, the distribution of separate certificates representing the Rights, the exercise or redemption of such Rights in accordance with any such Rights Agreement, or the termination or invalidation of such Rights. SECTION 11.20. Restriction on Shares Issued Upon Conversion. Shares -------------------------------------------- to be issued upon conversion of Notes prior to the effectiveness of a Shelf Registration shall be physically delivered in certificated form to the holders converting such Notes and the certificate representing such Shares shall bear a legend substantially to the following effect: "THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSON, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED 67 IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) 0R (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), AND (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (iii) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (iv) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (v) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (vi) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (vii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN WITHIN THE TIME PERIOD REFERRED 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 TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS. IN ANY CASE, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN 68 ANY HEDGING TRANSACTIONS WITH RESPECT TO THE SECURITIES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT." unless removed in accordance with Section 11.20(b). (a) If (i) Shares to be issued upon conversion of a Note prior to the effectiveness of a Shelf Registration are to be registered in a name other than that of the Holder of such Note or (ii) Shares represented by a certificate bearing the above legend are transferred subsequently by such Holder, then, unless the Shelf Registration has become effective and such Shares are being transferred pursuant to the Shelf Registration, the holder must deliver to the transfer agent for the Shares a certificate in substantially the form of Exhibit F as to compliance with the restrictions on transfer applicable to such Shares and neither the transfer agent nor the registrar for the Shares shall be required to register any transfer of such Shares not so accompanied by a properly completed certificate. (b) Except in connection with a Shelf Registration, if certificates representing Shares are issued upon the registration of transfer, exchange or replacement of any other certificate representing Shares bearing the above legend, or if a request is made to remove such legend from certificates representing Shares, the certificates so issued shall bear the above legend, or the above legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which, in the case of a transfer made pursuant to Rule 144 under the Securities Act, may include an opinion of counsel, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities Act or that such Shares are securities that are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision to the Company of such reasonably satisfactory evidence, the Company shall cause the transfer agent for the Shares to countersign and deliver certificates representing Shares that do not bear the legend. ARTICLE 12 MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls. If any provision of ---------------------------- this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the Trust Indenture Act, the required provision shall control. SECTION 12.02. Notices. Any notice or communication shall be in ------- writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, addressed as follows: 69 If to the Company: Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Telecopy No.: (734) 591-4462 Attention: General Counsel If to the Trustee: For payment, registration of transfer and exchange of the Notes: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Telephone: (212) 815-5287 Telecopy No.: (212) 815-5915 Attention: Corporate Trust Department The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Notices to the Trustee shall be effective only upon receipt. Any notice or communication mailed to a Noteholder shall be mailed to the Noteholder at the Noteholder's address as it appears on the Registrar and shall be sufficiently given 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 given in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.03. Communication by Holders with Other Holders. ------------------------------------------- Noteholders may communicate pursuant to Trust Indenture Act Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of Trust Indenture Act Section 312(c). SECTION 12.04. Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate of the Company in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with, 70 except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. SECTION 12.05. Statements Required in Certificate or Opinion. Each --------------------------------------------- certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual 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 statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he/she 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 individual, such covenant or condition has been complied with. SECTION 12.06. When Notes Disregarded. In determining whether the ---------------------- Holders of the required Principal Amount at Maturity of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be disregarded and deemed not to be Outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Subject to the foregoing, only Notes Outstanding at the time shall be considered in any such determination. SECTION 12.07. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the " Noteholder Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying 71 that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of the signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any manner which the Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Noteholder Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, suffered or omitted to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. (e) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. If a record date is fixed, those persons who were Holders of Notes at such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date. SECTION 12.08. Rules by Trustee, Paying Agent and Registrar. In -------------------------------------------- addition to the guidelines set forth herein, the Trustee may make reasonable rules for action by or a meeting of Noteholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 12.09. Legal Holidays. A "Legal Holiday" is a Saturday, -------------- Sunday or other day on which banking institutions in the State of New York are authorized or required by law to close. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 12.10. Governing Law. THIS INDENTURE AND THE NOTES SHALL ------------- BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. SECTION 12.11. No Recourse Against Others. A director, officer, -------------------------- employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issuance of the Notes. 72 SECTION 12.12. Successors. All agreements of the Company in this ---------- Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.13. Multiple Originals. The parties may sign any number ------------------ of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy of the Indenture is enough to prove this Indenture. SECTION 12.14. Table of Contents; Headings. The table of contents, ---------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 12.15. Severability. If any provision in this Indenture is ------------ deemed unenforceable, it shall not affect the validity or enforceability of any other provision set forth herein, or of the Indenture as a whole. [Rest of page intentionally left blank] 73 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. VALASSIS COMMUNICATIONS, INC. /s/ Barry P. Hoffman By: _________________________ Name: Barry P. Hoffman Title: Secretary, Executive Vice President and General Counsel THE BANK OF NEW YORK, as Trustee /s/ Robert A. Massimillo By: __________________________ Name: Robert A. Massimillo Title: Assistant Vice President 74 EXHIBIT A [FORM OF FACE OF SECURITY] FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT AT MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $551.26. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $448.74, THE ISSUE DATE IS JUNE 6, 2001 AND THE YIELD TO MATURITY IS 3.0% PER ANNUM. THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL INTEREST IN THE NOTE, EACH BENEFICIAL OWNER OF ALL OR ANY PORTION OF THE NOTE EVIDENCED HEREBY WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES (1) TO TREAT THE NOTE AS INDEBTEDNESS THAT IS SUBJECT TO TREAS. REG. SEC. 1.1275-4 (THE "CONTINGENT DEBT REGULATIONS") AND, FOR PURPOSES OF THE CONTINGENT DEBT REGULATIONS, TO TREAT, WITHOUT LIMITATION, THE AMOUNT OF CASH AND THE FAIR MARKET VALUE OF ANY SHARES BENEFICIALLY RECEIVED UPON A CONVERSION OF THE NOTE AS A CONTINGENT PAYMENT AND (2) TO BE BOUND BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE", WITHIN THE MEANING OF THE CONTINGENT DEBT REGULATIONS, WITH RESPECT TO THE NOTE. UNDER SUCH REGULATIONS, THE COMPARABLE YIELD OF THIS SECURITY IS 7.13%, AND THE PROJECTED PAYMENT SCHEDULE IS ATTACHED AS EXHIBIT G TO THE INDENTURE. A HOLDER OF THE SECURITY MAY ALSO OBTAIN THE PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST TO THE ISSUER AT THE FOLLOWING ADDRESS: VALASSIS COMMUNICATIONS, INC., 19975 VICTOR PARKWAY, LIVONIA, MICHIGAN 48152, ATTENTION: GENERAL COUNSEL. [THIS NOTE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSON, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) 0R (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), AND (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii) TO A PERSON WHOM THE SELLER REASONABLY A-1 BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (iii) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (iv) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (v) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (vi) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (vii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST THEREIN WITHIN THE TIME PERIOD REFERRED 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 TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. IN ANY CASE, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH RESPECT TO THE NOTES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.] [THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JUNE 6, 2001, ENTERED INTO BY THE ISSUER AND THE INITIAL PURCHASER FOR THE BENEFIT OF CERTAIN HOLDERS FROM TIME TO TIME OF SECURITIES.] [INCLUDE IF SECURITY IS A GLOBAL SECURITY -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO A-2 TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] A-3 VALASSIS COMMUNICATIONS, INC. Zero Coupon Convertible Senior Note due 2021
CUSIP No. ____________ $___________ Principal Amount at Maturity Issue Date: June 6, 2001 Original Issue Discount: $448.74 Issue Price: $551.26 (for each $1,000 Principal Amount at (for each $1,000 Principal Amount at Maturity) Maturity)
Valassis Communications, Inc., a Delaware corporation (herein called the "Issuer" or the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _____________, or its registered assigns, the Principal Amount at Maturity set forth above [INCLUDE IF NOTE IS A GLOBAL NOTE -- (which amount may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary, in accordance with the rules and procedures of the Depositary)] on June 6, 2021. This Note shall not bear periodic interest except as specified on the other side of this Note. Original Issue Discount will accrue as specified on the other side of this Note. This Note is convertible as specified on the other side of this Note. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. VALASSIS COMMUNICATIONS, INC. By: ------------------------- Name: ----------------------- Title: ---------------------- A-4 TRUSTEE'S CERTIFICATE OF AUTHENTICATION The Bank of New York, as Trustee, certifies that this is one of the Notes referred to in the Indenture. By: ---------------------------- Authorized Signatory Date of authentication: A-5 [FORM OF REVERSE SIDE OF NOTE] This Note is one of a duly authorized issue of Notes of the Company designated as its Zero Coupon Convertible Senior Notes due 2021, limited in aggregate Principal Amount at Maturity to $272,100,000 (subject to increase by up to $299,310,000 in the event the Initial Purchaser exercises the over- allotment option granted to it in the Purchase Agreement) (herein called the "Notes"), issued and to be issued under an Indenture, dated as of June 6, 2001 (herein called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes, of the terms upon which the Notes are, and are to be, authenticated and delivered and for the definitions of capitalized terms used but not defined in this Note. Interest - This Note shall not bear periodic interest, except as specified herein. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price, upon the date set for payment of a Purchase Price or Change in Control Purchase Price or upon the Stated Maturity of this Note) or if Contingent Interest, if any, due hereon or any portion of such Contingent Interest is not paid when due in accordance with the paragraph entitled Contingent Interest hereof, then in each such case the overdue amount shall bear interest at the rate of 3.0% per annum, compounded semiannually (to the extent that the payment of such interest shall be legally enforceable), which interest shall accrue from the date such overdue amount was due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. Original Issue Discount (the difference between the Issue Price and the Principal Amount at Maturity of the Note), in the period during which a Note remains outstanding, shall accrue at 3.0% per annum, on a semi-annual bond equivalent basis using a 360-day year composed of twelve 30-day months, from the Issue Date of this Note. Original Issue Discount shall cease to accrue on the earlier of (a) the date on which the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity becomes due and payable and (b) any Redemption Date, Conversion Date, Change in Control Purchase Date, Purchase Date or other date on which such Original Issue Discount shall cease to accrue in accordance with Section 2.09 of the Indenture. Method of Payment - Holders must surrender Notes to the Paying Agent to collect all payments in respect of the Notes, except for any Liquidated Damages payable pursuant to the Registration Rights Agreement and any Contingent Interest. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts in the manner described in the Indenture. Contingent Interest - Subject to the accrual and record date provisions specified in this paragraph, the Company shall pay contingent interest ("Contingent Interest") to the Holders during any six-month period (a "Contingent Interest Period") from June 6 to December 5 and from December 6 to June 5, commencing the period beginning June 6, 2006, if the average A-6 Security Market Price for the five trading days ending on the second trading day immediately preceding the relevant Contingent Interest Period equals 120% or more of the sum of the Issue Price of a Note and Original Issue Discount accrued thereon to the trading day immediately preceding the first day of the relevant Contingent Interest Period. The amount of Contingent Interest payable per Note in respect of any Contingent Interest Period shall equal the greater of (x) the cash dividends, if any, payable on the Shares with respect to any record date for such dividend that occurs during that period or (y) the conversion value of the Note multiplied by one-half of the annual rate of 0.30%, which will be computed on the basis of a 360-day year comprised of twelve 30-day months. Contingent Interest, if any, will accrue and be payable to Holders as of the 15th day preceding the last day of the relevant Contingent Interest Period. Such payments shall be paid on the 15th day after the relevant Contingent Interest Period. Original Issue Discount will continue to accrue at 3.0% per annum whether or not Contingent Interest is paid. "Security Market Price" means, as of any date of determination, the average of the secondary market bid quotations per Note obtained by the Bid Solicitation Agent for $10 million Principal Amount at Maturity at approximately 4:00 p.m. (New York City time) on such determination date from two recognized securities dealers in the City of New York (none of which shall be an Affiliate of the Company) selected by the Company and communicated to the Bid Solicitation Agent; provided, however, if (a) two such bids are not obtained by the Bid Solicitation Agent or (b) in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Notes as of such determination date, then the Security Market Price of the Notes for such determination date shall equal (i) the Conversion Rate in effect as of such determination date multiplied by (ii) the average Sale Price for the five trading days ending on such determination date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such five trading day period and ending on such determination date, of any event described in Section 11.06, 11.07 or 11.08 (subject to the conditions set forth in Sections 11.09 and 11.10) of the Indenture. Upon determination that Holders will be entitled to receive Contingent Interest which may become payable during a Contingent Interest Period, on or prior to the first day of such Contingent Interest Period, the Company shall issue a press release and publish such information on its web site at www.valassis.com or such other web site as the Company may from time to time - ---------------- maintain. Redemption at the Option of the Company - No sinking fund is provided for the Notes. On or after June 6, 2006, the Notes are redeemable as a whole, or from time to time in part, at any time at the option of the Company at a Redemption Price equal to the Issue Price plus the accrued Original Issue Discount to the Redemption Date as set forth in the next paragraph. The table below shows redemption prices (each a "Redemption Price") of a Note per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices equal the Issue Price plus accrued Original Issue Discount calculated to each such date. The Redemption Price of a Note redeemed between such dates shall include an additional A-7 amount reflecting the additional Original Issue Discount accrued since the next preceding date in the table.
