Document:

Exhibit 4.2

 

FIRST SUPPLEMENTAL INDENTURE

 

Dated as of March 11, 2011

 

to

 

INDENTURE

 

Dated as of March 11, 2011

 

Between

 

BEST BUY CO., INC.,

 

as Issuer

 

and

 

WELLS FARGO BANK, N.A.,

 

as Trustee

 

 

3.750% Notes due 2016

 

5.500% Notes due 2021

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1. DEFINITIONS
    	
2
    
	
 
    	
 
    
	
Section 1.1.
    	
Definition of Terms
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE 2. TERMS AND   CONDITIONS OF NOTES
    	
2
    
	
 
    	
 
    
	
Section 2.1.
    	
Designation and Principal Amount
    	
2
    
	
Section 2.2.
    	
Maturity
    	
2
    
	
Section 2.3.
    	
Further Issues
    	
2
    
	
Section 2.4.
    	
Payment
    	
3
    
	
Section 2.5.
    	
Global Securities
    	
3
    
	
Section 2.6.
    	
Interest
    	
3
    
	
Section 2.7.
    	
Authorized Denominations
    	
3
    
	
Section 2.8.
    	
Redemption; Purchase and Sinking Fund
    	
4
    
	
Section 2.9.
    	
Ranking
    	
4
    
	
Section 2.10.
    	
Appointments
    	
4
    
	
Section 2.11.
    	
Defeasance
    	
4
    
	
Section 2.12.
    	
Guarantees
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 3. FORM OF   NOTES
    	
4
    
	
 
    	
 
    
	
Section 3.1.
    	
Form of Notes
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 4. ORIGINAL ISSUE OF   NOTES
    	
4
    
	
 
    	
 
    
	
Section 4.1.
    	
Original Issue of Notes
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE 5. MISCELLANEOUS
    	
4
    
	
 
    	
 
    
	
Section 5.1.
    	
Ratification of Indenture
    	
4
    
	
Section 5.2.
    	
Trustee Not Responsible for Recitals
    	
4
    
	
Section 5.3.
    	
Governing Law
    	
5
    
	
Section 5.4.
    	
Separability
    	
5
    
	
Section 5.5.
    	
Counterparts
    	
5
    
	
 
    	
 
    	
 
    
	
EXHIBIT A – Form of   2016 Notes
    	
A-1
    
	
 
    	
 
    
	
EXHIBIT B – Form of   2021 Notes
    	
B-1
    

 

 

FIRST SUPPLEMENTAL INDENTURE, dated as of March 11, 2011 (this “Supplemental Indenture”), between BEST BUY CO., INC., a corporation duly organized and existing under the laws of the State of Minnesota (the “Company”), and WELLS FARGO BANK, N.A., a national banking association duly organized and existing under the laws of the United States, as Trustee (the “Trustee”).

 

RECITALS OF THE COMPANY

 

WHEREAS, the Company executed and delivered to the Trustee the Indenture, dated as of March 11, 2011 (the “Indenture”), to provide for the issuance of the Company’s debt securities (the “Securities”), to be issued in one or more series;

 

WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of two new series of its Securities under the Indenture to be known as its “3.750% Notes due 2016” (the “2016 Notes”) and  “5.500% Notes due 2021” (the “2021 Notes” and, together with the 2016 Notes, the “Notes”), the form and substance and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this Supplemental Indenture;

 

WHEREAS, the Board of Directors of the Company by duly adopted resolutions has authorized the proper officers of the Company to, among other things, determine the terms of the Securities to be issued under the Indenture and execute any and all appropriate documents necessary or appropriate to effect each such issuance;

 

WHEREAS, this Supplemental Indenture is being entered into pursuant to the provisions of Section 901(8) of the Indenture;

 

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture; and

 

WHEREAS, all things necessary to make this Supplemental Indenture a valid agreement of the Company, in accordance with its terms, and to make the Notes, when executed and delivered by the Company and authenticated by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Supplemental Indenture has been duly authorized in all respects.

 

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, and for the purpose of setting forth, as provided in the Indenture, the forms and terms of the Notes, the Company covenants and agrees with the Trustee, as follows:

 

 

ARTICLE 1.

 

DEFINITIONS

 

Section 1.1.            Definition of Terms.  Unless the context otherwise requires:

 

(a)           each term defined in the Indenture has the same meaning when used in this Supplemental Indenture;

 

(b)           the singular includes the plural, and vice versa; and

 

(c)           headings are for convenience of reference only and do not affect interpretation.

 

ARTICLE 2.

 

TERMS AND CONDITIONS OF NOTES

 

Section 2.1.            Designation and Principal Amount.

 

(a)           There is hereby authorized and established a series of Securities under the Indenture, designated as the “3.750% Notes due 2016,” which is initially limited in aggregate principal amount to $350,000,000 (except upon registration of transfer of, or in exchange for, or in lieu of, other 2016 Notes pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture and except for any Notes which, pursuant to Section 303 of the Indenture, are deemed never to have been authenticated and delivered).

 

(b)           There is hereby authorized and established a series of Securities under the Indenture, designated as the “5.500% Notes due 2021,” which is initially limited in aggregate principal amount to $650,000,000 (except upon registration of transfer of, or in exchange for, or in lieu of, other 2021 Notes pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture and except for any Notes which, pursuant to Section 303 of the Indenture, are deemed never to have been authenticated and delivered).

 

Section 2.2.            Maturity.

 

(a)           The Stated Maturity of principal of the 2016 Notes shall be March 15, 2016.

 

(b)           The Stated Maturity of principal of the 2021 Notes shall be March 15, 2021.

 

Section 2.3.            Further Issues.  The Company may at any time and from time to time, without the consent of the Holders of any series of the Notes, issue additional Notes of such series; provided that any such additional Notes shall be fungible for U.S. federal income tax purposes with the relevant series of Notes issued hereunder.  Any such additional Notes shall have the same ranking, interest rate, maturity date and other terms as the relevant series of the

 

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Notes.  Any such additional Notes of a series, together with the Notes of the relevant series herein provided for, shall constitute a single series of Securities under the Indenture.

 

Section 2.4.            Payment.  Principal of and interest on the Notes shall be payable in U.S. dollars in immediately available funds at the office or agency of the Company maintained for such purpose, which shall initially be at the Corporate Trust Office of the Trustee; provided, however, that payment of interest may be made at the option of the Company through the Paying Agent by check mailed to the Holder at such address as shall appear in the Security Register at the close of business on the Record Date for such Holder or by wire transfer to an account appropriately designated by the Holder to the Company and the Trustee; and provided, further, that the Company through the Paying Agent shall pay principal of and interest on the Notes in the form of Global Securities registered in the name of or held by The Depository Trust Company (“DTC”) or such other Depositary as any Officer of the Company may from time to time designate, or its respective nominee, by wire transfer in immediately available funds to such Depositary or its nominee, as the case may be, as the registered holder of such Notes in the form of Global Securities.

