-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LKXOlHACwmgJCvVWjgk5VX2majnT5i7PsGHej4jJZ9OHaNkv8mz1MAThBNQgHhwh M3pznbpxjmxa6XZ/9BR2fA== 0000950131-01-502026.txt : 20010628 0000950131-01-502026.hdr.sgml : 20010628 ACCESSION NUMBER: 0000950131-01-502026 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20010627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANKA BUSINESS SYSTEMS PLC CENTRAL INDEX KEY: 0000894010 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 980052869 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-55914 FILM NUMBER: 1668851 BUSINESS ADDRESS: STREET 1: 11201 DANKA CIRCLE N CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 7275766003 MAIL ADDRESS: STREET 1: 11201 DANKA CIRCLE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANKA HOLDING CO CENTRAL INDEX KEY: 0001143605 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 593498367 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-55914-01 FILM NUMBER: 1668852 BUSINESS ADDRESS: STREET 1: 11201 DANKA CIRLCE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 7275766003 MAIL ADDRESS: STREET 1: 11201 DANKA CIRCLE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANKA OFFICE IMAGING CO CENTRAL INDEX KEY: 0001143606 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 593498367 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-55914-02 FILM NUMBER: 1668853 BUSINESS ADDRESS: STREET 1: 11201 DANKA CIRLCE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 7275766003 MAIL ADDRESS: STREET 1: 11201 DANKA CIRCLE NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 S-4/A 1 ds4a.txt AMENDMENT #6 TO FORM S-4 As filed with the Securities and Exchange Commission on June 27, 2001 Registration No. 333-55914 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- Amendment No. 6 To FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 -------------- DANKA BUSINESS SYSTEMS PLC (Exact name of registrant as specified in its charter) *And the Subsidiary Guarantors listed below. England and Wales 5040 98-0052869 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation) Classification Code Number) Identification No.)
11201 Danka Circle North Masters House St. Petersburg, Florida 33716 107 Hammersmith Road (727) 576-6003 London W14 0QH England 011 44 207 603 1515 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------- F. Mark Wolfinger Chief Financial Officer Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, Florida 33716, (727) 579-2856 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Keith J. Nelsen, Esq. John E. Lowe, Esq. Senior Vice President & General Altheimer & Gray Counsel 10 South Wacker Drive Danka Business Systems PLC Suite 4000 11201 Danka Circle North Chicago, Illinois 60606 St. Petersburg, Florida 33716 (312) 715-4000 (727) 579-2801 -------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] -------------- CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------
Proposed Maximum Proposed Title of each Class of Amount Aggregate Maximum Amount of Securities to be to be Offering Price Aggregate Registration Registered Registered Per Unit Offering Price Fee - ---------------------------------------------------------------------------------- 10% subordinated notes due April 1, 2008..... $200,000,000 100% $200,000,000(1) $52,800(2) - ---------------------------------------------------------------------------------- Zero coupon senior subordinated notes due April 1, 2004 ........ (3) (3) (3) (3) - ---------------------------------------------------------------------------------- Guarantees related to the zero coupon senior subordinated notes due April 1, 2004 ........ (4) (4) (4) (4) - ---------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------
(1) Pursuant to Rule 457(f)(2) under the Securities Act of 1933, this amount is the book value of the maximum amount of 6.75% convertible subordinated notes due 2002 that may be received by the Registrant from tendering holders. (2) The registration fee has been calculated pursuant to Rule 457(f) under the Securities Act of 1933. (3) If any amount of the zero coupon senior subordinated notes are selected in this exchange offer, the amount of the 10% subordinated notes to be registered will be reduced to an amount such that the total of zero coupon senior subordinated notes and 10% subordinated notes to be issued upon completion of this exchange offer will be less than $200 million. Therefore, no additional registration fee is required pursuant to Rule 457 under the Securities Act of 1933. (4) Pursuant to Rule 457(n), no additional fee is required for the guarantees. -------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS
Primary State of Standard Industrial IRS Employee Name of Additional Registrant Principal Executive Office Incorporation Classification Code Identification Code - ----------------------------- ----------------------------- ------------- ------------------- ------------------- Danka Holding Company 11201 Danka Circle North Delaware 5040 59-3498367 St. Petersburg, Florida 33716 (727) 576-6003 Danka Office Imaging 11201 Danka Circle North Delaware 5040 59-3407614 Company St. Petersburg, Florida 33716 (727) 576-6003
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus and exchange offer may be changed. We may + +not complete this exchange offer and issue these securities until the + +registration statement filed with the Securities and Exchange Commission is + +effective. This prospectus is not an offer to sell these securities and it is + +not soliciting an offer to buy these securities in any jurisdiction where the + +offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Dated June 27, 2001 Prospectus and Exchange Offer DANKA BUSINESS SYSTEMS PLC [LOGO OF DANKA BUSINESS SYSTEMS PLC] Exchange Offer For All Outstanding 6.75% Convertible Subordinated Notes Due 2002 (CUSIP Nos. G2652NAA7, 236277AA7, and 236277AB5) Exchange Offer Expiration: June 29, 2001 at 8:00 a.m., New York City time. Exchange Offer We are offering to exchange cash and new debt securities for your 6.75% convertible subordinated notes due 2002 that are validly tendered, not withdrawn, and accepted, in this exchange offer. You can select the form of consideration that you will receive for your notes from the following three options: . Limited Cash Option $400 in cash for every $1,000 in principal amount of notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of old notes. If more than $60 million in principal amount of old notes are tendered under this option, we will exchange $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of notes tendered. We will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions as everyone else who tenders old notes under this option. . Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. . 10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all the old notes that you tender. You do not have to tender all of your old notes to participate in this exchange offer. You may withdraw your tender of old notes or change your choice of consideration options at any time before the expiration of this exchange offer. This exchange offer is subject to the following conditions: . valid tenders of at least 92% of the aggregate principal amount of the 6.75% convertible subordinated notes; . consent to this exchange offer from our senior bank lenders; . consent to this exchange offer from parties to our tax retention operating leases; . the closing of the purchase of Danka Services International ("DSI") by Pitney Bowes Inc.; and . other customary conditions. If we are unable to consummate this exchange offer, we may have to seek bankruptcy protection or commence liquidation or administration proceedings. In that case, owners of old notes may only receive repayment of little or none of the principal amount of their old notes. Old notes: On March 13, 1995, we issued and sold $200 million of 6.75% convertible subordinated notes due 2002. New notes: We are offering up to an aggregate maximum of $160 million zero coupon senior subordinated notes due April 1, 2004 and up to an aggregate maximum of $200 million 10% subordinated notes due April 1, 2008 as consideration under this exchange offer. The new senior subordinated notes will be fully and unconditionally and jointly and severally guaranteed, on a senior subordinated basis, by Danka Holding Company and Danka Office Imaging Company, our 100% owned subsidiaries. We intend to apply to list the new senior subordinated notes and the new 10% notes on the Luxembourg Stock Exchange. We will not receive any proceeds from the issuance of the new notes. If the conditions to this exchange offer are satisfied, or waived by us, we will accept for exchange any and all old notes that are validly tendered and not withdrawn before 8:00 a.m., New York City time, on the expiration date of this exchange offer. If the conditions are not satisfied or waived or if we otherwise terminate this exchange offer, tendered old notes will be returned, without expense to you. Both acceptance and rejection of this exchange offer involve a high degree of risk. See "Risk Factors" beginning on page 16 of this prospectus for a discussion of risk factors that you should consider in connection with this exchange offer and an investment in the new notes. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The exclusive dealer manager for this exchange offer is: Banc of America Securities LLC The date of this prospectus is June 27, 2001. TABLE OF CONTENTS
Page ---- Information Incorporated By Reference...................................... 1 Prospectus Summary......................................................... 2 Risk Factors............................................................... 16 Disclosure Regarding Forward-Looking Statements............................ 30 Use of Proceeds............................................................ 30 Capitalization............................................................. 31 This Exchange Offer........................................................ 35 Sale of DSI................................................................ 45 New Credit Facility........................................................ 51 Legal Proceedings.......................................................... 55 Selected Financial Data.................................................... 56 Unaudited Pro Forma Consolidated Financial Statements...................... 60 Comparison of the Old Notes and the New Notes.............................. 69 Terms of the Old Notes..................................................... 75 Terms of the New Notes..................................................... 81 Description of Existing Indebtedness....................................... 126 Description of Capital Stock............................................... 129 Book-Entry; Delivery and Form.............................................. 134 Material United States Federal and United Kingdom Tax Consequences......... 141 Plan of Distribution....................................................... 154 Legal Matters.............................................................. 154 Experts.................................................................... 154 Where You Can Find More Information........................................ 155 Certain United Kingdom Regulatory Issues................................... 156
ii INFORMATION INCORPORATED BY REFERENCE The SEC allows us to provide information about our business and other important information to you by "incorporating by reference" the information we file with the SEC, which means that we can disclose the information to you by referring in this prospectus to the documents we file with the SEC. We incorporate into this prospectus by reference the following documents filed by us with the SEC, each of which should be considered an important part of this prospectus: SEC Filing (SEC File No. 0-20828) Date or Period Covered Annual Report on Form 10-K, Year ended March 31, 2001 as amended on Form 10-K/A Current Report on Form 8-K Form 8-K filed May 1, 2001 Current Report on Form 8-K Form 8-K filed April 9, 2001 Current Report on Form 8-K Form 8-K filed June 11, 2001 Current Report on Form 8-K Form 8-K filed June 15, 2001 You may request a copy of each of our filings at no cost, by writing or telephoning us at the following address, telephone or facsimile number: Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, Florida 33716 Attn: Treasurer Telephone: (727) 578-4766 Facsimile: (727) 577-4802 You may also read and copy information that we incorporate by reference in this prospectus at the public reference facilities maintained by the SEC at: Securities and Exchange Commission Securities and Exchange Commission 450 Fifth Street, N.W., Room 1024 7 World Trade Center, 13th Floor Washington, D.C. 20549 New York, New York 10048 Securities and Exchange Commission 500 West Madison Street, Suite 1400 Chicago, Illinois 60661 You may also obtain copies of those materials at prescribed rates from the public reference section of the SEC at 450 Fifth Street, Washington, D.C. 20549. You may obtain copies from the public reference room by calling the SEC at (800) 732-0330. In addition, we are required to file electronic versions of those materials with the SEC through the SEC's EDGAR system. The SEC maintains a web site at http://www.sec.gov that contains the information incorporated by reference in this prospectus. Exhibits to documents will not be provided unless they are specifically incorporated by reference in that document. You must request the filings no later than five business days before the date you must make your investment decision in order for you to obtain timely delivery of this information. The information in this prospectus may not contain all of the information that may be important to you. You should read the entire prospectus, as well as the documents incorporated by reference in the prospectus, before you make any decision regarding this exchange offer. 1 PROSPECTUS SUMMARY The following summary highlights some information from this prospectus. It may not contain all of the information that may be important to you. To understand this exchange offer fully and for a more complete description of the legal terms of this exchange offer, you should read carefully this entire prospectus and the other documents to which we have referred you, including the letter of transmittal accompanying this prospectus. Danka Business Systems PLC We are one of the world's largest independent suppliers, by revenue, of photocopiers and office imaging equipment. We primarily market these products, and photocopier services, parts and supplies directly to customers in approximately 30 countries. Reason for this Exchange Offer We are making this exchange offer as a fundamental part of an overall plan to reduce and refinance our indebtedness. Background of this Exchange Offer We are currently operating with a very high level of indebtedness. Our obligations to make regular payments of interest, fees and principal to service our indebtedness have had, and continue to have, a significant impact on our financial results. The impact on our financial performance of these obligations has been exacerbated in recent periods by a decline in our cash flow from operations resulting from the difficult business conditions in the photocopier industry that we, and our competitors, are currently experiencing. Our goal is to provide for the long-term financing of our business through a plan to reduce and refinance our indebtedness. Our plan has three parts: . the refinancing of our old notes through this exchange offer; . the sale of DSI; and . the refinancing of our senior bank debt. We intend to close all three parts of our plan by June 29, 2001, but we cannot assure you that we will do so. Our two major items of indebtedness are our senior bank debt and the old notes. The senior bank debt is due for repayment in full on March 31, 2002 and the principal balance of the old notes is due for repayment on April 1, 2002. The old notes rank behind our senior bank debt in right of payment. We do not currently have, nor do we expect to have, sufficient liquidity to repay in full our senior bank debt and the old notes. Based on our recent history, expectations and the problems facing our industry generally, we do not anticipate that we will generate sufficient cash flow from operations to repay our senior bank debt or the old notes when they become due in 2002. Therefore, we wish now to refinance our senior bank debt and to exchange the old notes for a limited amount of cash and new subordinated debt of an extended maturity. If we are unable to consummate this exchange offer, we may have to seek bankruptcy protection or commence liquidation or administration proceeds. In that case, owners of old notes may only receive repayment of little or none of the principal amount of their old notes. 2 Because of the uncertainty regarding our ability to repay our senior bank debt and the old notes when they become due for repayment, the report of our independent auditors on our United States GAAP fiscal year 2001 consolidated financial statements contains an explanatory paragraph stating there is substantial doubt about our ability to continue as a going concern. The trading price of our American depositary shares has fallen from a high of $14.0625 on December 7, 1999 to $0.89 on June 26, 2001. As a result of this decline, we have been required to transfer the Nasdaq listing of our American depositary shares from the Nasdaq National Market to the Nasdaq SmallCap Market. We presently have very limited, if any, access to capital markets. Purchase of DSI by Pitney Bowes The purchase of DSI by Pitney Bowes is a condition of this exchange offer. On April 9, 2001, we entered into an agreement to sell DSI to Pitney Bowes for $290 million in cash. We have convened a meeting of our shareholders for June 27, 2001 for the purpose of approving the sale of DSI. See "Sale of DSI" for a description of the principal terms and conditions of the sale. We will use the majority of the net proceeds of the sale of DSI to repay part of our senior bank debt. We will also use the net proceeds of the sale of DSI to finance the cash payable under the limited cash option of this exchange offer, and to finance the costs of, and taxes associated with, this exchange offer. Senior Bank Debt The consent of our existing senior bank lenders is a condition of this exchange offer. As discussed above, we will use the majority of the net proceeds of DSI to refinance part of our senior bank debt. We anticipate that we will refinance the remainder of our senior bank debt by drawing down on a new credit facility that we expect will consist of a new revolving facility, a letter of credit facility and a new term loan. We expect the new credit facility to be provided by some or all of our existing senior bank lenders. See "New Credit Facility" for a description of the anticipated material terms of the new credit facility. Closing of the new credit facility will be conditioned on the successful completion of this exchange offer. Effective March 28, 2001, we obtained an amendment to the existing credit agreement for our senior bank debt which modified the financial covenants contained in the credit agreement for the period from March 28, 2001 through July 16, 2001. Without this amendment, we would have been in violation of the financial covenants. As a result of the magnitude of write-offs and charges taken in the fourth quarter of our fiscal year 2001 and the explanatory paragraph contained in our independent auditors' report on our fiscal year 2001 financial statements stating that there is substantial doubt about our ability to continue as a going concern, we were in non-compliance with the financial covenants and a covenant that our independent auditors' report must not contain such an explanatory paragraph. On June 7, 2001, we obtained an additional amendment to our credit agreement that waives compliance with the covenant that requires that the independent auditors' report on our March 31, 2001 financial statements must not contain such an explanatory paragraph and which provides that certain of the fourth quarter write-offs and charges are not taken into account in determining whether the financial covenants have been met. After giving effect to the amendment, we are in compliance with the financial covenants that apply under the credit agreement for the period through July 16, 2001. We were not required to pay a fee in consideration of the June 7, 2001 amendment. During the period ending July 16, 2001, we may receive advances under the credit agreement only for ordinary operational needs. If we do not refinance our senior bank debt before July 17, 2001, we expect that we will require an additional amendment to, or further waiver of, the financial covenants that will be in effect under the credit agreement from that date. However, we cannot assure you that our lenders would agree to a further amendment or waiver. 3 Effects of this Exchange Offer on Owners of the Old Notes This exchange offer is conditioned on our receiving tenders of at least 92% of the outstanding $200 million in principal amount of old notes. If this exchange offer is successful, $16 million or less in principal amount of the old notes will remain outstanding. Any remaining old notes will be subordinated to all of our other indebtedness, including our new credit facility, the new senior subordinated notes and the new 10% notes. The following list describes the order of priority for repayment of our funded indebtedness and secured obligations that will be outstanding following this exchange offer, in descending order: . first, our senior indebtedness, including our new credit facility, and any commitments under our tax retention operating leases; . next, the new zero coupon senior subordinated notes due 2004; . next, the new 10% subordinated notes due 2008; and . finally, any remaining old notes. These priorities of repayment will apply in the event of our liquidation, insolvency or similar proceedings. In addition, the subordination terms of the old notes will prevent us from making payments on any remaining old notes if, and for so long as, we are in default of any of our payment obligations under our funded indebtedness beyond applicable grace periods. We will also be prohibited from making payments on any remaining old notes if any other event of default exists under any of our other funded indebtedness that permits the holders to declare that indebtedness due and payable prior to its scheduled maturity date. In these circumstances, payments on the old notes cannot be prevented for more than 179 days after we receive notice of the event of default on the other indebtedness, unless that other indebtedness has been declared due and payable in full. Failure to pay an aggregate of $25 million of principal amount of indebtedness when due, including amounts due on any remaining old notes, will constitute an event of default under the new notes, and we anticipate that failure to pay some lesser amount will constitute an event of default under our new credit facility. We believe that opportunities to trade any old notes that remain outstanding after this exchange offer will be extremely limited. Therefore, it will likely be very difficult to sell any remaining old notes. If you choose not to accept this exchange offer, your old notes will remain outstanding and convertible into American depositary shares or ordinary shares. The old notes are convertible into American depositary shares at a price of $29.125 per American depositary share and into ordinary shares at a price of $7.281 per ordinary share. As of close of business on June 26, 2001, the closing price of our American depositary shares on the Nasdaq SmallCap Market was $0.89 and the closing price of our ordinary shares on the London Stock Exchange was (Pounds)0.1500 (equivalent to approximately $0.2125 at a rate of UK(Pounds)1:$1.4168). Our American depositary shares represent beneficial ownership of four ordinary shares. A summary of the terms of the new notes is contained in "Prospectus Summary--Summary Description of the New Notes." The terms of the old notes, the new senior subordinated notes and the new 10% notes, and the principal differences between the old notes and the new notes, are described in more detail in "Comparison of the Old Notes and the New Notes," "Terms of the Old Notes" and "Terms of the New Notes." 4 See "Unaudited Pro Forma Consolidated Financial Statements" for pro forma financial information which reflects the effect of this exchange offer, the sale of DSI and the refinancing of our senior bank debt on our business. Our board of directors expresses no opinion and is remaining neutral regarding any recommendation to you whether or not to tender your old notes under this exchange offer because the risks and benefits of this exchange offer to you will depend on your particular situation or status. Our board of directors has made no determination that the exchange ratios represent a fair valuation of either the old notes, the new senior subordinated notes or the new 10% notes and we have not obtained a fairness opinion from any financial advisor about the fairness of the exchange ratios to us or to you. In addition, we have not authorized anyone to make a recommendation regarding this exchange offer. You must make your own decision whether to tender your old notes in this exchange offer based upon your own assessment of the market value of the old notes and the likely value of the new notes, your liquidity needs and your investment objectives. Summary of the Terms of this Exchange Offer We summarize below the terms of this exchange offer. You should read the detailed description of the offer in the section entitled "This Exchange Offer." In addition, you should read the section entitled "Risk Factors" for a discussion of risk factors that you should consider in connection with this exchange offer. Purpose of this exchange offer......................... We are making this exchange offer as part of an overall plan to reduce and refinance our indebtedness. The other parts of our plan are the sale of DSI and the refinancing of our senior bank debt. Securities for which we are making this exchange offer.... $200 million in principal amount of 6.75% convertible subordinated notes due April 1, 2002. Securities offered under this exchange offer................ Up to $160 million in principal amount of zero coupon senior subordinated notes due April 1, 2004 and up to $200 million in principal amount of 10% subordinated notes due April 1, 2008. Cash offered under this Up to $24 million. exchange offer................ Consideration options......... You can select the form of consideration that you will receive for your old notes from the following three options: Limited Cash Option $400 in cash for every $1,000 in principal amount of old notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of old notes. If more than $60 million in principal amount of old notes are tendered under this option, we will exchange $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of old notes tendered. We will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions 5 as everyone else who tenders old notes under this option. We may issue new senior subordinated notes in denominations of less than $1,000. We will not determine whether the limited cash option is over-subscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes once we make this determination even though it may affect the type of exchange consideration that you will receive in this exchange offer. Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. We may issue new senior subordinated notes in denominations of less than $1,000. 10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all the old notes that you tender. You do not have to tender all of your old notes to participate in this exchange offer. However, this exchange offer is conditioned on us receiving valid tenders of at least 92% of the aggregate principal amount of the old notes. Conditions to this exchange This exchange offer is subject to the offer......................... conditions that: . we receive valid tenders for at least 92% of the aggregate principal amount of the old notes; . our senior bank lenders consent to this exchange offer; . parties to our tax retention operating leases consent to this exchange offer; . Pitney Bowes closes the purchase of DSI; . this exchange offer complies with applicable laws and applicable interpretations of the staff of the SEC; . this exchange offer complies with all applicable state securities or "blue sky" laws; . no litigation has been instituted or threatened or law enacted that could prohibit this exchange offer, materially adversely affect our business, or limit the tax deductability of interest on the new notes or materially impair the benefits to us of this exchange offer; 6 . no event has occurred affecting our business that would reasonably be expected to prohibit, prevent or significantly delay this exchange offer or materially impair the benefits of this exchange offer; . the trustee of the old notes has not objected to this exchange offer; and . no tender or exchange offer for our equity securities or any business combination involving us has been proposed or announced or has occurred. The sale of DSI is subject to the conditions described in "Sale of DSI." The refinancing of our senior bank debt will likely be subject to the conditions described in "New Credit Facility." Subject to satisfaction or waiver of the conditions, we will accept for exchange any and all old notes that are validly tendered and not withdrawn before 8:00 a.m., New York City time, on June 29, 2001, the expiration date of this exchange offer. However, we reserve the right to: . delay the acceptance of the old notes for exchange; . terminate this exchange offer; . extend the expiration date and retain all old notes that have been tendered, subject to the right of owners of old notes to withdraw their tendered old notes; . refuse to accept the old notes and return all old notes that have been tendered to us; or . waive any condition or otherwise amend the terms of this exchange offer in any respect. We will not waive or amend any condition after the expiration date of this exchange offer. Accrued interest.............. The last payment of interest on the old notes was made on April 1, 2001. This payment covered accrued interest at the rate of 6.75% from October 1, 2000 through March 31, 2001. The first payment of interest on the new 10% notes will be made on October 1, 2001. This payment will cover accrued interest at the rate of 10% effective from April 1, 2001 through September 30, 2001. We have structured the limited cash option and the zero coupon note option so that the price we are offering to pay will reflect payment in full for the old notes. There will be no separate payment of accrued interest on the old notes accepted in this exchange offer. 7 Procedures for tendering old We anticipate that tenders will be effected by notes......................... book entry transfers. If you wish to tender old notes in this exchange offer and you are not a participant in DTC, Euroclear or Clearstream, you should contact your broker, dealer, commercial bank, trust company or other nominee regarding the procedures to follow in tendering your old notes. Letters of transmittal and other documentation relating to the old notes and this exchange offer should not be sent to us. These documents should be sent only to the exchange agent. Questions regarding how to tender your old notes and requests for information should also be directed to the exchange agent. See "This Exchange Offer--Procedures for Exchanging Notes." Acceptance of old notes and delivery of new notes......... We will accept all old notes validly tendered, and not withdrawn, on or prior to 8:00 a.m., New York City time, on the expiration date. See "This Exchange Offer--Procedures for Exchanging Notes." The exchange agent will deliver the appropriate credit for new notes issued in this exchange offer to the accounts of the owners of the new notes at the Depositary Trust Company, Euroclear or Clearstream and make the appropriate cash payments as soon as practicable after the expiration date. See "This Exchange Offer--Exchange of Notes and Payment of Cash." Expiration date............... The expiration date is 8:00 a.m., New York City time on June 29, 2001, unless extended. See "This Exchange Offer--Amendment of this Exchange Offer." Withdrawal rights............. The tender of old notes may be withdrawn at any time prior to our acceptance of the tendered notes for payment. Notes not tendered or accepted for exchange......... Any old notes not accepted for exchange for any reason will be returned without expense to you as promptly as practicable after the expiration or termination of this exchange offer. If you do not exchange your old notes in this exchange offer, or if your old notes are not accepted for exchange, you will continue to hold your old notes and will be entitled to all the rights and will be subject to all the limitations applicable to the old notes. Use of proceeds............... We will not receive any cash proceeds from the issuance of the new notes offered in this exchange offer. Appraisal rights.............. You will have no dissenters' rights or appraisal rights in connection with this exchange offer. 8 United States and United Kingdom tax consequences of this exchange offer........... You are referred to the discussion of the United States federal income tax and United Kingdom tax consequences of this exchange offer in the section entitled "Material United States Federal and United Kingdom Tax Consequences." The tax consequences to you of this exchange offer will depend on the facts of your own situation. You should consult your own tax advisor for a full understanding of the tax consequences to you of this exchange offer. No established markets........ Although we intend to apply to list the new senior subordinated notes and the new 10% notes on the Luxembourg Stock Exchange, we cannot assure you that any active trading markets in the new senior subordinated notes or the new 10% notes will develop. "Blue Sky" compliance......... We are not making this offer to, and we will not accept tenders from, holders of notes in any jurisdiction in which this exchange offer or the acceptance of notes would not comply with the applicable securities or "blue sky" laws of that jurisdiction. Dealer manager................ Banc of America Securities LLC is the exclusive dealer manager for this exchange offer. Its address and telephone numbers are located in the section "Where You Can Find More Information." Exchange agent................ HSBC Bank USA is the exchange agent for this exchange offer. Its address and telephone numbers are located in the section "Where You Can Find More Information." Information agent............. D.F. King & Co., Inc. is the information agent for this exchange offer. Its address and telephone numbers are located in the section "Where You Can Find More Information." 9 Summary Description of the New Notes Zero Coupon Senior Subordinated Notes Due 2004 Notes offered................. Up to $160 million in aggregate principal amount. Maturity...................... April 1, 2004 Guarantees.................... Danka Holding Company and Danka Office Imaging Company, our 100% owned principal United States subsidiaries, will fully and unconditionally and jointly and severally guarantee, on a senior subordinated basis, the new senior subordinated notes. Ranking....................... The new senior subordinated notes will rank in right of payment behind our senior bank debt and all of our other existing and future senior debt. The new senior subordinated notes will rank in right of payment ahead of the new 10% notes and any remaining old notes. If we issue additional subordinated debt in the future, the new senior subordinated notes will rank in right of payment ahead of, or equal to, that debt. The new senior subordinated notes will be unsecured. The new senior subordinated notes will effectively rank in right of payment behind debt and other liabilities of our subsidiaries, including trade creditors. Because the new senior subordinated notes are subordinated, in the event of our bankruptcy, liquidation or dissolution, owners of the new senior subordinated notes will not be entitled to receive any payment until the holders of our senior debt have been paid in full. Assuming we complete all three parts of our overall refinancing plan, based on the assumptions for the pro forma financial information described on pages 60 and 61, on the closing of this exchange offer, the senior subordinated notes: . will be subordinated to approximately $303 million of senior debt; and . will rank senior to approximately $87 million of other subordinated debt. The terms of the new senior subordinated notes impose limitations on the amount of additional new indebtedness that we can incur. The terms of the new senior subordinated notes also prevent us from assuming any new indebtedness which results in right of payment behind our senior debt but ahead of the new senior subordinated notes. The guarantees of the new senior subordinated notes will rank junior in right of payment to all of our existing and future senior debt and all existing and future senior debt of Danka Holding Company and Danka Office Imaging Company and any guarantees by Danka Holding Company and Danka Office Imaging Company of any of our existing and future senior debt. The 10 guarantees will rank senior or equal to any existing and future senior subordinated indebtedness of Danka Holding Company and Danka Office Imaging Company and rank senior in right of payment to all other existing and future subordinated obligations of Danka Holding Company and Danka Office Imaging Company. Interest payments............. No interest payments will be made on the new senior subordinated notes. You will only receive a payment on the new senior subordinated notes on the maturity date of the notes. Optional redemption........... We will be permitted to redeem the new senior subordinated notes at any time in whole or in part for 100% of their principal amount. Put right on a change of Upon a change of control, owners of the new control....................... senior subordinated notes may require us to purchase their notes at a price equal to 109% of their principal amount. Put right on asset sale....... Owners of the new senior subordinated notes may require us to purchase their new notes at a price equal to 100% of their principal amount with the excess proceeds of an asset sale that we do not use to repay indebtedness senior to the new senior subordinated notes or to acquire replacement assets. Covenants..................... The new senior subordinated notes will include limitations on our ability, and certain of our subsidiaries' ability, to: . incur additional indebtedness; . provide guarantees; . create liens; . pay dividends on stock or repurchase stock; . make investments; . engage in transactions with our affiliates; . merge or consolidate; and . transfer or sell substantially all of our assets. Events of default............. The following are events of default under the indenture for the new senior subordinated notes: .our failure to pay principal at maturity; . our failure to pay the purchase price of the new senior subordinated notes on the exercise of the put rights which apply following a change of control or an asset sale; . our failure to perform any other covenant for 30 days after written notice; 11 . our failure to comply with limitations on mergers, consolidations and sales of assets; . if we or our subsidiaries default on any indebtedness which in aggregate exceeds $25 million; . the rendering of a final judgment against us or any of our subsidiaries in excess of $10 million remains unpaid for over 60 days; or .some events of bankruptcy, insolvency or reorganization. Listing....................... We intend to apply to list the new senior subordinated notes on the Luxembourg Stock Exchange. Optional Conversion........... If we fail to repay the new senior subordinated notes at maturity, there will be an event of default under the indenture for the new senior subordinated notes. In that event, holders of the new senior subordinated notes will be entitled, at their option, and in addition to all other rights and remedies, to convert all or part of their notes into our American depositary shares or ordinary shares. The conversion price will be calculated by reference to the closing market price of our American depositary shares for the twenty trading day period ending on the maturity date. This conversion right will be subject to the prior approval of our shareholders, which we will agree to use our reasonable efforts to obtain. The conversion right will also be subject to compliance with applicable laws and the obtaining of applicable regulatory approval. See "Terms of The New Notes--Zero Coupon Senior Subordinated Notes Due 2004-- Conversion Rights." Payment of additional amounts If we are required by the laws or regulations .............................. of the United Kingdom to make any deduction or withholding for any present or future taxes in respect of amounts to be paid by us under the new senior subordinated notes, we will pay the owners of the new senior subordinated notes such additional amounts as are necessary so that the net amounts paid to the owners of the new senior subordinated notes after that deduction or withholding will not be less than the amounts to which the indenture for the senior subordinated notes specifies the owners are entitled. United States GAAP accounting treatment..................... The new senior subordinated notes will be recorded at their principal amount. 12 10% Subordinated Notes Due 2008 Notes offered................. Up to $200 million in aggregate principal amount. Maturity...................... April 1, 2008 Ranking....................... The new 10% notes will rank in right of payment behind our senior bank debt and all of our other existing and future senior debt. The new 10% notes will rank in right of payment behind the new senior subordinated notes. The new 10% notes will rank in right of payment ahead of any remaining old notes. If we issue additional subordinated debt in the future, the new 10% notes will rank in right of payment equal to, or behind, that debt. The new 10% notes will be unsecured. The new 10% notes will effectively rank in right of payment behind debt and other liabilities of our subsidiaries, including trade creditors and the guarantees of the new senior subordinated notes. Because the new 10% notes are subordinated, in the event of our bankruptcy, liquidation or dissolution, owners of the new 10% notes will not be entitled to receive any payment until the holders of our senior debt, including our new senior subordinated notes, have been paid in full. Assuming we complete all three parts of our overall refinancing plan, based on the assumptions for the pro forma financial information described on pages 60 and 61 on the closing of this exchange offer, the new 10% notes: . will be subordinated to approximately $303 million of senior debt; . will be subordinated to approximately $42 million of new senior subordinated notes; and . will not rank senior to any other debt. The terms of the new 10% notes do not impose limitations on us incurring additional indebtedness senior to the new 10% notes. Interest payments............. Semi-annually in cash on April 1 and October 1, commencing October 1, 2001. Interest payable on the first interest payment date of October 1, 2001, will accrue effective from April 1, 2001 to October 1, 2001. Optional redemption........... We will be permitted to redeem the new 10% notes at any time following April 1, 2005. We may redeem all or part of the new 10% notes at the redemption prices expressed as percentages of principal amount as follows:
