Document:

Exhibit

10.7

 

 

BEST BUY CO., INC.

 

2000 RESTRICTED STOCK AWARD PLAN

 

 

2001 Amendment and Restatement

 

 

TABLE OF CONTENTS

 

	

  Section 1.

  	

   

  	

  Purpose

  of Plan

  	

  1

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 2.

  	

   

  	

  Definitions

  	

  1

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 3.

  	

   

  	

  Plan

  Administration

  	

  2

  
	

  (a)

  	

   

  	

  The Committee

  	

  2

  
	

  (b)

  	

   

  	

  Authority of the Committee

  	

  2

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 4.

  	

   

  	

  Shares

  Available for Issuance

  	

  3

  
	

  (a)

  	

   

  	

  Maximum Number of

  Shares Available

  	

  3

  
	

  (b)

  	

   

  	

  Accounting for

  Restricted Stock Awards

  	

  3

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 5.

  	

   

  	

  Participation

  	

  3

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 6.

  	

   

  	

  Restricted

  Stock Awards

  	

  3

  
	

  (a)

  	

   

  	

  Grant

  	

  3

  
	

  (b)

  	

   

  	

  Vesting of

  Restricted Stock Awards

  	

  3

  
	

  (c)

  	

   

  	

  Rights

  as a Shareholder

  	

  4

  
	

  (d)

  	

   

  	

  Dividends and Distributions

  	

  4

  
	

  (e)

  	

   

  	

  Restrictions

  on Transfer

  	

  4

  
	

  (f)

  	

   

  	

  Enforcement of Restrictions

  	

  4

  
	

  (g)

  	

   

  	

  Certificates

  	

  5

  
	

  (h)

  	

   

  	

  Gifts, Etc.

  	

  5

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 7.

  	

   

  	

  Agreements

  	

  5

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 8.

  	

   

  	

  Effect

  of Termination of Employment or Other Service

  	

  5

  
	

  (a)

  	

   

  	

  Termination Due to Death, Disability or

  Retirement

  	

  5

  
	

  (b)

  	

   

  	

  Termination for

  Reasons Other than Death, Disability or Retirement

  	

  5

  
	

  (c)

  	

   

  	

  Modification of Rights Upon Termination

  	

  5

  
	

  (d)

  	

   

  	

  Date of

  Termination of Employment or Other Service

  	

  6

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 9.

  	

   

  	

  Payment

  of Withholding Taxes

  	

  6

  
	

   

  	

   

  	

   

  	

   

  
	

  Section 10.

  	

   

  	

  Change

  in Control

  	

  6

  
	

  (a)

  	

   

  	

  Change in

  Control

  	

  6

  
	

  (b)

  	

   

  	

  Incumbent

  Directors

  	

  7

  
	

  (c)

  	

   

  	

  Acceleration

  of Vesting

  	

  7

  
	

  (d)

  	

   

  	

  Limitation on

  Change in Control Payments

  	

  7

  

 

i

 

	

  Section

  11.

  	

   

  	

  Rights of Eligible

  Recipients and Participants

  	

  8

  
	

  (a)

  	

   

  	

  Employment or Service

  	

  8

  
	

  (b)

  	

   

  	

  Non-Exclusivity of the Plan

  	

  8

  
	

   

  	

   

  	

   

  	

   

  
	

  Section

  12.

  	

   

  	

  Securities Law and Other

  Restrictions

  	

  8

  
	

   

  	

   

  	

   

  	

   

  
	

  Section

  13.

  	

   

  	

  Plan Amendment,

  Modification and Termination

  	

  8

  
	

   

  	

   

  	

   

  	

   

  
	

  Section

  14.

  	

   

  	

  Shareholder Approval

  	

  8

  
	

   

  	

   

  	

   

  	

   

  
	

  Section

  15.

  	

   

  	

  Effective Date and

  Duration of the Plan

  	

  8

  
	

   

  	

   

  	

   

  	

   

  
	

  Section

  16.

  	

   

  	

  Miscellaneous

  	

  9

  
	

   

  	

   

  	

   

  	

   

  
	

  (a)

  	

   

  	

  Governing Law

  	

  9

  
	

  (b)

  	

   

  	

  Successors

  and Assigns

  	

  9

  

 

ii

 

BEST BUY CO., INC.

2000 RESTRICTED STOCK AWARD PLAN

 

2001 Amendment and Restatement

 

Section 1.                                Purpose

of Plan.  The purpose of the Best

Buy Co., Inc. 2000 Restricted Stock Award Plan (the “Plan”) is to advance the

interests of Best Buy Co., Inc. (the “Company”) and its shareholders by

enabling the Company and its Affiliates to attract and retain persons of

ability to perform services for the Company and its Affiliates by providing an

incentive to such individuals through equity participation in the Company and

by rewarding such individuals who contribute to the achievement by the Company

and its Affiliates of their respective economic objectives.

 

Section 2.                                Certain

Definitions.  The following terms

will have the meanings set forth below, unless the context clearly otherwise

requires:

 

(a)                                “Affiliate”

means any “parent corporation” or “subsidiary corporation” of the Company as

defined by Sections 424(e) and 424(f) of the Code.

 

(b)                               “Board”

means the Board of Directors of the Company.

 

(c)                                “Change

in Control” means an event described in Section 10(a) of the Plan.

 

(d)                               “Code”

means the Internal Revenue Code of 1986, as amended.

 

(e)                                “Committee”

means the group of individuals administering the Plan, as provided in

Section 3 of the Plan.

 

(f)                                  “Common

Stock” means the common stock of the Company, par value $.10 per share.

 

(g)                               “Disability”

means the inability of the Participant to perform his or her usual duties for

the Company or its Affiliates as a result of physical or mental disability, and

such inability to perform continues or is expected to continue for at least

twelve (12) consecutive months.

 

(h)                               “Eligible

Recipients” means all employees of the Company or any Affiliate and any

directors, consultants and independent contractors of the Company or any

Affiliate.

 

(i)                                   “Exchange

Act” means the Securities Exchange Act of 1934, as amended.

 

(j)                                   “Participant”

means an Eligible Recipient who receives one or more Restricted Stock Awards

under the Plan.

 

 

(k)                                “Restricted

Stock Award” means an award of Common Stock granted to an Eligible

Recipient pursuant to Section 6 of the Plan that is subject to the restrictions

on transferability and the risk of forfeiture imposed by the provisions of such

Section 6.

 

(l)                                   “Retirement”

means termination of employment or service with the Company or any of its

Affiliates on or after age 60 so long as the employee has served the Company or

any of its Affiliates continuously for at least the three (3) years immediately

preceding retirement.

 

(m)                             “Securities

Act” means the Securities Act of 1933, as amended.

 

Section 3.                                Plan

Administration.

 

(a)                                The Committee. 

The Plan shall be administered by the Compensation and Human Resources

Committee (the “Committee”) of the Board. 

Restricted Stock Awards may not be granted to any person while serving

on the Committee unless approved by a majority of the disinterested members of

the Board.  To the extent consistent

with corporate law, the Committee may delegate to any officers of the Company

the duties, power and authority of the Committee under the Plan pursuant to

such conditions or limitations as the Committee may establish; provided,

however, that only the Committee or the entire Board, may exercise such duties,

power and authority with respect to Eligible Recipients who are subject to

Section 16 of the Exchange Act.

 

(b)                               Authority of the Committee.

 

(i)                                     In

accordance with and subject to the provisions of the Plan, the Committee will

have the authority to determine all provisions of Restricted Stock Awards as

the Committee may deem necessary or desirable and as consistent with the terms

of the Plan, including, without limitation, the following: (A) the

Eligible Recipients to be selected as Participants; (B) the nature and extent

of the Restricted Stock Awards to be made to each Participant (including the

number of shares of Common Stock to be subject to each Restricted Stock Award)

and the form of written agreement evidencing such Restricted Stock Award; (C) the

time or times when Restricted Stock Awards will be granted; and (D) the

restrictions and other conditions to which the vesting of Restricted Stock

Awards may be subject.  The Committee’s

determinations need not be uniform, and may be made by it selectively among

Eligible Recipients, whether or not such persons are similarly situated.  Each determination, interpretation or other

action made or taken by the Committee pursuant to the provisions of the Plan

will be conclusive and binding for all purposes and on all persons, and no

member of the Committee or the Board, as applicable, will be liable for any

action or determination made in good faith with respect to the Plan or any

Restricted Stock Award granted under the Plan.

 

(ii)                                  The

Committee will have the authority under the Plan to amend or modify the terms

of any outstanding Restricted Stock Award in any manner, including, without

limitation, the authority to modify the number of shares or other terms and

 

2

 

conditions of a Restricted Stock Award or accelerate

the vesting or otherwise terminate any restrictions relating to a Restricted

Stock Award; provided, however that the amended or modified terms are permitted

by the Plan as then in effect and that any Participant adversely affected by

such amended or modified terms has consented to such amendment or modification.

 

Section 4.                                Shares

Available for Issuance.

 

(a)                                Maximum Number of Shares Available.  The maximum aggregate number of shares of

Common Stock that will be available for issuance under the Plan will be One

Million (1,000,000) shares of the authorized, but unissued, Common Stock.  Such number and kind of shares shall be

appropriately adjusted in the event of any one or more stock splits, reverse stock

splits or stock dividends hereafter paid or declared with respect to such

stock.

 

(b)                               Accounting for Restricted Stock

Awards.  Shares of Common Stock

that are issued under the Plan or that are subject to outstanding Restricted

Stock Awards will be applied to reduce the maximum number of shares of Common

Stock remaining available for issuance under the Plan.  Any shares of Common Stock that constitute

any portion of a Restricted Stock Award that remains unvested and is forfeited

for any reason will automatically again become available for issuance under the

Plan.

 

Section 5.                                Participation.  Participants in the Plan will be those

Eligible Recipients who, in the judgment of the Committee, have contributed,

are contributing or are expected to contribute to the achievement of economic

objectives of the Company or its Affiliates. 

Restricted Stock Awards will be deemed to be granted as of the date

specified in the grant resolution of the Committee.

 

Section 6.                                Restricted

Stock Awards.

 

(a)                                Grant.  An

Eligible Recipient may be granted one or more Restricted Stock Awards under the

Plan, and such Restricted Stock Awards will be subject to such terms and

conditions, consistent with the other provisions of the Plan, as may be

determined by the Committee in its sole discretion.