---------------------------------------------------------------------------------- Date Issue Accrued Original Redemption Price Issue Discount Price at 3.0% ---------------------------------------------------------------------------------- June 6, 2006 $551.26 $ 88.50 $ 639.76 June 6, 2007 551.26 107.84 659.10 June 6, 2008 551.26 127.76 679.02 June 6, 2009 551.26 148.28 699.54 June 6, 2010 551.26 169.43 720.69 June 6, 2011 551.26 191.21 742.47 June 6, 2012 551.26 213.65 764.91 June 6, 2013 551.26 236.77 788.03 June 6, 2014 551.26 260.59 811.85 June 6, 2015 551.26 285.13 836.39 June 6, 2016 551.26 310.41 861.67 June 6, 2017 551.26 336.45 887.71 June 6, 2018 551.26 363.28 914.54 June 6, 2019 551.26 390.92 942.18 June 6, 2020 551.26 419.40 970.66 At Stated Maturity 551.26 448.74 1,000.00
In addition to the Redemption Price payable with respect to all Notes or portions thereof to be redeemed as of a Redemption Date, the Holders of such Notes (or portions thereof) shall be entitled to receive Liquidated Damages, if any, and accrued and unpaid Contingent Interest, if any, with respect thereto, which Liquidated Damages and Contingent Interest shall be paid in cash on the Redemption Date, as the case may be. A-8 Purchase By the Company at the Option of the Holder - Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Notes held by such Holder on the following Purchase Dates and at the following Purchase Prices per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the third Business Day prior to such Purchase Date and upon delivery of the Notes to the Paying Agent by the Holder as set forth in the Indenture. Purchase Date Purchase Price --------------------- ----------------------- June 6, 2004 $602.77 June 6, 2006 $639.76 June 6, 2011 $742.47 June 6, 2016 $861.67 On the 2004 and 2006 Purchase Dates, the Purchase Price (equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date) will be paid for in Shares as specified in Section 3.07 of the Indenture, or, at the election of the Company, in cash or in any combination of cash and Shares. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Notes if a Change in Control occurs at any time on or prior to June 6, 2006 for a Change in Control Purchase Price equal to the Issue Price plus accrued Original Issue Discount to the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash. In addition to the Purchase Price and Change in Control Purchase Price, as the case may be, payable with respect to all Notes or portions thereof to be purchased as of the Purchase Date and the Change in Control Purchase Date, as the case may be, the Holders of such Notes (or portions thereof) shall be entitled to receive Liquidated Damages, if any, and accrued and unpaid Contingent Interest, if any, with respect thereto, which Liquidated Damages and Contingent Interest shall be paid in cash promptly following the later of the Purchase Date or the Change in Control Purchase Date, as the case may be, and the time of delivery of such Notes to the Paying Agent pursuant to the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash and/or Shares sufficient to pay the Purchase Price or cash sufficient to pay the Change in Control Purchase Price, as the case may be, of, together with Liquidated Damages, if any, and accrued and unpaid Contingent Interest, if any, with respect to, all Notes or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, are deposited with the Paying Agent on the Business Day following the Purchase A-9 Date or the Change in Control Purchase Date, as the case may be, Original Issue Discount and Contingent Interest, if any, and Liquidated Damages, if any, will cease to accrue on such Notes (or portions thereof) immediately after such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, and accrued and unpaid Contingent Interest, if any, and Liquidated Damages, if any, upon surrender of such Note). Ranking - The Notes shall be senior unsecured obligations of the Company and will rank equally in right of payment with all our existing and future senior unsecured indebtedness. Conversion - A Holder of a Note may convert it into Shares in accordance with the terms and conditions set forth in Article 11 of the Indenture. The initial Conversion Rate is 11.8316 Shares per $1,000 Principal Amount at Maturity, subject to adjustment in certain events described in the Indenture. The Company will deliver cash or a check in lieu of any fractional Share. The Conversion Rate may be adjusted as provided in the Indenture. To convert a Global Note, a Holder must deliver to DTC the appropriate instruction form for conversion pursuant to DTC's conversion program. To convert a Note, a Holder must (1) complete and manually sign the conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Note to the Conversion Agent for cancellation, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (4) pay all funds required, if any, relating to Contingent Interest, if any, and Liquidated Damages, if any, on the Note to be converted for which the Holder is not entitled and pay any transfer or similar tax, if required. A Holder may convert a portion of a Note if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on, or other distributions with respect to, any Shares except as provided in the Indenture. On conversion of a Note, that portion of accrued Original Issue Discount attributable to the period from the Issue Date through the Conversion Date with respect to the converted Note and (except as provided below) accrued Contingent Interest, if any, and Liquidated Damages, if any, with respect to the converted Note shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through the delivery of the Shares (together with the cash payment, if any, in lieu of fractional Shares) in exchange for the Note being converted pursuant to the terms hereof; and the fair market value of such Shares (together with any such cash payment in lieu of fractional Shares) shall be treated as delivered pro rata, to the extent thereof, first in exchange for Original Issue Discount and accrued Contingent Interest accrued through the Conversion Date, if any, and Liquidated Damages, if any, and the balance, if any, of the fair market value of such Shares shall be treated as delivered in exchange for the Issue Price of the Note being converted pursuant to the provisions hereof. If the Company is a party to a consolidation, merger or binding share exchange or a transfer of its assets as, or substantially as, an entirety, or upon certain distributions described in A-10 the Indenture, the right to convert a Note into Shares may be changed into a right to convert it into securities, cash or other assets of the Company or another Person. [INCLUDE IF SECURITY IS A GLOBAL SECURITY -- In the event of a deposit or withdrawal of an interest in this Note, including an exchange, transfer, repurchase or conversion of this Note in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the rules and procedures of the Depositary.] [INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- Subject to certain limitations in the Indenture, at any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted Note, the Company shall promptly furnish or cause to be furnished Rule 144A Information to such Holder of Restricted Notes, or to a prospective purchaser of any such security designated by any such Holder, to the extent required to permit compliance by any such Holder with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto).] If an Event of Default shall occur and be continuing, the Issue Price plus the Original Issue Discount, accrued on all the Notes and accrued Contingent Interest, if any, and Liquidated Damages, if any, may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment or supplement thereof and of this Note and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes under the Indenture and this Note at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate Principal Amount at Maturity of the Outstanding Notes. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate Principal Amount at Maturity of the Outstanding Notes, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. As provided in and subject to the provisions of the Indenture, the Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Notes, the Holders of not less than 25% in Principal Amount at Maturity of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in Principal Amount at Maturity of Outstanding Notes a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The A-11 foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the Principal Amount at Maturity, Purchase Price or Change in Control Purchase Price of, accrued Original Issue Discount, Contingent Interest, if any, and Liquidated Damages, if any, on this Note at the times, place and rate, and in the coin or currency, prescribed in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company established pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate Principal Amount at Maturity, will be issued to the designated transferee or transferees. The Notes are issuable only in registered form without coupons in denominations of $1,000 Principal Amount at Maturity and any integral multiple of $1,000 above that amount. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate Principal Amount at Maturity of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. A-12 ASSIGNMENT FORM If you want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint _____________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ______________________ Signed: __________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. In connection with any transfer of this Note occurring prior to the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer), I or we are assigning and transferring this Note: [Check One] (1) [ ] to the Company or a Subsidiary of the Company; or (2) [ ] pursuant to and in compliance with Rule 144A under the Securities Act; or (3) [ ] outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act; or (4) [ ] pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or A-13 (5) [ ] pursuant to an effective registration statement under the Securities Act; or (6) [ ] pursuant to another available exemption from the registration requirements of the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any Person other than the registered Holder thereof, provided that if box (3), (4) or (6) is checked, the Company may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3)) and other information as the Company may reasonably request 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. If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 3.09 of the Indenture shall have been satisfied. Date: ______________________ Signed: _____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date: ____________________ Signed: ___________________________ NOTICE: To be executed by an executive officer. A-14 FORM OF CONVERSION NOTICE If you want to convert this Note into Shares of the Company, check the box: To convert only part of this Note, state the Principal Amount at Maturity to be converted (which must be $1,000 or an integral multiple of $1,000): $__________________________________ If you want the stock certificate made out in another person's name, fill in the form below: _______________________________________________________________________________ (Insert other person's social security or tax ID no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type other person's name, address and zip code) Date: ____________________ Signed: ____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-15 EXHIBIT B [FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL SECURITY OR DEFINITIVE SECURITY TO DEFINITIVE SECURITY] (Transfers pursuant to Section 2.13(a)(1) or Section 2.13(a)(2) of the Indenture) ________________, ___ The Bank of New York 101 Barclay St., Floor 21 West New York, New York 10286 Attention: Corporate Trust Department Re: Transfer of $________ Principal Amount at Maturity of Zero Coupon Convertible Senior Notes due 2021 (the "Notes") of Valassis Communications, Inc. (the "Company") ----- ------- Reference is hereby made to the Indenture dated as of June 6, 2001 (the "Indenture") between the Company and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to U.S. $_____________ aggregate Principal Amount at Maturity of Notes which are held [in the form of a [Definitive] [Global Note (CUSIP No. ________________)]*] in the name of [name of transferor] (the "Transferor") to effect the transfer of Notes. In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Notes and the Indenture and (ii) to a transferee that the Transferor reasonably believes is an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the U.S. Securities Act of 1933, as amended) (an "Institutional Accredited Investor") which is acquiring such Notes for its own account or for one or more accounts, each of which is an Institutional Accredited Investor, over which it exercises sole investment discretion and (iii) in accordance with applicable securities laws of any state of the United States. - --------------- * Insert, if appropriate. [Name of Transferor], By:_____________________________ Name:___________________________ Title:___________________________ Dated:___________________________ B-1 EXHIBIT C [FORM OF NON-DISTRIBUTION LETTER FOR INSTITUTIONAL ACCREDITED INVESTORS] (Transfers pursuant to Section 2.13(a)(1) or Section 2.13(a)(2) of the Indenture) ________________, ___ The Bank of New York 101 Barclay St., Floor 21 West New York, New York 10286 Attention: Corporate Trust Department Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Re: Purchase of $________ Principal Amount at Maturity of Zero Coupon Convertible Senior Notes due 2021 (together with the Shares issuable upon conversion thereof, the "Notes") of ----- Valassis Communications, Inc. (the "Company")/2/ ------- Ladies and Gentlemen: In connection with our purchase of the Notes we confirm that: 1. We understand that the Notes are not being and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), and are being sold to us in a transaction that is exempt from the registration requirements of the Securities Act. 2. We acknowledge that (a) neither the Company, nor the Initial Purchaser (as defined in the Offering Memorandum dated May 23, 2001 relating to the Notes (the "Offering Memorandum")) nor any person acting on behalf of the ------------------- Company or the Initial Purchaser has made any representation to us with respect to the Company or the offer or sale of any Notes; and (b) any information we desire concerning the Company and the Notes or any other matter relevant to our decision to purchase the Notes (including a copy of the Offering Memorandum) is or has been made available to us. 3. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Notes, and we are (or any - ----------------- /2/ Each U.S. purchaser, or account for which each U.S. purchaser is acting, should purchase at least $250,000 Principal Amount at Maturity of Notes. C-1 account for which we are purchasing under paragraph 4 below is) an institutional "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) able to bear the economic risk of investment in the Notes. 4. We are acquiring the Notes for our own account (or for accounts as to which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Notes, subject, nevertheless, to the understanding that the disposition of our property will at all times be and remain within our control. 5. We understand that (a) the Notes will be in registered form only and that any certificates delivered to us in respect of the Notes will bear a legend substantially to the following effect: "THIS NOTE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSON, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) 0R (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), AND (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii)TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (iii) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (iv) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (v) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE WITH A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (vi) IN ACCORDANCE WITH ANOTHER EXEMPTION C-2 FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (vii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST THEREIN WITHIN THE TIME PERIOD REFERRED 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 TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. IN ANY CASE, THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH RESPECT TO THE NOTES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT." and (b) the Company has agreed to reissue such certificates without the foregoing legend only in the event of a disposition of the Notes in accordance with the provisions of paragraph 6 below (provided, in the case of a disposition of the Notes in accordance with paragraph 6(f) below, that the legal opinion referred to in such paragraph so permits), or at our request at such time as we would be permitted to dispose of them in accordance with paragraph 6(a) below. 6. We agree that in the event that at some future time we wish to dispose of any of the Notes, we will not do so unless such disposition is made in accordance with any applicable securities laws of any state of the United States and: (a) the Notes are sold in compliance with Rule 144(k) under the Securities Act; or (b) the Notes are sold in compliance with Rule 144A under the Securities Act; or (c) the Notes are sold in compliance with Rule 904 of Regulation S under the Securities Act; or (d) the Notes are sold pursuant to an effective registration statement under the Securities Act; or (e) the Notes are sold to the Company or an affiliate (as defined in Rule 501(b) of Regulation D) of the Company; or (f) the Notes are disposed of in any other transaction that does not require registration under the Securities Act, and we theretofore have furnished to the Company or its designee an opinion of counsel experienced in securities law matters to such effect or such other documentation as the Company or its designee may reasonably request. Very truly yours, By ---------------------- (Authorized Officer) C-3 EXHIBIT D [FORM OF PURCHASE NOTICE] ________________, ___ The Bank of New York 101 Barclay St., Floor 21 West New York, New York 10286 Attention: Corporate Trust Department Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Re: Purchase of $________ Principal Amount at Maturity of Zero Coupon Convertible Senior Notes due 2021 (the "Notes") of Valassis Communications, Inc. (the "Company") ----- ------- Certificate No(s). of Notes: _____________________________ This is a Purchase Notice as defined in Section 3.07(a) of the Indenture dated as of June 6, 2001 (the "Indenture") between the Company and The Bank of New York, as Trustee. Terms used but not defined herein shall have the meanings ascribed to them in the Indenture. I intend to deliver the following aggregate Principal Amount at Maturity of Notes for purchase by the Company pursuant to Section 3.07(a) of the Indenture (in multiples of $1,000): $_____________________________ I hereby agree that the Notes will be purchased as of the Purchase Date pursuant to the terms and conditions thereof and of the Indenture. [In the event that the Company elects, pursuant to Section 3.07(b) of the Indenture, to pay the Purchase Price, in whole or in part, in Shares but such portion of the Purchase Price is ultimately payable entirely in cash because any of the conditions to payment of the Purchase Price in Shares is not satisfied prior to the close of business on the Purchase Date, I elect (check one): [ ] (1) to withdraw this Purchase Notice as to all of the Notes to which it relates; [ ] (2) to withdraw this Purchase Notice as to $___________________ Principal Amount at Maturity of Notes (Certificate No(s). ____________________); or [ ] (3) to receive cash in respect of the entire Purchase Price for all Notes or portions thereof to which this Purchase Notice relates.] Signed: ________________________ D-1 EXHIBIT E [FORM OF CHANGE IN CONTROL PURCHASE NOTICE] ________________, ___ The Bank of New York 101 Barclay St., Floor 21 West New York, New York 10286 Attention: Corporate Trust Department Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Re: Purchase of $________ Principal Amount at Maturity of Zero Coupon Convertible Senior Notes due 2021 (the "Notes") of Valassis Communications, Inc. (the "Company") ----- ------- Certificate No(s). of Notes: _____________________________ This is a Change in Control Purchase Notice as defined in Section 3.08 of the Indenture dated as of June 6, 2001 (the "Indenture") between the Company and The Bank of New York, as Trustee. Terms used but not defined herein shall have the meanings ascribed to them in the Indenture. I intend to deliver the following aggregate Principal Amount at Maturity of Notes for purchase by the Company pursuant to Section 3.08 of the Indenture (in multiples of $1,000): $________________________________ I hereby agree that the Notes will be purchased as of the Change in Control Purchase Date pursuant to the terms and conditions thereof and of the Indenture. Signed: ________________________ E-1 EXHIBIT F [FORM OF TRANSFER CERTIFICATE FOR TRANSFER OF RESTRICTED SHARES] (Transfers pursuant to Section 11.20(a) of the Indenture) [NAME AND ADDRESS OF TRANSFER AGENT OF SHARES] The Bank of New York 101 Barclay St., Floor 21 West New York, New York 10286 Attention: Corporate Trust Department Re: Shares of Valassis Communications, Inc. (the "Company") Reference is hereby made to the Indenture dated as of June 6, 2001 (the "Indenture") between the Company and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to ____ Shares represented by the accompanying certificate(s) that were issued upon conversion of Notes and which are held in the name of [name of transferor] (the "Transferor") to effect the transfer of such Shares. In connection with the transfer of such Shares, the undersigned confirms that such Shares are being transferred: CHECK ONE BOX BELOW (1) [ ] to the Company; or (2) [ ] pursuant to and in compliance with Regulation S under the Securities Act of 1933; or (3) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the transfer agent