Redemption Twelve Month Period Commencing Price ------------------------------ ---------- April 1, 2005.................................... 105.000% April 1, 2006.................................... 102.500% April 1, 2007 and thereafter..................... 100.000%
13 In addition, we will pay accrued and unpaid interest, if any, up to the date of redemption. Optional redemption following equity offerings.............. At any time before April 1, 2005, we will be permitted to redeem up to 35% in principal amount of the new 10% notes for their principal amount plus a premium of 10%, together with accrued and unpaid interest, if any, to the date of redemption, if: . we use the net cash proceeds of a public or private offering of our equity securities to finance the redemption; and . at least 65% of the aggregate principal amount of the new 10% notes originally issued remain outstanding after giving effect to the redemption. Put right on a change of Upon a change of control, owners of the new 10% control....................... notes may require us to purchase their notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of redemption. Covenants..................... The new 10% notes will include limitations on our ability, and certain of our subsidiaries' ability, to: . engage in transactions with our affiliates; . merge or consolidate; and . transfer or sell substantially all of our assets. Conversion.................... The new 10% notes will not be convertible into equity securities. Events of default............. The following are events of default under the indenture for the new 10% notes: . our failure to pay principal at maturity; . our failure to pay interest when due continued for 30 days; . our failure to pay the purchase price for the new 10% notes on the exercise of the put rights which apply following a change of control; . our failure to perform any other covenant for 30 days after written notice; . our failure to comply with limitations on mergers, consolidations and sales of assets; . if we or any of our subsidiaries default on any indebtedness which in aggregate exceeds $25 million; 14 . if a final judgment against us or any of our subsidiaries in excess of $10 million remains unpaid for over 60 days; or . some events of bankruptcy, insolvency or reorganization. Listing....................... We intend to apply to list the new 10% notes on the Luxembourg Stock Exchange. Withholding taxes............. Payments of interest on the new 10% notes may be made without withholding or deduction for or on account of United Kingdom income tax provided that, at the time of the payment, the new notes are listed on a recognized stock exchange, as defined in section 841 of the United Kingdom Income and Corporation Taxes Act 1988. The Luxembourg Stock Exchange is a recognized stock exchange. Payment of additional amounts and optional tax redemption... If we are required by the laws or regulations of the United Kingdom to make any deduction or withholding for any present or future taxes in respect of amounts to be paid by us under the new 10% notes, we will pay the owners of the new 10% notes such additional amounts as are necessary so that the net amounts paid to the owners of the new 10% notes after that deduction or withholding will not be less than the amounts to which the indenture for the 10% notes specifies the owners are entitled. If we are required to pay these additional amounts because of any change in law or regulation, we may redeem the new 10% notes for their principal amount plus accrued and unpaid interest, if any, to the date of redemption. United States GAAP accounting treatment..................... The new 10% notes will be recorded at the carrying amount of the old notes for which they are exchanged. 15 RISK FACTORS Holding any of our indebtedness presents risks. You should consider these risks in making your decision regarding whether to tender your old notes under this exchange offer. After the discussion of risks relating to our business and financial condition, we discuss risks which are more specifically applicable to this exchange offer, risks associated with holding the new senior subordinated notes and the new 10% notes, and risks associated with failure to tender your old notes in this exchange offer. Risks Associated with Our Business and Financial Condition The principal amount of our senior bank debt is due for repayment in full on March 31, 2002. If we are not able to refinance this indebtedness we will be unable to repay the principal amount of the old notes on its due date of April 1, 2002. If we are unable to refinance our senior bank debt, we will default on our obligation to repay the old notes on April 1, 2002. In those circumstances, it is highly likely that we would have to seek bankruptcy protection or commence liquidation or administration proceedings. The principal amount of our senior bank debt is due for repayment in full on March 31, 2002. We believe that it is highly unlikely that we will be able to repay this indebtedness with cash generated from our operations. Accordingly, we will have to refinance and/or extend the due date for the senior bank debt. Our ability to do so will depend on, among other things, our financial condition, market conditions and other factors beyond our control. The principal amount of the old notes is due for repayment on April 1, 2002, one day following the due date for repayment of our senior bank debt. We do not currently have, nor do we expect to have, sufficient liquidity to repay the old notes when they become due. Our independent auditors' report on our 2001 fiscal year United States GAAP consolidated financial statements contains an explanatory paragraph stating that there is a substantial doubt about our ability to continue as a going concern because of the uncertainty regarding our ability to repay our senior bank debt and the old notes when they become due for repayment. Our new credit facility will be conditioned on the successful completion of this exchange offer. It is highly unlikely that we will be able to refinance our senior bank debt beyond March 31, 2002 while any significant portion of the old notes remain outstanding. We may not reach a definitive agreement with our senior lenders for a new credit facility. We have reached an agreement with the steering committee of our existing consortium of banks on the principal terms of a new credit facility. However, the terms of a definitive agreement and our ability to draw down on the new credit facility will be subject to several conditions and we cannot assure you that these conditions will be satisfied. We anticipate that the conditions to the new credit facility will include: . approval by 100% of our existing banks; . finalization of definitive documentation; . closing of the sale of DSI; and . closing of this exchange offer. 16 We have incurred losses in the past and we may incur losses in the future. If we incur losses in the future, our growth potential and our ability to service our indebtedness may be impaired. We incurred a loss from operations of approximately $169.2 million during our 2001 fiscal year, which ended March 31, 2001. If we continue to incur losses in the future, we may limit our growth potential and our ability to execute our business strategy. In addition, our ability to service our indebtedness may be harmed because we may not generate sufficient cash flow from operations to pay principal or interest when due. We believe that our results for our 2001 fiscal year are due in large part to competitive pressures and reduced demand for office products and that our situation is consistent with the experiences of our competitors. These difficult conditions are due in large part to changes in the nature of the photocopier industry and the types of products that our customers are now demanding, in particular the transition from analog to digital equipment. As a result of these difficult conditions, we recorded charges and write-offs totaling $84.1 million in our 2001 fiscal year in connection with write-offs of excess, obsolete and non-recoverable equipment and the closure and consolidation of certain of our facilities. Our industry is highly competitive. This high level of competition may prevent us from growing, and may even decrease, our business. Our industry is highly competitive. We have competitors in all markets in which we operate. Much of the competition in our industry is driven by rapid technological advances. Besides competition from within the photocopier industry, we are also experiencing competition from other sources as a result of the development of new document processing, retention and duplication technologies. We may not be able to keep, and we may even lose, our market share because of the high level of competition in our industry. Certain of our major competitors are currently experiencing financial difficulties similar to our own. Some or all of these competitors may respond to their financial difficulties by reducing prices on certain products to increase market share or by disposing of surplus inventory. Any material deterioration in our financial condition is likely to affect our ability to compete with price-cutting by our competitors. Technological changes may impair our future operating performance and our ability to compete. The photocopier industry is changing rapidly from analog to digital photocopiers. Digital photocopiers are more efficient than analog photocopiers, meaning that our customers require less of them. In addition, digital photocopiers are increasingly more reliable than analog photocopiers and require less maintenance. This has contributed to the decline in our service contract revenue, which has traditionally formed a significant portion of our revenues. Development of new technologies in our industry may impair our future operating performance and our ability to compete. For example, we may not be able to: . procure or gain access to new products and bring them to the marketplace; . make the capital expenditures necessary for us to retrain personnel or compete with other providers of the new technologies; and . obtain new products. Our existing credit agreement imposes significant operating restrictions on us and contains significant financial covenants. Our new credit facility will impose similar restrictions and will contain similar covenants. If we fail to comply with the financial covenants, our lenders could demand that we repay them immediately. In addition, breach of the financial covenants in our existing credit agreement is also a breach of our tax retention operating leases. The credit agreement for our existing senior bank debt imposes significant operating restrictions on us and contains financial covenants. If we fail to comply with the financial covenants and do not obtain a waiver or amendment from our senior bank lenders, we will be in default under the credit agreement and lenders owning a majority of the senior bank debt will be permitted to demand immediate repayment. If we fail to repay our 17 senior bank debt when it becomes due, our lenders could proceed against certain of our and our subsidiaries' assets and capital stock which we have pledged to them as security for the repayment of the senior bank debt. If our lenders exercise their right to accelerate repayment of our senior bank debt, we may have to seek bankruptcy protection or commence liquidation or administration proceedings because we will not have sufficient cash to repay the senior bank debt in full. Our new credit facility will impose similar restrictions and will contain similar covenants. We obtained an amendment from our senior bank lenders in March 2001 which modified the requirements of the financial covenants contained in our existing credit agreement until July 16, 2001 for a fee of $1.5 million. We obtained a further amendment of the covenants contained in our existing credit agreement in June 2001, for no fee. We are in discussions with our lenders regarding the refinancing of our senior bank debt by the new credit facility. If we do not reach agreement for the refinancing of our senior bank debt with our lenders, we expect that we will require an additional amendment to, or further waiver of, the financial covenants that will be in effect under the credit agreement on and after July 17, 2001. However, there is a significant risk that our lenders would not agree to a further amendment or waiver. Our tax retention operating leases incorporate the financial covenants included in the credit agreement. If we breach the financial covenants or other restrictions in the tax retention operating leases, then the banks who have financed the properties leased under those leases may terminate the leases. In that case, we may be required to purchase the properties that are subject to the tax retention operating leases or they may be sold to third parties. In addition, we may be required to make payments to the banks under guarantees that we have given regarding the value of the properties. All of these occurrences would harm our business because they may cause us to cease to occupy the properties and they may require us to make unscheduled payments with respect to the properties. In March 2001 we obtained an amendment to the financial covenants incorporated in our tax retention operating leases until July 16, 2001 for a fee of $106,000. We obtained a further amendment of the covenants in June 2001, for no fee. We have significant indebtedness and leverage which could prevent us from meeting our obligations under our debt instruments. We have significant outstanding indebtedness. At March 31, 2001, we had consolidated indebtedness of approximately $719.2 million. We will remain highly leveraged following this exchange offer. Our significant level of indebtedness may: . require us to dedicate a substantial portion of our operating cash flows to payments of interest and principal; . impair our ability to generate sufficient cash to pay the interest and principal on our indebtedness when due; . limit our ability to make capital expenditures necessary for us to keep pace with the technological changes currently affecting our industry because of the payment obligations and covenants under our indebtedness; and . cause us to be vulnerable to increases in interest rates because a substantial amount of our indebtedness bears interest at floating rates, and only a portion of the indebtedness is hedged. In addition, our credit rating was recently downgraded by Standard & Poors from "B-minus" to "CC," which is considered junk bond status. Standard & Poors has stated that our rating remains on CreditWatch. The downgrading of our credit rating and uncertainty regarding possible further downgrades may make our indebtedness less attractive to lenders and investors, which may increase our cost of borrowing and restrict our ability to borrow. It is possible that Standard & Poors may further reduce our credit rating in the future. 18 If we breach our agreement with General Electric Capital Corporation, we may be unable to arrange for financing to our new customers through General Electric Capital Corporation. We have an agreement with General Electric Capital Corporation under which General Electric Capital Corporation agrees to provide financing to our customers to purchase equipment from us. Although we have other financing arrangements, General Electric Capital Corporation finances a significant part of our business. If we breach the covenants or other restrictions in our agreement with General Electric Capital Corporation then General Electric Capital Corporation may refuse to provide financing to our new customers. If General Electric Capital Corporation fails to provide financing to our new customers, those customers may be unable to purchase equipment from us if we are unable to provide comparable alternative financing arrangements on similar terms. A covenant in the agreement requires us to maintain a specified minimum consolidated net worth. If we breach that covenant, General Electric Capital Corporation can refuse to provide financing to our new customers and terminate the agreement as to any future financings. If, as a result, we are unable to provide a minimum level of customer leases under the agreement, we may be obligated to pay penalty payments to General Electric Capital Corporation, as described below. We recently obtained an amendment of the requirements of that covenant downwards for the period ended March 28, 2001. We were not required to pay a fee for the amendment. We expect that we will require a further amendment of the net worth covenant for a period of approximately four months starting March 29, 2001 and ending during July 2001, although we are not yet in breach of the covenant for that period. We intend to request the amendment from General Electric Capital Corporation, but we cannot assure you that General Electric Capital Corporation would agree to a further amendment. If we fail to provide a minimum level of customer leases under the agreement, we are required to pay penalty payments to General Electric Capital Corporation. We were obligated to pay a penalty payment of approximately $1.9 million to General Electric Capital Corporation because we did not satisfy minimum level requirements for the year ended March 31, 2001. The minimum level of customer leases required under the agreement for the year ended March 31, 2001 was $245 million. We provided $205.6 million of customer leases for that period. For the year ending March 31, 2002 we are required to provide a minimum level of $276 million of customer leases and for the year ending March 31, 2003 we are required to provide a minimum level of $289 million of customer leases. If we do not meet those minimum levels, we may be required to pay penalty payments equal to 4.75% of the amount of the shortfall. We presently anticipate that we may have a penalty payment of $4.5 million in fiscal year 2002 and a penalty payment of $5.5 million in 2003. However, we cannot assure you that any penalty payments will not be greater than these amounts. Closing of the purchase of DSI by Pitney Bowes is subject to the satisfaction of conditions which involve the actions of third parties whom we do not control. If those conditions are not satisfied, the purchase of DSI might not take place, meaning that we will not be able to complete this exchange offer or to achieve our overall refinancing plans. In addition, if the sale of DSI does not take place, we may be required to pay Pitney Bowes a termination fee of $6.25 million. The closing of the purchase of DSI by Pitney Bowes is a condition to this exchange offer and we will not close this exchange offer if we do not close the sale of DSI. The proceeds of the sale of DSI are the only available source of cash for the limited cash option under this exchange offer. Therefore, if we cannot close the sale of DSI, we will not be able to finance the limited cash option. If we cannot finance the limited cash option, we will not be able to complete this exchange offer. If we cannot complete this exchange offer, we will not be able to achieve our overall refinancing plan. In addition, if we cannot sell DSI, we will not be able to repay our senior bank debt in a sufficient amount so that we will be able to refinance the remainder. On April 9, 2001 we entered into a binding agreement for the purchase of DSI by Pitney Bowes. However, closing of the purchase is subject to conditions, including: . approval of the sale by our shareholders; . approval of the sale by our senior bank lenders; 19 . clearance of the sale or expiration of the applicable waiting period under the competition laws of the United Kingdom; and . other customary conditions (See "Sale of DSI."). We cannot guarantee that these conditions will be fulfilled so that the purchase will close, because satisfaction of the conditions is dependent on the actions of third parties whom we do not control. We will be required to pay Pitney Bowes a termination fee of $6.25 million if Pitney Bowes does not purchase DSI for one of the following reasons: . we do not obtain the approval of our shareholders to the purchase of DSI by Pitney Bowes and we enter into a definitive agreement to sell DSI to a third party on or before July 9, 2002; . our board of directors fails to recommend the purchase of DSI by Pitney Bowes to our shareholders or changes its recommendation in a way adverse to Pitney Bowes; . our board of directors recommends to our shareholders the purchase of DSI by a party other than Pitney Bowes; or . our board of directors takes any action or position with respect to a tender or exchange offer by a third party which is in any manner adverse to Pitney Bowes. Our business may be less profitable following the sale of DSI. DSI has historically been one of the most successful parts of our business. DSI represented 14% of our total revenue in fiscal year 2001 and was our only business segment to generate earnings from operations in fiscal year 2001. Following the sale of DSI, our business may be less profitable in the future. During the three fiscal years ended March 31, 2001, DSI was our only reporting segment to increase its total revenues and in each of those three fiscal years the operating margin of DSI on a percentage basis exceeded the operating margins for both of our other two principal business segments. Following the sale of DSI, we may not benefit from, or utilize opportunities for, growth in DSI's future business. The agreement for the sale of DSI to Pitney Bowes imposes obligations on us not to compete with the business of DSI and not to solicit employees of DSI for employment for two years following closing of the sale. In addition, we have agreed not to induce or attempt to persuade any current or prospective customers of DSI to terminate, fail to renew or fail to enter into a business relationships with DSI for two years following closing of the sale. DSI customers may stop purchasing products or services from our remaining businesses and our ability to market our other products and services to DSI customers may be limited. The sale of DSI will result in a reduction in our EBITDA, which may reduce our ability to service our indebtedness. EBITDA is our earnings before interest, taxes, depreciation and amortization. If we do not implement our restructuring plans in a timely manner, we may not be able to lower our costs to meet our current revenue and margin expectations and our profitability may be reduced. In December 2000, we announced that we would be eliminating approximately 1,200 positions, or approximately 8% of our worldwide workforce, and that we would be closing and consolidating several of our facilities in order to lower our costs to meet our current revenue and margin expectations. If we do not implement our restructuring plans within our projected time frames, our ability to achieve our anticipated savings and lower costs may be harmed which may reduce our profitability. We anticipate that the workforce reductions will be substantially completed by the second quarter of our 2002 fiscal year. We anticipate that the remaining lease obligations related to the facility closures will be substantially completed during our 2002 fiscal year. 20 If our program to enhance and unify our United States management information systems is unsuccessful, we may have difficulties obtaining information that we need to manage our business on a timely basis and without additional expense. If we fail to successfully implement our program to enhance and unify our United States management information system, our business could suffer because we may have difficulties obtaining information that we need to manage our business, price our products, invoice and collect from our customers, and process and pay our creditors on a timely basis and without additional expense. We currently operate a number of different management information systems in the United States, our biggest market. In the past, we have encountered some difficulties with coordinating those systems. We have recently begun a $12 million program to enhance and unify our United States management information systems. We anticipate that the program will be completed by March 31, 2002, the end of our fiscal year 2002. The success of our program depends on our ability to develop a system which adequately fulfils our management information needs. We may be prevented from developing a suitable system by technological problems or if we have insufficient resources to finance the project. Our business is dependent upon close relationships with our vendors and our ability to purchase products from these vendors on competitive terms. Without those relationships, we may not be able to obtain enough products and supplies to conduct our business. Significant reductions in supplies from our major vendors, or the loss of any major vendor, would seriously harm our business because we may not be able to supply those vendors' products to our customers on a timely basis in sufficient quantities or at all. We have relationships with Canon, Heidelberg, Nexpress, Ricoh and Toshiba for those companies to manufacture equipment, parts, supplies and software for resale by us in the United States, Canada, South America, Europe and Australia. The sale of these vendors' products represented over 75% of our total retail equipment sales in fiscal year 2000. We also rely on our equipment vendors for related parts and supplies. Our vendors may not continue to provide products to us at current levels if our financial situation continues to deteriorate. Currency fluctuations may affect our financial results or our ability to pay our liabilities. As a multinational company, changes in currency exchange rates affect our revenues, cost of sales and operating expenses. Approximately 43% of our revenue was generated outside the United States in our 2001 fiscal year with the majority of this revenue generated in countries that have adopted the euro as their currency and the United Kingdom. Over the past 12 months the euro weakened approximately 8% against the United States dollar and the United Kingdom pound weakened approximately 11% against the United States dollar. The weakening of the euro has negatively impacted our revenue in the last few years. We generally pay for high-volume copier, parts and supplies in euro countries in United States dollars but we generally invoice our customers in local currency. This has resulted, and may continue to result, in reduced operating margins and cash flow. We are an English company and if we are liquidated under United Kingdom insolvency laws, the consequences for holders of the old notes and the new notes may be worse than if we seek bankruptcy protection under United States laws. In addition, holders of the old notes and the new 10% notes are not creditors of our subsidiaries and therefore will not have rights as creditors with respect to any United States bankruptcy proceedings in which the subsidiaries are debtors. We are an English company and we are therefore subject to United Kingdom insolvency laws. The ability of our subordinated creditors to participate in, and achieve recovery under, United Kingdom insolvency proceedings is generally more limited than under United States bankruptcy law. Therefore, if we become subject to insolvency proceedings in the United Kingdom, your ability to recover from us may be more limited than if we were a United States company. 21 United Kingdom insolvency laws generally provide for liquidation of an insolvent entity under supervision of an appointed liquidator, and for payment of the proceeds to creditors strictly in accordance with legal priorities of payment. United Kingdom insolvency laws do not provide for reorganization of the entity under incumbent management, which is permitted under United States laws under Chapter 11 of the Bankruptcy Code, although there is a creditor- driven and creditor-supervised process called administration. Liquidation may result in recovery of lower values than a reorganization, and that could reduce the likelihood or amount of recovery by subordinate creditors. Unlike the United Kingdom, United States laws give unsecured creditors rights to participate in reorganizations under the Chapter 11 process. In practice, under United States laws, subordinate creditors may be able, through employment of these rights, to achieve a recovery greater than they could receive in a strict application of the legal priorities. The old notes and the new 10% notes are obligations of Danka Business Systems PLC, which is a holding company organized under the laws of England and Wales, and not obligations of our United States subsidiaries. Holders of the old notes and the new 10% notes would not be considered a creditor of our United States subsidiaries for the purposes of United States bankruptcy proceedings. Accordingly, in the event that our subsidiaries were to enter into a reorganization under Chapter 11 of the United States Bankruptcy Code, holders of the old notes and the new 10% notes would be unable to obtain the rights of a creditor in the Chapter 11 process. Risks Associated with this Exchange Offer If we do not refinance our senior bank debt, we will not consummate this exchange offer. This exchange offer is conditioned on the consent of our senior bank lenders. We anticipate that our senior bank lenders will consent to this exchange offer only if we are able to refinance our senior bank debt. If we are unable to consummate this exchange offer, our overall refinancing plan will not succeed and we may have to seek bankruptcy protection or commence liquidation or administration proceedings. In that case, owners of old notes may only receive repayment of little or none of the principal amount of their notes. We are prohibited from consummating this exchange offer by the terms of our existing credit agreement. Our new credit facility is conditioned on the successful completion of this exchange offer. Therefore, provided that we reach agreement on the definitive terms of the new credit facility with our senior lenders, we anticipate that our senior bank lenders will permit us to consummate this exchange offer. This exchange offer will not be consummated unless we receive tenders of at least 92% of the aggregate principal amount of outstanding old notes. This exchange offer is conditioned on us receiving tenders of at least 92% aggregate principal amount of the outstanding old notes. We cannot assure you that we will receive tenders of at least 92% aggregate principal amount of the outstanding old notes. If we are unable to consummate this exchange offer, we may have to seek bankruptcy protection or commence liquidation or administration proceedings. In that case, owners of old notes may only receive repayment of little or none of the principal amount of their old notes. If you choose the limited cash option and it is oversubscribed, you will have to accept new senior subordinated notes as part of your exchange consideration. If you choose the limited cash option under this exchange offer, and the limited cash option is oversubscribed, you will receive new senior subordinated notes as a portion of your consideration. We will not determine whether the limited cash option is oversubscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes at the time that we make this determination, even though it may affect the type of exchange consideration that you will receive in this exchange offer. The exchange ratios for this exchange offer do not reflect any valuation of the old notes, the new senior subordinated notes or the new 10% notes. Our board of directors has made no determination that the exchange ratios represent a fair valuation of either the old notes, the new senior subordinated notes or the new 10% notes. We have not obtained a fairness 22 opinion from any financial advisor about the fairness of the exchange ratios to you or to us. We cannot assure you that if you tender your old notes you will receive more value than if you choose to keep them. Cash payments that we made under the limited cash option under this exchange offer to owners of the old notes may be subject to challenge as preferences if we file for bankruptcy in the United States within ninety days of the closing of this exchange offer or if we enter into liquidation or administration proceedings in the United Kingdom within six months of the closing of this exchange offer. Any cash payment that we made under this exchange offer to an owner of the old notes may be subject to challenge as a preference under United States bankruptcy law. If so, the recipient of the payment may be required to return the cash payment. A cash payment may be subject to challenge as a preference if: . it is made by us within ninety days of a bankruptcy filing by us, or within one year in the case of owners of the old notes who are determined to be our insiders; . it is made when we are insolvent; and . it permits the owner of the old notes to receive more than the owner might otherwise receive in a liquidation under applicable bankruptcy laws. If any such payment were deemed to be a preference, the trustee in bankruptcy could recover the full amount of the payment from the recipient of the payment. The recipient of the payment would then be entitled to assert a claim in respect of the old notes against the bankruptcy estate. However, we may be unable to satisfy that claim in part or at all. The recipient of the payment will be reduced to the position of an owner of the old notes with the same priority as owners of old notes. Therefore, the recipient of the payment will rank behind holders of our senior debt and the new notes in right of payment. In addition, the recipient of the payment would not be able to assert any claims against the bankruptcy estate with respect to any new notes until the recipient of the payment returned any preferential cash payments to the trustee in bankruptcy. In addition, any payment that we made under this exchange offer to an owner of the old notes may be subject to challenge as a preference under United Kingdom insolvency law if it is shown that: . the payment is made by us with the intent of placing the owner of the old notes in a better position than otherwise in the event of our insolvent liquidation; and . the payment is made at a time that we are unable to pay our debts and our liquidation is commenced within six months of the payment, or within two years of the payment, in the case of persons connected to us. If any such payment were deemed to be a preference, the court would have wide powers to restore the position as if the preference had not been given. In particular, the full amount of such payment could be recovered by our liquidator. The recipient of the payment would then be entitled to assert a claim in respect of the old notes against us in our liquidation. However, we may be unable to satisfy that claim in part or at all. The recipient of the payment will be reduced to the position of an owner of the old notes with the same priority as owners of old notes. Therefore, the recipient of the payment will rank behind holders of our senior debt and the new notes in right of payment. Risks Associated with the New Senior Subordinated Notes and the New 10% Notes The new senior subordinated notes will be subordinated to our senior debt. If we default on our senior debt, we may not be able to pay you principal on the new senior subordinated notes. The new senior subordinated notes will rank in right of payment behind all of our existing and future senior debt, including our indebtedness under the new credit facility. We may not pay any principal, or any other amounts owing on, or purchase, redeem or otherwise retire the new senior subordinated notes, if principal or interest on our senior debt is not paid when due. In addition, if 23 we are in default on any of our other obligations under our senior debt, we may be prohibited from making payments to the owners of the new senior subordinated notes. The owners of our senior debt will be entitled to receive payment of all amounts due to them before the owners of the new senior subordinated notes upon any payment or distribution of our assets to our creditors upon our bankruptcy or liquidation or other insolvency or reorganization proceedings. We may not be able to convert your new senior subordinated notes into our American depositary shares or ordinary shares upon our failure to repay them. If we fail to repay the new senior subordinated notes on their maturity date, there will be an event of default on the new senior subordinated notes under the indenture for the new senior subordinated notes. In that event, holders of the new senior subordinated notes will be entitled, at their option, and in addition to all other rights and remedies, to convert all or part of their notes into American depositary shares or ordinary shares. However, conversion of the senior subordinated notes will be subject to prior shareholder approval and compliance with applicable laws and regulations, including any registration or listing requirements under United States and United Kingdom securities laws. Although we agree to use our reasonable efforts to obtain shareholder approval and to comply with applicable laws, we cannot assure you that we will obtain such approval or be in such compliance, whether promptly or at all. The new senior subordinated notes will not pay interest. The new senior subordinated notes will pay principal at their maturity date on April 1, 2004. You will not receive any interest payments on the senior subordinated notes. A court may void the guarantees of the new senior subordinated notes or subordinate the guarantees to other obligations of the guarantors. A court could void the guarantee of the new senior subordinated notes, or claims by holders of the new senior subordinated notes under those guarantees could be subordinated to all other debts of a guarantor. In addition, any payment by that guarantor under its guarantee could be required to be returned to that guarantor, or to a fund for the benefit of the creditors of that guarantor. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a court may void the guarantees of the new senior subordinated notes or subordinate the guarantees to other obligations if the court were to find that, at the time any guarantor of the new senior subordinated notes incurred the debt evidenced by its guarantee, the guarantor: . was insolvent or rendered insolvent by reason of such incurrence; was engaged in a business or a transaction for which that guarantor's remaining assets constituted unreasonably small capital; or intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured; and . received less than reasonably equivalent value or fair consideration for the incurrence of such debt. The measures of insolvency for purposes of the above will vary depending upon the law applied in any proceeding. Generally, however, a guarantor would be considered insolvent if: . the sums of its debts, including contingent liabilities, was greater than the saleable value of all of its assets at a fair valuation; or . the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or . it could not pay its debts as they become due. 24 The new 10% notes will be subordinated to our senior debt and our senior subordinated debt. If we default on our senior debt or our senior subordinated debt, we may not be able to pay you principal or interest on the new 10% notes. The new 10% notes will rank in right of payment behind all of our existing and future senior debt and senior subordinated debt, including our indebtedness under our new credit facility and the new senior subordinated notes. We may not pay any principal or interest on, or other amounts owing on, or purchase, redeem or otherwise retire the new 10% notes, if principal or interest on our senior debt or senior subordinated debt is not paid when due. In addition, if we are in default on any of our other obligations under our senior debt or our senior subordinated debt, we may be prohibited from making payments to the owners of the new 10% notes. The owners of our senior debt and senior subordinated debt, including the new senior subordinated notes, will be entitled to receive payment of all amounts due to them before the owners of the new 10% notes upon any payment or distribution of our assets to our creditors upon our bankruptcy or liquidation or other insolvency or reorganization proceedings. We may not be able to repay or refinance the new senior subordinated notes or the new 10% notes when they become due for payment. We can give no assurance that we will have the cash resources required to meet our obligations to repay the new senior subordinated notes and the new 10% notes when they are due. Although this exchange offer is a necessary step in our refinancing plan, we will remain highly leveraged following its successful completion. Our ability to service our indebtedness following this exchange offer, including our payment obligations under the new senior subordinated notes, the new 10% notes and other financial obligations, will depend upon our future operating performance, which in turn is subject to market conditions and other factors, including factors beyond our control. We may not be able to repurchase the new senior subordinated notes or the new 10% notes upon a change of control in accordance with the terms of the indentures. Holders of the new senior subordinated notes and the new 10% notes may not have their new notes repurchased following a change of control because: . we may have insufficient funds to repurchase the notes; or . we may be prohibited from repurchasing the notes by the terms of our senior indebtedness. Under the terms of the indentures for the new senior subordinated notes and new 10% notes, we may be required to repurchase all or a portion of the new senior subordinated notes then outstanding on a change of control at a purchase price equal to 109% of the principal amount of the senior subordinated notes, and the new 10% notes then outstanding on a change of control at a purchase price equal to 101% of the principal amount of the new 10% notes, plus accrued and unpaid interest, if any, to the date of purchase. Before we can repurchase the new senior subordinated notes or new 10% notes, we may be required to: . repay in full all of our indebtedness that is senior to the new senior subordinated notes and the new 10% notes; or . obtain the consent of our senior lenders to make the repurchase. The terms of our senior indebtedness may prevent us from repurchasing the new notes without the consent of our senior lenders, unless we also repay our senior indebtedness in full. In those circumstances, we would be required to obtain the consent of our senior lenders, or otherwise repay our senior indebtedness in full, before we could repurchase the new notes following a change of control. If we were unable to obtain the required consents or otherwise repay our senior indebtedness, the put right on a change of control will be ineffective. 25 Assuming that we complete all three parts of our overall refinancing plan, based on the assumptions for the pro forma financial information described on pages 60 and 61, we may be required to repay approximately $303 million of senior debt before we could repurchase any of the notes. In addition, we may be required to repurchase approximately $42 million of new senior subordinated notes before we could repurchase any new 10% notes. Therefore, if we have insufficient funds to repay our senior indebtedness in full prior to repurchasing the new notes or if we are unable to obtain any required consents, the put right will be ineffective. The subordination provisions of the indentures for the new senior subordinated notes and new 10% notes may prevent payments under a change of control offer. The put right may also be limited or unavailable in the event of a highly leveraged transaction or other transaction which may be prejudicial to the interests of the holders of the new senior subordinated notes and new 10% notes but which does not result in a change of control or otherwise violate the indentures for the new senior subordinated notes and the new 10% notes. The acquisition of a controlling interest in Danka by Cypress Associates II LLC or its affiliates is not a change of control event under the terms of the indentures for the new senior subordinated notes and new 10% notes. Therefore, the put right would not be available to holders of the new senior subordinated notes and the new 10% notes in those circumstances. The indentures for the new notes provide that a sale, lease, exchange or transfer of "all or substantially all" of our assets is a change of control event. However, there is no precise definition of the phrase "all or substantially all" under applicable law. Accordingly, the ability of holders of the new notes to require us to repurchase their notes upon the sale, lease, exchange or transfer of "all or substantially all" of our assets is uncertain. We may not be required, or we may not be able, to repurchase the new senior subordinated notes upon an asset sale. Holders of new senior subordinated notes may not have all or any of their notes repurchased following an asset sale because: . we are only required to repurchase the notes if there are excess proceeds of the asset sale; or . we may be prohibited from repurchasing the notes by the terms of our senior indebtedness. Under the terms of the indenture for the new senior subordinated notes, we may be required to repurchase all or a portion of the new senior subordinated notes following an asset sale at a purchase price equal to 100% of the principal amount of the notes. However, we are only required to repurchase notes from the excess proceeds of the asset sale that we do not use to repay indebtedness senior to the new senior subordinated notes or to acquire replacement assets. We can also defer the offer to you until there are excess proceeds in an amount greater than $5 million. It is likely that the terms of our senior indebtedness will require us to apply most, if not all, of the proceeds of an asset sale to repay that indebtedness, in which case there may be no excess proceeds of the asset sale for the repurchase of new senior subordinated notes. In addition, the terms of our senior indebtedness may prevent us from repurchasing the new senior subordinated notes without the consent of our senior lenders. In those circumstances, we would be required to obtain the consent of our senior lenders before we could repurchase the new senior subordinated notes with the excess proceeds of an asset sale. If we were unable to obtain any required consents, the requirement that we purchase the new senior subordinated notes from the excess proceeds of an asset sale will be ineffective. Assuming that we complete all three parts of our overall refinancing plan, based on the assumptions for the pro forma financial information described on pages 60 and 61, we may be required to repay approximately $303 million of senior debt before we could repurchase any of the senior subordinated notes. If we make a sale, lease, exchange or transfer of "all or substantially all" of our assets as permitted under the limitations contained in the indenture for the new senior subordinated notes regarding mergers, 26 consolidations and sales of assets, then we will not be required to repurchase the new senior subordinated notes from the excess proceeds of that transaction. However, there is no precise definition of the phrase "all or substantially all" under applicable law. Accordingly, the ability of holders of the new senior subordinated notes to require us to repurchase their notes upon the sale, lease, exchange or transfer of "all or substantially all" of our assets is uncertain. We may not be able to service the new notes because of our operational structure. We rely on our operating subsidiaries for cash, but our operating subsidiaries may not be able to pay cash to us. Except for the guarantees given by Danka Holding Company and Danka Office Imaging Company of our indebtedness under the new senior subordinated notes, holders of the new notes cannot demand repayment of the new notes from our subsidiaries because the new notes are not obligations of our subsidiaries. Therefore, although our operating subsidiaries may have cash, we may not be able to make payments on our indebtedness. In addition, the guarantees given by Danka Holding Company and Danka Office Imaging Company of our indebtedness under the new senior subordinated notes will be subordinated to any guarantees that those companies give of our senior indebtedness. We are a holding company and, as such, our operations are conducted through our subsidiaries. Our subsidiaries are our primary source of income and we rely on that income to make payments on our indebtedness. Our subsidiaries are separate and distinct legal entities. Except for the guarantees given by Danka Holding Company and Danka Office Imaging Company, our subsidiaries have no obligations, contingent or otherwise, to pay any amounts due under the new notes, whether by dividends, loans or other payments. The ability of our subsidiaries to make payments to us will also be affected by their obligations to their own creditors which as of March 31, 2001 amounted to $457.5 million in the aggregate. Some of our subsidiaries, including Danka Holding Company and Danka Office Imaging Company, guarantee our obligations under the credit agreement for our senior bank debt, which guarantees had been given in respect of approximately $560.0 million in commitments as of March 31, 2001. We anticipate that some of our subsidiaries will guarantee our obligations under the new credit facility. If we default on our senior bank debt, our lenders could require our subsidiaries to pay them under these guarantees, in which case the cash used to make these payments would not be available to us. In addition, applicable state or foreign laws may impose restrictions that limit payments to us from our subsidiaries, for instance laws that require our subsidiaries to maintain minimum amounts of capital or to make payments to shareholders only from profits or foreign laws that regulate the repatriation of assets. We expect a limited trading market for the new notes. A limited trading market will make it difficult for you to sell the new notes. Although we intend to list the new notes on the Luxembourg Stock Exchange, we do not expect an active trading market to develop in either the new senior subordinated notes or the new 10% notes. Accordingly, you may have difficulty selling them. Owners of the new 10% notes may become subject to United Kingdom withholding tax if the new 10% notes are not listed on a recognized stock exchange. If the new 10% notes are not listed on a stock exchange which is a "recognized stock exchange" for the purposes of United Kingdom tax law on any interest payment date, then we may be required to withhold United Kingdom income tax, currently at a rate of 20%, on any interest that we pay to you on the new 10% notes. We intend to list the new 10% notes on the Luxembourg Stock Exchange, which is a recognized stock exchange, before the first interest payment date, but we cannot assure you that our application to list the new 10% notes on the Luxembourg Stock Exchange will be successful or that the new 10% notes will be listed on the Luxembourg Stock Exchange prior to the first interest payment date. 27 The exchange of old notes solely for cash by a United States holder will be a taxable exchange for United States federal income tax purposes, resulting in the recognition of gain or loss by the United States holder. The exchange of old notes solely for new senior subordinated notes or a combination of cash and new senior subordinated notes will also be a taxable exchange, unless the new senior subordinated notes are considered "securities" for United States federal income tax purposes. The exchange of old notes solely for cash by a United States holder will be a taxable exchange. A United States holder making such an exchange will recognize ordinary income to the extent of any accrued and unpaid interest on the holder's old notes that has not previously been included in income, and gain or loss equal to the difference between the amount of cash received (excluding any amount that is allocable to accrued but unpaid interest on the old notes) and the United States holder's basis in its old notes. The tax consequences to a United States holder that exchanges old notes solely for new senior subordinated notes, or for a combination of new senior subordinated notes and cash, will depend on whether the new senior subordinated notes are considered "securities" for United States federal income tax purposes. The term "securities" is not clearly defined in the Internal Revenue Code, the applicable Treasury regulations, or judicial decisions. We have been advised by our counsel, Altheimer & Gray, that the new senior subordinated notes should not be considered "securities." Assuming that the new senior subordinated notes are not securities, a United States holder exchanging old notes for new senior subordinated notes, or a combination of new senior subordinated notes and cash, will recognize ordinary income to the extent of any accrued but unpaid interest on the old notes that has not previously been included in income, and will recognize gain or loss equal to the difference between the issue price of the new senior subordinated notes plus any cash received (excluding any amount allocable to accrued but unpaid interest on the old notes) and the United States holder's tax basis in the old notes. See "Material United States Federal Income Tax Consequences" for a more detailed discussion of the United States federal income tax consequences to holders of acquiring, owning and disposing of the new notes, including a discussion of the considerations relevant to whether the new senior subordinated notes qualify as "securities" for United States federal income tax purposes. Holders should consult their tax advisors regarding the United States federal, state, local and foreign tax consequences to them of tendering old notes in this exchange offer. The exchange by a United States holder of old notes for either (1) new 10% notes together with new senior subordinated notes, cash, or a combination of both or (2) solely new 10% notes will be treated as a recapitalization, unless either the old notes or the new 10% notes do not constitute securities for United States federal income tax purposes. If such an exchange qualifies as a recapitalization, the United States holder could not recognize loss, but may recognize gain on the exchange. The exchange by a United States holder of old notes solely for new 10% notes or for new 10% notes together with new senior subordinated notes, cash, or a combination of both will constitute a recapitalization under section 368(a)(1)(E) of the Internal Revenue Code so long as both the old notes and the new 10% notes are considered "securities" for United States federal income tax purposes. The term "securities" is not clearly defined in the Internal Revenue Code, the applicable Treasury regulations, or judicial decisions. We have been advised by our counsel, Altheimer & Gray, that the old notes and the new 10% notes should be treated as "securities" for United States federal income tax purposes. Assuming that the old notes and new 10% notes are securities, and that the new senior subordinated notes are not securities, a United States holder making such an exchange would not be permitted to recognize any loss, but would be required to recognize gain (if any) equal to the lesser of the issue price of the new senior subordinated notes plus any cash received, or the amount of gain realized on the exchange. See "Material United States Federal Income Tax Consequences" for a more detailed discussion of the United States federal income tax consequences to holders of acquiring, owning and disposing of the new notes, including a discussion of the uncertainty as to whether the old notes, the new 10% notes and the new senior subordinated notes qualify as "securities" for United States federal income tax purposes, and a discussion of the treatment of accrued but unpaid interest on the old notes. Holders should consult their tax advisors regarding the United States federal, state, local and foreign tax consequences to them of tendering old notes in this exchange offer. 28 You may be required to recognize original issue discount as taxable income on the new senior subordinated notes and the new 10% notes before you receive the cash payments to which the income is attributable. The new senior subordinated notes and the new 10% notes will be issued with original issue discount for tax purposes. Accordingly, holders of such new notes may be required to include amounts in gross income for United States federal income tax purposes before they receive the cash payments to which the income is attributable. The amount, if any, of original issue discount that a holder will be required to include in income will depend upon the exchange option that the holder chooses, certain facts relating to the trading activity and value of the new notes and old notes, and each holder's individual circumstances. See "Material United States Federal Income Tax Consequences" for a more detailed discussion of the United States federal income tax consequences to holders of acquiring, owning and disposing of the new notes. Risks Associated with Retaining the Old Notes Failure of this exchange offer may lead to our bankruptcy, liquidation or administration. In the event that this exchange offer fails to close, we are unlikely to be able to refinance our senior bank debt. If we fail to refinance our senior bank debt, we may have to seek bankruptcy protection and/or commence liquidation or administration proceedings. In that case, we expect that it is highly unlikely that owners of the old notes will receive repayment in full of the principal amount of their notes. In that case, owners of the old notes may only receive repayment of little or none of the principal amount of their notes. In the event of our bankruptcy, liquidation or administration, we may not be able to pay principal or interest on the old notes when due. We may also be prohibited from making those payments if we are in default on our indebtedness that is senior to the old notes. The holders of our senior debt, our other subordinated debt, and lessors under our tax retention operating leases will be entitled to receive payment of all amounts due to them before the owners of the old notes upon any payment or distribution of our assets to our creditors upon our bankruptcy, liquidation or other insolvency or reorganization proceedings. The old notes will rank in right of payment behind all of our existing and future senior debt, other secured liabilities and other subordinated debt. This includes our senior bank debt, the new senior subordinated notes and the new 10% notes. We may not pay any principal or interest on, or any amounts owing on, or purchase, redeem or otherwise retire the old notes if our senior debt or other subordinated debt is not paid when due. In addition, if we are in default of any of our other obligations under our senior debt or other subordinated debt, we may be prohibited from making payments to the owners of the old notes for specified periods of time. If you do not exchange your old notes in this exchange offer, it is likely you will not be able to sell them in the secondary market. Any old notes tendered and exchanged in this exchange offer will reduce the aggregate principal amount of the old notes outstanding. Because it is a condition of this exchange offer that at least 92% of the old notes are tendered, we anticipate that the liquidity of the market for any old notes remaining outstanding after this exchange offer will be extremely limited. 29 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS We have made forward-looking statements with respect to our financial condition, results of operations and business and on the expected impact of this exchange offer on our financial performance. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions as they relate to us or our management, are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including those described under "Risk Factors" in this prospectus, that could cause actual results to differ materially from the results contemplated by the forward-looking statements. The safe harbor for forward-looking statements provided for in the Private Securities Litigation Reform Act of 1995 does not apply to statements made in connection with this exchange offer. In evaluating this exchange offer, you should carefully consider the discussion of risks and uncertainties in the section entitled "Risk Factors" on pages 16 to 29 of this prospectus. USE OF PROCEEDS We will not receive any proceeds from the issuance of the new notes offered in this exchange offer. We will receive the old notes in consideration for issuing the new notes. The old notes surrendered in exchange for the new notes will be retired and cancelled and cannot be reissued. Accordingly, issuance of the new notes will not increase our indebtedness and, given the terms of this exchange offer, should decrease our indebtedness. The following table shows the sources and uses of cash for all three parts of our overall plan to reduce and refinance our indebtedness, which consists of this exchange offer, the sale of DSI and the refinancing of our senior bank debt, as if all three transactions were completed at March 31, 2001. The DSI sale price is subject to adjustment depending on the value of DSI's net assets at closing of the sale. If the sale had closed at March 31, 2001, the sale price would have been reduced by $7.2 million to $282.8 million primarily as a result of the level of DSI's accounts payable on that date. However, we anticipate that the actual DSI sale price should not be subject to so large an adjustment as we expect that the level of DSI's liabilities will be lower on the closing date of the sale than on March 31, 2001. The pro forma assumptions that we have used to prepare this table are set out in the Unaudited Pro Forma Financial Statements on pages 60 and 61 of this prospectus.
Sources Uses ------- ------ (in millions) Sale of DSI............................ $290.0 New borrowings under our senior credit facility.............................. 303.1 Adjustment to DSI sale proceeds due to decrease in net assets................ $ 7.2 Repayment of our existing senior bank debt.................................. 515.0 Cash portion of exchange offer......... 24.0 Payment of current taxes............... 19.3 Payment of transaction expenses........ 27.6 ------ ------ $593.1 $593.1 ====== ======
30 CAPITALIZATION The table below describes our debt and capitalization as of March 31, 2001 as if this exchange offer, the sale of DSI and the refinancing of our senior debt as described below had occurred on that date. You should read this information in conjunction with our consolidated financial information and accompanying notes included in our Annual Report on Form 10-K/A for the year ended March 31, 2001, which is incorporated into this prospectus by reference. The pro forma column does not purport to represent what our financial condition would actually have been if these transactions and events occurred on the date specified. The pro forma adjustments are based on available information and certain adjustments that our management believes are reasonable. In the opinion of our management, all adjustments have been made that are necessary to present fairly the unaudited pro forma consolidated data. We can give you no assurances that the transactions referred to in the assumptions will take place or, if they do take place, that they will take place on the terms specified in the assumptions. The pro forma adjustments have been prepared on the following assumptions: Exchange Offer . $112.5 million in principal amount of old notes are tendered under the limited cash option and are exchanged for $24 million in cash, which will be funded from the proceeds of the sale of DSI, and $42.0 million in principal amount of new senior subordinated notes. . $87.5 million in principal amount of old notes are tendered under the 10% note option and are exchanged for $87.5 million in principal amount of new 10% notes. . Interest expense on the new senior subordinated notes will not be recognized in future periods as the total interest expense has been recorded in the carrying amount of the new senior subordinated notes. Interest expense on the new 10% notes will be $8.7 million per year. . Fees and expenses associated with this exchange offer are $5.4 million. . We will pay a current United Kingdom corporation tax charge of $11.8 million, at an effective tax rate of 23.5%, in connection with this exchange offer. . The accompanying pro forma adjustments have been prepared on assumptions noted above relating to elections made by holders of the old notes as of May 31, 2001. However, we will not know the final adjustments until we receive the final elections to this exchange offer from the holders of the old notes. . The pro forma balance sheet assumes that 100% of all holders of the old notes will participate in this exchange offer and that 56.3% of the old notes will be exchanged for a combination of cash and the new senior subordinated notes and 43.7% of the old notes will be exchanged for the new 10% notes. These percentages are based on the tenders received as of May 31, 2001. Sale of DSI On April 9, 2001, we entered into an agreement to sell DSI to Pitney Bowes Inc. for $290.0 million in cash. The sale is on the terms and subject to the conditions and approvals described in "Sale of DSI." The sale price is subject to adjustment depending on the value of DSI's net assets at closing of the sale. If the sale had closed at March 31, 2001, the sale price would have been reduced by $7.2 million to $282.8 million, primarily as a result of the level of DSI's accounts payable on that date. The following assumptions have been made for the purposes of the pro forma adjustments as of March 31, 2001 only. We anticipate that the DSI sale price should not be subject to so large an adjustment as we expect that the level of DSI's liabilities will be lower on the closing date of the sale than on March 31, 2001. . We will sell DSI for $282.8 million and incur expenses in connection with the sale of $8.4 million, plus income taxes of $75.4 million, with an effective tax rate of 39.4%. 31 . We will apply $39.7 million of the proceeds of the sale of DSI to fund the limited cash portion of this exchange offer of $24 million, costs of the sale of DSI of $8.4 million, and current taxes resulting from the sale of DSI of $7.5 million. . We will apply the remainder of the proceeds of the sale of DSI to partially repay our senior bank debt, to pay costs and taxes associated with this exchange offer and to pay costs associated with the refinancing of our senior bank debt. . We will incur a deferred tax liability in association with the sale of DSI of $67.9 million. Refinancing of Senior Bank Debt . Our new credit facility will be variable rate debt with an estimated rate at time of refinancing of 9.0% per annum and the amount outstanding based on the pro forma balance sheet at March 31, 2001, is $303.1 million, which includes $13.8 million of estimated debt issue costs associated with the refinancing. . Fees and expenses associated with the refinancing of senior bank debt will be $13.8 million, $3.0 million of which will be deferred and will be amortized over the term of the new credit facility. Interest expense on the new credit facility will include $1.0 million of annual amortization of debt issue costs related to the refinancing. 32 We refer you to "Unaudited Pro Forma Consolidated Financial Statements" beginning on page 60 for a presentation of pro forma adjustments based on other assumptions.
Adjustments -------------------------------------- Refinancing Sale of of Senior Exchange Pro Historical DSI Bank Debt Offer Forma ---------- --------- ----------- --------- -------- (In thousands, except per share amounts) Current maturities of long-term debt and notes payable.......... $ 517,447 $(243,127)(a) $(289,276)(d) $ 17,150 (g) $ 2,194 --------- --------- --------- --------- -------- 517,447 (243,127) (289,276) 17,150 2,194 --------- --------- --------- --------- -------- Long-term debt: 6.75% convertible subordinated notes due April 1, 2002.... 200,000 -- -- (200,000)(h) -- Zero coupon senior subordinated notes due April 1, 2004.... -- -- -- 42,032 (h) 42,032 10% subordinated notes due April 1, 2008.... -- -- -- 87,460 (h) 87,460 13,800(e) Senior bank notes..... -- -- 289,276(d) -- 303,076 Other long-term debt and notes payable, less current maturities........... 1,731 (1,322)(b) -- -- 409 --------- --------- --------- --------- -------- Total long-term debt............... 201,731 (1,322) 303,076 (70,508) 432,977 --------- --------- --------- --------- -------- 6.50% convertible participating shares-- redeemable; $1.00 stated value: 500,000 authorized; 234,993 issued and outstanding............ 223,713 -- -- -- 223,713 --------- --------- --------- --------- -------- Shareholders' equity (deficit): Ordinary shares; 1.25 pence stated value: 500,000,000 authorized; 247,570,566 issued and outstanding............ 5,130 -- -- -- 5,130 Additional paid-in capital................ 325,399 -- -- -- 325,399 Accumulated deficit..... (302,619) 109,256(c) (8,160)(f) 30,847(i) (170,676) Accumulated other comprehensive (loss) income................. (100,260) 6,709(c) -- -- (93,551) --------- --------- --------- --------- -------- Total shareholders' equity (deficit)..... (72,350) 115,965 (8,160) 30,847 66,302 --------- --------- --------- --------- -------- Total capitalization..... $ 870,541 $(128,484) $ 5,640 $ (22,511) $725,186 ========= ========= ========= ========= ========
- -------- (a) Pro forma adjustment to reflect the use of the remaining estimated cash proceeds from the sale of DSI ($242,841) to repay a portion of the senior debt outstanding and remove debt of DSI ($286). (b) Pro forma adjustment to remove long-term debt of DSI resulting from the sale of DSI. (c) Pro forma adjustment to reflect the impact on equity resulting from the gain realized from the sale of DSI ($109,256), and the write-off of DSI's cumulative currency translation adjustment ($6,709). (d) Pro forma adjustment to reflect the reclassification of the new senior debt from current to long-term ($289,276). (e) Pro forma adjustment to record the liability for estimated debt issue costs associated with the refinancing of senior debt ($13,800). (f) Pro forma adjustment to reflect write-off of old debt issue costs ($1,166), write-off of estimated fees to be paid to creditors ($9,500), and deferred taxes related to both write-offs ($2,506). (Notes continued on following page) 33 (Notes continued from previous page) (g) Pro forma adjustment to reflect funds required for transaction costs of exchange offer ($5,400) and current taxes due from the exchange offer ($11,750). (h) Pro forma adjustment to reflect the exchange of the remaining $140,000 of old notes (after the exchange of $60,000 of old notes tendered for cash) for $32,014 of new senior subordinated notes plus accrued interest of $10,018 ($42,032) and $87,460 of new senior 10% notes ($87,460). The present value of the new senior subordinated notes was determined using an annual discount factor of 9.5%. This exchange offer is being accounted for as a troubled debt restructuring. As the total consideration being paid to owners tendering old notes under the limited cash option and the new senior subordinated notes, including interest, is estimated to be less than the carrying amount of the old notes being tendered, a gain on the extinguishment of the old notes is expected to be recognized. As a result, interest expense over the life of the new senior subordinated notes has been included in the carrying amount of the new notes ($10,018). Accordingly, interest expense will not be recognized in future financial statements for the new senior subordinated notes. Interest expense will be recognized in future financial statements for the new 10% notes. Other alternative exchange possibilities that may be helpful in understanding the pro forma effect of this exchange offer are shown in the footnotes to the Pro Forma Consolidated Balance Sheet. (i) Pro forma adjustment to reflect the impact on equity resulting from the gain realized from this exchange offer ($40,323), less estimated income taxes ($9,476). 34 THIS EXCHANGE OFFER This section of the prospectus describes our proposed exchange offer. While we believe that the description covers the material terms of this exchange offer, this summary may not contain all the information that is important to you. You should read the entire document and the other documents we refer to carefully for a more complete understanding of this exchange offer. Purpose of this Exchange Offer We are making this exchange offer as part of an overall plan to reduce and refinance our indebtedness. The other parts of our plan are the sale of DSI and the refinancing of our senior bank debt. Terms of this Exchange Offer You can select the form of consideration that you will receive for your old notes from the following three options: . Limited Cash Option $400 in cash for every $1,000 in principal amount of old notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of old notes. If more than $60 million in principal amount of old notes are tendered under this option, we will exchange $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of old notes tendered. We will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions as everyone else who tenders old notes under this option. We may issue new senior subordinated notes in denominations of less than $1,000. . Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. We may issue new senior subordinated notes in denominations of less than $1,000. . 10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all of the old notes that you tender. You do not have to tender all of your old notes to participate in this exchange offer. However, this exchange offer is conditioned on our receiving valid tenders of at least 92% of the aggregate principal amount of the old notes. You may withdraw your tender of old notes or change your choice of consideration options at any time before the expiration of this exchange offer. The limited cash option will likely be over-subscribed. Therefore, if you choose the limited cash option you should expect to receive new senior subordinated notes for a significant portion of the old notes that you tender for cash. 35 The following table illustrates how cash and new senior subordinated notes will be distributed for every $1,000 in principal amount of old notes to persons who choose the limited cash option, in the following scenarios: if $60 million or less, exactly $100 million, exactly $112.5 million, exactly $150 million or exactly $200 million in principal amount of old notes are tendered for the limited cash option. We have chosen to show the scenario that $112.5 million in principal amount of old notes are tendered for the limited cash option on the basis of elections made by holders of the old notes as of May 31, 2001. In the event that the principal amount of old notes tendered for the limited cash option is between one of the amounts shown in the table, the amount of cash and new senior subordinated notes distributed for every $1,000 in principal amount of old notes will vary proportionately.