 

(b)                               Vesting of Restricted Stock Awards.  The shares of Common Stock subject to a

Restricted Stock Award shall vest, and the forfeiture provisions and

restrictions on transfer set forth in this Plan shall terminate, as determined

by the Committee in its sole discretion, subject to the following:

 

(i)                                                                     No

more than twenty-five percent (25%) of the shares will vest upon grant of the

Restricted Stock Award;

 

(ii)                                                                  No

more than an additional twenty-five percent (25%) of the shares will vest on

the first anniversary of the date of grant of the Restricted Stock Award, if

the Participant has remained in the continuous employ or service of the Company

or one of its Affiliates;

 

3

 

(iii)                                                               No

more than an additional twenty-five percent (25%) of the shares will vest on

the second anniversary of the date of grant of the Restricted Stock Award, if

the Participant has remained in the continuous employ or service of the Company

or one of its Affiliates;

 

(iv)                                                              No

more than an additional twenty-five percent (25%) of the shares will vest on

the third anniversary of the date of grant of the Restricted Stock Award, if

the Participant has remained in the continuous employ or service of the Company

or one of its Affiliates;

 

The Committee may impose such restrictions or conditions, not

inconsistent with the provisions of the Plan, to the vesting of such Restricted

Stock Awards as it deems appropriate.

 

(c)                                Rights as a Shareholder.  Except as provided in Sections 6(a), 6(d)

and 6(e) of the Plan or under the terms of any agreement evidencing a

Restricted Stock Award, a Participant will have all voting, dividend,

liquidation and other rights with respect to shares of Common Stock issued to

the Participant as a Restricted Stock Award under this Section 6 upon the

Participant becoming the holder of record of such shares as if such Participant

were a holder of record of shares of unrestricted Common Stock.

 

(d)                               Dividends and Distributions.  Unless the Committee determines otherwise in

its sole discretion (either in the agreement evidencing the Restricted Stock

Award at the time of grant or at any time after the grant of the Restricted

Stock Award), any dividends or distributions (including regular quarterly cash

dividends, if any) paid with respect to shares of Common Stock subject to the

unvested portion of a Restricted Stock Award will be subject to the same

restrictions as the shares to which such dividends or distributions

relate.  In the event the Committee

determines not to pay such dividends or distributions currently, the Committee

will determine in its sole discretion whether any interest will be paid on such

dividends or distributions.  In

addition, the Committee in its sole discretion may require such dividends and

distributions to be reinvested (and in such case the Participants consent to

such reinvestment) in shares of Common Stock that will be subject to the same

restrictions as the shares to which such dividends or distributions

relate.  All stock dividends, stock

rights, and stock issued upon split-ups or reclassifications of shares of

Common Stock shall be subject to the same restrictions as the shares with

respect to which such stock dividends, rights, or additional shares are issued,

and may be held in custody as provided in Section 6(f).

 

(e)                                Restrictions on Transfer.  Except pursuant to testamentary will or the

laws of descent and distribution or as otherwise expressly permitted by the

Plan or agreement evidencing a Restricted Stock Award, no right or interest of

any Participant in a Restricted Stock Award prior to the vesting of such

Restricted Stock Award will be assignable or transferable, or subjected to any

lien, during the lifetime of the Participant, either voluntarily or

involuntarily, directly or indirectly, by operation of law or otherwise.

 

(f)                                  Enforcement of Restrictions.  To enforce the restrictions referred to in

this Section 6, the Committee may require the Participant, until the

restrictions have lapsed, to keep

 

4

 

the stock

certificates, together with duly endorsed stock powers, in the custody of the

Company or its transfer agent or to maintain evidence of stock ownership,

together with duly endorsed stock powers, in a non-certificated book-entry

stock account with the Company’s transfer agent.

 

(g)                               Certificates. 

A recipient of a Restricted Stock Award shall be issued a certificate or

certificates evidencing the shares subject to such Restricted Stock Award.  Such certificates shall be registered in the

name of the Participant, and may bear an appropriate legend referring to the

terms, conditions, and restrictions applicable to such Restricted Stock Award,

which legend shall be in substantially the following form:

 

“The

transferability of this certificate and the shares represented hereby are

subject to the terms and conditions (including forfeiture) of the Best Buy Co.,

Inc. 2000 Restricted Stock Award Plan and an Agreement entered into between the

registered owner and Best Buy Co., Inc. 

Copies of such Plan and Agreement are on file in the corporate offices

of Best Buy Co., Inc.”

 

(h)                               Gifts, Etc. 

Notwithstanding any other provision of this Section 6, the Committee may

permit a gift of shares subject to a Restricted Stock Award to the holder’s

spouse, child, stepchild, grandchild or legal dependent, or to a trust whose

sole beneficiary or beneficiaries shall be the holder and/or any one or more of

such persons; provided, that the donee shall have entered into an agreement

with the Company pursuant to which it agrees that such shares shall be subject

to the same restrictions in the hands of such donee as it was in the hands of

the donor.

 

Section 7.                                Agreements.  Each Restricted Stock Award granted pursuant

to the Plan shall be evidenced by an agreement setting forth the terms and

conditions upon which it is granted. 

Subject to the limitations set forth in the Plan, the Committee may

amend any such agreement to modify the terms or conditions governing the

Restricted Stock Award evidenced thereby.

 

Section 8.                                Effect

of Termination of Employment or Other Service.

 

(a)                                Termination Due to Death, Disability or

Retirement.  Except as provided in

any agreement evidencing an Restricted Stock Award, in the event a

Participant’s employment or other service with the Company and all Affiliates

is terminated by reason of death, Disability or Retirement, all Restricted

Stock Awards then held by the Participant will become fully vested.

 

(b)                               Termination for Reasons Other than Death,

Disability or Retirement. Except as provided in any agreement evidencing an

Restricted Stock Award, in the event a Participant’s employment or other

service is terminated with the Company and all Affiliates for any reason other

than death, Disability or Retirement, all Restricted Stock Awards then held by

the Participant that have not vested will be terminated and forfeited.

 

(c)                                Modification of Rights Upon Termination.  Notwithstanding the other provisions of this

Section 8, upon a Participant’s termination of employment or other service with

the Company and all Affiliates, the Committee may, in its sole discretion

(which may be

 

5

 

exercised at any

time on or after the date of grant, including following such termination),

cause Restricted Stock Awards then held by such Participant to vest and/or

continue to vest following such termination of employment or service, in each

case in the manner determined by the Committee.

 

(d)                               Date of Termination of Employment or Other

Service.  Unless the Committee

otherwise determines in its sole discretion, a Participant’s employment or

other service will, for purposes of the Plan, be deemed to have terminated on

the date recorded on the personnel or other records of the Company or the

Affiliate for which the Participant provides employment or other service, as

determined by the Committee in its sole discretion based upon such records.

 

Section 9.                                Payment

of Withholding Taxes.

 

The Company is

entitled to (i) withhold and deduct from future wages of the Participant (or

from other amounts that may be due and owing to the Participant from the

Company or a Affiliate), or make other arrangements for the collection of, all

legally required amounts necessary to satisfy any and all federal, state and

local withholding and employment-related tax requirements attributable to a

Restricted Stock Award, including, without limitation, the grant, vesting of,

or payment of dividends with respect to, a Restricted Stock Award, or (ii)

require the Participant promptly to remit the amount of such withholding to the

Company before taking any action, including issuing any shares of Common Stock,

with respect to a Restricted Stock Award.

 

Section 10.                         Change

in Control.

 

(a)                                Change in Control.  For purposes of this Section 10, a “Change in Control” of the

Company will mean the following:

 

(i)                                     the

sale, lease, exchange or other transfer, directly or indirectly, of

substantially all of the assets of the Company (in one transaction or in a

series of related transactions) to a person or entity that is not controlled by

the Company,

 

(ii)                                  the

approval by the shareholders of the Company of any plan or proposal for the

liquidation or dissolution of the Company;

 

(iii)                               a

merger or consolidation to which the Company is a party if the shareholders of

the Company immediately prior to effective date of such merger or consolidation

have “beneficial ownership” (as defined in Rule 13d-3 under the Exchange

Act), immediately following the effective date of such merger or consolidation,

of securities of the surviving corporation representing (A) more than 50%, but

not more than 80%, of the combined voting power of the surviving corporation’s

then outstanding securities ordinarily having the right to vote at elections of

directors, unless such merger or consolidation has been approved in advance by

the Incumbent Directors (as defined in Section 10(b) below), or (B) 50% or

less of the combined voting power of the surviving corporation’s then

outstanding securities ordinarily having the right to vote at elections of

 

6

 

directors

(regardless of any approval by the Incumbent Directors);

 

(iv)                              any

person becomes after the effective date of the Plan the “beneficial owner” (as

defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (A)

20% or more, but not 50% or more, of the combined voting power of the Company’s

outstanding securities ordinarily having the right to vote at elections of

directors, unless the transaction resulting in such ownership has been approved

in advance by the Incumbent Directors, or (B) 50% or more of the combined

voting power of the Company’s outstanding securities ordinarily having the

right to vote at elections of directors (regardless of any approval by the

Incumbent Directors); or

 

(v)                                 the

Incumbent Directors cease for any reason to constitute at least a majority of

the Board.

 

(b)                               Incumbent Directors  .  For purposes of this Section 10, “Incumbent

Directors” of the Company will mean any individuals who are members of the

Board on the effective date of the Plan and any individual who subsequently

becomes a member of the Board whose election, or nomination for election by the

Company’s shareholders, was approved by a vote of at least a majority of the

Incumbent Directors (either by specific vote or by approval of the Company’s

proxy statement in which such individual is named as a nominee for director

without objection to such nomination).

 

(c)                                Acceleration of Vesting  .  Without limiting the authority of the

Committee under Section 3(b) of the Plan, if a Change in Control of the Company

occurs, then, unless otherwise provided by the Committee in its sole discretion

either in an agreement evidencing a Restricted Stock Award at the time of grant

or at any time after the grant of a Restricted Stock Award, all outstanding

Restricted Stock Awards will become immediately fully vested.

 

(d)                               Limitation on Change in Control

Payments .  Notwithstanding

anything in Section 10(c) of the Plan to the contrary, if, with respect to

a Participant, the acceleration of the vesting of an Restricted Stock Award as

provided in Section 10(c) (which acceleration could be deemed a “payment”

within the meaning of Section 280G(b)(2) of the Code), together with any

other “payments” which such Participant has the right to receive from the

Company or any corporation that is a member of an “affiliated group” (as

defined in Section 1504(a) of the Code without regard to

Section 1504(b) of the Code) of which the Company is a member, would

constitute a “parachute payment” (as defined in Section 280G(b)(2) of the

Code), then the “payments” to such Participant pursuant to Section 10(c) of the

Plan will be reduced to the largest amount as will result in no portion of such

“payments” being subject to the excise tax imposed by Section 4999 of the Code;

provided, however, that if a Participant is subject to a separate agreement

with the Company or a Affiliate that expressly addresses the potential

application of Sections 280G or 4999 of the Code (including, without

limitation, that “payments” under such agreement or otherwise will not be

reduced or that the Participant will have the discretion to determine which

“payments” will be reduced), then the limitations of this Section 10(d) will

not apply, and any “payments” to a Participant pursuant to Section 10(c) of the

Plan will be treated as “payments” arising under such separate agreement.