a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Company or transfer agent); or (4) [ ] pursuant to an exemption from registration under the Securities Act of 1933 provided by Rule 144 thereunder. Unless one of the boxes is checked, the transfer agent will refuse to register any of the Shares evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (2), (3) or (4) is checked, the transfer agent may require, prior to registering any such transfer of the Shares such certifications and other information, and F-1 if box (4) is checked such legal opinions, as the Company reasonably requests in writing, by delivery to the transfer agent of a standing letter of instruction, to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. [Name of Transferor], By ----------------------------------- Name: -------------------------------- Title: ------------------------------- Dated: F-2 EXHIBIT G PROJECTED PAYMENT SCHEDULE - -------------------------------------------------------------------------------- PROJECTED PAYMENT SCHEDULE (PER NOTE) - -------------------------------------------------------------------------------- Gross Proceeds $150,000,000 - -------------------------------------------------------------------------------- YTM (Zero Coupon) 3.00% - -------------------------------------------------------------------------------- Projected Payment Year Schedule - -------------------------------------------------------------------------------- 0.0 $ 551.26 - -------------------------------------------------------------------------------- 0.5 0.00 - -------------------------------------------------------------------------------- 1.0 0.00 - -------------------------------------------------------------------------------- 1.5 0.00 - -------------------------------------------------------------------------------- 2.0 0.00 - -------------------------------------------------------------------------------- 2.5 0.00 - -------------------------------------------------------------------------------- 3.0 0.00 - -------------------------------------------------------------------------------- 3.5 0.00 - -------------------------------------------------------------------------------- 4.0 0.00 - -------------------------------------------------------------------------------- 4.5 0.00 - -------------------------------------------------------------------------------- 5.0 0.00 - -------------------------------------------------------------------------------- 5.5 0.00 - -------------------------------------------------------------------------------- 6.0 0.00 - -------------------------------------------------------------------------------- 6.5 0.00 - -------------------------------------------------------------------------------- 7.0 0.00 - -------------------------------------------------------------------------------- 7.5 0.00 - -------------------------------------------------------------------------------- 8.0 0.00 - -------------------------------------------------------------------------------- 8.5 0.00 - -------------------------------------------------------------------------------- 9.0 (1.31) - -------------------------------------------------------------------------------- 9.5 (1.36) - -------------------------------------------------------------------------------- 10.0 (1.42) - -------------------------------------------------------------------------------- 10.5 (1.48) - -------------------------------------------------------------------------------- 11.0 (1.54) - -------------------------------------------------------------------------------- 11.5 (1.60) - -------------------------------------------------------------------------------- 12.0 (1.67) - -------------------------------------------------------------------------------- 12.5 (1.74) - -------------------------------------------------------------------------------- 13.0 (1.81) - -------------------------------------------------------------------------------- 13.5 (1.88) - -------------------------------------------------------------------------------- 14.0 (1.96) - -------------------------------------------------------------------------------- 14.5 (2.04) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 15.0 (2.12) - -------------------------------------------------------------------------------- 15.5 (2.21) - -------------------------------------------------------------------------------- 16.0 (2.30) - -------------------------------------------------------------------------------- 16.5 (2.40) - -------------------------------------------------------------------------------- 17.0 (2.49) - -------------------------------------------------------------------------------- 17.5 (2.60) - -------------------------------------------------------------------------------- 18.0 (2.70) - -------------------------------------------------------------------------------- 18.5 (2.81) - -------------------------------------------------------------------------------- 19.0 (2.93) - -------------------------------------------------------------------------------- 19.5 (3.05) - -------------------------------------------------------------------------------- 20.0 (2,119.15) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Yield 7.13% - -------------------------------------------------------------------------------- EX-4.3 3 dex43.txt REGISTRATION RIGHTS AGREEMENT DATED JUNE 6, 2001 EXHIBIT 4.3 Valassis Communications, Inc. $272,100,000 Zero Coupon Convertible Senior Notes due 2021 REGISTRATION RIGHTS AGREEMENT ----------------------------- June 6, 2001 Bear, Stearns & Co. Inc. 245 Park Avenue New York, New York 10167 Dear Sirs: Valassis Communications, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to Bear, Stearns & Co. Inc. (the "Initial Purchaser"), upon the terms set forth in a purchase agreement, dated May 23, 2001 (the "Purchase Agreement"), $272,100,000 in aggregate principal amount at maturity of its Zero Coupon Convertible Senior Notes due 2021 ($299,310,000 in aggregate principal amount at maturity if the Initial Purchaser exercises its over-allotment option pursuant to the Purchase Agreement) (the "Notes"). The Notes will be convertible into shares of common stock of the Company, par value $0.01 per share (the "Shares") in accordance with the Indenture, dated as of June 6, 2001 (the "Indenture"), between the Company and The Bank of New York, as trustee (the "Trustee") pursuant to which the Notes will be issued. As an inducement to the Initial Purchaser to purchase the Notes, the Company agrees with the Initial Purchaser, (i) for the benefit of the Initial Purchaser and (ii) for the benefit of the holders of the Notes and the Shares (collectively, the "Securities") from time to time until such time as such Securities have been sold pursuant to the Shelf Registration Statement (as defined below) (each of the foregoing a "Holder" and, together, the "Holders"), as follows: 1. Shelf Registration. The Company shall take the following actions: (a) The Company shall use its reasonable efforts to file with the Securities and Exchange Commission (the "Commission") not later than the date (the "Filing Deadline") 60 days after the earliest date of original issuance of any of the Notes (the "Issue Date") and thereafter use its reasonable efforts to cause to be declared effective as promptly as practicable, but in no event later than the date (the "Effectiveness Deadline")120 days after the Issue Date, a registration statement (the "Shelf Registration Statement") on such form under the Securities Act of 1933, as amended (the "Securities Act") as the Company deems appropriate relating to the offer and sale of the Shares issuable upon conversion of the Notes and the Transfer Restricted Securities (as defined herein) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) Subject to Section 2(b) hereof, the Company shall use its reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectuses included therein to be lawfully delivered by the Holders of the relevant Securities, until the earliest of (i) the expiration of the holding period applicable to the Notes and the Shares by persons who are not affiliates of the Company under Rule 144(k) under the Securities Act or any successor provision, (ii) the date on which all the Notes and the Shares of those holders that complete and deliver in a timely manner the Notice and Questionnaire (as defined below) are registered under the Shelf Registration Statement and disposed of in accordance with the Shelf Registration Statement, or (iii) the date that there are no longer any Notes or Shares outstanding (in any case, such period being called the "Shelf Registration Period"). (c) Notwithstanding any other provision of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of such Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) The Company shall mail a notice of registration statement and selling securityholder notice and questionnaire, in substantially the form attached as Annex A to the Offering Memorandum (a "Notice and Questionnaire"), to each Holder to obtain certain information regarding such Holder for use in connection with the prospectus included in any Shelf Registration Statement. To be named as a selling securityholder in the Shelf Registration Statement and the related prospectus at the time of such Shelf Registration Statement's effectiveness, Holders must complete and deliver to the Company the completed Notice and Questionnaire at least three (3) business days prior to the intended distribution of Transfer Restricted Securities pursuant to the Shelf Registration Statement. Thereafter, any Holder wishing to sell Transfer Restricted Securities pursuant to either Shelf Registration Statement and related prospectus shall deliver a Notice and Questionnaire to the Company. From and after the date the Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable but in any event within ten (10) business days of receipt of a Notice and Questionnaire is delivered (i) if required by applicable law, file with the Commission a post-effective amendment to the applicable Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related prospectus or a supplement or amendment to any document incorporated therein by reference, or file any other document required (which may be incorporated by reference) under the Securities Act so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in such Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver such prospectus to purchasers of the Transfer Restricted Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to such applicable Shelf Registration Statement, use reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the "Amendment Effectiveness Deadline Date") that is thirty (30) days after the date such post- effective amendment is required by this clause to be filed and (ii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 1(c)(i); provided, however, notwithstanding the foregoing, if such Notice and Questionnaire is delivered during a Deferral Period (as defined in Section 2(c)), the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i) and (ii) above upon expiration of the Deferral Period in accordance with Section 2(b). Without limiting the generality of the preceding sentence, the Company may satisfy its requirements to act "as promptly as practicable" if it includes in an annual periodic report on Form 10-K or Form 10-Q the report and such information is thereby incorporated by reference in the Shelf Registration Statement. Each Holder that delivers, at any time, a duly completed Notice and Questionnaire together with such other information as may be reasonably requested of such Holder pursuant to this Agreement, and that is named as a selling securityholder in an effective Shelf Registration 2 Statement or post-effective amendment thereto, is hereafter referred to as a "Notice Holder" with respect to such Shelf Registration Statement. Notwithstanding anything contained herein to the contrary, the Company shall be under no obligation to name any Holder as a selling securityholder in any Shelf Registration Statement or related prospectus unless and until such Holder shall have timely delivered a completed Notice and Questionnaire, together with such other information regarding such Holder and the intended distribution as may be reasonably requested by the Company. Each Holder of Transfer Restricted Securities agrees that if such Holder wishes to sell Transfer Restricted Securities pursuant to either Shelf Registration Statement and related prospectus, it will do so only in accordance with this Section 1(d) and Section 2(c) hereof. 