Principal amount of new zero coupon Principal amount of Cash received senior subordinated old notes tendered for each $1,000 in notes due April 1, 2004 for the limited principal amount received for each $1,000 in cash option of old notes principal amount of old notes ------------------- ------------------ ----------------------------- $60,000,000 or less $400.00 $ 0.00 $100,000,000 $240.00 $320.00 $112,500,000 $213.26 $373.48 $150,000,000 $160.00 $480.00 $200,000,000 $120.00 $560.00
We will not determine whether the limited cash option is over-subscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes once we make this determination even though it may affect the type of exchange consideration that you will receive in this exchange offer. We will make a press announcement regarding the extent to which the limited cash option is over-subscribed and the amount of cash and new senior subordinated notes that persons who choose the limited cash option can expect to receive as soon as practicable following the expiration date of this exchange offer. Market and Trading Information Regarding the Old Notes The old notes currently are traded over-the-counter. The old notes are listed on the London Stock Exchange. However, there is no established reporting system and there are no publicly available quotations for the old notes. Accordingly, Banc of America Securities LLC has advised us that there is no practical way to determine the trading history of the old notes. We believe that trading in the old notes has been limited and sporadic. We believe that opportunities to trade old notes that remain outstanding after this exchange offer will be extremely limited. Conditions to this Exchange Offer This exchange offer is subject to the following conditions: . we receive valid tenders under this exchange offer of at least 92% of the aggregate principal amount of the outstanding old notes and those tenders are not withdrawn; . our senior bank lenders consent to this exchange offer; . parties to our tax retention operating leases consent to this exchange offer; . Pitney Bowes closes the purchase of DSI; . this exchange offer complies with applicable laws and applicable interpretations of the staff of the SEC; . this exchange offer complies with all applicable state securities or "blue sky" laws; . no action or proceeding has been instituted or threatened in any court or before any governmental agency and no law, rule, regulation, judgment, order or injunction has been proposed, including any 36 proposal which is in existence as of the date of this prospectus, enacted, entered or enforced by any court or government agency that would reasonably be expected to: . prohibit, prevent or materially impair our ability to proceed with this exchange offer; . materially adversely affect our business; . limit the tax deductibility of interest on or indebtedness on the new notes or any other debt connection to this exchange offer or that would materially increase the after-tax cost to us of this exchange offer; or . materially impair the benefits to us of this exchange offer; . no event has occurred or is reasonably likely to occur affecting our business that would reasonably be expected to: . prohibit, prevent or significantly delay consummation of this exchange offer; or . materially impair our contemplated benefits of this exchange offer; . the trustee of the old notes has not objected or taken any action that would reasonably be expected to prevent, prohibit or materially adversely affect the consummation of this exchange offer; and . no tender or exchange offer for any class of our equity securities and no merger, acquisition, business continuation or similar transaction involving us has occurred, been proposed or announced. All conditions to this exchange offer must be satisfied or waived on or before the expiration date for this exchange offer. Subject to the satisfaction or waiver of the conditions, we will accept for exchange any and all old notes that are validly tendered and not withdrawn at any time prior to acceptance for payment. Failure by us to enforce any conditions will not be considered a waiver of that condition. The sale of DSI is subject to the conditions described in "Sale of DSI." The refinancing of our senior bank debt will likely be subject to the conditions described in "New Credit Facility." Period for Tendering Old Notes As set forth in this exchange offer and prospectus and in the accompanying letter of transmittal, we will accept for exchange any and all old notes that are properly tendered on or prior to the expiration date and not withdrawn as permitted below. The term "expiration date" means 8:00 a.m., New York City time on June 29, 2001. However, if we extend the period of time for which this exchange offer is open, the term "expiration date" means the latest time and date to which this exchange offer is extended. We expressly reserve the right, at any time or from time to time, to extend the period of time during which this exchange offer is open, and thereby delay acceptance for exchange of any old notes, by announcing an extension of this exchange offer as described below. During any extension, all old notes previously tendered will remain subject to this exchange offer and may be accepted for exchange by us. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering owner as promptly as practicable after the expiration or termination of this exchange offer. We also expressly reserve the right, at any time or from time to time, regardless of whether or not the conditions to this exchange offer have been satisfied, subject to applicable law, to: . extend the expiration date for this exchange offer; . to amend this exchange offer and solicitation in any respect; . to terminate this exchange offer prior to the expiration date and return the old notes tendered pursuant thereto; or . to delay the acceptance of the old notes under this exchange offer; 37 with respect to each of the above by giving written notice of such extension, amendment or termination to the exchange agent. Any extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, with the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date. Without limiting the manner in which we may choose to make any public announcement, we will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service and to the Company Announcements Office of the London Stock Exchange. In our sole discretion, we will decide whether to exercise our right to extend the expiration date for this exchange offer. Tendered old notes may be withdrawn at any time on or prior to the expiration date. Procedures for Exchanging Notes We contemplate that the new notes will be delivered in book-entry form through DTC, Euroclear and Clearstream. Cash payment will be paid to you by the exchange agent. If you have any questions or need assistance in tendering your old notes, please call D.F. King & Co., Inc., the information agent, whose address and contact details appear in the section entitled "The Exchange Agent" below. Only holders of record are authorized to tender their old notes for exchange. We have been informed by the trustee for the old notes that none of the old notes are held in physical form. If you wish to tender old notes in this exchange offer and you are not a participant in DTC, Euroclear or Clearstream, you should contact your broker, dealer, commercial bank, trust company or other nominee promptly regarding the procedures to follow to tender your old notes. If you wish to exchange notes in this exchange offer on your own behalf, you must, before completing and signing the letter of transmittal and delivering the old notes, make appropriate arrangements to register the ownership of the notes in your name. This may take considerable time and may not be able to be completed before the expiration date of this exchange offer. Tender of old notes held through a custodian. If your old notes are held of record by a broker, dealer, commercial bank, trust company or other nominee, you must contact the holder of record promptly and instruct the holder of record to tender your old notes on your behalf. Any beneficial owner of old notes held of record by DTC, Euroclear or Clearstream or their nominee, through authority granted by DTC, Euroclear or Clearstream, may direct the holder of record to tender on the beneficial owner's behalf. Tender of old notes held through DTC, Euroclear or Clearstream. To tender notes that are held through DTC, the holder should transmit its acceptance through the Automated Tender Offer Program, and DTC will then edit and verify the acceptance and send an Agent's Message to the exchange agent for its acceptance. To tender old notes held through Euroclear or Clearstream, the holder should transmit its acceptance to Euroclear or Clearstream, as appropriate, and Euroclear or Clearstream will then edit or verify the acceptance and send an Agent's Message to the exchange agent for its acceptance. Delivery of tendered old notes must be made to the exchange agent pursuant to the book-entry delivery procedures set forth below. You should send letters of transmittal only to the exchange agent and not to us, D.F. King & Co., Inc. or Banc of America Securities LLC. The delivery of old notes and letter of transmittal, any required signature guarantees and all other required documents, including delivery through DTC, Euroclear, or Clearstream and any acceptance of an Agent's Message transmitted through the Automated Tender Offer Program or otherwise, is at the election and risk of the person tendering old notes and delivering the letter of transmittal. Except as otherwise provided in the letter of transmittal, delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, we recommend that the holder use properly insured, registered mail with return receipt requested, and that the mailing be made sufficiently in advance of the expiration date to assure timely delivery to the exchange agent. 38 Except as provided below, unless the old notes being tendered for exchange are deposited with the exchange agent on or before the expiration date, accompanied by a properly completed and duly executed letter of transmittal or a properly transmitted Agent's Message, we may, at our option, treat the tender of the old notes as defective for purposes of the right to exchange pursuant to this exchange offer. Exchange of the old notes will be made only against deposit of the tendered old notes and delivery of all other required documents. Book-entry delivery procedures. The exchange agent will establish accounts with respect to the old notes at DTC, Euroclear and Clearstream for purposes of this exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC, Euroclear or Clearstream may make book-entry delivery of the notes by causing DTC, Euroclear or Clearstream, as appropriate, to transfer such notes into the exchange agent's account in accordance with DTC's, Euroclear's, or Clearstream's procedures for such transfer. Although delivery of notes may be effected through book-entry into the exchange agent's account at DTC, Euroclear or Clearstream, the letter of transmittal, or facsimile of it, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent on or before the expiration date, as applicable. Delivery of documents to DTC, Euroclear or Clearstream does not constitute delivery to the exchange agent. The confirmation of a book-entry transfer into the exchange agent's account at DTC, Euroclear or Clearstream as described above is referred to as a "Book- Entry Confirmation." "Agent's Message" means a message transmitted by DTC, Euroclear or Clearstream, received by the exchange agent, and made a part of a Book-Entry Confirmation. The message states that DTC, Euroclear or Clearstream has received an express acknowledgement from the person tendering the old notes that the person has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce such agreement against the holder. Signature guarantees. Signatures on all letters of transmittal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program, unless the relevant old notes are tendered: . by a participant in DTC, Euroclear or Clearstream whose name appears on a security position listing as the owner of such old notes who has not completed the box entitled "Special Delivery Instructions" or "Special Exchange Instructions" on the letter of transmittal; or . for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, which entities we refer to as "eligible institutions." The signatures on the letter of transmittal accompanying the tendered old notes must be guaranteed by a Medallion Signature Guarantor if: . the old notes are registered in the name of a person other than the signer of the letter of transmittal; or . the old notes not accepted for exchange or not tendered are to be returned. Determination of validity. We will determine in our sole discretion all questions as to the validity, form, eligibility, including time or receipt, and acceptance and withdrawal of tendered old notes. We reserve the absolute right to reject any and all old notes not properly tendered or any old notes whose acceptance by us would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to any particular old notes either before or after the expiration date. Our interpretation of the terms and conditions of this exchange offer, including the instructions in the letter of transmittal, will be final and binding, on all parties. Unless waived, any defects or irregularities in connection 39 with tenders of old notes must be cured within a time period that we will determine. Neither we, the exchange agent nor any other person will have any duty or will incur any liability for failure to give such notification. Tenders of old notes will not be considered to have been made until any defects or irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering owners, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. Backup United States federal income tax withholding. To prevent backup federal income tax withholding, you must provide the exchange agent with your current taxpayer identification number and certify that you are not subject to backup federal income tax withholding by completing the applicable Form W-8 or Form W-9 included in the letter of transmittal. Withdrawals of Tenders You may withdraw tenders of old notes at any time on or prior to the expiration of this exchange offer, but the exchange consideration shall not be payable in respect of old notes that are withdrawn. We will not determine whether the limited cash option for the exchange consideration has been oversubscribed until after the expiration of this exchange offer. You will not be able to withdraw your tender of old notes at the time we make this determination even though it may affect the type of consideration that you will receive in this exchange offer. Except as otherwise provided in this prospectus, tenders of notes may be withdrawn at any time prior to 8:00 a.m., New York City time on the expiration date. For a withdrawal of tendered old notes to be effective, a written notice of withdrawal must be received by the exchange agent on or prior to the expiration of this exchange offer at the address set forth below under "Exchange Agent." Any notice of withdrawal must: . specify the name of the person who tendered the old notes to be withdrawn; . identify the old notes to be withdrawn, including the name and number of the account at the applicable book-entry transfer facility to be credited; and . be signed by the holder in the same manner as the original signature on the letter of transmittal by which the old notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee or other applicable person register transfer of the notes into the name of the person withdrawing the tender. If you have tendered your old notes through a custodian but wish to withdraw them, you must withdraw your tender through the custodian prior to the expiration of this exchange offer. All questions as to the validity, form and eligibility, including time or receipt, of notices of withdrawal will be determined by us. Our determination will be final and binding on all parties. Any old notes withdrawn will be deemed not to have been validly tendered for purposes of this exchange offer and no cash will be paid or new notes will be issued in exchange unless the old notes so withdrawn are validly retendered. Any old notes which have been tendered but which are effectively withdrawn will be credited by the exchange agent to the appropriate account at DTC, Euroclear or Clearstream, without expense to the withdrawing person as soon as practicable after withdrawal. Properly withdrawn old notes may be retendered by following one of the procedures described above under "Procedures for Exchanging Notes" at any time prior to the expiration date. Exchange of Notes and Payment of Cash We will pay cash and issue new senior subordinated notes and new 10% notes upon the terms of this exchange offer and applicable law with respect to the old notes validly tendered and not withdrawn for 40 exchange under this exchange offer promptly after the expiration date. We will pay any cash due on the old notes validly tendered and not withdrawn by deposit of funds with the exchange agent, who will act as agent of the owners of old notes tendering for cash for the purposes of receiving cash payments from us and transmitting those payments to the owners tendering for cash. We will exchange the old notes for new senior subordinated notes and new 10% notes by the credit to the account of the tendering owner at DTC, Euroclear or Clearstream, as appropriate, of the appropriate amount of new senior subordinated notes or new 10% notes, in the name of, or pursuant to the instructions of, the tendering owner. In all cases, cash payments or credits of new senior subordinated notes or new 10% notes for old notes will only be made as soon as practicable after the expiration date of this exchange offer and assuming receipt by the exchange agent of: . timely confirmation of a book-entry transfer of the old notes into the exchange agent's account at DTC, Euroclear or Clearstream pursuant to the procedures set forth in "Procedures for Exchanging Notes--Book-Entry Delivery Procedures" above; . a properly completed and duly signed letter of transmittal, or facsimile copy, or a properly transmitted Agent's Message; and . any other documents required by the letter of transmittal. If we do not accept any tendered old notes for exchange pursuant to this exchange offer for any reason, the exchange agent will, without expense and promptly after expiration or termination of this exchange offer credit the old notes to the account maintained at DTC, Euroclear or Clearstream from which the old notes were delivered. Interest on Notes The last payment of interest on the old notes was made on April 1, 2001. This payment covered accrued interest at the rate of 6.75% from October 1, 2000 through March 31, 2001. The first payment of interest on the new 10% notes will be made on October 1, 2001. This payment will cover accrued interest at the rate of 10% effective from April 1, 2001 through September 30, 2001. We have structured the limited cash option and the zero coupon note option so that the price we are offering to pay will reflect payment in full for the old notes. There will be no separate payment of accrued interest on the old notes accepted in this exchange offer. Amendment of this Exchange Offer We reserve the right to amend this exchange offer, in our sole discretion, to: . delay the acceptance of your old notes for exchange; . terminate this exchange offer; . extend the expiration date and retain all old notes that have been tendered, subject to the rights of owners of the old notes to withdraw their old notes; . refuse to accept the old notes and return all old notes that have been tendered to us; or . waive any condition to, or otherwise amend the terms of, this exchange offer in any respect and accept all properly tendered old notes that have not been withdrawn. We reserve the right, in our sole discretion, to reduce the amount of old notes that we will exchange under this exchange offer. We may also change the consideration that we are offering. If we change the consideration that we are offering, or decrease the amount of old notes being sought, we will give at least 10 business days' notice of the change. If that is less than the time remaining before the expiration date, the expiration date will be extended until a date that is no earlier than the 10th business day after the announcement. 41 Following any delay in acceptance, extension, termination or amendment, we will notify the exchange agent and make a public announcement. In the case of an extension, we will make the announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We will communicate any public announcement by issuing a release to the Dow Jones News Service and the Company Announcements Office of the London Stock Exchange. Future Transactions Involving Old Notes We reserve the right, in our sole discretion and if we are so permitted by the terms of our indebtedness, to purchase or make offers for any old notes that remain outstanding after the expiration date of this exchange offer. To the extent permitted by applicable law and regulation, we may make these purchases, if any, in the open market, in privately negotiated transactions, or in additional exchange offers. The terms of these purchases, if any, could differ from the terms of this exchange offer. It is possible that future purchases, if any, of old notes may be on less or more favorable terms than the terms offered in this exchange offer. We make no promises that we will purchase or make offers for any old notes that remain outstanding after the expiration date of this exchange offer. We do not currently contemplate that any circumstances will arise in which we will make any such purchases and, in any event, we may not have the financing to do so. "Blue Sky" Compliance We are making this exchange offer to all holders of old notes. We are not aware of any jurisdiction in which making of this exchange offer is not in compliance with applicable law. If we become aware of any jurisdiction in which the making of this exchange offer would not be in compliance with applicable law, we will make a good faith effort to comply with any such law. If, after such good faith effort, we cannot comply with any such law, this exchange offer will not be made to, nor will tenders of old notes be accepted from or on behalf of, the holders of old notes residing in such jurisdiction. Exchange Agent HSBC Bank USA has been appointed as the exchange agent for this exchange offer of the notes. We have agreed to pay HSBC Bank USA reasonable and customary fees for its services and will reimburse HSBC Bank USA for its reasonable out-of-pocket expenses. All executed letters of transmittal and any other required documents should be sent or delivered to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent, addressed as follows: HSBC Bank USA One Hanson Place Lower Level Brooklyn, New York 11243 By Facsimile: (718) 488-4488 Confirm Facsimile by Telephone: (718) 488-4475 Delivery of a letter of transmittal to an address other than that for the exchange agent as set forth above or transmission of instructions via facsimile other than as set forth above does not constitute a valid delivery of a letter of transmittal. 42 Dealer Manager We have retained Banc of America Securities LLC as our exclusive dealer manager in connection with this exchange offer. We will pay Banc of America Securities LLC a customary fee for its services. We have also agreed to reimburse Banc of America Securities LLC for its expenses and to indemnify it against certain expenses and liabilities, including liabilities under federal securities laws. Information Agent D.F. King & Co., Inc. has been appointed the information agent for this exchange offer of the notes. We have agreed to pay D.F. King reasonable and customary fees for its services and will reimburse D.F. King for its reasonable out-of-pocket expenses. Any questions concerning the procedures of this exchange offer or requests for assistance or additional copies of this prospectus or the letters of transmittal may be directed to the information agent at: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Bank and brokers, call collect: (212) 269-5500 Others, call toll free: (800) 769-4414 Nebraska residents should contact: Banc of America Securities LLC 100 North Tryon Street, 7th Floor Charlotte, North Carolina 28255 Attention: High Yield Special Products (704) 388-1457 (collect) (888) 292-0070 (toll free) Fees and Expenses We will bear the expenses of soliciting tenders for this exchange offer. We are making the principal solicitation by mail. However, where permitted by applicable law, we may make additional solicitations by telegraph, telephone or in person by officers and regular employees of ours and those of our affiliates. We have retained Banc of America Securities LLC as our exclusive dealer manager in connection with this exchange offer. In addition, we may make payments to brokers, dealers or others soliciting acceptance of this exchange offer. We will also pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses. We will pay the cash expenses to be incurred in connection with this exchange offer and are estimated in the aggregate to be approximately $5.4 million. Such expenses include fees and expenses of the trustee, accounting and legal fees and printing costs, among others. Transfer Taxes Owners who tender their old notes for exchange will not be obligated to pay any transfer taxes. If, however, . new notes are to be delivered to, or issued in the name of, any person other than the registered owner of the old notes; or 43 . old notes are registered in the name of any person other than the person signing the letter of transmittal; or . a transfer tax is imposed for any reason other than the exchange of new notes for old notes in connection with this exchange offer; then the amount of any transfer taxes, whether imposed on the registered owner or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from them is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder. United States GAAP Accounting Treatment We do not currently believe that we have sufficient liquid resources to repay the principal balance to satisfy the obligations of the old notes when they are due on April 1, 2002. In addition, we do not believe that we can obtain alternate financing with reasonable interest rates that would otherwise permit us to repay the old notes at that time. This exchange offer contains concessions by the holders of the old notes, including accepting new notes with an extended maturity date and accepting an interest rate on the new notes which is lower than we could obtain from other lenders, and, subject to the amount of old notes tendered for cash, a reduction in the face amount of our obligations. Accordingly, this exchange offer will be treated as a troubled debt restructuring in accordance with Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings," or SFAS 15. SFAS 15 applies to debt restructurings where a creditor for reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider. United States Federal and United Kingdom Tax Considerations See "Material United States Federal and United Kingdom Tax Consequences" for a discussion of the United States federal and United Kingdom tax consequences to holders of old notes acquiring, owning, and disposing of the new notes. Appraisal Rights You will not have any right to dissent and receive appraisal of your old notes in connection with this exchange offer. 44 SALE OF DSI On April 9, 2001, we entered into an asset purchase agreement to sell DSI to Pitney Bowes Inc. for $290 million in cash plus the assumption of some of the liabilities relating to the business of DSI. The closing of the purchase of DSI by Pitney Bowes is a condition to this exchange offer. This section summarizes the material terms of the asset purchase agreement. We urge you to read the complete asset purchase agreement for the precise legal terms of the agreement and other information that may be important to you. You may obtain copies of the asset purchase agreement from us. See "Where You Can Find More Information." Form of Sale of DSI Pitney Bowes will buy from us the assets used in or related to DSI's business, including DSI's inventory, fixed assets, leases of real and personal property, receivables and contracts, but not cash or intercompany accounts. We expect that, based on DSI's audited December 31, 2000 balance sheet, the liabilities assumed by Pitney Bowes will total approximately $25.9 million at closing of the sale and that the liabilities that we retain will total approximately $7.6 million at closing of the sale. Pitney Bowes will also assume the liabilities relating to DSI's business, including accounts payable, accrued and unpaid expenses, capital leases and contracts, but not DSI's tax liabilities, severance obligations, indebtedness for borrowed money, intercompany accounts or environmental liabilities, if any. Because DSI's operations are conducted through our subsidiaries in various countries, DSI's assets and liabilities will be transferred pursuant to separate agreements between each of those subsidiaries and Pitney Bowes, or subsidiaries of Pitney Bowes. Purchase Price The purchase price for DSI is $290 million in cash subject to adjustments. Pitney Bowes will also assume some of the liabilities related to DSI's business, as described above. The purchase price is subject to adjustment, as described below. $5 million of the purchase price will be set aside in an escrow account on closing. The net amount held in escrow, if any, will be paid to us within five business days after the resolution of the post closing adjustment described below. Adjustment to Purchase Price at Closing We are required to obtain the consent of some of DSI's customers to the assignment of their contracts with DSI to Pitney Bowes prior to the closing of the sale of DSI. If we do not obtain the consent of some customers who generate revenues for DSI of more than $5 million per year, the purchase price for DSI will be reduced at closing dollar-for-dollar by the amount of revenue generated by each non-consenting customer during the year ended March 31, 2001. As of May 31, 2001, we had received the consents to assignment from each of these seven customers. Therefore, no adjustment will be required to the purchase price by reason of our failure to obtain customer consents. If the purchase price were to be reduced for this reason, Pitney Bowes would pay us the following amounts, if any, within thirty days after one year following the closing date: . an amount equal to the lesser of the revenues generated by a non- consenting customer for Pitney Bowes in operating the DSI business during the one-year period following the closing date and the amount by which the purchase price was reduced at closing in respect of that non- consenting customer; and . if the non-consenting customer solicits bids for its business and Pitney Bowes is the successful bidder, an amount equal to the lesser of the revenues generated by the customer for Pitney Bowes in operating the DSI business during the one-year period following the closing date and the amount by which the purchase price was reduced at closing. 