 

7

 

Section 11.                         Rights

of Eligible Recipients and Participants.

 

(a)                                Employment or Service.  Nothing in the Plan will interfere with or

limit in any way the right of the Company or any Affiliate to terminate the

employment or service of any Eligible Recipient or Participant at any time, nor

confer upon any Eligible Recipient or Participant any right to continue in the

employ or service of the Company or any Affiliate.

 

(b)                               Non-Exclusivity of the Plan.  Nothing contained in the Plan is intended to

modify or rescind any previously approved compensation plans or programs of the

Company or create any limitations on the power or authority of the Board to

adopt such additional or other compensation arrangements as the Board may deem

necessary or desirable.

 

Section 12.                         Securities

Law and Other Restrictions. 

Notwithstanding any other provision of the Plan or any agreements

entered into pursuant to the Plan, the Company will not be required to issue

any shares of Common Stock under this Plan, and a Participant may not sell,

assign, transfer or otherwise dispose of shares of Common Stock issued pursuant

to Restricted Stock Awards granted under the Plan, unless (i) there is in

effect with respect to such shares a registration statement under the

Securities Act and any applicable state securities laws or an exemption from

such registration under the Securities Act and applicable state securities

laws, and (ii) there has been obtained any other consent, approval or

permit from any other regulatory body which the Committee, in its sole

discretion, deems necessary or advisable. 

The Company may condition such issuance, sale or transfer upon the

receipt of any representations or agreements from the parties involved, and the

placement of any legends on certificates representing shares of Common Stock,

as may be deemed necessary or advisable by the Company in order to comply with

such securities laws or other restrictions.

 

Section 13.                         Plan

Amendment, Modification and Termination. 

The Board may suspend or terminate the Plan or any portion thereof at

any time, and may amend the Plan from time to time in such respects as the

Board may deem advisable in order that Restricted Stock Awards under the Plan

will conform to any change in applicable laws or regulations or in any other

respect the Board may deem to be in the best interests of the Company;

provided, however, that no amendments to the Plan will be effective without

approval of the shareholders of the Company if shareholder approval of the

amendment is then required under the Exchange Act or the rules of any stock

exchange on which the Company’s securities are listed.  No termination, suspension or amendment of

the Plan may adversely affect any outstanding Restricted Stock Award without

the consent of the affected Participant.

 

Section 14.                         Shareholder

Approval.  Any Restricted Stock

Award granted under the Plan prior to the date on which the Plan is approved by

shareholders holding at least a majority of the voting stock of the Company

represented in person or by proxy at a duly held shareholders’ meeting shall be

contingent upon such approval.

 

Section 15.                         Effective

Date and Duration of the Plan.  The

effective date of the Plan shall be the date the Plan is approved by the

shareholders of the Company.  The Plan

will terminate at midnight on the tenth anniversary of the date prior to such

effective date and may be terminated prior to such time by Board action.  No Restricted Stock Award will be granted

after

 

8

 

such

termination.  Restricted Stock Awards

outstanding upon termination of the Plan may continue to become free of

restrictions, in accordance with their terms.

 

Section 16.                         Miscellaneous.

 

(a)                                Governing Law. 

The validity, construction, interpretation, administration and effect of

the Plan and any rules, regulations and actions relating to the Plan will be

governed by and construed exclusively in accordance with the laws of the State

of Minnesota.

 

(b)                               Successors and Assigns.  The Plan will be binding upon and inure to

the benefit of the successors and permitted assigns of the Company and the

Participants.

 

9Exhibit 4.1

 

EXECUTION COPY

 

PROVIDIAN FINANCIAL CORPORATION

 

as Issuer

 

AND

 

BANK ONE TRUST COMPANY, N.A.

 

as Trustee

 

 

THIRD SUPPLEMENTAL INDENTURE

 

Dated as of May 27, 2003

 

 

Supplement to Indenture dated as of May 1,
1999

 

1

 

	
  ARTICLE 1

  
	
  CREATION OF THE NOTES

  
	
   

  	
   

  
	
  Section
  1.01.

  	
  Designation Of Series

  
	
  Section
  1.02.

  	
  Form Of Notes

  
	
  Section
  1.03.

  	
  Limit On Amount Of Series

  
	
  Section
  1.04.

  	
  Interest

  
	
  Section
  1.05.

  	
  Certificate Of Authentication

  
	
  Section
  1.06.

  	
  No Sinking Fund

  
	
  Section
  1.07.

  	
  Issuance In Global Form

  
	
  Section
  1.08.

  	
  No Discharge; Defeasance

  
	
  Section
  1.09.

  	
  Tax Treatment Of The Notes

  
	
  Section
  1.10.

  	
  Other Terms Of Notes

  
	
  Section
  1.11.

  	
  Additional Definitions

  
	
   

  	
   

  
	
  ARTICLE 2

  
	
  CONVERSION OF NOTES

  
	
   

  	
   

  
	
  Section
  2.01.

  	
  Conversion Privilege

  
	
  Section
  2.02.

  	
  Exercise Of Conversion Privilege; Issuance
  Of Common Stock On Conversion; No Adjustment For Interest Or Dividends

  
	
  Section
  2.03.

  	
  Cash Payments in Lieu of Fractional Shares

  
	
  Section
  2.04.

  	
  Conversion Rate

  
	
  Section
  2.05.

  	
  Adjustment Of Conversion Rate

  
	
  Section
  2.06.

  	
  Effect Of Reclassification, Consolidation,
  Merger or Sale

  
	
  Section
  2.07.

  	
  Taxes On Shares Issued

  
	
  Section
  2.08.

  	
  Reservation of Shares, Shares to Be Fully
  Paid; Compliance With Governmental Requirements; Listing of Common Stock

  
	
  Section
  2.09.

  	
  Responsibility Of Trustee

  
	
  Section
  2.10.

  	
  Notice To Holders Prior To Certain Actions

  
	
   

  	
   

  
	
  ARTICLE 3

  
	
  REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE

  
	
   

  	
   

  
	
  Section
  3.01.

  	
  Repurchase At Option of Holders Upon a
  Fundamental Change

  
	
   

  	
   

  
	
  ARTICLE 4

  
	
  CONTINGENT INTEREST

  
	
   

  	
   

  
	
  Section
  4.01.

  	
  Contingent Interest

  
	
  Section
  4.02.

  	
  Payment of Contingent Interest

  
	
  Section
  4.03.

  	
  Contingent Interest Notification

  

 

2

 

	
  ARTICLE 5

  
	
  EVENTS OF DEFAULT

  
	
   

  	
   

  
	
  Section
  5.01.

  	
  Additional Events Of Default

  
	
   

  	
   

  
	
  ARTICLE 6

  
	
  AMENDMENTS, SUPPLEMENTS AND WAIVERS

  
	
   

  	
   

  
	
  Section
  6.01.

  	
  With Consent Of Holders

  
	
   

  	
   

  
	
  ARTICLE 7

  
	
  MISCELLANEOUS

  
	
   

  	
   

  
	
  Section
  7.01.

  	
  Application Of Third Supplemental Indenture

  
	
  Section
  7.02.

  	
  Effective Date

  
	
  Section
  7.03.

  	
  Counterparts

  

 

3

 

THIRD
SUPPLEMENTAL INDENTURE, dated as of May 27, 2003 by and between PROVIDIAN
FINANCIAL CORPORATION, a Delaware corporation, as issuer (the “Company”),
and BANK ONE TRUST COMPANY, N.A., a national banking association duly organized
and existing under the laws of the United States of America, as Trustee under
the Indenture (as hereinafter defined) (the “Trustee”).

 

RECITALS

 

WHEREAS, the
Company and the Trustee, as successor in interest to The First National Bank of
Chicago, are parties to that certain Indenture dated as of May 1, 1999 (the “Indenture,”
and all capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Indenture) providing for the issuance by the Company
of securities from time to time;

 

WHEREAS, the
Company desires to issue a new series of Securities under the Indenture, and
has duly authorized the creation and issuance of such Securities and the
execution and delivery of this Third Supplemental Indenture to modify the
Indenture and provide certain additional provisions as hereinafter described;

 

WHEREAS, the
Company and the Trustee deem it advisable to enter into this Third Supplemental
Indenture for the purposes of establishing the terms of such series of
Securities;

 

WHEREAS, the
execution and delivery of this Third Supplemental Indenture has been authorized
by a Board Resolution;

 

WHEREAS,
concurrent with the execution hereof, the Company has delivered an Officers’
Certificate and has caused its counsel to deliver to the Trustee an Opinion of
Counsel; and

 

WHEREAS, all
things necessary to make this Third Supplemental Indenture a valid agreement of
the Company in accordance with its terms have been done, and the execution and
delivery thereof have been in all respects duly authorized by the parties
hereto.

 

NOW,
THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

 

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

 

4

 

ARTICLE 1

CREATION OF THE NOTES

 

Section 1.01.  Designation Of Series.  Pursuant to the terms hereof and
Section 301 of the Indenture, the Company hereby creates a series of Securities
designated as the “4% Convertible Senior Notes due May 15, 2008” (the “Notes”),
which Notes shall be deemed “Securities” for all purposes under the Indenture.

 

Section 1.02.  Form Of Notes.  The definitive form of the Notes shall be
substantially in the form set forth in Exhibit A attached hereto, which is
incorporated herein and made part hereof. 
The Stated Maturity of the principal amount of the Notes shall be May
15, 2008.

 

Section 1.03.  Limit On Amount Of Series.  The Notes shall not exceed U.S.
$287,500,000 in aggregate principal amount, and may, upon the execution and
delivery of this Third Supplemental Indenture or from time to time thereafter,
be executed by the Company and delivered to the Trustee for authentication, and
the Trustee shall thereupon authenticate and deliver said Notes upon a Company
Order and delivery of an Officers’ Certificate and Opinion of Counsel as
contemplated by Section 303 of the Indenture. The Company can not reissue a
Note that has matured or been converted, purchased by the Company at the option
of the Holder, or otherwise cancelled, except for registration of transfer,
exchange or replacement of such Note.