 

Section 2.5.            Global Securities.  Upon the original issuance, the Notes will be represented by Global Securities registered in the name of Cede & Co., the nominee of DTC.  The Company will deposit the Global Securities with DTC or its custodian and register the Global Securities in the name of Cede & Co.

 

Section 2.6.            Interest.

 

(a)           The 2016 Notes shall bear interest (computed on the basis of a 360-day year consisting of twelve 30-day months) from March 11, 2011 at the rate of 3.750% per annum, payable semi-annually in arrears.  Interest payable on each Interest Payment Date shall include interest accrued from March 11, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for.  The Interest Payment Dates on which such interest shall be payable are March 15 and September 15, commencing on September 15, 2011; and the Record Date for the interest payable on any Interest Payment Date is the close of business on March 1 or September 1, as the case may be, next preceding the relevant Interest Payment Date.

 

(b)           The 2021 Notes shall bear interest (computed on the basis of a 360-day year consisting of twelve 30-day months) from March 11, 2011 at the rate of 5.500% per annum, payable semi-annually in arrears.  Interest payable on each Interest Payment Date shall include interest accrued from March 11, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for.  The Interest Payment Dates on which such interest shall be payable are March 15 and September 15, commencing on September 15, 2011; and the Record Date for the interest payable on any Interest Payment Date is the close of business on March 1 or September 1, as the case may be, next preceding the relevant Interest Payment Date.

 

Section 2.7.            Authorized Denominations.  The Notes shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

 

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Section 2.8.            Redemption; Purchase and Sinking Fund.  The Notes shall not be redeemable at the option of the Company or the Holders except as set forth in Paragraph 3 of the Notes.  The Company shall be required to purchase the Notes in accordance with the provisions of Paragraph 2 of the Notes.  The Notes shall not be entitled to the benefit of any sinking fund.

 

Section 2.9.            Ranking.  The Notes shall be senior unsecured debt securities of the Company, ranking equally with the Company’s other unsecured and unsubordinated Indebtedness.

 

Section 2.10.          Appointments.  The Trustee shall be the initial Security Registrar and initial Paying Agent for the Notes.

 

Section 2.11.          Defeasance.  The Company may elect, at its option at any time, pursuant to Section 1301 of the Indenture, to have Section 1302 or Section 1303 in the Indenture, or both, apply to the 2016 Notes or the 2021 Notes, or all of them, or any principal amount thereof.

 

Section 2.12.          Guarantees.  The Notes shall not be guaranteed by any Person.

 

ARTICLE 3.

 

FORM OF NOTES

 

Section 3.1.            Form of Notes.  The Notes and the Trustee’s certificate of authentication thereon shall to be substantially in the forms set forth in Exhibits A and B hereto.

 

ARTICLE 4.

 

ORIGINAL ISSUE OF NOTES

 

Section 4.1.            Original Issue of Notes.  The Notes may, upon execution of this Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall, upon Company Order, authenticate and deliver such Notes as in such Company Order provided.

 

ARTICLE 5.

 

MISCELLANEOUS

 

Section 5.1.            Ratification of Indenture.  The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided; provided, however, that the provisions of this Supplemental Indenture shall apply solely with respect to the Notes and not to any other series of Securities issued under the Indenture.

 

Section 5.2.            Trustee Not Responsible for Recitals.  The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no

 

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responsibility for the correctness thereof.  The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

 

Section 5.3.            Governing Law.  This Supplemental Indenture and each Note shall be governed by, and construed in accordance with, the law of the State of New York.

 

Section 5.4.            Separability.  In case any one or more of the provisions contained in the Indenture, this Supplemental Indenture or the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of the Indenture, this Supplemental Indenture or the Notes, but the Indenture, this Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

 

Section 5.5.            Counterparts.  This Supplemental Indenture may be executed in any number of counterparts each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

 

[Signature page follows]

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the day and year first above written.

 

	
 
    	
BEST BUY CO., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WELLS FARGO BANK, N.A.,
   as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

EXHIBIT A

 

[FORM OF NOTE]

 

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

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

BEST BUY CO., INC.

 

3.750% Notes due 2016

 

CUSIP No.: 086516 AK7

ISIN: US086516AK77

 

	
No. A-1
    	
 
    	
$350,000,000
    	
 
    

 

BEST BUY CO., INC., a corporation duly incorporated under the laws of the State of Minnesota (the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $350,000,000 (THREE HUNDRED FIFTY MILLION DOLLARS), as revised by the Schedule of Increases and Decreases attached hereto, on

 

A-1

 

March 15, 2016, and to pay interest thereon from March 11, 2011 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 15 and September 15 of each year, commencing on September 15, 2011, at the rate of 3.750% per annum, until the principal hereof is paid or made available for payment; provided that any principal and premium, and any such installment of interest, which is overdue shall bear interest at the rate of 3.750% per annum (to the extent permitted by applicable law), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on a “Special Record Date” for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of the Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

 

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

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

A-2

 

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

 

Dated:  March 11, 2011

 

	
 
    	
BEST   BUY CO., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

A-3

 

 

This Note is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

 

	
 
    	
WELLS   FARGO BANK, N.A.,
    
	
 
    	
as   Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    
	
Dated:   March 11, 2011
    	
 
    

 

A-4

 

[REVERSE OF NOTE]

 

1.             This Note is one of a duly authorized issue of Securities of the Company (the “Notes”), issued and to be issued in one or more series under the Indenture, dated as of March 11, 2011, and a supplemental indenture relating to the Notes dated as of March 11, 2011 (together, the “Indenture”), between the Company and Wells Fargo Bank, N.A., as Trustee (the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, such series initially limited in aggregate principal amount to $350,000,000; provided that the Company may at any time and from time to time, without the consent of any Holder, issue additional Notes of this series.

 

All terms which are used but not defined in this Note and which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

2.             If a Change of Control Triggering Event occurs, unless the Company has exercised its option to redeem the Notes pursuant to Paragraph 3 hereof, the Company shall make an offer (the “Change of Control Offer”) to each Holder of Notes to purchase all or any part (equal to $2,000 or any integral multiple of $1,000 in excess thereof) of such Holder’s Notes on the terms set forth herein.

 

In such Change of Control Offer, the Company shall offer payment in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, on the Notes up to, but not including, the date of purchase.

 

Within 30 days following any Change of Control Triggering Event or, at the Company’s option, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, the Company shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes describing the transaction that constitutes or may constitute the Change of Control Triggering Event and offering to purchase the Notes on the date specified in the notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed or, if the notice is mailed prior to the Change of Control, no earlier than 30 days and no later than 60 days from the date on which the Change of Control Triggering Event occurs (the “Change of Control Payment Date”).  The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

 

On the Change of Control Payment Date, the Company shall, to the extent lawful:

 

(a)           accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

 

(b)           deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of Notes or portions of Notes properly tendered; and

 

A-5

 

(c)           deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate Principal Amount of Notes or portions of Notes being repurchased.