2. Registration Procedures. In connection with any Shelf Registration required by Section 1 hereof, the following provisions shall apply: (a) The Company shall furnish to the Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and in the event that the Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Shelf Registration Statement, the Company shall use its reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchaser reasonably may propose within a reasonable period of time. (b) Subject to Section 2(c), upon the occurrence of any change or event as a result of which the Shelf Registration Statement or prospectus contained therein shall (i) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading or (ii) otherwise not be effective or usable for resale of Transfer Restricted Securities during the period required by this Agreement (a "Material Event"), the Company shall file as promptly as practicable an appropriate amendment to the Shelf Registration Statement or a supplement to the related prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into the Shelf Registration Statement and prospectus curing such defect and, in the case of an amendment to the Shelf Registration Statement, use its reasonable efforts to cause such amendment to be declared effective as soon as practicable. (c) Upon (A) the issuance by the Commission of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(c) of the Securities Act or (B) the occurrence of a Material Event or a prospective Material Event and the general counsel of the Company reasonably determines that the disclosure of material non- public information pursuant to Section 2(b) would be prejudicial or contrary to the interests of the Company, the Company shall give notice to the Notice Holders that the availability of such Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Transfer Restricted Securities pursuant to such Shelf Registration Statement until such Notice Holder is advised in writing by the Company that the prospectus may be used, and has received copies of the amended or supplemented prospectus or of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus. The Company will use reasonable efforts to ensure that the use of the prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable or (y) in the case of clause (B) above, as soon as, in the sole judgment of the general counsel of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter. The Company shall be entitled to exercise its right under this Section 2(c) to suspend the availability of the Shelf Registration Statement or any prospectus, without incurring or accruing any obligation to pay Liquidated Damage pursuant to Section 6, for one or more periods 3 not to exceed 45 days (or 75 days if a previously undisclosed proposed or pending material business transaction would be required to be disclosed in the Shelf Registration Statement and the prospectus contained therein) and such disclosure would, in the good faith judgment of the General Counsel of the Company, impede the Company's ability to consummate such transaction) in any 90-day period and not to exceed, in the aggregate, 90 days in any 360-day period (such period, during which the availability of the Shelf Registration Statement and any prospectus is suspended being a "Deferral Period"). (d) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Shelf Registration Statement. (e) The Company shall furnish to each Notice Holder included within the coverage of the Shelf Registration, upon request and without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules. (f) The Company shall, during the Shelf Registration Period, deliver to each Notice Holder included within the coverage of any Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the applicable Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. Subject to the provisions of this Agreement, the Company consents to the use of the prospectus or any amendment or supplement thereto by each Notice Holder of the Transfer Restricted Securities in connection with the offering and sale of the Transfer Restricted Securities covered by the prospectus, or any amendment or supplement thereto, included in the applicable Shelf Registration Statement. (g) Prior to any public offering of the Transfer Restricted Securities pursuant to the Shelf Registration Statement, the Company shall register or qualify or cooperate with the Notice Holders and their respective counsel in connection with the registration or qualification of the Transfer Restricted Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Notice Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action that would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (h) In connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, the Company shall cooperate with the Notice Holders to facilitate the timely preparation and delivery of certificates representing the Transfer Restricted Securities to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Notice Holders may request in writing within a reasonable period of time prior to sales of the Transfer Restricted Securities pursuant to such Shelf Registration Statement. (i) If the Company delivers a Deferral Notice, then the Initial Purchaser and the Notice Holders shall suspend use of the applicable prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 1(b) above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchaser and the Holders shall have received an amended or supplemented prospectus pursuant to Section 2(e). 4 (j) Not later than the effective date of the Shelf Registration Statement, the Company will provide a CUSIP number for the Notes and the Shares registered under such Shelf Registration Statement, and provide the trustee with certificates for such Notes, in a form eligible for deposit with The Depository Trust Company. (k) The Company will use its reasonable best efforts to comply with all rules and regulations of the Commission to the extent and so long as they are applicable to any Shelf Registration and will make generally available to its securityholders with respect to any Shelf Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Section 11(a) of the Securities Act and Rule 158 (which need not be audited) covering a twelve-month period beginning after the effective date of the Shelf Registration Statement; provided, that if the information required by this Section 2(k) is filed with the Commission and is publicly available, it shall be deemed to have satisfied its obligation to furnish such information to its securityholders pursuant to this Section 2(k). (l) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and, in connection therewith, shall cooperate with the Trustee and Holders to effect such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (m) The Company may require each Holder that proposes to sell Transfer Restricted Securities pursuant to any Shelf Registration Statement to furnish to the Company a properly completed Notice and Questionnaire together with such information regarding the Holder and the distribution of the Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (n) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form if requested pursuant to Section 8 hereof) and take all such other action, if any, as any Holder shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (o) The Company shall (i) make reasonably available for inspection by the Holders, any underwriter participating in any disposition pursuant to any Shelf Registration Statement and any attorney, accountant or other agent retained by such Holders or any such underwriter (the "Other Parties") all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Other Parties by one counsel designated by and on behalf of such Other Parties as described in Section 3(b) hereof; provided, further, the Company shall have no obligation to provide any information to any person that has not entered into an agreement, in form reasonably satisfactory to the Company, providing that such person shall keep such information confidential and use such information only for the due diligence purposes in connection with the Shelf Registration. (p) The Company, if requested by any Notice Holder covered by the Shelf Registration Statement, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Notice Holders and the managing underwriters, if 5 any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 2(n) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence, to such counsel's knowledge, of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with such Shelf Registration Statement, the offering and sale of the Securities, or any agreement of the type referred to in Section 2(n) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, at the time the foregoing opinion is delivered, such counsel shall additionally state that in the course of the preparation of such Shelf Registration Statement, it has participated in conferences with officers and other representatives of the Company, including its other counsel and independent public accountants, and your representatives, during the course of which the contents of the Shelf Registration Statement and related matters were discussed and, although it has not independently checked the accuracy or completeness of, or otherwise verified, and is not passing upon, and assumes no responsibility for, the accuracy, completeness or fairness of the statements contained in the Shelf Registration Statement, except to the extent specified therein, and although it has relied as to facts necessary to the determination of materiality, to a certain extent, upon the judgment of officers and representatives of the Company, as a result of such consideration and participation, nothing has come to its attention which causes it to believe that, as of its date and the Closing Date, the Shelf Registration Statement contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements, financial and statistical data and supporting schedules included or incorporated by reference in the Shelf Registration Statement); (ii) their officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the Securities and (iii) their independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in such Shelf Registration Statement to provide to the Notice Holders and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by the applicable Statement of Auditing Standards. (q) The Company will provide promptly to the Initial Purchaser and each Holder, upon request, each document filed by the Company with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3. Registration Expenses. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether any Shelf Registration Statement is ever filed or becomes effective, including without limitation; (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing (including printing of prospectuses), messenger and delivery services and telephone; 6 (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Shares on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. (b) In connection with any Shelf Registration Statement required by this Agreement, the Company will reimburse the Initial Purchaser and the Notice Holders of Transfer Restricted Securities who are selling or reselling Securities pursuant to the "Plan of Distribution" contained in such Shelf Registration Statement for the reasonable fees and disbursements (not exceeding $25,000 in the aggregate) of not more than one counsel, who shall be Latham & Watkins unless another firm shall be chosen by the Notice Holders of a majority in principal amount of the Applicable Amount (as defined below) of the Transfer Restricted Securities for whose benefit such Shelf Registration Statement is being prepared. 4. Indemnification. (a) The Company agrees to indemnify and hold harmless each Notice Holder and each person, if any, who controls such Notice Holder within the meaning of the Securities Act or the Exchange Act (each Notice Holder and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to such Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to such Shelf Registration in reliance upon and in conformity with written information pertaining to such Notice Holder and furnished to the Company by or on behalf of such Notice Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to any Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Notice Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Notice Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Notice Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Notice Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the 7 meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Notice Holders of the Securities if requested by such Notice Holders. (b) Each Notice Holder, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to such Shelf Registration Statement, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Notice Holder and furnished to the Company by or on behalf of such Notice Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Notice Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an Indemnified Party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party in writing of the commencement thereof; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 4 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an Indemnified Party otherwise than under this Section 4. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof the indemnifying party will not be liable to such Indemnified Party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. (d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an Indemnified Party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the Indemnified Party on the other from the exchange of the Securities, pursuant to the Shelf Registrations, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, 8 claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand or such Notice Holder or such other Indemnified Party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holders agree that it would not be just and equitable if contributions pursuant to this Section 4(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Notice Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Notice Holders from the sale of the Securities pursuant to any Shelf Registration Statement exceeds the amount of damages which such Notice Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this subsection (d), each person, if any, who controls such Indemnified Party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Indemnified Party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Shelf Registration Statements and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Indemnified Party. 5. Holders Obligations. Each Holder agrees, by acquisition of the Transfer Restricted Securities, that no Holder of Transfer Restricted Securities shall be entitled to sell any of such Transfer Restricted Securities pursuant to any Shelf Registration Statement or to receive a prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 1(d) hereof and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably request. Any sale of any Transfer Restricted Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the prospectus delivered by such Holder in connection with such disposition, that such prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such prospectus, in the light of the circumstances under which they were made, not misleading. Each Holder shall notify the Company no later than three (3) business days prior to any proposed sale by such Holder pursuant to a Shelf Registration Statement of such proposed sale which notice shall be effective for five (5) business days. Each Holder agrees that within ten (10) business days of any sale, disposition or other transfer of Securities, whether pursuant to a Shelf Registration Statement or exemption from registration under the Securities Act, such Holder shall provide written notice to the Company specifying the amount of Securities sold, disposed of or transferred and the name and address of the transferee of such Securities. Each Holder acknowledges that such Holder, when it sells Securities pursuant to a Shelf Registration Statement, will be required to be named as a selling securityholder in the related prospectus, will be required to deliver a prospectus to the purchaser, and will be subject to certain of the civil liability provisions under the Securities Act in connection with such Holder's sale. 9 6. Liquidated Damages Under Certain Circumstances. (a) "Liquidated Damages" shall accrue on the Notes as provided below if and only if, any of the following events shall occur (each such event in clauses (i) through (iii) below being herein called a "Registration Default"): (i) a Shelf Registration Statement with respect to both the Notes and the Shares required by this Agreement is not filed with the Commission on or prior to the Filing Deadline; (ii) a Shelf Registration Statement with respect to both the Notes and the Shares required by this Agreement is not declared effective by the Commission on or prior to the Effectiveness Deadline; or (iii) a Shelf Registration Statement required by this Agreement has been declared effective by the Commission but at any time after the Effectiveness Deadline (A) such Shelf Registration Statement ceases to be effective (other than pursuant to Section 2(c) hereof) or (B) such Shelf Registration Statement or the related prospectus fails to be usable in connection with resales of Transfer Restricted Securities (other than pursuant to Section 2(c) hereof) and (1) the Company fails to cure the Registration Default within five (5) business days by a post-effective amendment or a report filed pursuant to the Exchange Act or (2) if applicable, the Company does not terminate the Deferral Period by the 45th or 75th day, as applicable. Each of the foregoing events will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. Liquidated Damages shall accrue daily on the Applicable Amount (as defined below) from and including the day following the date on which a Registration Default shall occur until, but excluding, the earlier of the day on which all Registration Defaults have been cured and the date under Section 1(c) that the registration statement is no longer required, at a rate of 0.25% per annum of the Applicable Amount to and including the 90th day following such Registration Default and at a rate of 0.50% of the Applicable Amount from and after the 91st day following such Registration Default (the "Liquidated Damages Rate"); provided, however, that the Company shall in no event be required to pay Liquidated Damages in respect of more than one Registration Default at any one time. In the event a Holder has converted some or all of its Notes into Shares, the Holder shall be entitled to receive Liquidated Damages as provided above calculated on the principal amount at maturity of the Notes so converted, except to the extent such Shares have been registered. The "Applicable Amount" shall equal the sum of the initial issue price of such Notes plus accrued original issue discount with respect to such Notes through the date of determination, or, if a Holder has converted some or all of its Notes into Shares, such sum calculated as if such Notes were then outstanding, except to the extent such Shares no longer constitute Transfer Restricted Securities. In no event will Liquidated Damages accrue at a rate per year in excess of 0.50%. (b) Any amounts of Liquidated Damages due pursuant to Section 6(a) will be payable in cash semi-annually in arrears on each June 6 and December 5, with the first semi-annual payment due on the first such payment date after which a Registration Default occurs. The amount of Liquidated Damages will be determined by multiplying the applicable Liquidated Damages Rate by the initial issue price of the Notes plus accrued original issue discount with respect to such Notes through the date of determination and further multiplied by a fraction, the numerator of which is the number of days such Liquidated Damages Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months) and the denominator of which is 360. A Holder will not be entitled to Liquidated Damages as provided in Section 6(a) hereof unless such Holder has timely delivered to the Company a duly completed Notice and Questionnaire, together with such other information reasonably requested of such Holder in accordance with this Agreement. 10 (c) "Transfer Restricted Securities" means each Security until the earliest to occur of (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and for any period in which the Company (i) is not subject to Section 13 or 14 of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144(d)(4) under the Securities Act in order to permit resale of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13(g) or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. 