 

Section 1.04.  Interest.  
The Company will pay interest on the principal amount of the
Notes at the rate per annum of 4%.  Cash
interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from May 27, 2003.  The Company will pay interest semi-annually
in arrears on each May 15 and November 15 (each, an “Interest Payment Date”) to
the Holders of record on each next preceding May 1 and November 1 (each a “Regular
Record
Date”), respectively, commencing on November 15, 2003.  Interest will be computed on the basis of a
360-day year of twelve 30-day months and consistent with NASD Rule 11620(b).
The Company shall pay interest on overdue principal from time to time on demand
at the rate borne by the Notes and on overdue installments of interest (without
regard to any applicable grace periods) to the extent lawful.  The Company shall pay contingent interest on
the Notes as set forth in Article 4 hereof. 
The terms governing the payment of interest on the Notes shall otherwise
be as set forth in Article 4, the Form of Note attached hereto as Exhibit A,
and the Indenture.

 

Section 1.05.  Certificate Of Authentication.  The Trustee’s certificate of
authentication to be borne on the Notes shall be substantially as provided in
the Form of Note attached hereto as Exhibit A.

 

Section 1.06.  No Sinking Fund.  No sinking fund will be provided with respect to the
Notes.

 

Section 1.07.  Issuance In Global Form.  The Notes shall be issued as one
or more Global Securities, representing the aggregate principal amount at
maturity of the Notes, and shall be

 

5

 

deposited with the Depositary
or its custodian, which shall initially be the Trustee. The Notes shall be
registered in the name of Cede & Co., or other nominee of the Depositary.

 

Section 1.08.  No Discharge; Defeasance.  The Notes shall not be subject to
the provisions of Article XIII of the Indenture.

 

Section 1.09.  Tax Treatment Of The Notes.  The Company and the Holders, by
purchasing the Notes, agree that:

 

(i)                                     the
Notes are contingent payment debt instruments as described in Treasury Regulation
Section 1.1275-4;

 

(ii)                                  each
Holder shall be bound by the Company’s application of the Treasury Regulations
to the Notes, including the Company’s determination that the rate at which
interest will be deemed to accrue on the Notes for United States federal income
tax purposes will be 11% compounded semi-annually, which is the rate comparable
to the rate at which the Company would borrow on a noncontingent,
nonconvertible borrowing with terms and conditions otherwise comparable to the
Notes;

 

(iii)                               each
Holder shall use the projected payment schedule with respect to the Notes
provided by the Company to the Holder, as provided in Treasury Regulation
Section 1.1275-4(b)(4), to determine its interest accruals and adjustments as
provided in Treasury Regulation Section 1.1275-4(b)(4)(iv); and

 

(iv)                              the
Company and each Holder will not take any position on a tax return inconsistent
with clauses (i), (ii), or (iii) of this Section 1.09, unless required by
applicable law.

 

Section 1.10.  Other Terms Of Notes.  The other terms of the Notes
shall be as expressly set forth herein and in Exhibit A hereto.

 

Section 1.11.  Additional Definitions.  The words “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Third Supplemental
Indenture as a whole and not to any particular Article, Section or other
subdivision. For purposes of this Third Supplemental Indenture, the following
terms shall have the following definitions:

 

“Adjustment
Event” has the meaning specified in Section 2.05(k).

 

“Calculation
Agent” means the calculation agent from time to time appointed by
the Company pursuant to Section 2.01.

 

“Closing
Price” of the shares of Common Stock on any date means the closing
price per share (or, if no closing price is reported, the average of the
closing bid and ask prices or, if more than one in either case, the average of
the average closing bid and the average closing ask prices) on such date as
reported in on the New York Stock Exchange Composite Tape or as reported in
composite transactions for the principal United States securities exchange on
which shares of 

 

6

 

Common Stock are traded (if
other than the New York Stock Exchange) or, if the shares of Common Stock are
not listed on a United States national or regional securities exchange, the
closing sale price as reported by Nasdaq or by the National Quotation Bureau
Incorporated.  In the absence of such
quotations, the Company shall be entitled to determine the Closing Price on the
basis it considers appropriate. The Closing Price shall be determined without
reference to extended or after hours trading.

 

“Common Stock”
means any stock of any class of the Company which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which is not subject
to redemption by the Company.  Subject
to the provisions of Section 2.06, however, shares issuable on conversion of
Notes shall include only shares of the class designated as common stock of the
Company at the date of this Indenture (namely, the Common Stock, par value
$0.01) or shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to
redemption by the Company; provided that if at any time there shall
be more than one such resulting class, the shares of each such class then so
issuable on conversion shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.

 

“Company”
means the corporation named as the “Company” in the first paragraph of this
Third Supplemental Indenture, and, subject to the provisions of Section 801 of
the Indenture and Section 2.06, shall include its successors and assigns.

 

“contingent
interest” means interest that accrues and is payable as provided in
Article 4.

 

“Conversion
Price” as of any day means the amount equal to $1,000 divided by the
number of shares of Common stock issuable upon conversion of $1,000 principal
amount of Notes.

 

“Conversion
Rate” has the meaning specified in Section 2.04.

 

“Current
Market Price” has the meaning specified in Section 2.05(g)(i).

 

“Determination
Date” has the meaning specified in Section 2.05(k).

 

“ex-dividend
trading” has the meaning specified in Section 2.05(g)(i).

 

“Expiration
Time” has the meaning specified in Section 2.05(f).

 

“Fair Market
Value” has the meaning specified in Section 2.05(g)(ii).

 

“Fundamental
Change” means the occurrence of any transaction or event (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination,

 

7

 

reclassification,
recapitalization or otherwise) in connection with which all or substantially
all of the Common Stock shall be exchanged for, converted into, acquired for,
or constitutes solely the right to receive, consideration which is not all or
substantially all common stock that is (or, upon consummation of or immediately
following such transaction or event, which will be) listed on a United States
national securities exchange or approved (or, upon consummation of or
immediately following such transaction or event, which will be approved) for
quotation on the Nasdaq National Market or any similar United States system of
automated dissemination of quotations of securities prices.

 

“Fundamental
Change Notice” has the meaning specified in Section 3.01(b).

 

“Fundamental
Change Expiration Time” has the meaning specified in Section
3.01(b).

 

“Fundamental
Change Repurchase Date” has the meaning specified in Section
3.01(a).

 

“interest”
means, when used with reference to the Notes, any interest payable under the
terms of the Notes, including contingent interest, if any.

 

“non-electing
share” has the meaning specified in Section 2.06.

 

“Notes”
has the meaning set forth in Section 1.01.

 

“Outstanding”
has the meaning specified in the Indenture, except that Notes converted into
Common Stock pursuant to Article 2 shall not be deemed outstanding.

 

“Principal
Value Conversion” has the meaning specified in Section 2.01(a).

 

“Purchased
Shares” has the meaning specified in Section 2.05(f).

 

“Record Date”
has the meaning specified in Section 2.05(g)(iii).

 

“Rights”
has the meaning specified in Section 2.05(d).

 

“Securities”
has the meaning specified in Section 2.05(d)

 

“Trading Day”
has the meaning specified in Section 2.05(g)(iv).

 

“Trading
Price” means, on any date, the average of the secondary market bid
quotations for the Notes obtained by the Trustee for $10,000,000 principal
amount of Notes at approximately 3:30 p.m., New York City time, on such date
from three independent nationally recognized securities dealers selected by the
Company;
provided that if at least three such bids cannot reasonably be
obtained by the Trustee, but two bids are obtained, then the average of the two
bids shall be used, and if only one such bid can reasonably be obtained by the
Trustee, one bid shall be used; and provided further that if the Trustee
cannot reasonably obtain at least one bid for $10,000,000 principal amount of
Notes from a nationally recognized securities dealer, then the Trading Price
per $1,000 principal amount of Notes shall be deemed to be less than 98%

 

8

 

of the product of (a) the
number of shares of Common Stock issuable upon conversion of $1,000 principal
amount of Notes and (b) the Closing Price on such date.

 

“Trigger
Event” has the meaning set forth in Section 2.05(d).

 

ARTICLE 2

CONVERSION OF NOTES

 

Section 2.01.  Conversion Privilege.  (a) Subject
to and upon compliance with the provisions of this Indenture, before the close
of business on May 15, 2008, the Holder of any Note shall have the right, at
such Holder’s option, to convert the principal amount of the Note, or any
portion of such principal amount which is a multiple of $1,000, into fully paid
and non-assessable shares of Common Stock (as such shares shall then be
constituted) at the Conversion Rate in effect at such time, by surrender of the
Note so to be converted in whole or in part, together with any required funds,
under the circumstances described in this Section 2.01 and in the manner
provided in Section 2.02. The Notes shall be convertible only upon the
occurrence of one of the following events:

 

(i)                                     during
any calendar quarter commencing after June 30, 2003, if the Closing Price of
the Common Stock exceeds 110% of the Conversion Price in effect for at least 20
Trading Days in the 30 consecutive Trading Day period ending on the last
Trading Day of the immediately preceding calendar quarter (it being understood
for purposes of this Section 2.01(a)(i) that the Conversion Price in effect at
the close of business on each of the 30 consecutive Trading Days shall be
used);

 

(ii)                                  on
and after February 15, 2008, if the Closing Price of the Common Stock exceeds
110% of the Conversion Price in effect on any Trading Day on or after February
15, 2008;

 

(iii)                               during
the five Business Day period after any five consecutive Trading Day period in
which the Trading Price per $1,000 principal amount of the Notes for each day
of such five Trading Day period was less than 98% of the product of the Closing
Price of the Common Stock and the number of shares of Common Stock issuable
upon conversion of $1,000 principal amount of the Notes; provided that if on the date
of any conversion pursuant to this clause (iii) the Closing Price of the Common
Stock is greater than the Conversion Price, a Holder shall receive, in lieu of
Common Stock based on the Conversion Price, cash or Common Stock or a
combination of cash and Common Stock, at the Company’s option, with a value
equal to the principal amount of the Holder’s Notes plus accrued and unpaid
interest, including contingent interest, if any, as of the conversion date (a “Principal
Value Conversion”);

 

(iv)                              during
any period in which the Notes are rated at or below either CCC+ by Standard
& Poor’s Ratings Group or its successor entity, or Caa1 by Moody’s
Investors

 

9

 

Service or its successor entity; provided that the Company shall be under
no obligation to have the Notes rated; or

 

(v)                                 as
provided in subsection (b) of this Section 2.01.

 

A Calculation
Agent from time to time appointed by the Company shall, on behalf of the
Company, determine on a daily basis whether the Notes shall be convertible as a
result of the occurrence of an event specified in clause (i) or (ii) above and,
if the Notes shall be so convertible, the Calculation Agent appointed by the Company
shall promptly deliver to the Company and the Trustee written notice
thereof.  Whenever the Notes shall
become convertible pursuant to this Section 2.01, the Company or, at the
Company’s request, the Trustee in the name and at the expense of the Company,
shall notify the Holders of the event triggering such convertibility in the
manner provided in Section 106 of the Indenture, and the Company shall also
publicly announce such information and publish it on the Company’s web site.  Any notice so given shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice.