45 Post Closing Adjustment The purchase price for DSI is subject to adjustment depending on the value of DSI's net assets as of the closing of the sale, adjusted to account for assets and liabilities excluded from the sale. If the value of DSI's net assets as of the closing date exceeds $81.7 million, Pitney Bowes will pay us an amount equal to the excess on a dollar-for-dollar basis and the $5 million in escrow will be released. If the value of DSI's net assets is less than $81.7 million, we will pay Pitney Bowes an amount equal to the shortfall, or the amount will be paid from the escrow account established at closing, on a dollar-for-dollar basis. Any adjustment to the purchase price must be paid within three business days following the date on which the value of the net assets is agreed or finally determined and the balance of the escrow account will be released to us. The asset purchase agreement does not specify any limit on the amount payable by way of post closing adjustment. The value of DSI's net assets as of the closing date will be determined by reference to an audited balance sheet for DSI as of the closing date that we must prepare and provide to Pitney Bowes as soon as practicable, and no more than 90 days, after the closing of the sale of DSI. Pitney Bowes will have the opportunity to review and object to the determination of the audited balance sheet and we and Pitney Bowes will calculate the value of DSI's net assets following the resolution of any objections. Conditions to the Closing of the Sale of DSI Closing of the sale of DSI is subject to the following conditions: . Our shareholders must approve the sale. . The applicable waiting period under the Hart-Scott-Rodino Act has expired or been terminated. . The applicable waiting period under the German Act Against Restraints of Competition has expired. . The sale has been cleared by, or the applicable waiting period has expired, under United Kingdom competition legislation. . There is no suit, proceeding or investigation by a governmental authority or other person seeking to restrain, enjoin or hinder the sale. . We and Pitney Bowes deliver to each other customary closing documents. In addition, we will not be obligated to complete the sale of DSI unless: . The representations and warranties of Pitney Bowes contained in the asset purchase agreement are true and correct as of the closing date. . Pitney Bowes has performed and complied in all material respects with all agreements and obligations required by the asset purchase agreement to be performed and complied with by it on or prior to the closing date. We may waive any or all of these conditions. Pitney Bowes will not be obligated to complete the purchase of DSI unless: . Our representations and warranties contained in asset purchase agreement are true and correct as of the closing date. . We have performed and complied in all material respects with all agreements and obligations required by the asset purchase agreement to be performed and complied with by us on or prior to the closing date. . We have received the consent of our senior bank lenders to the sale of DSI and their release of liens on the assets of DSI being acquired by Pitney Bowes. . We have delivered to Pitney Bowes specified material third party consents, except to the extent the failure to deliver such a consent results in a reduction to the purchase price. 46 . We have assigned to Pitney Bowes significant permits and significant environmental permits relating to DSI's business. Pitney Bowes may waive any or all of these conditions. We and Pitney Bowes have agreed to use our respective commercially reasonable best efforts to do all things necessary to consummate the transaction contemplated by the asset purchase agreement as soon as possible. We have agreed to take all steps necessary to call, give notice of, convene and hold a meeting of our shareholders for the purpose of securing the approval of the sale of DSI. We have agreed to use our commercially reasonable best efforts to cause a proxy statement to be mailed to our shareholders as promptly as practicable and to cause a circular prepared in accordance with the rules and regulations of the United Kingdom Listing Authority to be delivered to our United Kingdom shareholders as promptly as practicable. We also agreed to provide Pitney Bowes with an opportunity to review and comment on the proxy statement and circular. Representations and Warranties The asset purchase agreement includes customary representations and warranties from us to Pitney Bowes, including representations and warranties regarding the business and assets of DSI, and our ability to perform our obligations under the asset purchase agreement. The asset purchase agreement also includes customary representations and warranties from Pitney Bowes to us, including representations and warranties regarding Pitney Bowes' ability to perform its obligations under the asset purchase agreement. Termination of the DSI Sale Agreement We and Pitney Bowes can agree to terminate the asset purchase agreement at any time before the sale closes. In addition, the asset purchase agreement may be terminated if specified events occur. These include: . By either party, if the conditions to closing, including the approval of our shareholders, have not been satisfied by 11:59 p.m., Eastern time, on June 30, 2001. However, either we or Pitney Bowes may extend this date for three successive one-month periods. . By either party, if the obligations to closing of the other party become impossible to fulfill. However, Pitney Bowes will have no right to terminate the agreement because of our failure to satisfy the condition to closing that our representations and warranties are true and correct, unless our aggregate liability for breach of our representations and warranties exceeds $1.25 million and Pitney Bowes has given us thirty days' notice of its intention to terminate the agreement, during which time we may cure the breach, retain or assume the liability arising out of the breach or pay Pitney Bowes an amount to make it whole for the breach. . By either party, if the other party or, in the case of Pitney Bowes, if any of our subsidiaries which operate DSI, enters into bankruptcy or similar insolvency proceeding. . By Pitney Bowes, if there is a material adverse change in the condition, financial or otherwise, or of the operations of, DSI taken as a whole. Termination Fee We must pay a termination fee to Pitney Bowes of $6.25 million if the sale of DSI does not close for one of the following reasons: . We do not obtain the approval of our shareholders to the sale of DSI to Pitney Bowes and we enter into a definitive agreement to sell DSI to a third party on or before July 9, 2002. 47 . Our board of directors fails to recommend the sale of DSI to Pitney Bowes to our shareholders or changes its recommendation in a way adverse to Pitney Bowes. . Our board of directors recommends to our shareholders the sale of DSI to some party other than Pitney Bowes. . Our board of directors takes any action or position with respect to a tender or exchange offer by a third party which is in any manner adverse to Pitney Bowes. Accounting Treatment We expect to account for the sale of DSI as a discontinued business segment. Income Tax Consequences for Danka of the Sale of DSI The sale of DSI will be a taxable transaction to us for income tax purposes. In general, we will recognize taxable gains or losses in the United States and each foreign country in which we are selling DSI's assets equal to the difference, if any, between the amount realized by us from the sale of the assets and our adjusted tax basis in the assets. The amount realized by us from the sale will equal the sum of the amount of cash received by us plus the amount of our liabilities that are assumed by Pitney Bowes in consideration for the assets. Non-Competition, Confidentiality and Non-Solicitation Covenants We have agreed, that for a period of two years from the closing of the sale of DSI, we and our subsidiaries will not compete with DSI's business anywhere in the world. We have also covenanted that after the closing date, we and our subsidiaries will not disclose any confidential information relating to the DSI business. For a period of two years from the closing date, we and our subsidiaries will not solicit for employment any employees of DSI or employees of Pitney Bowes involved with the DSI business. In addition, we have agreed that, for a period of two years from the closing date of the DSI sale, we and our subsidiaries will not induce or attempt to persuade any current or prospective customer of DSI to terminate, fail to renew or enter into, a business relationship with DSI. Indemnification We have agreed to indemnify Pitney Bowes, subject to the limits described below, from and against each of the following: . The breach by us of any of our representations, warranties or covenants contained in the asset purchase agreement or in any document delivered by us pursuant to the asset purchase agreement. . Any liability of the DSI business not assumed by Pitney Bowes under the asset purchase agreement. . Any failure by us to comply with bulk sales laws existing in the United States and foreign jurisdictions regarding the transfer in bulk of a major part of DSI's assets outside the ordinary course of DSI's business that require notification to trade creditors in order for Pitney Bowes to avoid liability to those creditors for our trade payables. . Any employee benefit liability of the DSI business not expressly assumed by Pitney Bowes under the asset purchase agreement. . Any environmental liabilities associated with the DSI business. Pitney Bowes has agreed to indemnify us under the asset purchase agreement from and against each of the following liabilities: . Breach by Pitney Bowes of any of its representations, warranties or covenants contained in the asset purchase agreement or in any document delivered by Pitney Bowes pursuant to the asset purchase agreement. 48 . Any liability of the DSI business assumed by Pitney Bowes under the asset purchase agreement. . Any acts or omissions of Pitney Bowes after the closing date. No indemnified party will be entitled to recover with respect to any matter or group of related matters until the damages with respect to that matter or those matters exceeds $250,000, after which damages may be recovered without regard to that limitation. No indemnified party will be entitled to recover any damages until the total amount for which that party would recover exceeds $10 million. No indemnified party will have any right to recover damages in excess of $45 million. The foregoing limitations will not apply with respect to liability for assumed or excluded liabilities. The representations and warranties made in the asset purchase agreement survive for one year after the closing of the sale of DSI, except as follows. Our representations and warranties with respect to taxes, environmental matters and employee benefit matters survive until 90 days after the expiration of the applicable statute of limitations. Our representations and warranties with respect to our power and authority to engage in the transactions contemplated by the asset purchase agreement will survive forever. Services and Supplies Agreement At the closing, we will enter into a services and supplies agreement with Pitney Bowes pursuant to which we will continue to provide equipment services and supplies with respect to the installed base of equipment used in connection with DSI's business for a period of two years following the closing date. We will continue to provide these services and supplies to Pitney Bowes during this period on terms no less favorable than those upon which we provided such services and supplies to DSI during the fiscal year ended March 31, 2001. Transitional Support Services Agreement At the closing, we will enter into a transitional support services agreement with Pitney Bowes pursuant to which we will provide administrative services to Pitney Bowes for DSI until the earlier of Pitney Bowes' assumption of responsibility for each such service or six months after the closing date. We will continue to provide these services to Pitney Bowes during this period on terms no less favorable than those upon which we provided such services to DSI prior to the closing. Regulatory and Anti-Trust Approvals Under the Hart-Scott-Rodino Act, we and Pitney Bowes cannot close the sale of DSI until required information has been furnished to the Antitrust Division of the United States Department of Justice and the United Stated Federal Trade Commission and waiting period requirements have been satisfied. We and Pitney Bowes made relevant filings on May 4, 2001. We received notice of early termination of the waiting period from the Federal Trade Commission on May 14, 2001. We and Pitney Bowes cannot close the sale of DSI until required information has been filed with the German Bundeskartellamt and waiting period requirements have been satisfied under the German Act Against Restraints of Competition. Pitney Bowes made the relevant filings on May 11, 2001. Pitney Bowes received notice that the transaction has been cleared by the Bundeskartellamt on May 22, 2001. Closing of the sale of DSI is also conditional on clearance of the sale being obtained from the United Kingdom Secretary of State for Trade and Industry under United Kingdom competition legislation. Pitney Bowes submitted a statutory merger notice to the United Kingdom Director General of Fair Trading on May 21, 2001. The Director General of Fair Trading has an initial period of 20 working days, beginning with the first day following receipt of the notice and payment of the relevant fee, to consider the notice and make a recommendation to the Secretary of State as to whether the transaction should be cleared or referred to the United Kingdom Competition Commission for further investigation. The initial period expired on June 21, 2001. The initial period was extended by the Director General of Fair Trading for a further period of 15 working days, which extended period expires on July 12, 2001. If the Director General of Fair Trading does not refer the transaction to the Competition Commission, or if the Director General of Fair Trading does not otherwise 49 extend the initial period, then the transaction may proceed. If a reference is made to the Competition Commission, the Secretary of State will make a final decision whether to clear the transaction approximately four months following the referral decision, during which time the Competition Commission will investigate the transaction. We do not believe that the sale of DSI to Pitney Bowes raises any material anti-trust concerns but we cannot assure you that a challenge to the sale of DSI on anti-trust grounds will be made or, if a challenge is made, that it would be unsuccessful. 50 NEW CREDIT FACILITY We have reached an agreement with the steering committee of our existing senior bank lenders on the principal terms of a new credit facility which will consist of revolver, term loan and letter of credit commitments. We plan to draw down on the new credit facility to refinance our indebtedness under our existing senior credit facility. The consent of our senior bank lenders is a condition to this exchange offer. We anticipate that our senior bank lenders will consent to this exchange offer if we agree definitive terms with our senior bank lenders for the new credit facility. This section summarizes the likely material terms of the new credit facility. The new credit facility is subject to the approval by all of our existing senior bank lenders, finalization of definitive documentation, the completion of the sale of DSI, and the closing of this exchange offer. We anticipate that the documentation for the new credit facility will consist of an amendment and restatement of the existing credit agreement for our senior bank debt. Lenders The lenders under the new credit facility will be all or substantially all of our existing lenders under our existing senior credit facility. Bank of America will be administrative agent for the new credit facility Amount and components of the new credit facility The total amount of indebtedness that we may incur under the new credit facility will be $320 million. The new credit facility will consist of the following components:
Principal Component amount/commitment --------- ----------------- Term loan $190 million Revolving line $100 million Letter of credit line $ 30 million
Our borrowings under the new credit facility will be in U.S. dollars only. Bank of America will provide swingline commitments under the new credit facility. Maturity The new credit facility will mature on the earlier of: . one business day prior to the date of maturity of the new senior subordinated notes. The new senior subordinated notes mature on April 1, 2004; and . the date which is 36 months from the closing date of the new credit facility. We anticipate that we will close the new credit facility on or about June 29, 2001. Fees We will be required to pay the lenders under the new credit facility the following fees on the following dates:
Date Fee ---- --- Closing of the new credit facility $11.2 million, which is equal to 350 basis points (3.5%) of the initial amount of the total commitments First anniversary of closing An amount equal to 150 basis points (1.5%) of the then total commitments Second anniversary of closing An amount equal to 400 basis points (4.0%) of the then total commitments
51 Interest Interest under the new credit facility will be payable monthly in arrears. The interest rate payable under the new credit facility will initially be LIBOR, which is approximately 4% at the date of this prospectus, plus 500 basis points (5.0%). The interest rate will increase as follows:
Date Increase ---- -------- Six month anniversary of closing 50 basis points (0.5%) Twelve month anniversary of closing 50 basis points (0.5%) Quarterly following the twelve month anniversary 50 basis points (0.5%)
The interest rate will decrease by 50 basis points (0.5%) for every $25 million reduction in the principal amount outstanding under the term loan and every $25 million permanent reduction in commitments under the revolving line or the letter of credit line. Ranking and security Our indebtedness under the new credit facility will rank senior to all of our other indebtedness. Our indebtedness under the new credit facility will be secured by first liens on substantially all of the assets, including real property, of our United States subsidiaries and a pledge of 100% of the outstanding stock of each of our United States and non-United States subsidiaries. Repayment schedule Our borrowings under the term loan portion of the new credit facility will be repayable as follows:
Date Repayment ---- --------- December 31, 2001 $2 million March 31, 2002 $3 million June 30, 2002, September 30, 2002, $4 million December 31, 2002 and March 31, 2003 June 30, 2003 and each calendar quarter end thereafter $8 million
The remaining outstanding balance under the term loan, revolving line and letter of credit line will be payable in full on maturity of the new credit facility. In addition to the above repayment schedule, we will be required to make additional repayments of our indebtedness using available cash generated by our business each fiscal year. Financial Covenants We anticipate that our new credit facility will include the following financial covenants: . A minimum consolidated net worth covenant This covenant will require that our consolidated net worth, excluding some of our foreign subsidiaries that do not execute guarantees of our indebtedness under the new credit facility, is not less than the sum of: . an amount equal to 75% of our consolidated net worth as of June 30, 2001; and 52 . an amount equal to 50% of our consolidated net income for each calendar quarter commencing on or after July 1, 2001, on a cumulative basis. . A minimum interest coverage ratio covenant This covenant will require that the ratio of our consolidated EBITDA, our earnings before interest, tax, depreciation and amortization, to our cumulative interest payments and bank fees for the periods specified below must not be less than as follows:
Relevant Period Ratio --------------- ----- Quarter ending September 30, 2001 0.55 to 1.00 Two quarters ending December 31, 2001 1.45 to 1.00 Three quarters ending March 31, 2002 2.04 to 1.00 Four quarters ending June 30, 2002 2.11 to 1.00 Four quarters ending September 30, 2002 2.37 to 1.00 Four quarters ending December 31, 2002 2.56 to 1.00 Four quarters ending March 31, 2003 and 2.74 to 1.00 each rolling four quarter period thereafter
. A minimum cumulative consolidated EBITDA covenant This covenant requires that our minimum EBITDA, our earnings before interest, tax, depreciation and amortization, for the periods specified below must not be less than as follows:
Relevant Period Minimum EBITDA --------------- -------------- Quarter ending September 30, 2001 $5,000,000 Two quarters ending December 31, 2001 $25,900,000 Three quarters ending March 31, 2002 $54,000,000 Four quarters ending June 30, 2002 $83,200,000 Four quarters ending September 30, 2002 $91,500,000 Four quarters ending December 31, 2002 $97,200,000 Four quarters ending March 31, 2003 and $103,200,000 each rolling four quarter period thereafter
. A limit on our capital expenditures Our capital expenditures will to be limited to the following amounts:
Fiscal Year Amount ----------- ------ Year ending March 31, 2002 $50,100,000 Year ending March 31, 2003 $83,200,000 Year ending March 31, 2004 $79,100,000
Our existing credit agreement includes a consolidated net worth covenant, a minimum interest coverage covenant and a minimum consolidated EBITDA covenant. However, the requirements of the proposed covenants in the new credit facility take account of our current financial position and our proposed sale of DSI. Our existing credit agreement also includes a consolidated fixed charge ratio covenant and a consolidated total leverage ratio covenant, which we anticipate will not be included in the new credit facility. Other Covenants The new credit facility will also contain negative and affirmative covenants similar to our existing credit agreement and that will likely place restrictions on us regarding: . disposing of assets 53 . incurring additional indebtedness . repaying subordinated indebtedness, including the new notes. . creating liens over our assets . paying dividends, other than payment-in-kind dividends on our participating shares . acquiring new businesses Foreign Indebtedness Our non-US subsidiaries will be permitted to borrow up to a maximum aggregate principal amount of $25 million on a secured or unsecured basis. However, our non-US subsidiaries which have pledged their assets to secure our obligations under the new senior credit facility will not be permitted to incur any additional indebtedness and will not be permitted to guarantee any indebtedness. Mandatory Prepayments We will be required to prepay our indebtedness under the new credit facility by the following amounts in the following circumstances: . By 90% of the net proceeds of the sale of our assets outside the ordinary course of business. . By 100% of the net proceeds of any new debt or equity financings that are not permitted under the new credit facility but subsequently permitted by our lenders. These amounts will be applied first in prepayment of the principal amount of the term loan, second to reduce permanently the amount of commitments available under the revolving facility and third to reduce permanently the amount of commitments available under the letter of credit facility, or to cash collateralize any outstanding letters of credit. 54 LEGAL PROCEEDINGS On March 22, 2000, the United States District Court for the Middle District of Florida, Tampa Division entered an order dismissing a consolidated class action complaint brought against us and certain former directors and executives on June 18, 1998. The complaint alleged, principally, that we and the other defendants had issued materially false and misleading statements regarding our progress integrating Kodak's office imaging and outsourcing businesses, had engaged in improper accounting practices and that certain former officers had utilized insider information, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5. We have reached a tentative settlement agreement with the plaintiff class in which we have agreed to pay $2.7 million to the plaintiffs. The full payment will be covered by insurance. A fairness hearing, at which the parties will seek the court's approval of the settlement agreement, is scheduled for August 17, 2001. It is anticipated that approval will be granted by the court. On or about December 11, 2000, Danka's former chief executive officer, Larry K. Switzer, filed a demand for arbitration with the American Arbitration Association to be heard in St. Petersburg, Florida. The demand alleges that Mr. Switzer is entitled to damages for an alleged breach of his employment contract with us, an alleged breach of the amendments to his employment agreement, an alleged breach of an agreement to provide split-dollar insurance, and other and further relief. Mr. Switzer is seeking four annual payments of approximately $900,000 each for split-dollar life insurance premiums and a $1.6 million bonus payment. Management believes that the potential outcome of these proceedings will not have a material effect on our financial position, results of operations or liquidity. We are also subject to other legal proceedings and claims which arise in the ordinary course of our business. We do not expect these legal proceedings to have a material effect upon our financial position, results of operations or liquidity. 55 SELECTED FINANCIAL DATA The following table presents our summary selected consolidated financial and pro forma information which takes into account the possible effect of this exchange offer, the sale of DSI and the refinancing of our senior bank debt. This information should be read in conjunction with our consolidated financial statements, and accompanying notes included in our annual report on Form 10-K/A for the year ended March 31, 2001, which is incorporated into this prospectus by reference and the Unaudited Pro Forma Consolidated Financial Statements beginning on page 59 of this prospectus. Certain prior year amounts have been reclassified to conform with the current year presentation. The unaudited pro forma column does not purport to represent what our financial condition would actually have been if these transactions and events occurred on the date specified. The pro forma adjustments are based on available information and certain adjustments that our management believes are reasonable. In the opinion of our management, all adjustments have been made that are necessary to present fairly the unaudited pro forma consolidated data. We can give you no assurances that the transactions referred to in the assumptions will take place or, if they do take place, that they will take place on the terms specified in the assumptions. The pro forma adjustments have been prepared on the following assumptions: Exchange Offer . $112.5 million in principal amount of old notes are tendered under the limited cash option and are exchanged for $24 million in cash, which will be funded from the proceeds of the sale of DSI and $42.0 million in principal amount of new senior subordinated notes. . $87.5 million in principal amount of old notes are tendered under the 10% note option and are exchanged for $87.5 million in principal amount of new 10% notes. . Interest expense on the new senior subordinated notes will not be recognized in future periods as the total interest expense has been recorded as part of the carrying amount of the new senior subordinated notes. Interest expense on the new 10% notes will be $8.7 million per year. . Fees and expenses associated with this exchange offer are $5.4 million. . We will pay a current United Kingdom corporation tax charge of $11.8 million at a tax rate of 23.5% in connection with this exchange offer. . The accompanying unaudited pro forma statements have been prepared on assumptions noted above relating to elections made by the holders of the old notes as of May 31, 2001. However, we will not know the final adjustments until we receive the final elections to this exchange offer from the holders of the old notes. . The pro forma balance sheet assumes that 100% of all holders of the old notes will participate in this exchange offer and that 56.3% of the old notes will be exchanged for a combination of cash and the new senior subordinated notes and 43.7% of the old notes will be exchanged for the new 10% notes. These percentages are based on the tenders received as of May 31, 2001. Sale of DSI On April 9, 2001, we entered into an agreement to sell DSI to Pitney Bowes Inc. for $290.0 million in cash. The sale is on the terms and subject to the conditions and approvals described in "Sale of DSI." The sale price is subject to adjustment depending on the value of DSI's net assets at closing of the sale. If the sale had closed at March 31, 2001, the sale price would have been reduced by $7.2 million to $282.8 million. The following assumptions have been made for the purposes of the pro forma adjustments as of March 31, 2001 only and we anticipate that the DSI sale price should not be subject to such a large adjustment. 56 . We will sell DSI for $282.8 million and incur expenses in connection with the sale of $8.4 million plus income taxes of $75.4 million, at an effective tax rate of 39.4%. . We will apply $39.7 million of the proceeds of the sale of DSI to fund the limited cash portion of this exchange offer of $24 million, costs of the sale of DSI of $8.4 million, and current taxes resulting from the sale of DSI of $7.5 million. . We will apply the remainder of the proceeds of the sale of DSI to partially repay our senior bank debt, to pay costs and taxes associated with this exchange offer and to pay costs associated with the refinancing of our senior bank debt. . We will incur a deferred tax liability in connection with the sale of DSI of $67.9 million. Refinancing of Senior Bank Debt . We are assuming that our new credit facility will be variable rate debt with an estimated rate at time of refinancing of 9.0% per annum and the amount outstanding based on the pro forma balance sheet at March 31, 2001, is $303.1 million, which includes $13.8 million of estimated debt issue costs associated with the refinancing. . United Kingdom corporation tax on interest is computed using a 23.5% tax rate. . Fees and expenses associated with the refinancing of senior bank debt will be $13.8 million, $3.0 million of which will be deferred and will be amortized over the term of the new credit facility. Interest expense on new facility will include $1.0 million of annual amortization of debt issue costs related to the refinancing. 57 We refer you to "Unaudited Pro Forma Consolidated Financial Statements" beginning on page 60 for a presentation of pro forma adjustments based on other assumptions.