 

The Company shall publicly announce the results of the Change of Control Offer on, or as soon as possible after, the date of purchase.

 

The Company shall not be required to make a Change of Control Offer upon the occurrence of a Change of Control Triggering Event if a third party makes such an offer in the manner, at the time and otherwise in compliance with the requirements for an offer made by the Company and the third party purchases all Notes properly tendered and not withdrawn under its offer.  In addition, the Company shall not purchase any Notes if there has occurred and is continuing on the Change of Control Payment Date an Event of Default under the Indenture, other than a default in the payment of the Change of Control Payment upon a Change of Control Triggering Event.

 

The Company shall comply in all material respects with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the purchase of the Notes as a result of a Change of Control Triggering Event.  To the extent that the provisions of any such securities laws or regulations conflict with these Change of Control Offer provisions, the Company shall comply with those securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Offer provisions by virtue of any such conflict.

 

For purposes of this Paragraph 2, the following terms shall have the following specified meanings:

 

“Change of Control” means the occurrence of any of the following:

 

(1)           the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person (other than the Company or a Subsidiary) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Company’s outstanding Voting Stock or other Voting Stock into which the Company’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of securities; provided, however, that a person shall not be deemed beneficial owner of, or to own beneficially any securities, (A) tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person’s affiliates until such tendered securities are accepted for purchase or exchange thereunder or (B) if such beneficial ownership (i) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (ii) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act;

 

(2)           the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company’s assets and the assets of the Subsidiaries, taken as a

 

A-6

 

whole, to one or more persons (other than to the Company or a Subsidiary); provided, however, that none of the circumstances in this clause (2) shall be a Change of Control if the persons that beneficially own the Company’s Voting Stock immediately prior to the transaction own, directly or indirectly, shares with a majority of the total voting power of all of the outstanding Voting Stock of the surviving or transferee person immediately after the transaction;

 

(3)           the Company consolidates with, or merges with or into, any person or any such person consolidates with, or merges with or into, the Company, in either case, pursuant to a transaction in which any of the Company’s outstanding Voting Stock or the Voting Stock of such other person is converted into or exchanged for cash, securities or other property, other than pursuant to a transaction in which shares of the Company’s Voting Stock outstanding immediately prior to the transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving person immediately after giving effect to such transaction;

 

(4)           the adoption of a plan relating to the Company’s liquidation or dissolution; or

 

(5)           the first day on which a majority of the members of the Company’s Board of Directors are not Continuing Directors.

 

Notwithstanding the foregoing, a transaction shall not be deemed to involve a Change of Control if (a) the Company becomes a direct or indirect wholly-owned subsidiary of a holding company (i.e., a parent company) and (b)(1) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Company’s Voting Stock immediately prior to that transaction or (2) immediately following that transaction no person (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company; provided that any series of related transactions shall be treated as a single transaction.  The term “person,” as used in this definition, has the meaning given thereto in Section 13(d)(3) of the Exchange Act.

 

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Event.

 

“Continuing Director” means, as of any date of determination, any member of the Company’s Board of Directors who (1) was a member of such Board of Directors on the date the Notes were issued, (2) was nominated for election to such Board of Directors with the approval of a committee of the Board of Directors consisting of a majority of independent Continuing Directors or (3) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Company’s proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

 

A-7

 

“Fitch” means Fitch Inc., or any successor thereto.

 

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P or Fitch, and the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

 

“Rating Agencies” means each of Moody’s, S&P and Fitch and, if any of Moody’s, S&P and Fitch ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the control of the Company, a “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company (as certified by a Board Resolution) as a replacement agency for Moody’s, S&P or Fitch, or all of them, as the case may be.

 

“Rating Event” means the rating on the Notes is lowered independently by each of the Rating Agencies and the Notes are rated below an Investment Grade Rating by each of the Rating Agencies on any day during the period commencing on the earlier of the date of the first public notice of the occurrence of a Change of Control or the Company’s intention to effect a Change of Control and ending 60 days following consummation of such Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for a possible downgrade by any of the Rating Agencies).

 

“S&P” means Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc. or any successor thereto.

 

“Voting Stock” means, with respect to any specified “person” (as that term is used in Section 13(d) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors or equivalent body of such person.

 

3.             The Notes shall be redeemable at any time or from time to time, in a whole or in part, at the Company’s option, on at least 30 days’ but not more than 60 days’ prior notice mailed to the registered address of each Holder of Notes to be redeemed (the “Redemption Date”), at a redemption price (the “Redemption Price”) equal to the greater of: (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of interest and principal on the Notes to be redeemed (exclusive of interest accrued and unpaid to, but not including, the Redemption Date) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points.

 

The Redemption Price for any Notes redeemed pursuant to this Paragraph 3 shall include accrued and unpaid interest, if any, on the principal amount of such Notes up to, but not including, the Redemption Date.

 

A-8

 

For purposes of this Paragraph 3, the following terms shall have the following specified meanings:

 

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of the Notes.

 

“Comparable Treasury Price” means, with respect to any Redemption Date, (A) the arithmetic average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the arithmetic average of all such quotations for such Redemption Date.

 

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means Merrill Lynch, Pierce Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and UBS Securities LLC, or their respective affiliates, which are primary U.S. government securities dealers in the United States of America, and their respective successors plus one other primary U.S. government securities dealer in the United States of America designated by the Company; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in New York City (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any Redemption Date, the arithmetic average, as determined by the Company, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent or interpolated (on a day count basis) yield to maturity of the applicable Comparable Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the applicable Comparable Treasury Price for such Redemption Date.

 

The provisions of Article XI of the Indenture shall apply to any redemption of the Notes.

 

The Notes are not entitled to the benefit of any sinking fund.

 

4.             The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes under the Indenture and the Notes at any time by the Company

 

A-9

 

and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes, to waive compliance by the Company with certain provisions of the Indenture and the Notes and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holders of Notes shall be conclusive and binding upon such Holders and upon all future Holders of the Notes and of any Notes issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

5.             If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may be declared, or shall immediately become, due and payable in the manner and with the effect provided in the Indenture.

 

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

 

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

 

6.             The Indenture contains provisions for defeasance at any time of the entire indebtedness of the Notes or certain restrictive covenants and Events of Default with respect to such Notes, in each case upon compliance with certain conditions set forth in the Indenture.

 

7.             As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of and any interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

A-10

 

The Notes are issuable only in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like principal amount of Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

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

 

This Note is a Global Security and is subject to the provisions of the Indenture relating to Global Securities, including the limitations in Section 305 thereof on transfers and exchanges of Global Securities.

 

8.             This Note and the Indenture shall be governed by, and construed in accordance with, the law of the State of New York.