 

The Trustee
(or other conversion agent appointed by the Company) shall have no obligation
to determine the Trading Price of the Notes under this Section 2.01 unless the
Company has requested such a determination; and the Company shall have no
obligation to make such request unless a Holder provides it, on or prior to
12:00 noon (New York City time) on any Trading Day, with reasonable evidence
that the Trading Price per $1,000 principal amount of Notes would be less than
98% of the product of the Closing Price of the Common Stock and the number of
shares of Common Stock issuable upon conversion of $1,000 principal amount of
Notes.  If such evidence is provided,
the Company shall instruct the Trustee (or other conversion agent) to determine
the Trading Price of the Notes beginning on the next Trading Day and on each
successive Trading Day until the Trading Price per $1,000 principal amount of
Notes is greater than or equal to 98% of the product of the Closing Price of
the Common Stock and the number of shares issuable upon conversion of $1,000
principal amount of the Notes.

 

(b)                       In addition, if:

 

(i)                                     (A)
the Company distributes to all holders of its Common Stock rights or warrants
entitling them (for a period expiring within 45 days of the record date for the
determination of the stockholders entitled to receive such distribution) to
subscribe for or purchase shares of Common Stock, at a price per share less than
the average of the Closing Price of the Common Stock for the ten Trading Days
immediately preceding, but not including, the date such distribution is first
publicly announced by the Company, or (B) the Company distributes to all
holders of its Common Stock, cash or other assets, debt securities or rights to
purchase its securities, where the Fair Market Value of such distribution per
share of Common Stock exceeds 5% of the Closing Price of the Common Stock on
the Trading Day immediately preceding the date such distribution is first
publicly announced by the Company, then, in either case, the Notes may be
surrendered for conversion at any time on and after the date that the Company
gives notice to the Holders of such distribution, which shall be not less than
20 days prior to the

 

10

 

commencement of ex-dividend trading for such distribution, until the
earlier of the close of business on the Business Day immediately preceding, but
not including, the commencement of ex-dividend trading or the date the Company
publicly announces that such distribution will not take place; provided
that no adjustment to the Conversion Rate or the ability of a Holder of a Note
to convert will be made if the Holder will otherwise participate in such
distribution without conversion; or

 

(ii)                                  the
Company consolidates with or merges with or into another Person or is a party
to a binding share exchange or conveys, transfers, sells, leases or otherwise
disposes of all or substantially all of its properties and assets, then the
Notes may be surrendered for conversion at any time from and after the date 15
days prior to the anticipated effective date of the transaction and ending on
and including the date 15 days after the consummation of the transaction.  The Board of Directors shall determine the
anticipated effective date of the transaction, and such determination shall be
conclusive and binding on the Holders and shall be publicly announced by the Company
and posted on its web site not later than two Business Day prior to such 15th
day prior to the effective date of the transaction.

 

(c)                        A
Note in respect of which a Holder is electing to exercise its option to require
repurchase upon a Fundamental Change pursuant to Section 3.01 may be converted
only if such Holder withdraws its election in accordance with Section
3.01.  A Holder of Notes is not entitled
to any rights of a holder of Common Stock until such Holder has converted his
Notes to Common Stock, and only to the extent such Notes are deemed to have
been converted to Common Stock under this Article 2.

 

Section 2.02.  Exercise Of Conversion Privilege; Issuance Of
Common Stock On Conversion; No Adjustment For Interest Or Dividends.  (a)  In
order to exercise the conversion privilege with respect to any Note in
certificated form, the Company must receive at the office or agency of the
Company maintained for that purpose or, at the option of such Holder, the
Corporate Trust Office, such Note with the original or facsimile of the form
entitled “Conversion
Notice” on the reverse thereof, duly completed and manually signed,
together with such Note duly endorsed for transfer, accompanied by the funds,
if any, required by this Section 2.02. 
Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, and shall be
accompanied by transfer or similar taxes, if required pursuant to Section 2.07.

 

(b)                       In
order to exercise the conversion privilege with respect to any interest in a
Global Security, the beneficial owner must complete, or cause to be completed,
the appropriate instruction form for conversion pursuant to the Depositary’s
book-entry conversion program, deliver, or cause to be delivered, by book-entry
delivery an interest in the aggregate principal amount to be converted of such
Global Security, furnish appropriate endorsements and transfer documents if
required by the Company or the Trustee or conversion agent, and pay the funds,
if any, required by this Section 2.02 and any transfer or similar taxes, if
required pursuant to Section 2.07. Upon the conversion of an interest in a
Global Security, the Trustee (or other

 

11

 

conversion
agent appointed by the Company), or the Custodian at the direction of the
Trustee (or other conversion agent appointed by the Company), shall make a
notation on such Global Security as to the reduction in the principal amount
represented thereby.  The Company shall
notify the Trustee in writing of any conversions of Notes effected through any
conversion agent other than the Trustee.

 

(c)                        In
the case of a Principal Value Conversion, a Holder will receive either cash,
Common Stock or a combination of cash and Common Stock, at the Company’s
option, with a value equal to the principal amount of the Note converted plus
accrued and unpaid interest, including contingent interest, if any, as of the
conversion date.  If a Holder surrenders
its Notes for conversion and it is a Principal Value Conversion, the Company
will notify the Holder by the second Trading Day following the conversion date
whether it will pay all or a portion of the principal amount plus accrued and
unpaid interest in cash, Common Stock or a combination of cash and Common
Stock, and in what percentage.  Any
Common Stock delivered upon a Principal Value Conversion will be valued at the
greater of (x) the Conversion Price on the conversion date and (y) the Closing
Price of the Common Stock on the third Trading Day after the conversion
date.  The Company will pay any portion
of the principal amount plus accrued and unpaid interest to be paid in cash on
the third Trading Day after the conversion date.  If the Company elects to deliver Common Stock to pay any portion
of such principal amount plus accrued and unpaid interest, it will deliver such
Common Stock on the fourth Trading Day following the conversion date.

 

(d)                       As
promptly as practicable after satisfaction of the requirements for conversion
set forth above, subject to compliance with any restrictions on transfer if
shares issuable on conversion are to be issued in a name other than that of the
Holder (as if such transfer were a transfer of the Note or Notes (or portion thereof)
so converted), the Company shall issue and shall deliver to such Holder at the
office or agency maintained by the Company for such purpose pursuant to Section
1002 of the Indenture, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof as determined by the Company in accordance with the provisions of this
Article 2 and a check or cash in respect of any fractional interest in respect
of a share of Common Stock arising upon such conversion, calculated by the
Company as provided in Section 2.03.  In
case any Note of a denomination greater than $1,000 shall be surrendered for
partial conversion, subject to Section 2.03, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of the Note so
surrendered, without charge to him, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Note.

 

(e)                        Each
conversion shall be deemed to have been effected as to any such Note (or
portion thereof) on the date on which the requirements set forth above in
Section 2.02(a) or Section 2.02(b) have been satisfied as to such Note (or
portion thereof), and the Person in whose name any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares
represented thereby; provided that any such surrender on any
date when the stock transfer books of the Company shall be closed shall
constitute the Person in whose name the certificates are to

 

12

 

be issued as
the record holder thereof for all purposes on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Rate in effect on the date upon which such Note shall be
surrendered.

 

(f)                          Any
Note or portion thereof surrendered for conversion during the period from the
close of business on the record date for any interest payment date to the close
of business on the Business Day preceding the following interest payment date
that has not been called for repurchase during such period shall be accompanied
by payment, in immediately available funds or other funds acceptable to the
Company, of an amount equal to the interest otherwise payable on such interest
payment date on the principal amount being converted; provided that no such
payment need be made (i) if a Fundamental Change Repurchase Date will occur
during such period, (ii) to the extent of contingent interest, if any, payable
on the Note converted after the record date with respect to such contingent
interest, or (iii) to the extent of any interest with respect to which there is
an ongoing default in payment on the Notes, if any, at the time of
conversion.  Except as provided above in
this Section 2.02(f), no payment or other adjustment shall be made for interest
accrued on any Note converted or for dividends on any shares issued upon the
conversion of such Note as provided in this Article 2.

 

(g)                       Upon
the conversion of a Note, that portion of the accrued but unpaid interest,
including accrued contingent interest, 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 delivery of the Common
Stock and the payment of contingent interest, if any, together, in the case of
a Principal Value Conversion, with any cash payment paid in lieu of shares of
Common Stock, and in each case together with any cash payment 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 of Common Stock and
the payment of contingent interest, if any, together, in the case of a
Principal Value Conversion, with any such cash payment paid in lieu of shares
of Common Stock, and in each case together with any such cash payment in lieu
of fractional shares, shall be treated as delivered, to the extent thereof,
first in exchange for and in satisfaction of our obligation to pay the
principal amount of the converted Note, the accrued but unpaid interest
thereon, if any, and the contingent interest thereon, if any, and the balance, if
any, of such Fair Market Value of such Common Stock (and any such cash
payments) shall be treated as issued in exchange for and in satisfaction of the
right to convert the Note being converted pursuant to the provisions hereof.

 

Section 2.03.  Cash Payments in Lieu of Fractional
Shares.  No fractional shares
of Common Stock or scrip certificates representing fractional shares shall be
issued upon conversion of Notes.  If
more than one Note shall be surrendered for conversion at one time by the same Holder,
the number of full shares that shall be issuable upon conversion shall be
computed on the basis of the aggregate principal amount of the Notes (or
specified portions thereof to the extent permitted hereby) so surrendered.  If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the Holder of Notes.  The current market
price of a share of Common Stock shall be the Closing Price of the Common Stock
on the

 

13

 

last Trading Day immediately
preceding the day on which the Notes (or specified portions thereof) are deemed
to have been converted.

 

Section 2.04.  Conversion Rate.  Each $1,000 principal amount of the Notes shall be
convertible into 76.8758 shares of Common Stock (the “Conversion Rate”), subject to
adjustment as provided in this Article 2.

 

Section 2.05.  Adjustment Of Conversion Rate.  The Conversion Rate shall be
adjusted from time to time by the Company as follows:

 

(a)                        In
case the Company shall hereafter pay a dividend or make a distribution on its
outstanding Common Stock in shares of Common Stock, the Conversion Rate shall
be increased so that the same shall equal the rate determined by multiplying
the Conversion Rate in effect at the opening of business on the date following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution by a fraction,

 

(i)                                     the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution plus the
total number of shares of Common Stock constituting such dividend or other
distribution; and

 

(ii)                                  the
denominator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination.