Pro forma for the twelve For the years ended months ended March 31 March 31 ---------------------------------------------------------- -------------- 1997 1998 1999 2000 2001 2001 ---------- ---------- ---------- ---------- ---------- -------------- In thousands, except share amounts REVENUE: Retail................. $1,851,766 $3,065,694 $2,689,090 $2,390,153 $1,966,132 $1,676,113 Wholesale.............. 240,531 257,042 208,130 105,469 97,128 97,128 ---------- ---------- ---------- ---------- ---------- ---------- 2,092,297 3,322,736 2,897,220 2,495,622 2,063,260 1,773,241 ---------- ---------- ---------- ---------- ---------- ---------- GROSS PROFIT: Retail equipment sales................. 735,457 1,132,209 906,161 851,759 555,720 497,650 Special charges, retail gross profit.......... -- (10,000) (57,853) -- -- -- Wholesale.............. 44,061 49,136 28,992 18,654 16,206 16,206 Special charges, wholesale gross profit................ -- -- (514) -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- 779,518 1,171,345 876,786 870,413 571,926 513,856 ---------- ---------- ---------- ---------- ---------- ---------- Selling, general and administrative expenses............... 610,770 941,707 919,897 738,319 676,953 639,885 Special charges, general and administrative expenses............... -- -- 16,805 -- -- -- Amortization of intangible assets...... 19,386 21,232 19,714 14,258 13,252 12,842 Write-off of goodwill and other long-lived assets................. -- -- 109,474 -- 25,577 25,577 Commitment to Kodak under R&D agreements... 12,500 50,000 53,434 -- -- -- Restructuring charges (credits).............. 35,000 11,000 40,818 (4,148) 15,705 15,705 Other income............ -- (896) (2,668) -- -- -- Other expense........... 1,626 -- -- 4,879 9,622 8,968 ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS (LOSS) FROM OPERATIONS............. 100,236 148,302 (280,688) 117,105 (169,183) (189,121) Interest expense........ (34,947) (68,253) (79,540) (105,060) (82,639) (65,795) Interest income 2,588 3,143 2,675 4,369 3,163 3,163 Loss on sale of business ....................... -- -- -- (2,061) -- -- ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS (LOSS) BEFORE INCOME TAXES........... 67,877 83,192 (357,553) 14,353 (248,659) (251,753) Provision (benefit) for income taxes........... 25,522 30,958 (62,773) 4,019 (28,099) (32,431) ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEMS 42,355 52,234 (294,780) 10,334 (220,560) (219,322) Extraordinary items-- early extinguishment of debt, net of tax....... (578) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- NET EARNINGS (LOSS) .... $ 41,777 $ 52,234 $ (294,780) $ 10,334 $ (220,560) $ (219,322) ========== ========== ========== ========== ========== ========== BASIC (LOSS) EARNINGS PER ADS: Income before extraordinary items... $ 0.75 $ 0.92 $ (5.18) $ 0.10 $ (3.91) $ (3.89) Extraordinary items.... (0.01) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total.................. $ 0.74 $ 0.92 $ (5.18) $ 0.10 $ (3.91) $ (3.89) ========== ========== ========== ========== ========== ==========
58
Pro forma for the twelve For the years ended months ended March 31 March 31 ------------------------------------------------------ -------------- 1997 1998 1999 2000 2001 2001 --------- --------- --------- --------- --------- -------------- In thousands, except share amounts DILUTED EARNINGS (LOSS) PER ADS: Income before extraordinary items... $ 0.73 $ 0.90 $ (5.18) $ 0.10 $ (3.91) $(3.88) Extraordinary items.... (0.01) -- -- -- -- -- --------- --------- --------- --------- --------- ------ Total.................. $ 0.72 $ 0.90 $ (5.18) $ 0.10 $ (3.91) $(3.88) ========= ========= ========= ========= ========= ====== Dividends per ADS...... $ 0.16 $ 0.20 -- -- -- -- --------- --------- --------- --------- --------- ------ OPERATING DATA: Ratio of earnings to fixed charges......... 2.29 1.86 N/A 1.08 N/A N/A --------- --------- --------- --------- --------- ------ OTHER DATA: EBITDA(a).............. $ 199,238 $ 322,718 $(114,692) $ 279,704 $ 3,250 Cash flows: From operating activities............ 192,654 171,391 36,564 180,559 146,479 From investing activities............ (871,587) (75,299) (190,340) (78,830) (82,311) From financing activities............ 707,503 (135,199) 185,749 (106,077) (67,640) Cash capital expenditures, net..... 92,747 189,133 191,054 126,879 88,419 BALANCE SHEET DATA: Total assets............ 2,352,704 2,178,941 1,905,142 1,667,697 1,282,943 Long-term debt, less current maturities..... 1,059,823 858,892 1,052,415 715,406 201,731 Total debt.............. 1,101,208 943,382 1,142,147 802,182 719,178 Redeemable convertible participating shares... -- -- -- 207,878 223,713 Shareholders' equity (deficit) ............. 465,731 480,307 171,164 176,714 (72,350) - -------- (a) Reconciliation of EBITDA to Net Earnings (Loss) EBITDA................. $ 199,238 $ 322,718 $(114,692) $ 279,704 $ 3,250 Less: Interest expense (34,947) (68,253) (79,540) (105,060) (82,639) (Provision) benefit for income taxes.......... (25,522) (30,958) 62,773 (4,019) 28,099 Depreciation and Amortization.......... (96,414) (171,273) (163,321) (160,292) (169,270) Extraordinary item..... (578) -- -- -- -- --------- --------- --------- --------- --------- Net Earnings (loss).... $ 41,777 $ 52,234 $(294,780) $ 10,334 $(220,560) ========= ========= ========= ========= =========
You should find the following explanations useful in understanding our financial data: . The ratio of earnings to fixed charges is computed by dividing income (before income taxes, extraordinary items, discontinued operations and fixed charges) by fixed charges. Fixed charges include interest expense, participating dividends and the portion of rental expenses which are deemed to represent interest. . The ratio of earnings to fixed charges for fiscal year 1999 and 2001 are not presented because of the loss before income taxes incurred for these periods. Earnings were inadequate to cover fixed charges by $357.6 million in our fiscal year 1999, $262.8 million for fiscal year 2001, and $243.5 million for pro forma fiscal year 2001. . EBITDA means earnings before interest, income taxes, depreciation and amortization. EBITDA is not a measure utilized under generally accepted accounting principles. However, we believe that EBITDA provides additional information for measuring our ability to generate funds for liquidity and capital requirements as a supplement to the information presented under generally accepted accounting principles and that this data is useful for additional analysis. EBITDA should not be considered in isolation or as a substitute for net income, cash from operating activities and other consolidated operations or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. In addition, in reviewing our pro forma financial information you should refer to the assumptions and notes which accompany our pro forma financial information on pages 60 to 68 of this prospectus. 59 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS We have set out our unaudited pro forma consolidated financial statements on the following pages. The unaudited pro forma consolidated balance sheet as of March 31, 2001 has been prepared on the basis that this exchange offer, the sale of DSI and the refinancing of our senior debt as described below, had occurred on March 31, 2001. The unaudited pro forma combined consolidated statements of operations for the year ended March 31, 2001 has been prepared on the basis that this exchange offer as described below had occurred on April 1, 2000. You should read this information in conjunction with our consolidated financial information and the accompanying notes included in our Annual Report on Form 10-K/A for the year ended March 31, 2001, which is incorporated into this prospectus by reference. The unaudited pro forma consolidated financial data does not purport to represent what our results of operations would actually have been had if these transactions and events occurred on the dates specified, or to project our results of operations for any future period or date. The pro forma adjustments are based on available information and certain adjustments that our management believes are reasonable. In the opinion of our management, all adjustments have been made that are necessary to present fairly the unaudited pro forma consolidated data. We can give you no assurances that the transactions referred to in the assumptions will take place or, if they do take place, that they will take place on the terms specified in the assumptions. The pro forma financial statements have been prepared on the following assumptions: Exchange Offer . $112.5 million in principal amount of old notes are tendered under the limited cash option and are exchanged for $24 million in cash, which will be funded from the proceeds of the sale of DSI, and $42.0 million in principal amount of new senior subordinated notes. . $87.5 million in principal amount of old notes are tendered under the 10% note option and are exchanged for $87.5 million in principal amount of new 10% notes. . Interest expense on the new senior subordinated notes will not be recognized in future periods as the total interest expense has been recorded as part of the carrying amount of the new senior subordinated notes. Interest expense on the new 10% notes will be $8.7 million per year. . Fees and expenses associated with this exchange offer are $5.4 million. . We will pay a current United Kingdom corporation tax charge of $11.8 million, at a tax rate of 23.5%, in connection with this exchange offer. . The accompanying unaudited pro forma statements have been prepared on the assumptions noted above relating to elections made by the holders of the old notes as of May 31, 2001. However, we will not know the final adjustments until we receive the final elections to this exchange offer from the holders of the old notes. . The pro forma balance sheet assumes that 100% of all holders of the old notes will participate in this exchange offer and that 56.3% of the old notes will be exchanged for a combination of cash and the new senior subordinated notes and 43.7% of the old notes will be exchanged for the new 10% notes. These percentages are based on the tenders received as of May 31, 2001. Sale of DSI On April 9, 2001, we entered into an agreement to sell DSI to Pitney Bowes Inc. for $290.0 million in cash. The sale is on the terms and subject to the conditions and approvals described in "Sale of DSI." The sale price is subject to adjustment depending on the value of DSI's net assets at closing of the sale. If the sale 60 had closed at March 31, 2001, the sale price would have been reduced by $7.2 million to $282.8 million. The following assumptions have been made for the purposes of the pro forma adjustments as of March 31, 2001 only and we anticipate that the DSI sale price should not be subject to such a large adjustment. . We will sell DSI for $282.8 million and incur expenses in connection with the sale of $8.4 million plus income taxes of $75.4 million, at an effective tax rate of 39.4%. . We will apply up to $39.7 million of the proceeds of the sale of DSI to fund the limited cash portion of this exchange offer of $24 million, costs of the sale of DSI of $8.4 million, and current taxes resulting from the sale of DSI of $7.5 million. . We will apply the remainder of the proceeds of the sale of DSI to partially repay our senior bank debt, to pay costs and taxes associated with this exchange offer and to pay costs associated with the refinancing of our senior bank debt. . We will incur a deferred tax liability in association with the sale of DSI of $67.9 million. Refinancing of Senior Debt . Our new credit facility will be variable rate debt with an estimated rate at time of refinancing of 9.0% per annum and the amount outstanding based on the pro forma balance sheet at March 31, 2001, is $303.1 million, which includes $13.8 million of estimated debt issue costs associated with the refinancing. . United Kingdom corporation tax on interest is computed using a 23.5% tax rate. . Fees and expenses associated with the refinancing of senior bank debt will be $13.8 million, $3.0 million of which will be deferred and will be amortized over the term of the new credit facility. Interest expense on the new facility will include $1.0 million of annual amortization of debt issue costs related to the refinancing. Other alternative exchange possibilities that may be helpful in understanding the pro forma effect of this exchange offer are shown in the footnotes to the Pro Forma Consolidated Balance Sheet. 61 Unaudited Pro Forma Consolidated Balance Sheet March 31, 2001 (In thousands, except per share amounts)
Adjustments --------------------------------------- Refinancing of Senior Exchange Historical Sale of DSI Bank Debt Offer Pro Forma ---------- ----------- ----------- --------- ---------- ASSETS Current Assets: Cash and cash equiva- lents................. $ 69,085 $ 24,000 (a) $ -- $ (24,000)(a) $ 69,085 Accounts receivable, net................... 395,849 (49,451)(b) -- -- 346,398 Inventories............ 201,645 (2,122)(b) -- -- 199,523 Prepaid expenses, de- ferred income taxes and other current assets................ 83,229 (2,203)(b) -- -- 81,026 ---------- --------- --------- --------- ---------- Total Current Assets... 749,808 (29,776) -- (24,000) 696,032 Equipment on operating leases, net............ 134,434 (46,532)(b) -- -- 87,902 Property and equipment, net.................... 77,716 (5,099)(b) -- -- 72,617 Intangible assets, net.. 252,699 (8,528)(b) -- -- 244,171 Other assets............ 68,286 (480)(b) 5,640 (f) 1,489 (j) 74,935 ---------- --------- --------- --------- ---------- Total Assets........... $1,282,943 $ (90,415) $ 5,640 $ (22,511) $1,175,657 ========== ========= ========= ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: $(242,841)(c) Current maturities of long-term debt and notes payable......... $ 517,447 $ (286)(b) $(289,276)(g) $ 17,150 (k) $ 2,194 Accounts payable....... 153,392 (16,789)(b) -- -- 136,603 Accrued expenses and other current liabili- ties.................. 194,509 (12,049)(b) -- -- 182,460 Deferred revenue....... 35,158 (189)(b) -- -- 34,969 ---------- --------- --------- --------- ---------- Total Current Liabili- ties.................. 900,506 (272,154) (289,276) 17,150 356,226 6.75% convertible subor- dinated notes due April 1, 2002................ 200,000 -- -- (200,000)(l) -- Zero coupon senior sub- ordinated notes due April 1, 2004.......... -- -- -- 42,032 (l) 42,032 10% subordinated notes due April 1, 2008...... -- -- -- 87,460 (l) 87,460 13,800 (h) -- -- Senior bank debt........ -- -- 289,276 (g) -- 303,076 Other long-term debt and notes payable.......... 1,731 (1,322)(b) -- -- 409 67,897 (d) -- -- -- Deferred income taxes and other long-term li- abilities.............. 29,343 (801)(b) -- -- 96,439 ---------- --------- --------- --------- ---------- Total Liabilities...... 1,131,580 (206,380) 13,800 (53,358) 885,642 ---------- --------- --------- --------- ---------- 6.50% Convertible Par- ticipating Shares--Re- deemable: $1.00 stated value; 500,000 authorized; 234,993 issued and outstanding............ 223,713 -- -- -- 223,713 Shareholders' Equity: Ordinary Shares 1.25 pence stated value; 500,000,000 authorized; 247,570,566 issued and outstanding........... 5,130 -- -- -- 5,130 Additional paid-in cap- ital.................. 325,399 -- -- -- 325,399 Accumulated deficit.... (302,619) 109,256 (e) (8,160)(i) 30,847 (l) (170,676) Accumulated other com- prehensive loss ...... (100,260) 6,709 (e) -- -- (93,551) ---------- --------- --------- --------- ---------- Total Shareholders' Eq- uity (Deficit)........ (72,350) 115,965 (8,160) 30,769 66,224 ---------- --------- --------- --------- ---------- Total Liabilities and Shareholders' Equity.. $1,282,943 $ (90,415) $ 5,640 $ (22,511) $1,175,657 ========== ========= ========= ========= ==========
- -------- (a) Pro forma adjustment to reflect use of proceeds from sale of DSI. (b) Pro forma adjustment to remove the assets and liabilities of DSI resulting from the sale of DSI. (c) Pro forma adjustment to reflect the use of the remaining estimated cash proceeds from the sale of DSI ($242,841) to repay a portion of the senior debt outstanding, after use of cash to pay DSI transaction costs ($8,400); current income taxes resulting from the sale of DSI ($7,500); and cash portion of this exchange offer ($24,000). (d) Pro forma adjustment to recognize estimated deferred income taxes resulting from the sale of DSI ($67,897). (e) Pro forma adjustment to reflect the impact on equity resulting from the gain realized from the sale of DSI ($109,256), and the write-off of DSI's cumulative currency translation adjustment ($6,790). (Notes continued on following page) 62 (Notes continued from previous page) (f) Pro forma adjustment to record new debt issue costs ($4,300); write-off of old debt issue costs ($1,166); and deferred taxes ($2,506). (g) Pro forma adjustment to reflect the reclassification of the new senior debt from current to long-term ($289,276). (h) Pro forma adjustment to record the liability for estimated debt issue costs associated with the refinancing of senior debt ($13,800). (i) Pro forma adjustment to reflect write-off of old debt issue costs ($1,166), write-off of estimated fees to be paid to creditors ($9,500), and deferred taxes related to both write-offs ($2,506). (j) Pro forma adjustment to reflect deferred income taxes on gain realized from this exchange offer ($2,274) and write-off of old debt issue costs ($785). (k) Pro forma adjustment to reflect funds required for transaction costs of exchange offer ($5,400) and current taxes due from the exchange offer ($11,750). (l) Pro forma adjustment to reflect the exchange of the remaining $140,000 of old notes (after the exchange of $60,000 of old notes tendered for cash) for $32,014 of new senior subordinated notes plus accrued interest of $10,018 ($42,032) and $87,460 of new 10% notes ($87,460). This exchange offer is being accounted for as a troubled debt restructuring. As the total consideration being paid to owners tendering old notes under the limited cash option and the new senior subordinated notes, including interest, is estimated to be less than the carrying amount of the old notes being tendered, a gain on the extinguishment of the old notes is expected to be recognized. As a result, interest expense over the life of the new senior subordinated notes has been included in the carrying amount of the new notes ($10,018). Accordingly, interest expense will not be recognized in future financial statements for the new zero coupon notes. Interest expense will be recognized in future financial statements for the new 10% notes. The pro forma balance sheet assumes that 100% of all holders of the old notes will participate in this exchange offer and that 56.3% of the old notes will be exchanged for a combination of cash and the new senior subordinated notes and 43.7% of the old notes will be exchanged for the new 10% notes. These percentages are based on the tenders received as of May 31, 2001. As of May 31, 2001 approximately 78% of outstanding old notes had been tendered. As of May 31, 2001 the cash portion of this exchange offer was fully subscribed; however, we can not predict which exchange option holders of the old notes not yet tendered will choose. Presented below are alternative exchange possibilities that we believe may be helpful in understanding the pro forma effect of this exchange offer.
Cash New portion of zero exchange Old 6.75% coupon New 10% offer notes notes notes ---------- ---------- ------- -------- 1. 100% of old notes exchanged (56.3% cash offer and senior subordinated notes, 43.7% new 10% notes)............. $24,000 $(200,000) $42,032 $ 87,460 2. 95% of old notes exchanged (56.3% cash offer and senior subordinated notes, 43.7% new 10% notes)............. $24,000 $(190,000) $37,530 $ 83,087 3. 100% of old notes exchanged (65.8% cash offer and senior subordinated notes, 34.2% new 10% notes)............. $24,000 $(200,000) $57,295 $ 68,381 4. 100% of old notes exchanged (44.0% cash offer and senior subordinated notes, 56.0% new 10% notes)............. $24,000 $(200,000) $22,390 $112,012
The principal amount of the senior subordinated notes includes the interest expense over the life of the new notes. The net gain on this exchange offer ($30,847) as presented in the Pro Forma Consolidated Balance Sheet is the carrying amount of the old notes being tendered under the limited cash option ($112,540), net of cash paid ($24,000), new senior subordinated notes issued ($32,014), interest over the term of the new senior subordinated notes ($10,018), debt issue costs from the old and the new notes ($6,185), and income taxes ($9,476). 63 Unaudited Pro Forma Consolidated Statements Of Operations For the Twelve Months Ended March 31, 2001 (In thousands, except per share amounts)
Adjustments ------------------------------------- Refinancing of Senior Exchange Historical Sale of DSI Bank Debt Offer Pro Forma ---------- ----------- ----------- -------- ---------- REVENUE: Retail equipment sales......... $ 626,717 $ (12,610)(a) $ -- $ -- $ 614,107 Retail service, supplies and rentals....................... 1,339,415 (277,409)(a) -- -- 1,062,006 Wholesale...................... 97,128 -- -- -- 97,128 ---------- --------- ------- -------- ---------- Total Revenue.................. 2,063,260 (290,019) -- -- 1,773,241 ---------- --------- ------- -------- ---------- COSTS AND OPERATING EXPENSES: Cost of retail equipment sales......................... 528,287 (9,991)(a) -- -- 518,296 Retail service, supplies and rental costs.................. 882,125 (221,958)(a) -- -- 660,167 Wholesale costs of revenue..... 80,922 -- -- -- 80,922 Selling, general and adminis- trative expenses.............. 676,953 (37,068)(a) -- -- 639,885 Amortization of intangible as- sets.......................... 13,252 (410)(a) -- -- 12,842 Write-off of goodwill and other long-lived assets............. 25,577 -- -- -- 25,577 Restructuring charges (cred- its).......................... 15,705 -- -- -- 15,705 Other expense.................. 9,622 (654)(a) -- -- 8,968 ---------- --------- ------- -------- ---------- Total costs and operating ex- penses........................ 2,232,443 (270,081) -- -- 1,962,362 ---------- --------- ------- -------- ---------- (Loss) earnings from opera- tions.......................... (169,183) (19,938) -- -- (189,121) Interest expense................ (82,639) -- 12,090 (b) 4,754 (d) (65,795) Interest income................. 3,163 -- -- -- 3,163 ---------- --------- ------- -------- ---------- (Loss) earnings before income taxes .. (248,659) (19,938) 12,090 4,754 (251,753) Provision (benefit) for income taxes.......................... (28,099) (8,290)(a) 2,841 (c) 1,117 (e) (32,431) ---------- --------- ------- -------- ---------- Net (loss) earnings............. $ (220,560) $ (11,648) $ 9,249 $ 3,637 $ (219,322) ========== ========= ======= ======== ========== Basic earnings (loss) per ADS: From continuing operations before extraordinary items and discontinued operations....... $ (3.91) $ (3.89) ========== ========== Weighted average ADSs.......... 60,438 60,438 ========== ========== Diluted earnings (loss) per ADS: From continuing operations be- fore extraordinary items and discontinued operations....... $ (3.91) $ (3.89) ========== ========== Weighted average ADSs.......... 60,438 60,438 ========== ==========
- -------- (a) Pro forma adjustment to reflect the elimination of historical revenue and expenses resulting from the sale of DSI. (b) Pro forma adjustment reflects the reduction of interest expense resulting from lower borrowing from the refinancing of senior debt. The adjustment ($12,090) assumes a 1.5% increase in the interest rate on variable rate bank debt which results in additional pro forma interest expense ($10,208) which is offset by lower interest on reduced borrowings ($22,298). The affect of a one-quarter percent change in the pro forma interest rate is ($903). (c) Pro forma adjustment to reflect income taxes based on an estimated income tax rate of 23.5%. (d) Pro forma adjustment to record interest expense associated with new 10% notes ($8,746); less interest expense associated with the old notes ($13,500). (e) Pro forma adjustment to reflect estimated income taxes resulting from the interest adjustment noted in (d) above at an estimated income tax rate of 23.5%. A gain on discounted operations resulting from the sale of DSI is not included in the Unaudited Pro Forma Consolidated Statements of Operations. The estimated gain from the sale of DSI is $109.3 million and assumes gross proceeds from the sale of $282.8 million. The book value of net assets to be sold at March 64 31, 2001 is $74.5 million. Other deductions from gross proceeds include the estimated expenses of the sale ($8.4 million), income taxes ($75.4 million) and the write-off of DSI's cumulative translation adjustment ($6.7 million) and goodwill ($8.5). An extraordinary loss resulting from the refinancing of bank debt is not included in the Unaudited Pro Forma Consolidated Statements of Operations. The extraordinary loss includes the write-off of old debt issue costs ($2.3 million), fees paid to creditors on new borrowings ($9.5 million), and related tax benefits ($2.8 million). This exchange offer is being accounted for as a troubled debt restructuring. As the total consideration being paid to owners tendering old notes under the limited cash option and the new senior subordinated notes, including interest, is estimated to be less than the carrying amount of the old notes being tendered, a gain on the extinguishment of the old notes is expected to be recognized. As a result, interest expense over the life of the new senior subordinated notes has been included in the carrying amount of the new notes presented on the unaudited pro forma consolidated balance sheet ($10,018). Accordingly, interest expense on the senior subordinated is not recognized in these unaudited pro forma consolidated statements of operations. At May 31, 2001 the cash portion of this exchange offer was fully subscribed; however, for old notes not yet tendered we can not predict which exchange option holders of the old notes will choose. Presented below are alternative exchange possibilities that we believe may be helpful in understanding the pro forma effect of this exchange offer.
Extraordinary Interest gain--net Expense of tax -------- ------------- 1. 100% of old notes exchanged (56.3% cash offer and senior subordinated notes, 43.7% new 10% notes)............................... $4,754 $30,108 2. 95% of old notes exchanged (56.3% cash offer and senior subordinated notes, 43.7% new 10% notes)............................... $4,041 $29,247 3. 100% of old notes exchanged (65.8% cash offer and senior subordinated notes, 34.2% new 10% notes)............................... $6,662 $33,027 4. 100% of old notes exchanged (44.0% cash offer and senior subordinated notes, 56.0% new 10% notes)............................... $2,299 $26,352
65 Unaudited Pro Forma Consolidated Financial Statements for the Subsidiary Guarantors We have set out unaudited pro forma consolidated financial statements for Danka Holding Company and Danka Office Imaging Company on the following pages. Danka Holding Company and Danka Office Imaging Company will fully and unconditionally guarantee the new zero coupon senior subordinated notes on a joint and several basis. The senior subordinated notes and the guarantees are subordinated to all our existing and future senior indebtedness. Danka Holding Company and Danka Office Imaging Company are our 100% owned subsidiaries and represent substantially all of our operations in the United States. Danka Office Imaging Company owns the United States operations of DSI. On April 9, 2001, we entered into an agreement to sell DSI, including DSI's United States operations, to Pitney Bowes Inc. for $290.0 million in cash. The sale of DSI is on the terms and subject to the conditions and approvals described in "Sale of DSI." The unaudited pro forma consolidated balance sheet as of March 31, 2001 has been prepared on the basis that the sale of DSI on the terms described below had occurred on March 31, 2001. The unaudited pro forma consolidated statements of operations for the year ended March 31, 2001 has been prepared on the basis that the sale of DSI on the terms described below had occurred on April 1, 2000. The unaudited pro forma financial information does not take into account this exchange offer or the refinancing of our senior bank debt because we do not believe that to do so would provide additional material information regarding Danka Holding Company or Danka Office Imaging Company. You should read this information in conjunction with the consolidated financial information and the accompanying notes included in our Annual Report on Form 10-K/A for the year ended March 31, 2001, which is incorporated into this prospectus by reference. The unaudited pro forma consolidated financial data does not purport to represent what Danka Holding Company's and Danka Office Imaging Company's results of operations would actually have been had the sale of DSI occurred on the dates specified, or to project Danka Holding Company's and Danka Office Imaging Company's results of operations for any future period or date. The pro forma adjustments are based on available information and certain adjustments that our management believes are reasonable. In the opinion of our management, all adjustments have been made that are necessary to present fairly the unaudited pro forma consolidated data. We can give you no assurances that the sale of DSI will take place or, if it does take place, that it will take place on the terms specified in the assumptions. The DSI sale price is subject to adjustment depending on the value of DSI's net assets, as defined, at closing of the sale. If the sale had closed on March 31, 2001, the sale price would have been reduced by $7.2 million to $282.8 million primarily as a result of the level of DSI's accounts payable on that date. The following assumptions have been made for the purposes of the pro forma adjustments as of March 31, 2001 only. We anticipate that the DSI sale price should not be subject to so large an adjustment as we expect that the level of DSI's liabilities to be lower on the closing date of the sale than on March 31, 2001. . We will sell the United States operations of DSI owned by Danka Office Imaging Company for $181.1 million and incur current income taxes on the sale of $7.5 million. . The net proceeds of sale of the United States operations of DSI will be utilized to reduce Danka Office Imaging Company's intercompany indebtedness to Danka Business Systems PLC. Danka Business Systems PLC will utilize the net proceeds of the sale of DSI as described in "Prospectus Summary--Sale of DSI." . The estimated after-tax gain resulting from the sale of the United States operations of DSI is $73.7 million. Danka Office Imaging Company will incur a deferred tax liability in connection with the sale of the United States operations of DSI of $45.0 million. 66 Unaudited Pro Forma Consolidated Balance Sheet March 31, 2001 (In thousands)
Subsidiary Guarantors Historical Sale of DSI Pro Forma ---------- ----------- --------- ASSETS Current Assets: Cash..................................... $ 27,723 $ -- $ 27,723 Accounts receivable, net................. 195,596 (24,167)(a) 171,429 Inventories.............................. 88,959 (672)(a) 88,287 Prepaid expenses, deferred income taxes and other current assets................ 68,285 (26)(a) 68,259 --------- --------- --------- Total Current Assets..................... 380,563 (24,865) 355,698 Equipment on operating leases, net....... 71,293 (30,114)(a) 41,179 Property and equipment, net.............. 58,563 (1,442)(a) 57,121 Intangible assets, net................... 85,171 (8,507)(a) 76,664 Other assets............................. 52,698 -- 52,698 --------- --------- --------- Total Assets............................. $ 648,288 $ (64,928) $ 583,360 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt and notes payable........................... $ 44,199 $ (47)(a) $ 44,152 Accounts payable......................... 89,154 (6,060)(a) 83,094 Accrued expenses and other current liabilities............................. 72,090 (3,950)(a) 68,140 Deferred revenue......................... 19,810 (10)(a) 19,800 Due to (from) affiliate.................. 518,928 (173,586)(b) 345,342 --------- --------- --------- Total Current Liabilities................ 744,181 (183,653) 560,528 Due to (from) affiliate -- long-term..... 200,000 -- 200,000 Long-term debt and notes payable......... 780 -- 780 Deferred income taxes and other long-term liabilities............................. 4,445 44,984 (c) 49,429 --------- --------- --------- Total Liabilities........................ 949,406 (138,669) 810,737 Shareholders' Equity (Deficit): Share capital............................ 258 -- 258 Additional paid-in-capital............... 106,644 -- 106,644 Accumulated deficit...................... (408,020) 73,741 (d) (334,279) --------- --------- --------- Total Shareholders' Equity (Deficit)..... (301,118) 73,741 (227,377) --------- --------- --------- Total Liabilities and Shareholders' Equity (Deficit)........................ $ 648,288 $ (64,928) $ 583,360 ========= ========= =========
- -------- (a) Pro forma adjustment to remove the assets and liabilities resulting from the sale of the United States operations of DSI. (b) Pro forma adjustment to reflect the net proceeds from the sale of the United States operations of DSI ($181,086), less payment of current income taxes ($7,500). (c) Pro forma adjustment to recognize estimated deferred income taxes resulting from the sale of the United States operations of DSI. (d) Pro forma adjustment to reflect the impact on equity resulting from the gain realized from the sale of the United States operations of DSI. 67 Unaudited Pro Forma Consolidated Statements of Operations For the Twelve Months Ended March 31, 2001 (In thousands)
Subsidiary Guarantors Historical Sale of DSI Pro Forma ---------- ----------- ---------- REVENUE Retail equipment sales................. $ 356,024 $ (12,610)(a) $ 343,414 Retail service, supplies & rentals..... 819,928 (158,705)(a) 661,223 ---------- --------- ---------- Total revenue.......................... 1,175,952 (171,315) 1,004,637 ---------- --------- ---------- COSTS AND OPERATING EXPENSES Cost of retail equipment sales......... 318,888 (9,991)(a) 308,897 Retail service, supplies & rental costs................................. 506,724 (121,281)(a) 385,443 Selling, general & administrative expenses.............................. 417,587 (19,878)(a) 397,709 Amortization of intangible assets...... 4,813 (408)(a) 4,405 Restructuring charges.................. 4,661 -- 4,661 Other (income) expense................. (14,312) -- (14,312) ---------- --------- ---------- Total costs and operating expenses..... 1,238,361 (151,558) 1,086,803 ---------- --------- ---------- Loss from operations.................... (62,409) (19,757) (82,166) Interest expense........................ (81,759) -- (81,759) ---------- --------- ---------- Loss before income taxes................ (144,168) (19,757) (163,925) Provision (benefit) for income taxes.... (25,685) (8,215)(a) (33,900) ---------- --------- ---------- Net loss................................ $ (118,483) $ (11,542) $ (130,025) ========== ========= ==========
- -------- (a) Pro forma adjustment to reflect the elimination of historical revenue and expenses resulting from the sale of the United States operations of DSI. 68 COMPARISON OF THE OLD NOTES AND THE NEW NOTES
New Senior Old Notes Subordinated Notes New 10% Notes - ---------------------------------------------------------------------------------------------- Aggregate principal $200 million Up to $160 million Up to $200 amount outstanding on million initial issuance - ---------------------------------------------------------------------------------------------- Maturity date April 1, 2002 April 1, 2004 April 1, 2008 - ---------------------------------------------------------------------------------------------- Interest rate 6.75% annual rate, No interest payments 10% annual payable in cash on will be made on the rate, April 1 and October 1 senior subordinated payable in of each year. notes. cash on April 1 and October 1 of each year. Interest payable on October 1, 2001 will include accrued interest effective from April 1, 2001. - ---------------------------------------------------------------------------------------------- Guarantees Our obligations under Our obligations under Our the old notes are not the new senior obligations guaranteed. subordinated notes under the will be fully and new 10% unconditionally notes are guaranteed, on a not senior subordinated guaranteed. basis, by Danka Holding Company and Danka Office Imaging Company, our principal United States subsidiaries. - ---------------------------------------------------------------------------------------------- Redemption at our option We can redeem the old We can redeem the new We can notes at any time in senior subordinated redeem the whole or part for notes at any time in new 10% their principal amount whole or part for 100% notes at plus accrued and of their principal any time unpaid interest, if amount. following any, to the date of the fourth redemption. The anniversary current redemption of their price is 100.964% of initial principal amount. issue date. The redemption price, as a percentage of principal amount, is: Twelve Month Period Redemption Commencing Price ------------ ---------- April 1, 2005 105.000% April 1, 2006 102.500% April 1, 2007 100.000% and thereafter In addition, we will pay accrued and unpaid interest, if any, to the date of redemption. - ----------------------------------------------------------------------------------------------
69
New Senior Old Notes Subordinated Notes New 10% Notes - ------------------------------------------------------------------------------------------------- Redemption at our None None At any time before option following April 1, 2005, we can equity offerings redeem up to 35% of the principal amount of the new 10% notes originally issued for their principal amount plus a premium of 10%, together with accrued and unpaid interest, if any, to the date of redemption, if: . we use the net cash proceeds of a public or private offering of our equity securities to finance the redemption; and . at least 65% of the aggregate principal amount of the new 10% notes originally issued remain outstanding after giving effect to the redemption. - ------------------------------------------------------------------------------------------------- Repurchase at option Upon a change of Upon a change of Upon a change of of holders--change control, owners of the control, owners of the control, owners of the of control old notes can require new senior new 10% notes can us to purchase their subordinated notes can require us to purchase old notes at a price require us to purchase their new notes at a equal to 101% of their their new notes at a price equal to 101% of principal amount, plus price equal to 109% of their principal accrued and unpaid their principal amount, plus accrued interest, if any, to amount, so long as we and unpaid interest, the date of have satisfied other if any, to the date of redemption, so long as of our payment redemption, so long as we have satisfied obligations. we have satisfied other of our payment other of our payment obligations. obligations. - ------------------------------------------------------------------------------------------------- Repurchase at option None Owners of the new None of holders--asset senior subordinated sale notes can require us to purchase their new notes at a price equal to 100% of their principal amount with excess proceeds of an asset sale. - -------------------------------------------------------------------------------------------------