 

A-11

 

SCHEDULE OF INCREASES OR DECREASES

 

The following increases or decreases in this Global Security have been made:

 

	
Date of
   Transfer or
   Exchange
    	
 
    	
Amount of decrease
   in Principal
   Amount of this
   Global Security
    	
 
    	
Amount of increase
   in Principal
   Amount of this
   Global Security
    	
 
    	
Principal Amount
   of this Global

Security following
   such decrease or
   increase
    	
 
    	
Signature of
   authorized
   signatory of Trustee
   or Security
   Registrar
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

A-12

 

EXHIBIT B

 

[FORM OF NOTE]

 

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

 

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

BEST BUY CO., INC.

 

5.500% Notes due 2021

 

CUSIP No.: 086516 AL5

ISIN: US086516AL50

 

	
No. A-[1][2]
    	
 
    	
$[500,000,000][150,000,000]
    

 

BEST BUY CO., INC., a corporation duly incorporated under the laws of the State of Minnesota (the “Company,” which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $[500,000,000][150,000,000] ([FIVE HUNDRED][ONE HUNDRED FIFTY] MILLION DOLLARS), as revised by the Schedule of Increases and Decreases attached hereto, on March 15, 2021, and to pay interest thereon from March 11, 2011

 

B-1

 

or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 15 and September 15 of each year, commencing on September 15, 2011, at the rate of 5.500% per annum, until the principal hereof is paid or made available for payment; provided that any principal and premium, and any such installment of interest, which is overdue shall bear interest at the rate of 5.500% per annum (to the extent permitted by applicable law), from the dates such amounts are due until they are paid or made available for payment, and such interest shall be payable on demand. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on a “Special Record Date” for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of the Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

 

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

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

B-2

 

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

 

	
Dated:   March 11, 2011
    
	
 
    
	
 
    	
BEST   BUY CO., INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

B-3

 

This Note is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

 

	
 
    	
WELLS   FARGO BANK, N.A.,
    
	
 
    	
as   Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    
	
Dated:   March 11, 2011
    	
 
    

 

B-4

 

[REVERSE OF NOTE]

 

1.             This Note is one of a duly authorized issue of Securities of the Company (the “Notes”), issued and to be issued in one or more series under the Indenture, dated as of March 11, 2011, and a supplemental indenture relating to the Notes dated as of March 11, 2011 (together, the “Indenture”), between the Company and Wells Fargo Bank, N.A., as Trustee (the “Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, such series initially limited in aggregate principal amount to $650,000,000; provided that the Company may at any time and from time to time, without the consent of any Holder, issue additional Notes of this series.

 

All terms which are used but not defined in this Note and which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

2.             If a Change of Control Triggering Event occurs, unless the Company has exercised its option to redeem the Notes pursuant to Paragraph 3 hereof, the Company shall make an offer (the “Change of Control Offer”) to each Holder of Notes to purchase all or any part (equal to $2,000 or any integral multiple of $1,000 in excess thereof) of such Holder’s Notes on the terms set forth herein.

 

In such Change of Control Offer, the Company shall offer payment in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, on the Notes up to, but not including, the date of purchase.

 

Within 30 days following any Change of Control Triggering Event or, at the Company’s option, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, the Company shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes describing the transaction that constitutes or may constitute the Change of Control Triggering Event and offering to purchase the Notes on the date specified in the notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed or, if the notice is mailed prior to the Change of Control, no earlier than 30 days and no later than 60 days from the date on which the Change of Control Triggering Event occurs (the “Change of Control Payment Date”).  The notice shall, if mailed prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

 

On the Change of Control Payment Date, the Company shall, to the extent lawful:

 

(a)           accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

 

(b)           deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of Notes or portions of Notes properly tendered; and

 

B-5

 

(c)           deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate Principal Amount of Notes or portions of Notes being repurchased.

 

The Company shall publicly announce the results of the Change of Control Offer on, or as soon as possible after, the date of purchase.

 

The Company shall not be required to make a Change of Control Offer upon the occurrence of a Change of Control Triggering Event if a third party makes such an offer in the manner, at the time and otherwise in compliance with the requirements for an offer made by the Company and the third party purchases all Notes properly tendered and not withdrawn under its offer.  In addition, the Company shall not purchase any Notes if there has occurred and is continuing on the Change of Control Payment Date an Event of Default under the Indenture, other than a default in the payment of the Change of Control Payment upon a Change of Control Triggering Event.

 

The Company shall comply in all material respects with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the purchase of the Notes as a result of a Change of Control Triggering Event.  To the extent that the provisions of any such securities laws or regulations conflict with these Change of Control Offer provisions, the Company shall comply with those securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Offer provisions by virtue of any such conflict.

 

For purposes of this Paragraph 2, the following terms shall have the following specified meanings:

 

“Change of Control” means the occurrence of any of the following:

 

(1)           the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person (other than the Company or a Subsidiary) becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Company’s outstanding Voting Stock or other Voting Stock into which the Company’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of securities; provided, however, that a person shall not be deemed beneficial owner of, or to own beneficially any securities, (A) tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person’s affiliates until such tendered securities are accepted for purchase or exchange thereunder or (B) if such beneficial ownership (i) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (ii) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act;

 

(2)           the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company’s assets and the assets of the Subsidiaries, taken as a

 

B-6

 

whole, to one or more persons (other than to the Company or a Subsidiary); provided, however, that none of the circumstances in this clause (2) shall be a Change of Control if the persons that beneficially own the Company’s Voting Stock immediately prior to the transaction own, directly or indirectly, shares with a majority of the total voting power of all of the outstanding Voting Stock of the surviving or transferee person immediately after the transaction;

 

(3)           the Company consolidates with, or merges with or into, any person or any such person consolidates with, or merges with or into, the Company, in either case, pursuant to a transaction in which any of the Company’s outstanding Voting Stock or the Voting Stock of such other person is converted into or exchanged for cash, securities or other property, other than pursuant to a transaction in which shares of the Company’s Voting Stock outstanding immediately prior to the transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving person immediately after giving effect to such transaction;

 

(4)           the adoption of a plan relating to the Company’s liquidation or dissolution; or

 

(5)           the first day on which a majority of the members of the Company’s Board of Directors are not Continuing Directors.

 

Notwithstanding the foregoing, a transaction shall not be deemed to involve a Change of Control if (a) the Company becomes a direct or indirect wholly-owned subsidiary of a holding company (i.e., a parent company) and (b)(1) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Company’s Voting Stock immediately prior to that transaction or (2) immediately following that transaction no person (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company; provided that any series of related transactions shall be treated as a single transaction.  The term “person,” as used in this definition, has the meaning given thereto in Section 13(d)(3) of the Exchange Act.

 

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Event.

 

“Continuing Director” means, as of any date of determination, any member of the Company’s Board of Directors who (1) was a member of such Board of Directors on the date the Notes were issued, (2) was nominated for election to such Board of Directors with the approval of a committee of the Board of Directors consisting of a majority of independent Continuing Directors or (3) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the Company’s proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

 

B-7

 

“Fitch” means Fitch Inc., or any successor thereto.