8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by the Shelf Registrations are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Notice Holders of a majority in aggregate principal amount at maturity of such Transfer Restricted Securities to be included in such offering (provided that the Holders of Shares issued upon conversion of Notes shall not be deemed Holders of Shares, but shall be deemed to be Holders of the aggregate principal amount at maturity of Notes from which such Shares were converted) and shall be reasonably acceptable to the Company. No Holder may participate in any underwritten registration hereunder unless such person (i) agrees to sell such Holder's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the Holders entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires (including the Notice and Questionnaire), powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. Miscellaneous. (a) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (b) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount at maturity of the Transfer Restricted Securities (provided that the Holders of Shares issued upon conversion of Notes shall not be deemed Holders of Shares, but shall be deemed to be Holders of the aggregate principal amount at maturity of Notes from which such Shares were converted) affected by such amendment, modification, supplement, waiver or consents. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail (registered or certified, return receipt requested), facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder, that is not a Notice Holder, at the address of such Holder as set forth on the records of the Registrar under the Indenture, with a copy to such Registrar. 11 (2) if to a Notice Holder, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto. (3) if to the Initial Purchaser; Bear, Stearns & Co. Inc. 245 Park Avenue New York, NY 10167 Fax No.: (212) 272-8296 Attention: Corporate Finance Department with a copy to: Latham & Watkins 885 Third Avenue New York, NY 10022-4802 Fax No.: (212) 906-1200 Attention: Raymond Y. Lin (4) if to the Company; Valassis Communications, Inc. 19975 Victor Parkway Livonia, MI 48152 Fax No.: (734) 591-4460 Attention: General Counsel with a copy to: McDermott, Will & Emery 50 Rockefeller Plaza New York, New York 10020-1605 Fax No.: (212) 547-5444 Attention: Amy S. Leder All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (d) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchaser, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (e) Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to 12 perform all of the terms and provisions of the Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (i) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount at maturity of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 13 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchaser and the Company in accordance with its terms. Very truly yours, VALASSIS COMMUNICATIONS, INC. by /s/ Barry P. Hoffman ------------------------------------------- Name: Barry P. Hoffman Title: Secretary, Executive Vice President and General Counsel 14 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. BEAR, STEARNS & CO. INC. by /s/ Stephen Parish -------------------------------- Name: Stephen Parish Title: Senior Managing Director 15 EX-5.1 4 dex51.txt OPINION OF MCDERMOTT, WILL & EMERY EXHIBIT 5.1 [Letterhead of McDermott, Will & Emery] July 25, 2001 Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Re: Registration Statement on Form S-3 Zero Coupon Convertible Senior Notes due 2021 Shares of Common Stock, par value $0.01 per share ------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Valassis Communications, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission (the "SEC") of a Registration Statement on Form S-3 (the "Registration Statement") covering the resale by selling securityholders of $272,100,000 in aggregate principal amount at maturity of Zero Coupon Convertible Senior Notes due 2021 (the "Notes") and the shares of common stock, par value $0.01 per share, issuable upon conversion of the Notes (the "Shares"). The Notes were issued pursuant to an Indenture, dated June 6, 2001, between the Company and The Bank of New York, as trustee (the "Indenture"). In rendering the opinions set forth herein, we have examined the Restated Certificate of Incorporation of the Company, as amended through the date hereof, the Amended and Restated By-Laws of the Company, as amended through the date hereof, the resolutions adopted by the Board of Directors of the Company on May 29, 2001, the Indenture, the Registration Statement and such other documents, records and matters of law as we have deemed necessary or appropriate as a basis for the opinions set forth below. In our examination we have assumed the genuineness of all signatures including indorsements, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies. Our opinion with respect to the validity and binding effect of any document or agreement is subject to the effect of any applicable bankruptcy, insolvency, fraudulent Valassis Communications, Inc. July 25, 2001 Page 2 conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and general principles of equity (regardless of whether such validity or binding effect is considered in a proceeding at law or in equity). Based upon the foregoing, and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. The Notes have been duly and validly authorized by the Company, and are the valid and binding obligations of the Company. 2. The Shares, when delivered in accordance with the provisions of the Notes and the Indenture, will be duly and validly issued and fully paid and non- assessable. Members of our firm are admitted to the Bar of the State of New York. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to being named in the related prospectus under the caption "Legal Matters" with respect to the matters stated therein. Very truly yours, /s/ McDermott, Will & Emery MCDERMOTT, WILL & EMERY EX-8.1 5 dex81.txt OPINION OF MCDERMOTT, WILL & EMERY EXHIBIT 8.1 [Letterhead of McDermott, Will & Emery] July 25, 2001 Valassis Communications, Inc. 19975 Victor Parkway Livonia, Michigan 48152 Re: Registration Statement on Form S-3 Zero Coupon Convertible Senior Notes due 2021 Shares of Common Stock, par value $0.01 per share ------------------------------------------------- Ladies and Gentlemen: We have acted as special tax counsel to Valassis Communications, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission (the "SEC") of a Registration Statement on Form S-3 (the "Registration Statement") pursuant to the Securities Act of 1933, as amended (the "Securities Act"), relating to the registration for resale under the Securities Act of $272,100,000 aggregate issue price of the Company's Zero Coupon Convertible Senior Notes due 2021 (the "Notes"), which may be converted in certain cases into shares of the Company's common stock. In rendering the opinions set forth herein, we have reviewed the Registration Statement, including the exhibits thereto, and such other documents, records and instruments as we have deemed necessary or appropriate for purposes of this opinion. Based upon the foregoing, and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that the discussion set forth in the Registration Statement under the heading "Certain United States Federal Income Tax Considerations," to the extent it states matters of law, summaries of legal matters, or legal conclusions with respect thereto under the laws of the United States, is a fair summary in all material respects of the material United States federal income tax consequences to holders of the Notes under existing United States laws, subject to the qualifications and assumptions stated therein. Valassis Communications, Inc. July 25, 2001 Page 2 The opinion set forth above is based upon our interpretations of current United States federal income tax law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. No opinion is being rendered as to the amount of the comparable yield for the Notes. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to being named in the related prospectus under the caption "Legal Matters" with respect to the matters stated therein. In giving such consent, we do not admit that we are "experts" under the Securities Act, or the rules and regulations of the SEC issued thereunder, with respect to any part of the Registration Statement, including this exhibit. This opinion is intended solely for your use as an exhibit to the Registration Statement for the purpose of the above sale of the Notes or common stock and is not to be relied upon for any other purpose. Very truly yours, /s/ McDermott, Will & Emery MCDERMOTT, WILL & EMERY EX-12.1 6 dex121.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES
Three months ended March 31, Years Ended December 31, -------------------- ------------------------------------------------------------------------ 2001 2000 2000 1999 1998 1997 1996 ------ ------- ------- ------- ------- ------- ------- Earnings as defined: Profit before tax 51,958 85,111 202,117 188,650 136,509 115,030 65,873 as reported Interest expense 5,713 5,285 22,924 25,968 34,450 38,312 39,625 Rent expense 297 241 1,033 1,067 1,200 1,108 1,166 Total earnings 57,968 90,637 226,074 215,685 172,159 154,450 106,664 Fixed charges as defined: Interest expense 5,713 5,285 22,924 25,968 34,450 38,312 39,625 Rental expense 297 241 1,033 1,067 1,200 1,108 1,166 Total fixed charges 6,010 5,526 23,957 27,035 35,650 39,420 40,791 Ratio of earnings to fixed charges 9.65 16.40 9.44 7.98 4.83 3.92 2.61
EX-23.3 7 dex233.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Valassis Communications, Inc. on Form S-3 of our report dated February 6, 2001, appearing in the Annual Report on Form 10-K of Valassis Communications, Inc. for the year ended December 31, 2000, and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP Detroit, Michigan July 25, 2001 EX-25.1 8 dex251.txt FORM T-1 STATEMENT OF ELIGIBILITY OF THE TRUSTEE EXHIBIT 25.1 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ___________________________ THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code)
___________________________ VALASSIS COMMUNICATIONS, INC. (Exact name of obligor as specified in its charter) Delaware 38-2760940 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 19975 Victor Parkway Livonia, Michigan 48152 (Address of principal executive offices) (Zip code)
Zero Coupon Convertible Senior Notes due 2021 (Title of the indenture securities) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject.
Name Address - ----------------------------------------------------------------------------------------- Superintendent of Banks of the State of New 2 Rector Street, New York, N.Y. York 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a- 29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -2- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 16th day of July, 2001. THE BANK OF NEW YORK By: /S/ LUIS PEREZ --------------------------- Name: LUIS PEREZ Title: ASST. VICE PRESIDENT -3- -----END PRIVACY-ENHANCED MESSAGE-----