70
New Senior Old Notes Subordinated Notes New 10% Notes - ------------------------------------------------------------------------------------------ Conversion The old notes are If we fail to repay The new 10% convertible at any the new senior notes are time into our American subordinated notes at not depositary shares at a maturity, there will convertible price of $29.125 per be an event of default into equity American depositary under the indenture securities. share or our ordinary for the new senior shares at a price of subordinated notes. In $7.281 per ordinary that event, holders of share, subject to the new senior adjustment in limited subordinated notes circumstances. will be entitled, at their option, and in addition to any and all other rights and remedies, to convert all, or any part, of their notes into our American depositary shares or ordinary shares. The conversion price will be calculated by reference to the closing market price of our American depositary shares for the twenty trading day period ending on the maturity date. This conversion right will be subject to the prior approval of our shareholders, which we will agree to use our reasonable efforts to obtain. The conversion right will also be subject to compliance with applicable laws and the obtaining of applicable regulatory approval. - ------------------------------------------------------------------------------------------ Ranking and security The old notes rank in The new senior The new 10% right of payment subordinated notes notes will behind our senior bank will rank in right of rank in debt and all of our payment behind our right of other existing and senior bank debt and payment future senior debt. all of our other behind our The old notes will existing and future senior bank rank in right of senior debt. The new debt and payment behind the new senior subordinated all of our senior subordinated notes will rank in other notes and the new 10% right of payment ahead existing notes. If we issue of the new 10% notes and future additional and any remaining old senior subordinated debt in notes. If we issue debt. The the future, the old additional new 10% notes will rank in subordinated debt in notes will right of payment the future, the new rank in behind, or equal to, senior subordinated right of that debt. The old notes will rank in payment notes are unsecured. right of payment ahead behind the of, or equal to, that new senior debt. The new senior subordinated subordinated notes notes. The will be unsecured. new 10% notes will rank in right of payment ahead of any remaining old notes. If we issue additional subordinated debt in the future, the new 10% notes will rank in right of payment equal to, or behind, that debt. The new 10% notes will be unsecured. - ------------------------------------------------------------------------------------------
71 New Senior Old Notes Subordinated Notes New 10% Notes - ----------------------------------------------------- Affirmative The old notes The new senior The new 10% notes Covenants include the subordinated include the following notes include the following required actions: following required actions: required actions: . maintenance of an office for notices in New York, New York; . maintenance of . maintenance of an office for an office for notices in New notices in New York, New York; York, New York; . a compliance certificate delivered by an officer at least once yearly; . maintenance of . maintenance of property and property and insurance; insurance; . a compliance . a compliance certificate by certificate counsel at given by least once counsel at yearly; least once yearly; . maintenance of corporate existence; . timely payment . maintenance of of taxes and London Stock other claims; Exchange listing; . timely payment of taxes and other claims; . maintenance of corporate existence; . the payment of . maintenance of additional corporate amounts in the existence; event of the imposition of United Kingdom withholding tax; . maintenance of all registration, regulations and licenses; . maintenance of all registration, regulations and licenses; . the payment of . timely payment additional of principal amounts in the and interest on event of the the old notes; imposition of and United Kingdom withholding tax; . the payment of additional amounts in the event of the imposition of United Kingdom withholding tax; . filing of public reports. . timely payment of principal and interest on the new 10% notes; and . timely payment of principal on the new senior subordinated notes; . filing of public reports. . addition of subsidiary guarantees in specified circumstances; and . filing of public reports. - -------------------------------------------------------------------------------- 72
New Senior Old Notes Subordinated Notes New 10% Notes - ----------------------------------------------------------------------------------------------- Negative Covenants The old notes include The new senior The new 10% notes limitations on our and subordinated notes include limitations on our subsidiaries' include limitations on our and our ability to, among our and our subsidiaries' ability other things: subsidiaries' ability to, among other to, among other things: things: . merge or . incur additional . engage in consolidate; and indebtedness; transactions with our affiliates; . transfer or sell . incur any debt that . merge or substantially all of ranks below our consolidate; our assets. senior debt but .transfer or sell ranks ahead of the substantially all of new senior our assets; subordinated notes; .make payments on .pay dividends on our indebtedness our shares, purchase which is or redeem our subordinated to the shares, make new 10% notes, investments or make including the old payments on debt notes; and which is .engage in business subordinated to the activities that are new senior not reasonably subordinated notes; related to our . create or permit existing businesses. any encumbrance or restriction on the ability of our subsidiaries to pay money to us; .issue or sell capital stock of our subsidiaries; .create liens; .engage in transactions with our affiliates; .merge or consolidate; .transfer or sell substantially all of our assets; .make payments on our indebtedness which is subordinated to the new senior subordinated notes, including the old notes; .engage in any new business activities that are not reasonably related to our existing businesses; and .provide guarantees of other subordinated debt. - -----------------------------------------------------------------------------------------------
73
New Senior Old Notes Subordinated Notes New 10% Notes - -------------------------------------------------------------------------------------------------- Events of default The following are The following are The following are events of default events of default events of default under the terms of the under the terms of the under the terms of the old notes: new senior new 10% notes: subordinated notes: . our failure to pay . our failure to pay . our failure to pay principal when due; principal at principal at maturity; maturity; . our failure to pay . our failure to pay . our failure to pay interest when due the purchase price interest when due continued for 30 of the new senior continued for 30 days; subordinated notes days; .our failure to on the exercise of .our failure to pay provide notice of a the repurchase the purchase price designated event as rights which apply of the new 10% notes provided in the following a change on the exercise of indenture; of control or an the repurchase .our failure to asset sale; rights which apply perform any other .our failure to following a change covenant for 90 days perform any other of control; after written covenant for 30 days .our failure to notice; after written perform any other .some events of notice; covenant for 30 days bankruptcy, .our failure to after written insolvency or comply with the notice; reorganization; or provisions on .our failure to .our failure to limitations on comply with the repurchase any mergers, provisions on securities as consolidations and limitations on provided in the sale of assets; mergers, indenture. .if we or our consolidations and subsidiaries default sale of assets; on any indebtedness .if we or our which in aggregate subsidiaries default exceeds $25 million; on any indebtedness .our rendering of a which in aggregate final judgment exceeds $25 million; against us or any of .our rendering of a our subsidiaries in final judgment excess of $10 against us or any of million remains our subsidiaries in unpaid for over 60 excess of $10 days; or million remains .some events of unpaid for over 60 bankruptcy, days; or insolvency or .some events of reorganization. bankruptcy, insolvency or reorganization. - -------------------------------------------------------------------------------------------------- Remedies upon default If an event of default If an event of default If an event of default occurs, either the occurs, either the occurs, either the trustee or holders of trustee or holders of trustee or holders of at least 25% in at least 25% in at least 25% in aggregate principal aggregate principal aggregate principal amount of the old amount of the amount of the notes may accelerate outstanding new senior outstanding new 10% the maturity of all of subordinated notes may notes may accelerate the old notes. accelerate the the maturity of all of maturity of all of the the new 10% notes. new senior subordinated notes. - --------------------------------------------------------------------------------------------------
74 TERMS OF THE OLD NOTES The following is a summary of the terms of the old notes that we are offering to exchange under this exchange offer. The terms of the old notes include those terms stated in the indenture for the old notes dated as of March 13, 1995, as amended as of December 10, 1999 and those terms made part of the indenture by reference to the Trust Indenture Act of 1939. We urge you to read the indenture in its entirety. You may obtain copies of the indenture from us. See "Where You Can Find More Information." Principal, Maturity and Interest $200 million in principal amount of old notes is outstanding. The old notes have a maturity date of April 1, 2002. On maturity, owners of the old notes are entitled to receive 100% of the principal amount of the old notes plus accrued interest. The old notes bear interest at a rate of 6.75% per annum. We pay the interest semi-annually in cash on April 1 and October 1 (or the next following business day after those dates). Upon conversion (unless otherwise called for redemption), each old note ceases to bear interest from the interest payment date immediately preceding the conversion date. Interest is computed on the basis of a 360-day year comprised of 12 months of 30 days each. Ranking The old notes rank in right of payment behind substantially all of our indebtedness, including the new senior subordinated notes and the new 10% notes. The old notes are unsecured. Form We issued the old notes in bearer form in the form of global notes. No old notes have been issued in definitive form. Conversion The old notes are convertible into: . American depositary shares representing ordinary shares, at an initial conversion price of $29.125 per American depositary share (inclusive of United Kingdom stamp duty reserve tax); or . $7.281 per ordinary share (equivalent to an initial conversion rate of approximately 34.335 American depositary shares or 137.339 ordinary shares per $1,000 principal amount of old notes). Conversion rights can only be exercised with respect to $100,000 principal amount of old notes or integral multiples of $1,000 in excess of $100,000. Conversion rights cannot be exercised on the business day immediately preceding any interest payment date, unless the interest payment date is also a redemption date. If the interest payment date is also a redemption date, the conversion right may be exercised prior to the close of business on that day. Fractions of ordinary shares or American depositary shares are not issued on conversion of old notes and no cash adjustments are made in respect of fractional entitlements. Adjustment of conversion price: The conversion price for the old notes is subject to adjustment upon the occurrence of the following events: . the issuance of ordinary shares as a dividend or distribution on our ordinary shares; 75 . the issuance to all holders of our ordinary shares of rights or warrants to subscribe for or purchase ordinary shares at less than the current market price at the time of issuance or rights or warrants to subscribe for or purchase any other securities or indebtedness; . subdivisions, combinations and reclassifications of our ordinary shares; . the distribution to all holders of our ordinary shares of cash or other assets (other than any regular semi-annual or quarterly dividends payable solely in cash that may from time to time be fixed by our board of directors); or . some repurchases by us or any of our subsidiaries of our ordinary shares for a price in excess of the then current market price of the ordinary shares. Trustee and Agents HSBC Bank USA (formerly Marine Midland) is trustee for the old notes. The principal office of HSBC Bank USA is 140 Broadway, New York, New York 10005. HSBC Bank USA is also the principal paying agent, transfer agent and conversion agent for the old notes. HSBC is responsible, among other things, for: . accepting old notes for exchange and registering transfers of old notes; . ensuring that payments of principal and interest in respect of the old notes received by the trustee are duly paid to owners of the old notes; . transmitting to us any notices from owners of the old notes; and . accepting conversion notices and related documents. We have appointed HSBC Bank plc at its office in London, England as an additional paying agent, transfer agent and conversion agent. We may vary or terminate the appointment of the trustee, the registrar and any paying agent, transfer agent or conversion agent at any time with or without cause. In addition, we may appoint another registrar or additional or other agents or approve any change in the office through which the registrar or any agent acts. However, there must always be a registrar, a paying agent, a transfer agent and a conversion agent in the Borough of Manhattan, the City of New York, New York and in London, England. Redemption at Our Option We can redeem old notes at our option in whole or in part at any time prior to maturity upon not less than 30 nor more than 60 days' notice. Upon redemption, owners of old notes will receive the redemption price set out below, expressed as a percentage of the principal amount of the old notes, together with accrued interest to the redemption date.
Twelve Month Period Commencing Redemption Price ------------------------------ ---------------- April 1, 2000............................................. 101.929% April 1, 2001............................................. 100.964%
If less than all of the old notes are redeemed, the trustee will select which old notes will be redeemed (in principal amounts of $100,000 or integral multiples of $1,000 in excess thereof) by lot or, in its discretion, on a pro rata basis. Repurchase Rights of Owners of the Old Notes Owners of the old notes have the right, at their option, to require us to repurchase all or a portion of their old notes for a price equal to 100% of the principal amount of the old notes plus accrued interest (if any) on the occurrence of the following events: . On a change in control. A change of control includes, among others, the following events: 76 . if any person or group becomes the beneficial owner of more than 50% of our outstanding voting stock; . if any person or group has the right to elect or designate for election a majority of our board of directors; . we merge with another entity or sell all, or substantially all, of our assets to another person, in any event pursuant to a transaction in which more than 50% of our total voting stock outstanding is reclassified or changed into or exchanged for cash, securities or other property; or . if our continuing directors cease to form a majority of our board of directors. For these purposes our continuing directors are (a) our directors as of March 13, 1995, and (b) all directors appointed since March 13, 1995 whose appointment was approved by a majority of our directors then still in office who were either directors as of March 31, 1995 or whose election was previously so approved. . On a termination of trading. A termination of trading occurs if our ordinary shares or our American depository shares are not: . listed for trading on the London Stock Exchange, in the case of the ordinary shares, or the Nasdaq National Market, in the case of the American depository shares; or/and . listed for trading on a United States national securities exchange; or/and . approved for trading on an established automated over-the-counter trading market in the U.S. If a designated event occurs, any repurchase of the old notes could, absent payment in full of any outstanding senior debt or waiver, be prevented by the subordination provisions of the indenture. In addition, the repurchase of old notes upon a designated event may be prohibited by the terms of our senior debt. As a result, absent payment in full of our senior debt or waiver, repurchase of the old notes could be prevented. Payment of Additional Amounts and Tax Redemption If we are required by the laws or regulations of the United Kingdom to make any deduction or withholding for any present or future taxes, assessments or other governmental charges in respect of any amounts to be paid by us under the old notes, we will pay owners of the old notes, as additional interest, such additional amounts as may be necessary so that the net amounts paid to owners of the old notes after that deduction or withholding will be not less than the amounts specified in the note to which owners of the old notes are entitled. However, we are not required to make any payment of additional amounts in some limited circumstances, which are outlined in the indenture for the old notes. We may redeem the old notes in whole, but not in part, at any time, upon not less than 30 nor more than 60 days' notice if we are required to pay the additional amounts described above because of any change in the laws or regulations of the United Kingdom. Subordination The payment of the principal of, any premium and interest on the old notes is subordinated in right of prior payment in full of all our existing and future senior debt. Upon any payment or distribution of assets to our creditors upon any liquidation, insolvency or similar proceedings of Danka, then the holders of all existing and future senior debt will be entitled to receive payment in full of all amounts due or to become due to them before owners of the old notes are entitled to receive any payment in respect of the principal of, any premium, or interest on the old notes. In addition, no payment on the old notes may be made if: . any default in the payment of principal of, any premium, or interest on, or rent under, or any other payment obligation under all existing and future senior debt beyond any applicable grace period; or 77 . any event of default with respect to all existing and future senior debt, permitting the holders of such debt, or a trustee or other representative on behalf of the holders thereof, to declare such debt due and payable prior to the date on which it would otherwise have become due and payable. However, payments on the old notes may not be prevented for a period of more than 179 days after an applicable default notice has been received by the trustee, unless the debt for which such event of default exists has been declared due and payable in its entirety. If the debt has been declared due and payable in its entirety, then no payment on the old notes may be made until such acceleration has been rescinded or annulled or such debt has been paid in full. We are obligated to pay reasonable compensation to the trustee and to indemnify the trustee against any losses, liabilities or expenses incurred by it in connection with its duties relating to the old notes. The trustee's claims for such payments is senior to claims of owners of the old notes in respect of all funds collected or held by the trustee. Events of Default The following are events of default under the indenture for the old notes: . failure by us to pay principal, including any redemption price or repurchase price, of, or premium, if any, on any note when due; . failure by us to pay any interest, including any additional amounts, on any note when due, which continues for 30 days; . failure by us to provide notice of an event which entitles owners of old notes to require us to repurchase their old notes, or to purchase old notes when they are due; . failure by us to perform any of our other covenants in the indenture continuing for 90 days; and . events of insolvency or reorganization involving us or our material subsidiaries. If certain of these events of default occur and continue, the aggregate principal amount of the old notes will automatically become immediately due and payable. If any other event of default with respect to the old notes occurs and continues, either the trustee or the holders of at least 25% in aggregate principal amount of the old notes outstanding may, by notice, declare the principal amount of all of the old notes to be due and payable immediately. At any time after such declaration of acceleration has been made, but before a judgment or decree for payment of money has been obtained by the trustee, the holders of a majority in aggregate principal amount of the old notes outstanding, under certain circumstances, may rescind and annul such declaration. Except in limited situations, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request or direction of owners of old notes unless the owners offer to indemnify the trustee. The owners of a majority in aggregate principal amount of the old notes have the right to direct the time, method and place of conducting proceedings for any remedy available to the trustee or exercising any trust or power conferred on the trustee. This right is limited by the trustee's indemnity from those persons. You do not have any right to institute any proceeding with respect to the indenture or the old notes, unless: . you have given to the trustee written notice of a continuing event of default; . the holders of at least 25% in aggregate principal amount of the old notes outstanding have made a written request, and offered reasonable indemnity, to the trustee to institute such proceedings as trustee; . the trustee has not received from the holders of a majority, in principal amount, of the old notes outstanding a direction inconsistent with such request; and . the trustee has failed to institute such proceeding within 60 days. 78 These limitations do not apply to a suit instituted by an owner of the old notes to enforce the payment of the principal of, or interest on, old notes on or after the appropriate due date. Mergers, Consolidations and Certain Purchases of Assets We cannot consolidate or merge with any other person and will not, directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of our properties and assets as an entirety unless, immediately after giving effect to such transaction: . no event of default or an event or condition which, after the giving of notice or lapse of time or both, would constitute an event of default under the indenture for the old notes will have occurred and be continuing; . the person formed by such consolidation or merger, or the person which acquires by transfer, conveyance, sale, lease or other disposition all or substantially all of our properties and assets as an entirety, will be a company organized and validly existing under the laws of England and Wales or the United States or any political subdivision thereof and, if not Danka, will expressly assume all our obligations under the old notes and the indenture and the performance of every covenant of the indenture on our part to be performed or observed and will have provided for conversion rights in accordance with the indenture; and . we, or our successor, expressly agree to indemnify each holder of a note, or a beneficial interest therein, against any tax, assessment or governmental charge payable by withholding or deduction thereafter imposed on such holder solely as a consequence of such transaction with respect to payments in respect of the old notes or any purchase by us of old notes. Modification and Waiver We and the trustee may make modifications and amendments to the indenture for the old notes with the consent of the holders of not less than a majority in principal amount of the old notes to be affected. However, we cannot make any of the following modifications or amendments to the old notes without the consent of each owner of the old notes who is affected by any of the following: . changes to the stated maturity of the principal, or premium, or any installment of interest; . reduction of the principal or the interest rate; . changes to our obligations to pay additional amounts; . adverse changes to our obligations to repurchase the old notes; . modifications to the subordination provisions which is adverse to owners of the old notes; . changes to the currency in which principal or interest is payable; . impairment of the right to institute a lawsuit for the enforcement of any payment on the old notes; . change to the right to convert any old notes which is adverse to the owners of the old notes; . reduction in the percentage in principal amount of old notes required for modification or amendment of the indenture or for waiver of compliance with certain provisions of the indenture or the waiver of certain defaults; or . increase to the conversion price. The holders of not less than a majority in aggregate principal amount of the old notes outstanding may waive any past default under the indenture, except a default in the payment of principal of, or any interest on, any old note. 79 Consent to Service We have irrevocably designated CT Corporation Systems as our authorized agent for service of process in any legal action or proceeding arising out of or relating to the indenture or the old notes. Any such legal action or proceeding must be brought in any federal or state court in the Borough of Manhattan, the City of New York. In addition, we have irrevocably submitted to the non-exclusive jurisdiction of those courts. Governing Law The indenture and the old notes are governed by the laws of the State of New York. 80 TERMS OF THE NEW NOTES Zero Coupon Senior Subordinated Notes Due 2004 The following is a summary of the terms of the new senior subordinated notes that Danka proposes to issue in this exchange offer. The new senior subordinated notes will be issued under an indenture between Danka and HSBC Bank USA, as the trustee for the new senior subordinated notes. The terms of the new senior subordinated notes include those terms stated in the senior subordinated indenture and those terms made part of the senior subordinated indenture by reference to the Trust Indenture Act of 1939. This section is only a summary of the material provisions of the senior subordinated indenture. This section, however, does not restate the senior subordinated indenture in its entirety. We urge you to read the senior subordinated indenture because the senior subordinated indenture and not this description defines your rights as holders of the new senior subordinated notes. You may obtain copies of the senior subordinated indenture from Danka. See "Where You Can Find More Information." This section uses defined terms. See "Definitions" on page 95. Principal and Maturity The new senior subordinated notes . have a maximum aggregate principal amount of $160.0 million; and . will mature on April 1, 2004. Danka will issue the new senior subordinated notes in denominations of $1,000 and integral multiples of $1,000, except that Danka may also issue new senior subordinated notes in denominations of less than $1,000. The new senior subordinated notes will initially be issued in the form of a global note in bearer form. See "Book Entry; Delivery and Form." If definitive registered notes are issued, the following will apply. Principal of, and premium, if any, on each new senior subordinated note will be payable and the new senior subordinated notes may be presented for transfer or exchange at the office or agency of Danka maintained for those purposes. Danka will not charge a service fee for any exchange or registration of transfer of the new senior subordinated notes, but Danka may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with any exchange or registration of transfer. Unless otherwise designated by Danka, Danka's office or agency will be the corporate trust office of the trustee. Subsidiary Guarantees The new senior subordinated notes are guaranteed by Danka Holding Company and Danka Office Imaging Company, our 100% owned principal United States subsidiaries. The guarantees of new senior subordinated notes are: . general unsecured obligations of each guarantor; . subordinated in right of payment to all existing and future Senior Debt and Guarantor Senior Debt; . subordinated in right of payment to any guarantees by the guarantors of our existing and future Senior Debt; . ranked senior to or equally with any existing and future senior subordinated debt of the guarantors; and . senior in right of payment to all other existing and future subordinated obligations of each guarantor. Payment on the new senior subordinated notes and under the guarantees will be subordinated to the payment of Senior Debt and Guarantor Senior Debt. Guarantor Senior Debt is Senior Debt of Danka for which the guarantors are liable. The new senior subordinated indenture will permit us and the guarantors to incur additional indebtedness, including Senior Debt and Guarantor Senior Debt. Each guarantor will jointly and severally, fully and unconditionally guarantee our obligations under the new senior subordinated notes. Each guarantee will be subordinated to the prior payment in full in cash or cash equivalents of all Guarantor Senior Debt on the same basis as the new senior subordinated notes are subordinated to Senior Debt. Each guarantor that makes a payment or distribution under a guarantee shall be entitled to a pro rata contribution from each other guarantor based on the net assets of each other guarantor. 81 Each guarantor may consolidate with or merge into or sell its assets to us or another guarantor that is a restricted subsidiary of ours, or with other persons upon the terms and conditions set forth in the new senior subordinated note indenture. A guarantor may not sell or otherwise dispose of all or substantially all of its assets, or consolidate with or merge with or into another person (whether or not such guarantor is the surviving person) unless certain conditions are met. The guarantee of a guarantor will be deemed automatically discharged and released in accordance with the terms of the new senior subordinated note indenture: (1) in connection with any sale of all of the capital stock or any sale or other disposition of all or substantially all of the assets of the guarantor, including by way of merger or consolidation; or (2) if a guarantor is dissolved or liquidated in accordance with the provisions of the senior subordinated note indenture. Ranking The new senior subordinated notes rank below all of Danka's existing and future Senior Debt. They rank or will rank pari passu or senior to Danka's existing and future senior subordinated Debt. They are senior to the new 10% notes and the old notes. This means that if Danka defaults, holders of Senior Debt are entitled to be paid in full before any payments are made on the new senior subordinated notes. The new senior subordinated notes are entitled to be paid in full before any other subordinated Debt of Danka. In addition, the senior lenders will have the right to block current payments on the new senior subordinated notes if there is a default under the Senior Debt. The new senior subordinated notes are subordinate in right of payment to the prior payment in full of all existing and future Senior Debt. Upon any payment or distribution of assets of Danka to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets, bankruptcy, insolvency or any similar proceedings of Danka, the holders of Senior Debt will first be paid in full the principal of, premium, if any, and interest on such Senior Debt before the holders of the new senior subordinated notes are entitled to receive any payment of principal of or premium on such new senior subordinated notes or on account of the purchase or redemption or other acquisition of new senior subordinated notes by Danka or any subsidiary of Danka, except for permitted insolvency payments. If the trustee or a holder of any new senior subordinated note receives any payment or distribution of assets of Danka before all the Senior Debt is paid in full, then such payment or distribution will be required to be paid over or delivered to the trustee in bankruptcy or other person making payment or distribution of assets of Danka to be applied to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in full. Danka may not make any payments on account of the new senior subordinated notes or on account of the purchase or redemption or other acquisition of the new senior subordinated notes if a default occurs and is continuing in the payment when due of principal of, premium, if any, or interest on any Senior Debt, including any default in the payment when due of any obligations, commitment or facility fees, letter of credit fees or agency fees under the Credit Facility, or any default in payment when due of any reimbursement obligation of Danka with respect to any letter of credit issued under the Credit Facility, referred to as a senior payment default. In addition, if a default, other than a senior payment default, occurs and is continuing with respect to the Credit Facility or any Designated Senior Debt that permits, or with the giving of notice or lapse of time or both would permit, the holders thereof, or a trustee on behalf thereof, to accelerate the maturity thereof, referred to as a senior nonmonetary default, and Danka and the trustee have received written notice thereof from the agent bank for the Credit Facility or from an authorized person on behalf of any Designated Senior Debt, then Danka may not make any payments on account of the new senior subordinated notes or on account of the purchase or 82 redemption or other acquisition of the new senior subordinated notes for a period, referred to as a blockage period, commencing on the date Danka and the trustee receive such written notice and ending on the earlier of: . 