 

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P or Fitch, and the equivalent investment grade credit rating from any additional Rating Agency or Rating Agencies selected by the Company.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

 

“Rating Agencies” means each of Moody’s, S&P and Fitch and, if any of Moody’s, S&P and Fitch ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the control of the Company, a “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company (as certified by a Board Resolution) as a replacement agency for Moody’s, S&P or Fitch, or all of them, as the case may be.

 

“Rating Event” means the rating on the Notes is lowered independently by each of the Rating Agencies and the Notes are rated below an Investment Grade Rating by each of the Rating Agencies on any day during the period commencing on the earlier of the date of the first public notice of the occurrence of a Change of Control or the Company’s intention to effect a Change of Control and ending 60 days following consummation of such Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for a possible downgrade by any of the Rating Agencies).

 

“S&P” means Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc. or any successor thereto.

 

“Voting Stock” means, with respect to any specified “person” (as that term is used in Section 13(d) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors or equivalent body of such person.

 

3.             The Notes shall be redeemable at any time or from time to time, in a whole or in part, at the Company’s option, on at least 30 days’ but not more than 60 days’ prior notice mailed to the registered address of each Holder of Notes to be redeemed (the “Redemption Date”), at a redemption price (the “Redemption Price”) equal to the greater of: (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of interest and principal on the Notes to be redeemed (exclusive of interest accrued and unpaid to, but not including, the Redemption Date) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points; provided, that if the Company redeems any Notes on or after December 15, 2020, the Redemption Price for such Notes shall be equal to 100% of the principal amount of the Notes to be redeemed.

 

The Redemption Price for any Notes redeemed pursuant to this Paragraph 3 shall include accrued and unpaid interest, if any, on the principal amount of such Notes up to, but not including, the Redemption Date.

 

B-8

 

For purposes of this Paragraph 3, the following terms shall have the following specified meanings:

 

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of the Notes.

 

“Comparable Treasury Price” means, with respect to any Redemption Date, (A) the arithmetic average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Company obtains fewer than four such Reference Treasury Dealer Quotations, the arithmetic average of all such quotations for such Redemption Date.

 

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company.

 

“Reference Treasury Dealer” means Merrill Lynch, Pierce Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and UBS Securities LLC, or their respective affiliates, which are primary U.S. government securities dealers in the United States of America, and their respective successors plus one other primary U.S. government securities dealer in New York City designated by the Company; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in the United States of America (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer.

 

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any Redemption Date, the arithmetic average, as determined by the Company, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent or interpolated (on a day count basis) yield to maturity of the applicable Comparable Treasury Issue, assuming a price for such Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the applicable Comparable Treasury Price for such Redemption Date.

 

The provisions of Article XI of the Indenture shall apply to any redemption of the Notes.

 

The Notes are not entitled to the benefit of any sinking fund.

 

4.             The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes under the Indenture and the Notes at any time by the Company

 

B-9

 

and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all Notes, to waive compliance by the Company with certain provisions of the Indenture and the Notes and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holders of Notes shall be conclusive and binding upon such Holders and upon all future Holders of the Notes and of any Notes issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

5.             If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may be declared, or shall immediately become, due and payable in the manner and with the effect provided in the Indenture.

 

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

 

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

 

6.             The Indenture contains provisions for defeasance at any time of the entire indebtedness of the Notes or certain restrictive covenants and Events of Default with respect to such Notes, in each case upon compliance with certain conditions set forth in the Indenture.

 

7.             As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of and any interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

B-10

 

The Notes are issuable only in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like principal amount of Notes of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

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

 

This Note is a Global Security and is subject to the provisions of the Indenture relating to Global Securities, including the limitations in Section 305 thereof on transfers and exchanges of Global Securities.

 

8.             This Note and the Indenture shall be governed by, and construed in accordance with, the law of the State of New York.

 

B-11

 

SCHEDULE OF INCREASES OR DECREASES

 

The following increases or decreases in this Global Security have been made:

 

	
Date of
   Transfer or
   Exchange
    	
 
    	
Amount of decrease
   in Principal
   Amount of this
   Global Security
    	
 
    	
Amount of increase
   in Principal
   Amount of this
   Global Security
    	
 
    	
Principal Amount
   of this Global
   Security following
   such decrease or
   increase
    	
 
    	
Signature of
   authorized
   signatory of Trustee
   or Security
   Registrar
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

B-12EXHIBIT 10.1

 

HARDINGE INC.

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT dated as of March 7, 2011 (the “Agreement”), between HARDINGE INC., a New York corporation (the “Company”) and Richard L. Simons (the “Executive”).

 

WHEREAS, the Company desires to engage the Executive to provide services pursuant to the terms of this Agreement and the Executive desires to accept such engagement.

 

NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

 

1.                                       EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE

 

This Agreement shall become effective as of the date hereof.  For purposes of this Agreement, the term “Effective Date” shall mean the date hereof.

 

2.                                       EMPLOYMENT AND DUTIES

 

2.1                                 General.  The Company hereby employs the Executive as, and the Executive agrees to serve as, President and Chief Executive Officer, upon the terms and conditions herein contained.  The Executive shall perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the “Board”).  The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board.

 

2.2                                 Exclusive Services.  Except as may otherwise be approved in advance by the Board, the Executive shall devote his full working time throughout the Employment Term (as defined in Section 2.3) to the services required of him hereunder.  The Executive shall render his services exclusively to the Company during the Employment Term, and shall use his best efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position.  During the Employment Term, the Executive will not be employed with any other person or entity, or be self-employed, without the prior written approval of the Board.

 

2.3                                 Term of Employment.  The Executive’s employment under this Agreement shall commence as of the date hereof and shall terminate on the earlier of (i) the anniversary of the Effective Date or (ii) termination of the Executive’s employment pursuant to this Agreement; provided, however, that the term of the Executive’s employment shall be automatically extended without further action of either party for additional one year periods unless written notice of either party’s intention not to extend (a “Non-Renewal Notice”) has been given to the other party hereto at least 60 days prior to the expiration of the then effective term.  The period commencing as of the Effective Date and ending on the anniversary of the Effective

 

 

Date or such later date to which the term of the Executive’s employment shall have been extended is hereinafter referred to as the “Employment Term”.  Notwithstanding the foregoing, in the event of a Change in Control (as defined in Section 5.6) occurring during the Employment Term, the Employment Term shall be extended so that it terminates on the second anniversary of the date of the Change in Control, provided, however, the Employment Term will not be so extended if the Executive has given a Notice of Non-Renewal prior to the occurrence of the Change of Control.

 

2.4                                 Reimbursement of Expenses.  Unless otherwise agreed to by the Executive and the Company, the Company shall reimburse the Executive for reasonable travel and other business expenses incurred by him in the fulfillment of his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied.

 

3.                                       ANNUAL COMPENSATION

 

3.1                                 Base Salary.  From the Effective Date, the Executive shall be entitled to receive a base salary (“Base Salary”) at a rate of $375,000.00 per annum, payable in accordance with the Company’s payroll practices.  Subject to the Executive’s rights under Section 5.2, Base Salary is subject to increase or decrease, from time to time, in the sole and absolute discretion of the Board.  Once changed, such amount shall constitute the Executive’s annual Base Salary.