 

Such an increase shall be successively made whenever any such payment
of a dividend or distribution in shares of Common Stock on the Company’s
outstanding Common Stock is made, and each such increase shall become effective
immediately after the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or
other distribution.  If any dividend or
distribution of the type described in this Section 2.05(a) is declared but not
so paid or made, the Conversion Rate shall again be adjusted to the Conversion
Rate that would then be in effect if such dividend or distribution had not been
declared.

 

(b)                       In
case the Company shall issue rights or warrants to all holders of its
outstanding shares of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Current Market Price
on the date fixed for determination of stockholders entitled to receive such
rights or warrants, the Conversion Rate shall be increased so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the date fixed for determination of stockholders entitled
to receive such rights or warrants by a fraction,

 

(i)                                     the
numerator of which shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for determination of stockholders

 

14

 

entitled to receive such rights or warrants
plus the total number of additional shares of Common Stock offered for
subscription or purchase; and

 

(ii)                                  the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for determination of
stockholders entitled to receive such rights or warrants plus the number of
shares that the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price.

 

Such
adjustment shall be successively made whenever any such rights or warrants are
issued, and shall become effective immediately after the opening of business on
the day following the date fixed for determination of stockholders entitled to
receive such rights or warrants.  To the
extent that shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Conversion Rate shall be readjusted to the
Conversion Rate that would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered.  If such rights or warrants are not so
issued, the Conversion Rate shall again be adjusted to be the Conversion Rate
that would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been
fixed.  In determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights or
warrants and any amount payable on exercise or conversion thereof, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.

 

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

 

(d)                       In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock shares of any class of capital stock of the Company or
evidences of its indebtedness or assets (including capital stock of or similar
equity interests in a Subsidiary or other business unit of the Company or any
other securities, but excluding any rights or warrants referred to in Section
2.05(b), and excluding any dividend or distribution (x) paid exclusively in
cash or (y) referred to in Section 2.05(a)) (any of the foregoing hereinafter
in this Section 2.05(d) called the “Securities”), then, in each such case, the
Conversion Rate shall be increased so that the same shall be equal to the rate
determined by multiplying the Conversion Rate in effect on the Record Date with
respect to such distribution by a fraction,

 

15

 

(i)                                     the
numerator of which shall be the Current Market Price on such Record Date; and

 

(ii)                                  the
denominator of which shall be the Current Market Price on such Record Date less
the Fair Market Value (which, in the case of Securities consisting in whole or
in part of capital stock or similar equity interests, shall be determined based
the Current Market Price of such Securities (replacing all references in the
definition of Current Market Price to the Common Stock with references to such
Securities), and which shall otherwise be determined by the Company’s Board of
Directors, whose determination shall be conclusive, and which determination
shall be described in a resolution of the Board of Directors) on the Record
Date of the portion of the Securities so distributed applicable to one share of
Common Stock,

 

such adjustment to become effective immediately prior to the opening of
business on the day following such Record Date; provided that if the then
Fair Market Value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive upon conversion the amount of Securities such Holder would
have received had such Holder converted each Note on the Record Date. If such
dividend or distribution is not so paid or made, the Conversion Rate shall
again be adjusted to be the Conversion Rate that would then be in effect if
such dividend or distribution had not been declared.  If the Board of Directors determines the Fair Market Value of any
distribution for purposes of this Section 2.05(d) by reference to the actual or
when issued trading market for any securities, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price on the applicable Record Date. If the amount of any adjustment hereunder
is not determinable as of the effective date of such adjustment, then a Holder
converting Notes on and after such effective date and prior to the date such
adjustment is determinable shall be entitled to receive the amount of shares of
Common Stock of the Company determined by applying the Conversion Rate as in
effect immediately prior to such effective date and an additional amount of
shares of Common Stock, if any, as shall result from the adjustment of such
Conversion Rate.

 

Rights or
warrants distributed by the Company to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Company’s
capital stock (either initially or under certain circumstances), which rights
or warrants, until the occurrence of a specified event or events (“Trigger
Event”): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock (such rights or warrants, “Rights”), shall be deemed not
to have been distributed for purposes of this Section 2.05 (and no adjustment
to the Conversion Rate under this Section 2.05 will be required) until the
occurrence of the earliest Trigger Event, whereupon such Rights shall be deemed
to have been distributed and an appropriate adjustment (if any is required) to
the Conversion Rate shall be made under this Section 2.05(d).  If any such Right, including any such
existing Rights distributed prior to the date of this Indenture, are subject to
events, upon the occurrence of which such Rights become exercisable to purchase
different securities, evidences of indebtedness or other assets, then the date
of the occurrence of any and each such event shall

 

16

 

be deemed to be the date of distribution and record date with respect
to new Rights (and a termination or expiration of the existing Rights without
exercise by any of the holders thereof). 
In addition, in the event of any distribution (or deemed distribution)
of Rights, or any Trigger Event or other event (of the type described in the
preceding sentence) with respect thereto that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Rate under this Section 2.05 was made, (1) in the case of any such Rights that
shall all have been redeemed or repurchased without exercise by any holders thereof,
the Conversion Rate shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case
may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of Common Stock
with respect to such Rights (assuming such holder had retained such Rights),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such Rights that shall have expired or been
terminated without exercise by any holders thereof, the Conversion Rate shall
be readjusted as if such Rights had not been issued. No adjustment of the
Conversion Rate shall be made pursuant to this Section 2.05(d) in respect of
Rights distributed or deemed distributed on any Trigger Event to the extent
that such Rights are actually distributed, or reserved by the Company for
distribution to Holders of Notes upon conversion by such Holders of Notes to
Common Stock.

 

Holders shall
be entitled to receive upon conversion of their Notes, in addition to the
shares of Common Stock issuable upon conversion, the related Rights for the
Common Stock pursuant to that certain Rights Agreement, dated as of June 1,
1997, between the Company and First Chicago Trust Company of New York, as
amended by Amendment No. 1 to Rights Agreement dated February 17, 1999, or any
replacement or successor plan thereto, subject to the generally applicable
terms of such plan, and no additional adjustment to the Conversion Rate shall
be made with respect to such Rights; provided that if a Trigger Event has
occurred with respect to such Rights at the time of conversion of Notes, then
Holders of such Notes shall not be entitled to receive such Rights upon
conversion of their Notes but the Conversion Rate shall be adjusted as set
forth in the foregoing paragraph (disregarding the last sentence thereof).

 

For purposes
of this Section 2.05(d) and Section 2.05(a) and (b), any dividend or
distribution to which this Section 2.05(d) is applicable that also includes
shares of Common Stock, or rights or warrants to subscribe for or purchase
shares of Common Stock (or both), shall be deemed instead to be (1) a dividend
or distribution of the evidences of indebtedness, assets or shares of capital
stock other than such shares of Common Stock or rights or warrants (and any
Conversion Rate adjustment required by this Section 2.05(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Rate adjustment required by Sections
2.05(a) and 2.05(b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as “the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution”, “the date fixed for the
determination of stockholders entitled to receive such rights or warrants” and
“the date fixed for such determination” within the meaning of Section 2.05(a)
and 2.05(b) and (B) any shares of Common Stock included in such dividend or
distribution shall 

 

17

 

not be deemed “outstanding at
the close of business on the date fixed for such determination” within the
meaning of Section 2.05(a).

 

(e)                        In
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock cash (excluding (x) any quarterly cash dividend on the Common
Stock to the extent the aggregate cash dividend per share of Common Stock in
any fiscal quarter does not exceed the greater of (A) the amount per share of
Common Stock of the next preceding quarterly cash dividend on the Common Stock
to the extent that such preceding quarterly dividend did not require any
adjustment of the Conversion Rate pursuant to this Section 2.05(e) (as adjusted
to reflect subdivisions, or combinations of the Common Stock), and (B) 1.25% of
the arithmetic average of the Closing Price of the Common Stock during the ten
Trading Days immediately prior to the date of declaration of such dividend, and
(y) any dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary),
then, in such case, the Conversion Rate shall be increased so that the same
shall equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the close of business on such record date by a fraction,

 

(i)                                     the
numerator of which shall be the Current Market Price on such record date; and

 

(ii)                                  the
denominator of which shall be the Current Market Price on such record date less
the amount of cash so distributed (and not excluded as provided above) applicable
to one share of Common Stock,

 

such adjustment to be effective immediately prior to the opening of
business on the day following the record date; provided that if the
portion of the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the record date, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
Holder shall have the right to receive upon conversion the amount of cash such
Holder would have received had such Holder converted each Note on the record
date.  If such dividend or distribution
is not so paid or made, the Conversion Rate shall again be adjusted to be the
Conversion Rate that would then be in effect if such dividend or distribution
had not been declared.  If any
adjustment is required to be made as set forth in this Section 2.05(e) as a
result of a distribution that is a quarterly dividend, such adjustment shall be
based upon the amount by which such distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant hereto.  If an adjustment is required to be made as
set forth in this Section 2.05(e) above as a result of a distribution that is
not a quarterly dividend, such adjustment shall be based upon the full amount
of the distribution.

 

(f)                          In
case a tender or exchange offer made by the Company or any Subsidiary for all
or any portion of the Common Stock shall expire and such tender or exchange
offer (as amended upon the expiration thereof) shall require the payment to
stockholders of consideration per share of Common Stock having a Fair Market
Value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) that as of
the last time (the “Expiration Time”) tenders or exchanges may
be made pursuant to such

 

18

 

tender or exchange offer (as it
may be amended) exceeds the Closing Price of a share of Common Stock on the
Trading Day next succeeding the Expiration Time, the Conversion Rate shall be
increased so that the same shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the Expiration Time by a
fraction,

 

(i)                                     the
numerator of which shall be the sum of (x) the Fair Market Value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum number of shares to be accepted in such tender or
exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted up to any such
maximum, being referred to as the “Purchased Shares”) and (y) the product of
the number of shares of Common Stock outstanding (less any Purchased Shares) at
the Expiration Time and the Closing Price of a share of Common Stock on the
Trading Day next succeeding the Expiration Time; and

 

(ii)                                  the
denominator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time multiplied
by the Closing Price of a share of Common Stock on the Trading Day next
succeeding the Expiration Time,

 

such adjustment to become effective immediately prior to the opening of
business on the day following the Expiration Time.  If the Company is obligated to purchase shares pursuant to any
such tender or exchange offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Rate shall again be adjusted to be the Conversion
Rate that would then be in effect if such tender or exchange offer had not been
made.