 

3.2                                 Annual Review.  The Executive’s Base Salary shall be reviewed by the Board, based upon the Executive’s performance not less often than annually.

 

3.3                                 Discretionary Bonus.  After the Effective Date, the Executive shall be entitled to such bonus, if any, as may be awarded to the Executive from time to time by the Board in the sole and absolute discretion of the Board.

 

4.                                       EMPLOYEE BENEFITS

 

The Executive shall, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holidays) which shall be established by the Company for, or made available to, its executives generally.

 

5.                                       TERMINATION OF EMPLOYMENT

 

5.1                                 Termination Events.

 

5.1.1.                     By the Company.  The Company may terminate the Executive’s employment at any time for Cause (as hereinafter defined), without Cause, or upon the Executive’s Permanent Disability (as hereinafter defined).

 

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5.1.2.                     By the Executive.  The Executive may terminate his employment at any time for Good Reason (as hereinafter defined) or without Good Reason.

 

5.2                                 Termination Without Cause; Resignation for Good Reason.

 

5.2.1  Prior to a Change in Control.  If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company without Cause, or the Executive resigns from his employment hereunder for Good Reason, in either case at any time prior to a Change in Control, the Company shall continue to pay the Executive the Base Salary (at the rate in effect immediately prior to such termination) for eighteen (18) months (such period being referred to hereinafter as the “Severance Period”).  The payments shall occur in installments in the same amount in effect immediately prior to such termination and at the same regular payment intervals as the Executive’s Base Salary was being paid on January 1, 2011 and such installments shall be deemed a series of separate payments within the meaning of Treas. Reg. §1.409A-2(b)(2)(iii).  Installments which in the aggregate do not exceed Executive’s Base Salary payable over 6 months shall be paid in a lump sum within 60 days following Executive’s termination of employment.  The remaining installments, if any, shall be paid in regular payment intervals with the first such installment paid on the first payment date occurring on or after the day following the 6-month anniversary of the Executive’s termination of employment.  In addition, the Executive shall be entitled to continue to participate for a period of eighteen (18) months following such termination in all employee welfare benefit plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company) provided, however, that for the first six months following the Executive’s termination of employment, the Executive shall pay the premiums of any welfare benefit plans to the extent that the payment of such premiums by the Company would have constituted gross income to the Executive.  The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company.  In the event of the Executive’s death during the Severance Period, Base Salary continuation payments under this Section 5.2.1 shall continue to be made during the remainder of the Severance Period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive’s estate.

 

If, during the Severance Period, the Executive breaches his obligations under Section 7 of this Agreement, the Company may, upon written notice to the Executive, terminate the Severance Period and cease to make any further payments or provide any benefits described in this Section 5.2.1.

 

The Company’s obligation to make the Base Salary continuation and health insurance payments described in this Section 5.2.1 shall be subject to the following conditions: (i) within twenty-one (21) days after the effective date of termination or resignation, the Executive shall have executed and delivered to the Company a Termination Agreement and

 

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Release (“Release”) in the form of Exhibit A attached hereto, and (ii) the Release shall not have been revoked by the Executive during the Executive during the revocation period specified therein.  If the Executive fails to deliver a fully executed Release to the Company before expiration of such twenty-one (21) day period, or such release is revoked as permitted therein, then the Company will have no obligation to make any of the payments specified in this Section 5.2.1.

 

5.2.2                        Within 12 Months Following a Change in Control.  If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company without Cause, or the Executive terminates his employment hereunder for Good Reason, in either case within 12 months following a Change in Control, the Company shall pay to the Executive cash payments equal to two times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control.  The payment based on the Executive’s Base Salary shall occur in installments in the same amount in effect immediately prior to such termination and at the same regular payment intervals as the Executive’s Base Salary was being paid on January 1, 2011 and such installments shall be deemed a series of separate payments within the meaning of Treas. Reg. §1.409A-2(b)(2)(iii).  Installments which in the aggregate do not exceed Executive’s Base Salary payable over 6 months shall be paid in a lump sum within 60 days following Executive’s termination of employment.  The remaining installments shall be paid in regular payment intervals with the first such installment paid on the first payment date occurring on or after the day following the 6-month anniversary of the Executive’s termination of employment.  The payment based on the Executive’s average annual bonus, which shall be deemed a separate “payment” within the meaning of Treas. Reg. §1.409A-2(b)(2) from the payment based on Base Salary, shall be paid in a lump sum within 60 days following the Executive’s termination of employment.  In addition, the Executive shall be entitled to continue to participate for a period of two years following such termination in all employee welfare benefit plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company) provided, however, that for the first six months following the Executive’s termination of employment, the Executive shall pay the premiums of any welfare benefit plans to the extent that the payment of such premiums by the Company would have constituted gross income to the Executive.  The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company.  In the event of the Executive’s death during the period when installment payments under this Section 5.2.2 are being made, such payments shall continue to be made during the remainder of such period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive’s estate.

 

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5.2.3                        After 12 Months Following a Change in Control.  If, prior to the expiration of the Employment Term, the Executive resigns from his employment for any reason at any time later than twelve months following a Change in Control, the Company shall pay to the Executive cash payments equal to two times the sum of (i) his Base Salary (at the rate in effect immediately prior to such termination or, if higher, as in effect immediately prior to the Change in Control) and (ii) his average annual bonus earned during the three fiscal years immediately preceding the Change in Control.  The payment based on the Executive’s Base Salary shall occur in installments in the same amount in effect immediately prior to such termination and at the same payment intervals as the Executive’s Base Salary was being paid on January 1, 2011 provided, however, that no such installment shall be paid before the day following the 6-month anniversary of the Executive’s termination of employment.  The payment based on the Executive’s average annual bonus, which shall be deemed a separate “payment” within the meaning of Treas. Reg. §1.409A-2(b)(2) from the payment based on Base Salary, shall be paid in a lump sum on the day following the 6-month anniversary of the Executive’s termination of employment. In addition, the Executive shall be entitled to continue to participate for a period of two years following such termination in all employee welfare benefit plans that the Company provides and continues to provide generally to its executive employees (or, if the Executive is not entitled to participate in any such plan under the terms thereof, in a comparable substitute arrangement provided by the Company) provided, however, that for the first six months following the Executive’s termination of employment, the Executive shall pay the premiums of any welfare benefit plans to the extent that the payment of such premiums by the Company would have constituted gross income to the Executive.  The Company shall reimburse the Executive for any premiums or other expenses incurred by the Executive with respect to his participation and that of any of his dependents in any such employee benefit welfare plan. The Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment except as determined in accordance with the terms of the employee benefit plans or programs of the Company.    In the event of the Executive’s death during the period when installment payments under this Section 5.2.3 are being made, such payments shall continue to be made during the remainder of such period to the beneficiary designated in writing for this purpose by the Executive or, if no such beneficiary is specifically designated, to the Executive’s estate.