 

(g)                       For
purposes of this Section 2.05, the following terms shall have the meaning
indicated:

 

(i)                                     “Current
Market Price” shall mean the average of the daily Closing Prices per
share of Common Stock for the ten consecutive Trading Days commencing on and
including the fifth Trading Day after the date on which “ex-dividend trading”
commences with respect to the issuance, distribution, subdivision or
combination requiring such computation immediately prior to the date in
question.  For purpose of this
paragraph, “ex-dividend trading” commences, (1) when used with respect to
any issuance or distribution, on the first date on which the Common Stock
trades, regular way, on New York Stock Exchange, or the Nasdaq National Market
or such other national or regional exchange or market on which the Common Stock
is then principally traded, without the right to receive such issuance or distribution,
and (2) when used with respect to any subdivision or combination of shares of
Common Stock, on the first date on which the Common Stock trades, regular way,
on such exchange or in such market after the time at which such subdivision or
combination becomes effective. If another issuance, distribution, subdivision
or combination to which Section 2.05 applies occurs during the period
applicable for calculating “Current Market Price” pursuant to the

 

19

 

definition in the preceding paragraph, “Current
Market Price” shall be calculated for such period in a manner
determined by the Board of Directors to reflect the impact of such issuance,
distribution, subdivision or combination on the Closing Price of the Common
Stock during such period.

 

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

 

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

 

(iv)                              “Trading Day”
shall mean (x) if the applicable security is listed or admitted for trading on
the New York Stock Exchange or another national securities exchange, a day on
which the New York Stock Exchange or another national securities exchange is
open for business, or (y) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made thereon, or (z) if the
applicable security is not so listed, admitted for trading or quoted, any day
other than a Saturday or Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.

 

(h)                       The
Company may make such increases in the Conversion Rate, in addition to those
required by Section 2.05(a), (b), (c), (d), (e), or (f) as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.

 

To the extent
permitted by applicable law, the Company from time to time may increase the
Conversion Rate by any amount for any period of time if the Board of Directors
shall have made a determination that such increase would be in the best interests
of the Company, which determination shall be conclusive.

 

(i)                           No
adjustment in the Conversion Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in such
rate;
provided that any adjustments that by reason of this Section 2.05(i)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment.  All
calculations under this Section 2.05 shall be made by the Company and shall be
made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a
share, as the case may be.  No
adjustment need be made for rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or for any issuance of
Common Stock or convertible or exchangeable securities or rights to purchase
Common Stock or convertible or exchangeable securities.  To the

 

20

 

extent the Notes become
convertible into cash, assets, property or securities (other than capital stock
of the Company), no adjustment need be made thereafter as to the cash, assets,
property or such securities.  Interest
will not accrue on any cash into which the Notes are convertible.

 

(j)                           Whenever
the Conversion Rate is adjusted as herein provided, the Company shall promptly
file with the Trustee and any conversion agent other than the Trustee an
Officers’ Certificate setting forth the Conversion Rate after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment.  Unless and until a
Responsible Officer of the Trustee shall have received such Officers’
Certificate, the Trustee shall not be deemed to have knowledge of any
adjustment of the Conversion Rate and may assume that the last Conversion Rate
of which it has knowledge is still in effect. 
Promptly after delivery of such certificate, the Company shall prepare a
notice of such adjustment of the Conversion Rate setting forth the adjusted
Conversion Rate and the date on which each adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Rate to the Holder
of each Note at its last address appearing on the Security Register provided
for in Section 305 of the Indenture, within twenty (20) days after execution
thereof.  Failure to deliver such notice
shall not affect the legality or validity of any such adjustment.

 

(k)                        In
any case in which this Section 2.05 provides that an adjustment shall become
effective immediately after (1) a record date or Record Date for an event, (2)
the date fixed for the determination of stockholders entitled to receive a
dividend or distribution pursuant to Section 2.05(a), (3) a date fixed for the
determination of stockholders entitled to receive rights or warrants pursuant
to Section 2.05(b), or (4) the Expiration Time for any tender or exchange offer
pursuant to Section 2.05(f) (each a “Determination Date”), the Company may elect
to defer until the occurrence of the applicable Adjustment Event (as
hereinafter defined) (x) issuing to the Holder of any Note converted after such
Determination Date and before the occurrence of such Adjustment Event, the
additional shares of Common Stock or other securities issuable upon such
conversion by reason of the adjustment required by such Adjustment Event over
and above the Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such Holder any amount in cash in lieu of
any fraction pursuant to Section 2.03. 
For purposes of this Section 2.05(k), the term “Adjustment Event” shall mean:

 

(i)         in any case referred to
in clause (1) hereof, the occurrence of such event,

 

(ii)         in any case referred to
in clause (2) hereof, the date any such dividend or distribution is paid or
made,

 

(iii)        in any case referred to in
clause (3) hereof, the date of expiration of such rights or warrants, and

 

(iv)        in any case referred to in
clause (4) hereof, the date a sale or exchange of Common Stock pursuant to such
tender or exchange offer is consummated and becomes irrevocable.

 

21

 

(l)                           For
purposes of this Section 2.05, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu
of fractions of shares of Common Stock. 
The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.

 

Section 2.06.  Effect Of Reclassification, Consolidation,
Merger or Sale.  If any of
the following events occur, namely (i) any reclassification or change of the
outstanding shares of Common Stock (other than a subdivision or combination to
which Section 2.05(c) applies), (ii) any consolidation, merger or combination
of the Company with another Person as a result of which holders of Common Stock
shall be entitled to receive stock, other securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of all or substantially all of the properties
and assets of the Company to any other Person as a result of which holders of
Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing Person, as the
case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that each Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance assuming such holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance (provided that, if the
kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance is not the same for each share of
Common Stock in respect of which such rights of election shall not have been
exercised (“non-electing share”), then for the purposes of this Section
2.06 the kind and amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance for each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares).  Such supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 2.

 

The Company
shall cause notice of the execution of such supplemental indenture to be mailed
to each Holder of Notes, at its address appearing on the Security Register
provided for in Section 305 of the Indenture, within twenty (20) days after
execution thereof.  Failure to deliver
such notice shall not affect the legality or validity of such supplemental
indenture.

 

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

 

22

 

If this
Section 2.06 applies to any event or occurrence, Section 2.05 shall not apply.

 

Section 2.07.  Taxes On Shares Issued.  The issue of stock certificates
on conversions of Notes shall be made without charge to the converting Holder
for any documentary, stamp or similar issue or transfer tax in respect of the
issue thereof.  The Company shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than
that of the Holder of any Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the Person or
Persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

 

Section 2.08.  Reservation of Shares, Shares to Be Fully
Paid; Compliance With Governmental Requirements; Listing of
Common Stock.  The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.

 

Before taking
any action which would cause an adjustment increasing the Conversion Rate to an
amount that would cause the Conversion Price to be reduced below the then par
value, if any, of the shares of Common Stock issuable upon conversion of the
Notes, the Company will take all corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue shares of such Common Stock at such adjusted Conversion Rate.

 

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

 

The Company
covenants that, if any shares of Common Stock to be provided for the purpose of
conversion of Notes hereunder require registration with or approval of any
governmental authority under any federal or state law before such shares may be
validly issued upon conversion, the Company will in good faith and as
expeditiously as possible, to the extent then permitted by the rules and
interpretations of the Commission (or any successor thereto), endeavor to
secure such registration or approval, as the case may be.

 

The Company
further covenants that, if at any time the Common Stock shall be listed on the
New York Stock Exchange, the Nasdaq National Market or any other national
securities exchange or automated quotation system, the Company will, if permitted
by the rules of such exchange or automated quotation system, list and keep
listed, so long as the Common Stock shall be so listed on such exchange or
automated quotation system, all Common Stock issuable upon conversion of the
Notes;
provided that if the rules of such exchange or automated quotation
system permit the Company to defer the listing of such Common Stock until the
first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.

 

23

 

Section 2.09.  Responsibility Of Trustee.  The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any Holder of Notes to determine the Conversion Rate or whether any facts exist
which may require any adjustment of the Conversion Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or whether the same conforms with the
provisions herein or in any supplemental indenture provided to be employed, in
making the same.  The Trustee and any
other conversion agent shall not be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any Note; and the Trustee and any other conversion agent make no
representations with respect thereto. 
Neither the Trustee nor any conversion agent shall be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property or cash upon the
surrender of any Note for the purpose of conversion or to comply with any of
the duties, responsibilities or covenants of the Company contained in this
Article 2.  Without limiting the
generality of the foregoing, neither the Trustee nor any conversion agent shall
be under any responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 2.06
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Holders upon the conversion of their
Notes after any event referred to in such Section 2.06 or to any adjustment to
be made with respect thereto, but, subject to the provisions of Section 601 of
the Indenture, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Opinion of Counsel and
Officers’ Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.

 

Section 2.10.  Notice To Holders Prior To Certain Actions.  In case:

 

(a)                        the
Company shall declare a dividend (or any other distribution) on its Common Stock
that would require an adjustment in the Conversion Rate pursuant to Section
2.05; or

 

(b)                       the
Company shall authorize the granting to the holders of all or substantially all
of its Common Stock of rights or warrants to subscribe for or purchase any share
of any class or any other rights or warrants; or

 

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

 

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

 

24

 

the Company shall cause to be filed with the Trustee and to be mailed
to each Holder of Notes at its address appearing on the Security Register
provided for in Section 305 of the Indenture, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be determined,
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective or occur, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up.  Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.

 

ARTICLE 3

REPURCHASE AT OPTION OF HOLDERS UPON A
FUNDAMENTAL CHANGE

 

Section 3.01.  Repurchase At Option of Holders Upon a
Fundamental Change.  (a) 
If there shall occur a Fundamental Change at any time prior to maturity
of the Notes, then each Holder shall have the right, at such Holder’s option,
to require the Company to repurchase all of such Holder’s Notes, or any portion
thereof that is a multiple of $1,000 principal amount, on the date (the “Fundamental
Change Repurchase Date”) that is thirty (30) days after the date of
the Fundamental Change Notice (as defined in Section 3.01(b)) of such
Fundamental Change (or, if such 30th day is not a Business Day, the next
succeeding Business Day) at a repurchase price equal to 100% of the principal
amount thereof, together with accrued and unpaid interest, including contingent
interest, if any, to, but excluding, the Fundamental Change Repurchase Date; provided
that if such Fundamental Change Repurchase Date is an interest payment date,
then the interest payable on such interest payment date shall be paid to the
holders of record of the Notes on the applicable record date instead of the
holders surrendering the Notes for repurchase on such date.

 

Upon
presentation of any Note to be repurchased in part only, the Company shall
execute and, upon the Company’s written direction to the Trustee, the Trustee
shall authenticate and make available for delivery to the Holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations,
in aggregate principal amount equal to the portion of the Notes presented not
to be repurchased.

 

(b)                       On
or before the tenth day after the occurrence of a Fundamental Change, the
Company or at its written request (which must be received by the Trustee at
least five (5) Business Days prior to the date the Trustee is requested to give
notice as described below, unless the Trustee shall agree in writing to a
shorter period), the Trustee, in the name of and at the expense of the Company,
shall mail or cause to be mailed to all holders of record on the date of the
Fundamental Change a notice (the “Fundamental Change Notice”) of the
occurrence of

 

25

 

such Fundamental Change and of
the repurchase right at the option of the Holders arising as a result
thereof.  Such notice shall be mailed by
first class mail to each Holder of Notes at its last address as the same
appears on the Security Register. If the Company shall give such notice, the
Company shall also deliver a copy of the Fundamental Change Notice to the
Trustee at such time as it is mailed to Note Holders.  The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice.  In any case,
failure to give such notice by mail or any defect in the notice to the Holder
of any Note shall not affect the validity of the proceedings for the repurchase
of any other Note.  Concurrently with
the mailing of any Fundamental Change Notice, the Company shall issue a press
release announcing such Fundamental Change referred to in the Fundamental
Change Notice, the form and content of which press release shall be determined
by the Company in its sole discretion. 
The failure to issue any such press release or any defect therein shall
not affect the validity of the Fundamental Change Notice or any proceedings for
the repurchase of any Note which any Note Holder may elect to have the Company
repurchase as provided in this Section 3.01.

 

Each
Fundamental Change Notice shall specify the circumstances constituting the
Fundamental Change, the Fundamental Change Repurchase Date, the price at which
the Company shall be obligated to repurchase Notes, that the Holder must
exercise the repurchase right on or prior to the close of business on the
Fundamental Change Repurchase Date (the “Fundamental Change Expiration Time”), that
the Holder shall have the right to withdraw any Notes surrendered prior to the
Fundamental Change Expiration Time, a description of the procedure which a Note
Holder must follow to exercise such repurchase right and to withdraw any
surrendered Notes, the place or places where the Holder is to surrender such
Holder’s Notes, the amount of interest accrued on each Note to the Fundamental
Change Repurchase Date and the CUSIP number or numbers of the Notes (if then
generally in use).

 

No failure of
the Company to give the foregoing notices and no defect therein shall limit the
Note Holders’ repurchase rights or affect the validity of the proceedings for
the repurchase of the Notes pursuant to this Section 3.01.

 

(c)                        For
a Note other than a Global Security to be so repurchased at the option of the
Holder, the Company must receive at the office or agency of the Company
maintained for that purpose or, at the option of such Holder, the Corporate
Trust Office, such Note with the form entitled “Option to Elect Repurchase Upon A
Fundamental Change” on the reverse thereof duly completed, together
with such Notes duly endorsed for transfer, on or before the Fundamental Change
Expiration Time.  All questions as to
the validity, eligibility (including time of receipt) and acceptance of any
Note for repurchase shall be determined by the Company, whose determination
shall be final and binding absent manifest error.

 

(d)                       On
or prior to the Fundamental Change Repurchase Date, the Company will deposit
with the Trustee or with one or more paying agents (or, if the Company is
acting as its own paying agent, set aside, segregate and hold in trust as
provided in Section 1003 of the Indenture) an amount of money sufficient to
repurchase on the Fundamental Change Repurchase Date all the Notes to be
repurchased on such date at the appropriate repurchase price, together

 

26

 

with accrued and unpaid
interest, including contingent interest, if any, to, but excluding, the
Fundamental Change Repurchase Date; provided that if such payment is made on
the Fundamental Change Repurchase Date it must be received by the Trustee or
paying agent, as the case may be, by 10:00 a.m., New York City time, on such
date. Payment for Notes surrendered for repurchase (and not withdrawn) prior to
the Fundamental Change Expiration Time will be made promptly (but in no event
more than five (5) Business Days) following the Fundamental Change Repurchase
Date by mailing checks for the amount payable to the Holders of such Notes
entitled thereto as they shall appear in the Security Register.

 

(e)                        In
the case of a reclassification, change, consolidation, merger, combination,
sale or conveyance to which Section 2.06 applies, in which the Common Stock of
the Company is changed or exchanged as a result into the right to receive
stock, securities or other property or assets (including cash), which includes
shares of Common Stock of the Company or shares of common stock of another
Person that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination
shall be conclusive and binding), then the Person formed by such consolidation
or resulting from such merger or which acquires such assets, as the case may
be, shall execute and deliver to the Trustee a supplemental indenture
(accompanied by an Opinion of Counsel that such supplemental indenture complies
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Indenture relating to
the right of holders of the Notes to cause the Company to repurchase the Notes
following a Fundamental Change, including without limitation the applicable
provisions of this Section 3.01 and the definitions of Common Stock and
Fundamental Change, as appropriate, as determined in good faith by the Company
(which determination shall be conclusive and binding), to make such provisions
apply to such other Person if different from the Company and the common stock
issued by such Person (in lieu of the Company and the Common Stock of the
Company).

 

(f)                          The
Company will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act to the extent then applicable in connection
with the repurchase rights of the holders of Notes in the event of a
Fundamental Change.

 

ARTICLE 4

CONTINGENT INTEREST

 

Section 4.01.  Contingent Interest.   If the average Trading Price for
the Notes for the five Trading Days ending on the fifth Trading Day next
preceding May 1, 2008 is greater than $1,445, then the Company will pay
contingent interest on May 15, 2008 in an amount per $1,000 principal amount of
Notes determined as follows:  If the
Average Note Value is less than $1,690 (the “Contingent Interest Threshold”),
then the amount of such contingent interest shall equal 2.5% (the “Contingent
Interest Rate”) times the Average Note Value.  If the Average Note Value is equal to or
greater than the Contingent Interest Threshold, then the amount of such

 

27

 

contingent interest shall equal
the sum of (i) the Contingent Interest Rate times the Contingent Interest
Threshold, plus (ii) 0.25% times the difference (expressed as a positive
number) between the Average Note Value and the Contingent Interest
Threshold.  “Average Note Value” shall
mean the arithmetic average of the average Trading Prices (as defined below)
for the five Trading Days immediately preceding, but not including, May 15,
2004, 2005, 2006 and 2007. “Trading
Price” as used herein shall have the meaning set forth in Section
1.11, provided
that if the Trustee cannot reasonably obtain at least one bid for $10,000,000
principal amount of the Notes from a nationally recognized securities dealer,
then the Trading Price shall equal the trading price as of the next preceding
Trading Day for which the Trustee could reasonably obtain at least one such
bid.

 

Section 4.02.  Payment of Contingent Interest.  Contingent interest shall be paid
to the Person in whose name any Note (or its Predecessor Security) is
registered on the Security Register at the close of business on May 1, 2008.
Except as otherwise expressly provided herein, contingent interest due under
this Article 4 shall be treated for all purposes of this Indenture like any
other interest accruing on the Notes.

 

Section 4.03.  Contingent Interest Notification.  On or prior to the date that is
five Trading Days after May 1, 2008, the Company will disseminate a press
release through Dow Jones & Company, Inc. or Bloomberg Business News, and
deliver a copy thereof to the Trustee, stating whether contingent interest will
be paid on the Notes and the amount and record date thereof.

 

ARTICLE 5

EVENTS OF DEFAULT

 

Section 5.01.  Additional Events Of Default.  Pursuant to Sections 301(17) and
501(8) of the Indenture, so long as any of the Notes are outstanding, the
following shall be an Event of Default with respect to the Notes, in addition
to the Events of Default contained in Section 501 of the Indenture:

 

(a)                        Default
in the payment of the principal of or premium, if any, on any of the Notes as
and when the same shall become due and payable either at Maturity or in
connection with any repurchase pursuant to Article 3, by acceleration or
otherwise.

 

(b)                       Default
in the payment of any interest, including contingent interest, if any, on any
Note when it becomes due and payable, and continuance of such default for a
period of 30 days;

 

(c)                        Default
in the performance, or breach, of any covenant or warranty of the Company in
the Notes, this Third Supplemental Indenture or the Indenture (other than a
covenant or warranty a default in the performance of which or a breach of which
is elsewhere in this Section or in Section 501 of the Indenture specifically
dealt with or which has expressly been included in the Indenture solely for the
benefit of series of Securities other than this series), and continuance of
such default or breach for a period of 60 days after there has been given, by
registered or

 

28

 

certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of not less
than 25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a “Notice of Default” hereunder;

 

(d)                       Default
in the Company’s obligation to convert any portion of the principal amount of a
Note in accordance with its terms following exercise by the Holder of the right
to convert such Note; or

 

(e)                        Default
in the Company’s obligation to provide a Fundamental Change Notice upon a
Fundamental Change as provided in Section 3.01.

 

ARTICLE 6

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

Section 6.01.  With Consent Of Holders.  Pursuant to Section 301 (and
subject to Section 902) of the Indenture, so long as any of the Notes are
outstanding, without the consent of each Holder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 513 of the
Indenture, may not (in addition to the events described in paragraphs (1)
through (9) of Section 901 of the Indenture):

 

(a)                        make
any change that impairs or adversely affects the rights of the Holders of the
Notes to convert any Notes into Common Stock, or to institute suit for the
enforcement of any conversion of the Notes; or

 

(b)                       reduce
or impair or adversely affect the right of a Holder to receive the applicable
Fundamental Change repurchase price pursuant to Article 3 hereof, or to
institute suit for the enforcement of payment of such Fundamental Change
repurchase price.

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.01.  Application Of Third Supplemental
Indenture.  Each and every
term and condition contained in this Third Supplemental Indenture that
modifies, amends or supplements the terms and conditions of the Indenture shall
apply only to the Notes created hereby and not to any future series of
Securities established under the Indenture.  Except as specifically amended and supplemented by, or to the
extent inconsistent with, this Third Supplemental Indenture, the Indenture
shall remain in full force and effect and is hereby ratified and confirmed.

 

Section 7.02.  Effective
Date.  This Third
Supplemental Indenture shall be effective as of the date first above written
and upon the execution and delivery hereof by each of the parties hereto.

 

29

 

Section 7.03.  Counterparts.  This Third Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

 

30

 

IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed by their respective officers
hereunto duly authorized, all as of the day and year first above written.

 

	
   

  	
  PROVIDIAN FINANCIAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anthony Vuoto

  	
   

  
	
   

  	
  Name:

  	
  Anthony Vuoto

  
	
   

  	
  Title:

  	
  Vice Chairman & Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK ONE TRUST COMPANY, N.A., as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Janice Ott Rotunno

  	
   

  
	
   

  	
  Name:

  	
  Janice Ott Rotunno

  
	
   

  	
  Title:

  	
  Vice President

  

 

31

 

EXHIBIT A

 

32

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