 

5.3                                 Termination for Cause; Resignation Without Good Reason.  If, prior to the expiration of the Employment Term, the Executive’s employment is terminated by the Company for Cause, or the Executive resigns from his employment hereunder other than for Good Reason, the Executive shall (subject to Section 5.2.3) be entitled only to payment of his Base Salary as then in effect through and including the date of termination or resignation.  Subject to Section 5.2.3, the Executive shall have no further right to receive any other compensation or benefits after such termination or resignation of employment, except as determined in accordance with the terms of the employee benefit plans or programs of the Company.

 

5.4                                 Cause.  Termination for “Cause” shall mean termination of the Executive’s employment by the Company because of:

 

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(i)                                     any act or omission that constitutes a breach by the Executive of any of his obligations under this Agreement or any Company policy or procedure and failure to cure such breach after notice of, and a reasonable opportunity to cure, such breach;

 

(ii)                                  the continued willful failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company;

 

(iii)                               an act of moral turpitude, dishonesty or fraud by, or criminal conviction of, the Executive which in the determination of the Board would render his continued employment by the Company damaging or detrimental to the Company;

 

(iv)                              any misappropriation of Company property by the Executive; or

 

(v)                                 any other willful misconduct by the Executive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its subsidiaries or affiliates.

 

5.5                                 Good Reason.  For purposes of this Agreement, “Good Reason” shall mean the occurrence of one or more of the following events provided that, the Executive shall give the Company a written notice, within 90 days following the initial occurrence of the event, describing the event that the Executive claims to be Good Reason and stating the Executive’s intention to terminate employment unless the Company takes appropriate corrective action:

 

(i)                                     a material decrease in the Executive’s Base Salary that is not part of a general decrease in base salary for substantially all of the Company’s senior executives or a failure by the Company to pay material compensation due and payable to the Executive in connection with his employment;

 

(ii)                                  the Company’s failure to assign to the Executive duties that are generally consistent with the Executive’s position and title;

 

(iii)                               a material diminution in benefits provided by the Company to the Executive except for a diminution applicable to substantially all of the Company’s senior executives;

 

(iv)                              the Company’s requiring the Executive to relocate to an office or location more than 50 miles from the Company’s facilities in Elmira, New York;

 

(v)                                 a failure or refusal of any successor company to assume the Company’s obligations under this Agreement; or

 

(vi)                              the Company’s material breach of any material term of this Agreement.

 

The Company shall have 30 days from the date of receipt of the written notice from the Executive stating his claim of Good Reason in which to take appropriate corrective action.  If the Company does not cure the Good Reason, the Good Reason will be deemed to have occurred at

 

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the end of the 30-day period.  This section shall apply with respect to any successor of the Company following a Change in Control as if such successor were the Company.

 

5.6                                 Change in Control.  For purposes of this Agreement, the term “Change in Control” shall mean and shall be deemed to occur if and when:

 

(i)                                     an offeror (other than the Company) purchases securities of the Company pursuant to a tender or exchange offer for such securities which represent 35% or more of the combined voting power of the Company’s then outstanding securities;

 

(ii)                                  any person (as such term is used in Sections 13 (d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan of the Company or any person or entity appointed or established pursuant to any such plan, hereafter becomes the beneficial owner, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities, excluding any such securities held by such person as trustee or other fiduciary of an employee benefit plan of the Company;

 

(iii)                               the membership of the Board changes as the result of a contested election or elections, so that a majority of the individuals who are directors at any particular time were proposed by persons other than (a) directors who were members of the Board immediately prior to a first such contested election (“Continuing Directors”) or (b) directors proposed by the Continuing Directors and were initially elected to the Board as a result of such a contested election or elections occurring within the previous two years; or

 

(iv)                              the shareholders of the Company approve a merger, consolidation, sale or disposition of all or substantially all of the Company’s assets, or a plan of partial or complete liquidation.

 

6.                                       DEATH OR DISABILITY

 

In the event of termination of employment by reason of death or Permanent Disability, the Executive (or his estate, as applicable) shall be entitled to Base Salary and benefits determined under Sections 3 and 4 through the date of termination.  Other benefits shall be determined in accordance with the benefit plans maintained by the Company, and the Company shall have no further obligation hereunder.  For purposes of this Agreement, “Permanent Disability” means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity shall exist for any continuous period of 180 days.

 

7.                                       CONFIDENTIALITY; NONSOLICITATION; NONCOMPETITION

 

7.1                                 Confidentiality.  The Executive covenants and agrees with the Company that he will not any time during the Employment Term and thereafter, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company,

 

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directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and affiliates.  The term “confidential information” includes information not previously made generally available to the public or to the trade by the Company’s management, with respect to the Company’s or any of its subsidiaries’ or affiliates’ products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company’s products), business plans, prospects or opportunities, but shall exclude any information which is or becomes generally available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under this Section 7.1.  The Executive will be released of his obligations under this Section 7.1 to the extent the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law provided that the Executive provides the Company with prompt written notice of such requirement.

 

7.2                                 Acknowledgment of Company Assets.  The Executive acknowledges that the Company, at the Company’s expense, has acquired, created and maintains, and will continue to acquire, create and maintain, significant goodwill with its current and prospective customers, vendors and employees, and that such goodwill is valuable property of the Company.  The Executive further acknowledges that to the extent such goodwill will be generated through the Executive’s efforts, such efforts will be funded by the Company and the Executive will be fairly compensated for such efforts.  The Executive acknowledges that all goodwill developed by the Executive relative to the Company’s customers, vendors and employees shall be the sole and exclusive property of the Company and shall not be personal to the Executive.  Accordingly, in order to afford the Company reasonable protection of such goodwill and of the Company’s confidential information, the Executive agrees as follows:

 

7.2.1.                     Nonsolicitation.  For so long as the Executive is employed by the Company, and continuing for two years thereafter if termination of employment occurs for any reason prior to a Change in Control, the Executive shall not, without the prior written consent of the Company, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor, officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company: (i) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or, during the then most recent 12-month period, was employed by, or had served as an agent or key consultant of the Company or any of its subsidiaries; (ii) solicit or endeavor to entice away from the Company or any of its subsidiaries any person or entity who is, or was within the then most recent 12-month period, a customer or client (or reasonably anticipated to the general knowledge of the Executive or the public to become a customer or client) of the Company or any of its subsidiaries; or (iii) solicit or endeavor to entice away from the Company or any of its subsidiaries any person who is employed by the Company or its subsidiaries or induce such person to terminate his or her employment with the Company or its subsidiaries.

 

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7.2.2.                     No Competing Employment.  For so long as the Executive is employed by the Company, and continuing for one year thereafter if termination of employment occurs for any reason prior to a Change in Control, the Executive shall not, directly or indirectly, as a sole proprietor, member of a partnership, stockholder or investor (other than a stockholder or investor owning not more than a 1% interest), officer or director of a corporation, or as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity other than the Company, render any service to or in any way be affiliated with a competitor (or any person or entity that is reasonably anticipated to the general knowledge of the Executive or the public to become a competitor) of the Company or any of its subsidiaries.

 

7.3                                 Exclusive Property.  The Executive confirms that all confidential information is and shall remain the exclusive property of the Company.  All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive.  Upon termination of the Executive’s employment with the Company for any reason, the Executive promptly deliver to the Company all of the following that are in the Executive’s possession or under his control: (i) all computers, telecommunication devices and other tangible property of the Company and its affiliates, and (ii) all documents and other materials, in whatever form, which include confidential information or which otherwise relate in whole or in part to the present or prospective business of the Company or its affiliates, including but not limited to, drawings, graphs, charts, specifications, notes, reports, memoranda, and computer disks and tapes, and all copies thereof.

 

7.4                                 Injunctive Relief.  Without intending to limit the remedies available to the Company, the Executive acknowledges that a breach of any of the covenants contained in this Section 7 may result in material and irreparable injury to the Company or its affiliates or subsidiaries for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to seek a temporary restraining order and/or a preliminary or permanent injunction restraining the Executive from engaging in activities prohibited by this Section 7 or such other relief as may be required specifically to enforce any of the covenants in this Section 7.  If for any reason, it is held that the restrictions under this Section 7 are not reasonable or that consideration therefore is inadequate, such restrictions shall be interpreted or modified to include as much of the duration and scope identified in this Section 7 as will render such restrictions valid and enforceable.

 

7.5                                 Communication to Third Parties.  The Executive agrees that Company shall have the right to communicate the terms of this Section 7 to any third parties, including but not limited to, any prospective employer of the Executive.  The Company waives any right to assert any claim for damages against Company or any officer, employee or agent of Company arising from such disclosure of the terms of this Section 7.

 

7.6                                 Independent Obligations.  The provisions of this Section 7 shall be independent of any other provision of this Agreement.  The existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense of the enforcement of this Section 7 by the Company.

 

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7.7                                 Non-Exclusivity.  The Company’s rights and the Executive’s obligations set forth in this Section 7 are in addition to, and not in lieu of, all rights and obligations provided by applicable statutory or common law.

 

8.                                       CERTAIN PAYMENTS

 

Notwithstanding anything in this Agreement to the contrary, if any amounts due to the Executive under this Agreement and any other plan or program of the Company constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)), then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times his “base amount” (as defined in Section 280G(b)(3) of the Code) less $1.00.  The determination to be made with respect to this Section 9 shall be made by an accounting firm jointly selected by the Company and the Executive and paid by the Company, and which may be the Company’s independent auditors.

 

9.                                       MISCELLANEOUS.

 

9.1                                 Notices.  All notices or communications hereunder shall be in writing, addressed as follows:

 

To the Company:

 

Hardinge Inc.

One Hardinge Drive

Elmira, New York 14902-1507

Telecopier No. (607) 734-2353

Attention:  Mr. Kyle Seymour, Chairman of the Board

 

To the Executive:

 

Richard L. Simons

 

 

 

All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission, or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed.

 

9.2                                 Severability.  Each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be

 

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ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

9.3                                 Assignment.  The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company’s business and properties.  Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Executive.

 

9.4                                 Entire Agreement.  This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the Company and the Executive relating to the subject matter hereof.  This Agreement may be amended at any time by mutual written agreement of the parties hereto.

 

9.5                                 Withholding.  The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company’s employee benefits plans, if any.

 

9.6                                 Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that state.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Executive has hereunto set his hand, as of the day and year first above written.

 

	
 
    	
HARDINGE   INC.
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   KYLE H. SEYMOUR
    
	
 
    	
Name:
    	
Kyle   H. Seymour
    
	
 
    	
Title:
    	
Chairman   of the Board
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/   RICHARD L. SIMONS
    
	
 
    	
 
    	
Richard   L. Simons
    

 

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EXHIBIT A

 

HARDINGE INC.

TERMINATION AGREEMENT AND RELEASE

 

In consideration of the payments and benefits to be provided to me by Hardinge Inc. (the “Company”) pursuant to Section 5.2.1 of the Employment Agreement between the Company and me dated March 7, 2011 (the “Employment Agreement”), I agree as follows:

 

1.                                       Termination.  My employment with the Company is terminated effective                          and I will not thereafter apply for employment with the Company.

 

2.                                       Release.  On behalf of myself and my heirs, successors executors, administrators, trustees, legal representatives, agents and assigns, I fully and forever release and discharge the Company, its subsidiaries, divisions and affiliates and its and all of their predecessors, successors, assigns, directors and officers (collectively “Released Parties”) from any and all claims, demands, suits, causes of action, obligations, promises, damages, fees, covenants, agreements, attorneys’ fees, debts, contracts and torts of every kind whatsoever, known or unknown, at law or in equity, foreseen or unforeseen, which against the Released Parties I ever had, now have or which I may have for, upon or by reason of any matter, cause or thing whatsoever relating to or arising from my employment with the Company or the termination thereof, specifically including, but not limited to, all claims under the following:  the Civil Rights Acts of 1866, 1871, 1964 and 1991; the Age Discrimination in Employment Act of 1967; the Older Workers’ Benefit Protection Act of 1990; the Americans with Disabilities Act; the Equal Pay Act; the Employee Retirement Income Security Act; the Worker Adjustment Retraining Notification Act; the Family and Medical Leave Act; the National Labor Relations Act; the Occupational Safety and Health Act; the New York State Human Rights Law; the New York City Human Rights Law; the New York State Labor Law; §§ 120 and 241 of the New York State Workers’ Compensation Law; any contract of employment, express or implied; and any and all other federal, state or local laws, rules or regulations.

 

I hereby waive the right to receive any personal relief (i.e. monetary or equitable relief) as a result of any lawsuit or other proceeding brought by the EEOC or any other governmental agency, based on or related to any of the matters from which I have released the Released Parties. I also will take all actions necessary, if any, now or in the future, to make this Release effective, including seeking and obtaining any necessary governmental or court approval.

 

The foregoing release shall not operate to release the Company from its obligations to make payments and provide benefits as provided under Section 5.2.1 of the Employment Agreement.

 

In connection with the foregoing release (i) I acknowledge that the payments and benefits under Section 5.2.1 of the Employment Agreement are good and sufficient consideration to which I would not otherwise be entitled but for my execution and delivery to the Company of this instrument, (ii) I acknowledge that I have been advised by the Company to consult with an attorney before signing this instrument, (iii) the Company has allowed me at least twenty-one (21) days from the date I first receive this instrument to consider it before being required to sign

 

 

it and return it to the Company, and (iv) I may revoke this instrument, in its entirety, within seven (7) days after signing it by delivering written notice of such revocation to the Company on or before 5:00 p.m. on the seventh day of such revocation period.

 

IN WITNESS WHEREOF, the undersigned has executed this instrument as of the          day of                       .

 

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