179 days after such date; or . the date, if any, on which the Senior Debt to which such default relates is discharged or such default is waived or otherwise cured. In any event, not more than one blockage period may be commenced during any period of 360 consecutive days, and there will be a period of at least 181 consecutive days in each period of 360 consecutive days when no blockage period is in effect. No senior nonmonetary default that existed or was continuing on the date of the commencement of any blockage period with respect to the Senior Debt initiating such blockage period will be, or can be, made the basis for the commencement of a subsequent blockage period, unless such default has been cured or waived for a period of not less than 90 consecutive days. If, notwithstanding the foregoing, Danka makes any payment to the trustee or the holder of any note prohibited by the subordination provisions, then such payment will be required to be paid over and delivered to the holders of the Senior Debt remaining unpaid, to the extent necessary to pay in full all the Senior Debt. Because of the subordination, in the event of insolvency of Danka, holders of the new senior subordinated notes may recover less ratably than creditors of Danka who are holders of Senior Debt. The subordination provisions described above will cease to apply to the new senior subordinated notes upon any defeasance or covenant defeasance of the new senior subordinated notes as described below under "Defeasance." The new senior subordinated notes, while junior to all Senior Debt, do rank above all other subordinated debt, including the new 10% notes and the old notes. If Danka defaults, the holders of the new senior subordinated notes are entitled to be paid in full, subject to payment of the Senior Debt, before any other subordinated debt of Danka. In addition, the holders of the new senior subordinated notes will have the right to block payments on the subordinated debt if there is a default under the new senior subordinated notes. Optional Conversion If Danka fails to repay the new senior subordinated notes at maturity, there will be an event of default under the indenture for the new senior subordinated notes. In that event holders of the new senior subordinated notes will be entitled, at their option, and in addition to all other rights and remedies, to convert all or part of their notes into Danka's American depositary shares or ordinary shares. The conversion price will be based on the average closing market price for Danka's American depositary shares for the period of twenty trading days ending on the maturity date. The conversion right will be subject to the prior approval of our shareholders and compliance with applicable laws and regulations. If Danka fails to repay the new senior subordinated notes at maturity, there will be an event of default under the indenture for the new senior subordinated notes. In that event, holders of the new senior subordinated notes will be entitled, at their option, and in addition to all other rights and remedies, to convert all or part of their notes into Danka's American depositary shares or ordinary shares. The price and number of shares will be determined in accordance with the indenture. The price at which the new senior subordinated notes will be convertible into American depositary shares will be equal to the average closing market price for Danka's American depositary shares on the Nasdaq SmallCap Market, or, if the American depositary shares are listed on another United States exchange, that other exchange, for the period of twenty trading days ending on the maturity date. The price at which the new senior subordinated notes will be convertible into ordinary shares will be equal to the American depositary share conversion price divided by the number of ordinary shares represented by one American depositary share, which is currently four. The ordinary share conversion price will not be less than the stated value of Danka's ordinary shares, currently UK(Pounds)0.0125 per ordinary share, and the American depositary share conversion price will not be less than the stated value of Danka's ordinary 83 shares multiplied by the number of ordinary shares represented by one American depositary share. Fractions of ordinary shares or American depositary shares will not be issued. Holders of the new senior subordinated notes exercising the conversion right will be required to pay any taxes or duties that arise on the issuance of the American depositary shares or ordinary shares that they receive or otherwise in connection with conversion of their notes. The conversion right will be exercisable only if the issuance of new ordinary shares, or new ordinary shares represented by American depositary shares, in exchange for the new senior subordinated notes is approved by Danka's shareholders and otherwise complies with applicable laws and regulations, including, without limitation, the securities laws and regulations of the United States and the United Kingdom. Danka will covenant in the new senior subordinated note indenture to use its reasonable efforts to obtain shareholder approval for the new share issuance and to take all steps necessary to comply with applicable securities laws in connection with the issuance as soon as reasonably practicable after the maturity date. The conversion right will not be exercisable in the event that Danka does not obtain shareholder approval for the issuance, or is unable without undue expenditure or effort to comply with applicable laws and regulations in connection with the issuance. The conversion right must be exercised by holders of the new senior subordinated notes within a period of twenty business days following the specified maturity date by written notice to the trustee. The conversion right will not be exercisable if, following the maturity date, but prior to the date on which Danka obtains shareholder approval for the issuance of the new shares, the principal amount of the new senior subordinated notes has been repaid in full. In no event will the conversion right be exercisable prior to the maturity date of the new senior subordinated notes. Payment of Additional Amounts If we are required by the laws or regulations of the United Kingdom to make any deduction or withholding for any present or future taxes, assessments or other governmental charges in respect of any amounts to be paid by us under the new senior subordinated notes, we will pay owners of the new senior subordinated notes, such additional amounts as may be necessary so that the net amounts paid to owners of the new senior subordinated notes after that deduction or withholding will be not less than the amounts specified in the note to which owners of the new senior subordinated notes are entitled. However, we are not required to make any payment of additional amounts in some limited circumstances, which are outlined in the indenture for the new senior subordinated notes. Optional Redemption In general. Danka may redeem the new senior subordinated notes in full or in part at anytime, for their principal amount. At any time, Danka may redeem all or part of the new senior subordinated notes with at least 30 but not more than 60 days' notice at 100% of their principal amount. Selection and Notice of Redemption If Danka redeems or purchases less than all of the new senior subordinated notes, the trustee will select the new senior subordinated notes for redemption or purchase in compliance with the requirements of the principal national securities exchange, if any, on which the new senior subordinated notes are listed, or, if the new senior subordinated notes are not so listed, on a pro rata basis, by lot or any other method that the trustee deems fair and appropriate. Danka will mail notice of redemption by first class mail at least 30 but not more than 60 days before the redemption date to each holder of new senior subordinated notes to be redeemed at the last address for that 84 holder shown on the registry books. If Danka redeems any note in part only, the notice of redemption that relates to that note will state the portion of the principal amount to be redeemed. Danka will issue a new note in principal amount equal to the unredeemed or unpurchased portion in the name of the holder upon cancellation of the original note, subject to DTC procedures. Mandatory Redemption or Sinking Fund Except in the event of a change of control offer or a net proceeds offer, Danka is not required to make mandatory redemption or sinking fund payments for the new senior subordinated notes. Repurchase at the Option of Holders Change of control. Upon a change of control, the holders of the new senior subordinated notes have the right to require Danka to purchase the new senior subordinated notes. The purchase price will equal 109% of the principal amount of the new senior subordinated notes. A change of control includes: . disposition of all or substantially all of Danka's assets to a person or group, other than Cypress Associates II LLC and its affiliates, except to effect a change of domicile; . approval of a plan of liquidation or dissolution, except to effect a change of domicile; . acquisition of a majority of Danka's voting stock by a person or group, other than Cypress Associates II LLC and its affiliates; . replacement of a majority of the board of directors over a two year period by directors not approved by a majority of the existing board; and . merger or consolidation that results in a person or group acquiring a majority of Danka voting stock. Upon a change of control, each holder of the new senior subordinated notes will have the right to require Danka to purchase the holder's new senior subordinated notes in whole or in part at a purchase price in cash equal to 109% of their principal amount pursuant to the offer described in the next succeeding paragraph, referred to as a change of control offer. The definition of change of control includes any sale, lease, exchange or other transfer of "all or substantially all" the assets of Danka and its subsidiaries taken as whole to any person or group of persons. Although there is a developing body of caselaw interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of new senior subordinated notes to require Danka to make a change of control offer as a result of the sale, lease, exchange or other transfer of less than all of the assets of Danka may be uncertain. Within 30 days following any change of control, Danka will mail a notice to each holder, with a copy to the trustee, stating: . that a change of control has occurred and that the holder has the right to require Danka to repurchase the holder's new senior subordinated notes, in whole or in part, and if in part, equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 109% of the principal amount thereof; . the circumstances and relevant facts regarding the change of control; . the repurchase date, which will not be earlier than 30 days and not later than 60 days from the date the notice is mailed; . that holders electing to have a note purchased pursuant to a change of control offer will be required to surrender the note, and forms required by the indenture, to the paying agent, which may be Danka, at the address specified in the notice before the close of business on the repurchase date; . that holders will be entitled to withdraw their election if the paying agent receives, not later than the close of business on the third business day preceding the repurchase date, a telegram, telex, facsimile 85 transmission or other written communication setting forth the name of the holder, the principal amount of new senior subordinated notes the holder delivered for purchase, and a statement that the holder is withdrawing his election to have the new senior subordinated notes purchased; and . that holders which elect to have their new senior subordinated notes purchased only in part will be issued new senior subordinated notes in a principal amount equal to the unpurchased portion of the new senior subordinated notes surrendered. On the repurchase date, Danka will accept for payment new senior subordinated notes or portions thereof tendered pursuant to the change of control offer, deposit with the trustee or a paying agent money sufficient to pay the purchase price of all new senior subordinated notes or portions thereof so tendered and deliver or cause to be delivered to the trustee new senior subordinated notes so accepted, together with an officers' certificate indicating the new senior subordinated notes or portions thereof which have been tendered to Danka. The trustee or a paying agent will promptly mail to the holders of new senior subordinated notes so accepted payment in an amount equal to the purchase price therefor and promptly authenticate and mail to the holders a new note in a principal amount equal to any unpurchased portion of the note surrendered. Danka will publicly announce the results of the change of control offer on or as soon as practicable after the repurchase date. In the event a change of control occurs and any repurchase pursuant to the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the Securities Exchange Act of 1934, Danka will comply with the requirements of Rule 14e-l as then in effect, to the extent applicable, and any other applicable securities laws or regulations with respect to the repurchase. The change of control provisions described above may deter certain mergers, tender offers and other takeover attempts involving Danka. Danka's ability to repurchase new senior subordinated notes upon a change of control may be limited by the terms of its then existing contractual obligations. Repurchase of the new senior subordinated notes upon a change of control may constitute a default under the Credit Facility, and any future credit agreements or other agreements relating to Senior Debt may contain provisions that would restrict Danka's ability to repurchase new senior subordinated notes upon a change in control. If Danka makes a change of control offer following a change of control, Danka may not have adequate financial resources to repurchase all new senior subordinated notes tendered. Danka's failure to repurchase tendered new senior subordinated notes or to make a change of control offer following a change of control would constitute an Event of Default under the senior subordinated indenture, but the subordination provisions in the senior subordinated indenture may restrict payments to the holders of new senior subordinated notes. The provisions of the senior subordinated indenture may not afford holders of the new senior subordinated notes protection in the event of a highly leveraged transaction involving Danka that may adversely affect the holders of the new senior subordinated notes, if the transaction does not result in a change of control, violate the covenant described under "Limitation on Incurrence of Additional Debt" or "Limitation on Restricted Payments" or otherwise violate the senior subordinated indenture. Asset sales. Danka will not dispose of assets in an Asset Sale unless it receives the fair market value of the assets disposed of, and Danka applies any Net Cash Proceeds to prepay Senior Debt, make an investment in replacement assets or a combination of prepayment or investment or make an offer to repurchase the new senior subordinated notes as described below. Danka will not, and will not cause or permit any of its Restricted Subsidiaries to, consummate an Asset Sale, except under the following circumstances: (1) Danka or the applicable Restricted Subsidiary receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by Danka's board of directors). (2) Upon the consummation of the Asset Sale, Danka will apply, or cause its Restricted Subsidiary to apply, the Net Cash Proceeds of the Asset Sale within 360 days of receipt either (a) to prepay Senior Debt, 86 (b) to make an investment in properties and assets, other than cash, cash equivalents or inventory that replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in a Permitted Business, or (c) a combination of prepayment and investment permitted by (a) and (b). On the 360th day after an Asset Sale, the net proceeds offer trigger date, the portion of the aggregate amount of Net Cash Proceeds not applied on or before the net proceeds offer trigger date multiplied by a fraction the numerator of which is equal to the principal amount of the new senior subordinated notes and the denominator of which is equal to the sum of the principal amount of the new senior subordinated notes and all Debt ranking equal to the new senior subordinated notes, referred to as a net proceeds offer amount will be applied by Danka or the Restricted Subsidiary to make an offer to purchase, the net proceeds offer, on a date, the net proceeds offer payment date at least 30 but not more than 60 days following the applicable net proceeds offer trigger date, from all holders on a pro rata basis, that amount of the new senior subordinated notes equal to the net proceeds offer amount at a price equal to 100% of the principal amount of the new senior subordinated notes to be purchased. If any non-cash consideration received is converted into or sold or otherwise disposed of for cash or cash equivalents (other than interest received with respect to any non-cash consideration), then the conversion or disposition will be deemed to be an Asset Sale and the Net Cash Proceeds of which will be applied in accordance with this covenant. Danka may defer the net proceeds offer until there is an aggregate unutilized net proceeds offer amount equal to or in excess of $5 million resulting from one or more Asset Sales. Following the deferment, the entire unutilized net proceeds offer amount, and not just the amount in excess of $5 million, will be applied. Each net proceeds offer will be mailed to the record holders of the new senior subordinated notes within 30 days following the net proceeds offer trigger date, with a copy to the trustee, and will comply with the procedures set forth in the senior subordinated indenture. Upon receiving notice of the net proceeds offer, holders may elect to tender their new senior subordinated notes in whole, or in part in integral multiples of $1,000, in exchange for cash. To the extent holders properly tender new senior subordinated notes in an amount exceeding the net proceeds offer amount, tendered new senior subordinated notes will be purchased on a pro rata basis based on amounts tendered. A net proceeds offer will remain open for a period of 20 business days or a longer period as may be required by law. To the extent that the aggregate amount of new senior subordinated notes tendered pursuant to a net proceeds offer is less than the net proceeds offer amount, Danka may use any remaining net proceeds offer amount for general corporate purposes subject to the provisions of the senior subordinated indenture, and the net proceeds offer amount will return to zero. Danka will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, and any other securities laws and regulations thereunder to the extent they apply in connection with the repurchase of new senior subordinated notes pursuant to a net proceeds offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sales" covenant of the senior subordinated indenture, Danka will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the "Asset Sales" covenant of the senior subordinated indenture. Covenants The senior subordinated indenture contains covenants with which Danka must comply. We set forth below a summary and more detailed description of the material covenants. Limitation on incurrence of additional debt. Danka and its subsidiaries will not, directly or indirectly, incur any additional debt not allowed under the senior subordinated indenture. Danka will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of any Debt, other than Permitted Debt, except that Danka and its Restricted 87 Subsidiaries may incur Debt, including Acquired Debt, if there is no default or Event of Default at the time or as a consequence of the incurrence of the Debt and on the date of incurrence of the Debt, if after giving effect to the incurrence of the Debt, the Consolidated Fixed Charge Coverage Ratio of Danka would be equal to or greater than 2.0 to 1. The accrual of interest and the accretion of original issue discount do not constitute the Incurrence of Debt. For purposes of determining compliance with this restriction: (1) in the event that an item of Debt meets the criteria of more than one of the categories of Debt described above or in the definition of "Permitted Debt," Danka will classify, in its sole discretion, the item of Debt and shall only be required to include the amount and type of Debt in one of the categories referred to above or in the definition of "Permitted Debt;" and (2) Debt permitted by this covenant need not be permitted solely by reference to one provision permitting the Debt but may be divided and classified in more than one type and permitted in part by one provision and in part by one or more other provisions of this covenant that would permit incurrence of such Debt. Limitation on other subordinated debt. Danka will not incur any Debt that is by its terms subordinated to Senior Debt but ranks senior to the new senior subordinated notes. No guarantor will incur or permit to exist any debt that is by its terms subordinated in right of payment to Guarantor Senior Debt but ranks senior in right of payment to such guarantor's guarantee of the new senior subordinated notes. For purposes of this restriction, Debt which is secured by a junior lien does not constitute subordinated debt by virtue of a junior priority. Limitation on restricted payments. Danka will not and will not permit any of its Restricted Subsidiaries to make Restricted Payments except in limited circumstances. Danka will not and will not permit any of its Restricted Subsidiaries to make Restricted Payments, unless at the time of the Restricted Payment and immediately after giving effect to the Restricted Payment: (1) no default or Event of Default has occurred or is continuing, (2) Danka can incur at least $1.00 of additional Debt, in addition to Permitted Debt, under the "Limitation on Incurrence of Additional Debt" covenant, and (3) the aggregate amount of Restricted Payments, including the proposed Restricted Payment, made after the issue date is less than the formula described below. In addition, Danka may make Restricted Payments that fall within permitted Restricted Payments baskets. Danka may also make non-cash payments to holders of Danka's participating shares as required under the terms of those shares. Restricted Payments. "Restricted Payments" are those that Danka or any of its Restricted Subsidiaries make in connection with the following: (1) the declaration or payment of any dividend or any distribution, other than dividends or distributions payable in the form of Qualified Capital Stock of Danka, on or in respect of shares of Danka's capital stock or any Restricted Subsidiary's capital stock; (2) the purchase, redemption or other acquisition or retirement for value of any capital stock of Danka or any Subsidiary of Danka or any warrants, rights or options to purchase or acquire shares of any class of capital stock; (3) any Investment, other than Permitted Investments; or (4) any payment on or with respect to, or purchase, redemption, defeasement or other acquisition or retirement for value of any Debt that ranks below the new senior subordinated notes in right of payment, except a payment of interest or payment of principal at stated maturity and except an offer to purchase the new 10% notes made in accordance with their terms upon a change of control, provided the offer is consummated after the corresponding offer on the new senior subordinated notes has been consummated and the purchase price for any tendered senior subordinated notes has been paid in full. 88 Formula. The formula allows Restricted Payments, including the proposed restricted payment, that do not in the aggregate exceed the sum of: (1) 50% of the cumulative Consolidated Net Income, or if a loss, minus 100% of the loss, of Danka earned during the period after the issue date and on or before the date the Restricted Payment occurs, excluding any partial fiscal quarter or quarters; plus (2) 100% of the aggregate net cash proceeds received by Danka from any person other than a subsidiary of Danka from the issuance and sale after the issue date, and on or before the date the Restricted Payment occurs, of Qualified Capital Stock; and (3) 100% of the net cash proceeds from the sale of Investments by Danka, other than Permitted Investments, if the Investment was made after the issue date. Baskets. There are separate Restricted Payments "baskets" permitting: (1) the payment of any dividend within 60 days after the date of declaration of a dividend if the dividend would have been permitted on the date of declaration; (2) if no default or Event of Default has occurred or is continuing, acquisition of any shares of Qualified Capital Stock of Danka or payment, redemption, acquisition or defeasance of Debt that ranks below the senior subordinated notes in right of payment, either (a) solely in exchange for shares of Qualified Capital Stock of Danka and, in the case of the payment, redemption, acquisition or defeasance of Debt, for Refinancing Debt, or (b) through the application of net proceeds of a substantially concurrent sale for cash of shares of Qualified Capital Stock of Danka; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Debt with the net cash proceeds from Refinancing Debt; (4) the payment of a dividend or distribution by any one of Danka's Restricted Subsidiaries to Danka or any one of Danka's wholly owned Restricted Subsidiaries; and (5) if no default or Event of Default has occurred or is continuing, repurchases of capital stock deemed to occur upon the exercise of stock options held by current or former employees or directors if the capital stock represents a portion of the exercise price. (6) if no default or Event of Default has occurred or is continuing, dividends and distributions by a Restricted Subsidiary pro rata to the holders of its capital stock. Limitation on dividend and other payment restrictions affecting subsidiaries. Danka generally will not allow its Restricted Subsidiaries to be subject to restrictions on their ability to pay money to Danka. Danka may not, and may not permit any Restricted Subsidiary of Danka to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of Danka: (1) to pay dividends or make any other distributions in respect of its capital stock; (2) to make loans or advances or to pay or guarantee any Debt or other obligation owed to Danka or any Restricted Subsidiary of Danka; or (3) to transfer any of its property or assets to Danka or another of Danka's Restricted Subsidiaries. Notwithstanding the foregoing, those encumbrances or restrictions that exist under or by reason of the following are permitted: (1) applicable law; (2) the senior subordinated indenture; 89 (3) the 10% indenture; (4) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any subsidiary of Danka; (5) any instrument governing Acquired Debt, which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person or the properties or assets of the person so acquired; (6) agreements existing on the issue date to the extent and in the manner agreements are in effect on the issue date; (7) purchase money obligations for property acquired that impose restrictions of the nature described in clause (5) above on the property so acquired; (8) any instrument or agreement governing Senior Debt; (9) any instrument or agreement governing any other Debt permitted to be incurred under the senior subordinated indenture, provided that the encumbrances or restrictions that exist in an instrument or agreement are similar to those in the senior subordinated indenture; or (10) any restrictions imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the capital stock or property of any Restricted Subsidiary that apply pending the closing of the sale or disposition. Limitation on issuances and sales of capital stock of Restricted Subsidiaries. Danka will not, and will not permit any of its Restricted Subsidiaries to, issue, transfer, convey, sell, lease or otherwise dispose of any capital stock (other than directors' qualifying shares) of any Restricted Subsidiary of Danka to any person, other than Danka or another of Danka's Restricted Subsidiaries, unless the disposition complies with the "Asset Sales" covenant. Limitation on Liens. Danka and its Restricted Subsidiaries may not pledge assets as collateral for any Debt that ranks equally with or junior to the new senior subordinated notes, unless the new senior subordinated notes also receive the benefit of the pledge. Danka will not, and will not permit any Restricted Subsidiary of Danka to, directly or indirectly, create, incur, assume or permit or suffer to exist any liens upon any property or assets of Danka or any of its Restricted Subsidiaries whether owned on the issue date or acquired after the issue date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom, in order to secure any Debt that ranks equally with or junior to the new senior subordinated notes, unless: (1) for liens securing Debt that is expressly subordinate or junior in right of payment to the new senior subordinated notes, the new senior subordinated notes are secured by a lien that is senior in priority to the liens securing Debt which is subordinated to the new senior subordinated notes; and (2) in all other cases, the new senior subordinated notes are equally and ratably secured. The restrictions will not apply to: (1) liens existing as of the issue date; (2) liens securing Senior Debt; (3) liens in favor of Danka or a wholly owned Restricted Subsidiary of Danka on assets of any Restricted Subsidiary of Danka; (4) liens securing Refinancing Debt that is incurred to Refinance Debt that is secured by a lien permitted under the senior subordinated indenture and has been incurred in accordance with the senior subordinated indenture; provided, however that the effect of the liens is no more unfavorable to the 90 holders of the new senior subordinated notes than the liens for the Debt being Refinanced and do not extend to any property or assets not securing the Debt so Refinanced; and (5) Permitted Liens. Limitation on transactions with affiliates. Danka and its Restricted Subsidiaries may not enter into transactions with persons it controls, is controlled by or is under common control with, unless Danka complies with specified procedures. Danka will not, and will not permit any Restricted Subsidiary of Danka, directly or indirectly, to enter into any transaction or series of related transactions with or for the benefit of any affiliate of Danka or its Restricted Subsidiaries, other than affiliate transactions on terms that are no less favorable to Danka or its Restricted Subsidiary than those that could reasonably have been obtained in a comparable transaction at such time on an arm's length basis from a person that is not an Affiliate of Danka or its Restricted Subsidiary, and that satisfy the following: all affiliate transactions and each series of related Affiliate transactions that are similar or part of a common plan involving aggregate payments or other property with a fair market value in excess of $5 million will be approved by the board of directors of Danka or its Restricted Subsidiary, as the case may be, which approval will be evidenced by a board resolution stating that the board of directors, including a majority of the disinterested directors, has determined that the transaction complies with the foregoing provisions. If Danka or any Restricted Subsidiary of Danka enters into an affiliate transaction, or a series of related affiliate transactions related to a common plan, that involves aggregate payments or other property with a fair market value of more than $20 million, Danka or the relevant Restricted Subsidiary will, before the consummation, obtain a favorable opinion as to the fairness of the transaction or series of related transactions to Danka or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an independent financial advisor and file the same with the trustee. The restrictions of this covenant will not apply to: (1) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors or employees of Danka or any subsidiary of Danka as determined in good faith by Danka's board of directors; (2) transactions between or among Danka and any of its Restricted Subsidiaries or between or among Restricted Subsidiaries; (3) any agreement in effect on the issue date and any modified or replacement agreement of an agreement in effect on the issue date that is not more disadvantageous to the holders of the new senior subordinated notes in any material respect than the original agreement as in effect on the issue date; and (4) Restricted Payments and Permitted Investments permitted by the senior subordinated indenture. Limitations on merger, consolidation and sale of all assets. Danka will not merge, amalgamate or consolidate with other companies or sell all or substantially all its assets unless the surviving corporation assumes all obligations under the senior subordinated indenture, Danka or the surviving corporation could incur $1.00 of additional Debt under the "Limitation on Incurrence of Additional Debt" covenant or, alternatively, the Consolidated Fixed Charge Coverage Ratio is not reduced as a result of the transaction, Danka is not in default under the new senior subordinated notes and Danka or the surviving corporation has provided an officer's certificate and opinion of counsel to the trustee to that effect. Danka will not, in a single transaction or series of related transactions: . consolidate, amalgamate or merge with or into any person; or . sell, assign, transfer, lease, convey or otherwise dispose of, or cause or permit any subsidiary of Danka to sell, assign, transfer, lease, convey or otherwise dispose of, all or substantially all of Danka's assets, determined on a consolidated basis for Danka and Danka's subsidiaries. 91 unless, in either case: (1) either: (a) Danka is the surviving or continuing corporation; or (b) the person, if other than Danka, formed by the consolidation or amalgamation or into which Danka is merged or the person that acquires the properties and assets of Danka and of Danka's subsidiaries substantially as an entirety, the surviving entity (x) except in the case of a transaction with the sole purpose of effecting a change of domicile of Danka to a jurisdiction other than England and Wales, is a corporation organized and validly existing under the laws of England and Wales or the United States or any State thereof or the District of Columbia and (y) expressly assumes, by a supplemental indenture, the due and punctual payment of the principal of, and premium, if any, on all of the new senior subordinated notes and the performance of every covenant of the new senior subordinated notes, and the senior subordinated indenture on the part of Danka to be performed or observed; (2) immediately after giving effect to the transaction and the assumption contemplated by clause (1)(b)(y) above, including giving effect to any Debt and Acquired Debt incurred or anticipated to be incurred in connection with or in respect of a transaction, Danka or the surviving entity, as the case may be, can incur at least $1.00 of additional Debt, in addition to Permitted Debt, pursuant to the "Limitation on Incurrence of Additional Debt" covenant or, alternatively, the Consolidated Fixed Charge Coverage Ratio is not reduced as a result of the transaction; (3) immediately after giving effect to the transaction and the assumption contemplated by clause (1)(b)(y) above, including giving effect to any Debt and Acquired Debt incurred or anticipated to be incurred and any lien granted in connection with or in respect of the transaction, no default or Event of Default has occurred or is continuing; (4) Danka or the surviving entity agree to indemnify each holder of new senior subordinated notes against any tax, levy, assignment or governmental change payable by withholding or deduction which may be imposed on the holder as a result of a merger or consolidation; and (5) Danka or the surviving entity will have delivered to the trustee an officers' certificate and an opinion of counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental senior subordinated indenture is required in connection with the transaction, the supplemental senior subordinated indenture will comply with the applicable provisions of the senior subordinated indenture and that all conditions precedent in the senior subordinated indenture relating to the transaction have been satisfied. Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of Danka in accordance with the foregoing, in which Danka is not the continuing corporation, the successor person formed by the consolidation or into which Danka is merged or to which a conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, Danka under the senior subordinated indenture and the new senior subordinated notes and, except in the case of a lease, Danka will be released. Subject to and except as provided in the "Asset Sales" covenant, each guarantor, other than any guarantor whose guarantee is to be released in accordance with the terms of the guarantee and the senior subordinated indenture, will not, and we will not cause or permit any guarantor to, consolidate with or merge with or into any person other than us or any other guarantor unless: (i) the entity formed by or surviving any such consolidation or merger, if other than the guarantor, is a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia; (ii) such surviving entity, if other than the guarantor, assumes by supplemental indenture all of the obligations of the guarantor on the guarantee; and 92 (iii) immediately after giving effect to such transaction, no default or event of default shall have occurred and be continuing. Any merger or consolidation of a guarantor with and into us, with us being the surviving entity, or another guarantor that is a restricted subsidiary of ours need only have delivered to the trustee an officers' certificate stating that such consolidation or merger and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with the applicable provisions of the senior subordinated note indenture and that all conditions precedent in the senior subordinated note indenture relating to such transaction have been satisfied. Limitations on payment for consent. Neither Danka nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any holder of any new senior subordinated notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the senior subordinated indenture or the new senior subordinated notes unless consideration is offered to be paid or is paid to all holders of the new senior subordinated notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to the consent, waiver or agreement. Limitation on business activities. Danka will not and will not permit any of its Restricted Subsidiaries to engage in any business other than Permitted Businesses, except to such extent as would not be material to the Danka and its Restricted Subsidiaries taken as a whole. Limitation on restricted and unrestricted subsidiaries. The board of directors of Danka may designate an Unrestricted Subsidiary to be a Restricted Subsidiary and may designate a Restricted Subsidiary to be an Unrestricted Subsidiary if no default or Event of Default has occurred and upon compliance with the "Limitation on Incurrence of Debt" covenant. The board of directors of Danka may, if no default or Event of Default will have occurred and be continuing or would arise therefrom, designate an Unrestricted Subsidiary to be a Restricted Subsidiary, provided, however, that: (1) any such redesignation will be deemed to be an incurrence as of the date of such redesignation by Danka and its Restricted Subsidiaries of the Debt of such redesignated subsidiary for purposes of the "Limitation on Incurrence of Additional Debt" covenant; and (2) unless such redesignated subsidiary does not have any Debt outstanding, other than Permitted Debt, no designation will be permitted if immediately after giving effect to the redesignation and the incurrence of any additional Debt, other than Permitted Debt, Danka could not incur $1.00 of additional Debt, other than Permitted Debt, pursuant to the "Limitation on Incurrence of Additional Debt" covenant. The board of directors of Danka also may, if no default or event of default will have occurred and be continuing or would arise therefrom, designate any Restricted Subsidiary to be an Unrestricted Subsidiary if: (1) such designation is at that time permitted under the "Limitation on Restricted Payments" covenant, for purposes of this clause, Danka will be deemed to have made an Investment, other than a Permitted Investment, in the amount of the fair market value of the equity of such subsidiary held directly or indirectly by Danka; (2) immediately after giving effect to such designation, Danka could incur $1.00 of additional debt, in addition to Permitted Debt, pursuant to the "Limitation of Incurrence of Additional Debt" covenant; (3) such subsidiary meets the requirements of the definition of the term Unrestricted Subsidiary; and (4) any subsidiary of such designated Restricted Subsidiary is also designated as, and meets the requirements of, an Unrestricted Subsidiary. 93 Any such designation by the board of directors of Danka will be evidenced to the trustee by filing with the trustee a certified copy of the board resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the above conditions and was permitted by "Limitation on Restricted Payments" covenant. We may not designate a guarantor as an Unrestricted Subsidiary. Affirmative Covenants Subsidiary guarantees In the event that Danka provides any subsidiary guarantees for other subordinated debt, then Danka will be required to provide subsidiary guarantees of the new senior subordinated notes on the basis described below. Danka will not permit any Restricted Subsidiary to guarantee other subordinated debt unless: (1) the Restricted Subsidiary guarantor will fully and unconditionally guarantee, jointly and severally, to each holder of the new senior subordinated notes and the trustee, the payment of the principal of, and premium, if any, on, the new senior subordinated notes as follows: if the other subordinated debt that is being guaranteed is expressly subordinate or junior in right of payment to the new senior subordinated notes, the new senior subordinated notes are guaranteed by a guarantee which is senior to the Restricted Subsidiary guarantees of the other subordinated debt; and (2) in other cases, the new senior subordinated notes are equally and ratably guaranteed. Maintenance of office or agency for notices and demands. Danka will maintain in New York, New York, an office or agency where the new senior subordinated notes may be presented for payment, registration of transfer or exchange as provided in the senior subordinated indenture and an office or agency where notices and demands to or upon Danka in respect of the notes or of the senior subordinated indenture may be served. Danka may designate multiple offices for purposes of notices and demands. Maintenance of property and insurance. Danka agrees to maintain all material property, including equipment, in reasonable condition and order. Danka will provide or cause to be provided, for itself and each of its subsidiaries, insurance against loss or damage arising from the conduct of the business of Danka and its subsidiaries with reputable insurers in such amounts, with such deductibles, and by such methods as will be either (i) consistent in all material respects with past practices of Danka or the applicable subsidiary, or (ii) customary in the industry, unless the failure to provide such insurance would not have a material adverse effect on the financial condition or results of operations taken as a whole or be a violation of applicable law or material agreement of Danka or its subsidiaries. Compliance certificate and opinion of counsel. Danka will deliver to the trustee, within 120 days after the end of Danka's fiscal year, an officer's certificate, if given by one of Danka's officers, or an opinion of counsel, if it is given by counsel, stating that a review of its activities and the activities of its subsidiaries during the preceding fiscal year has been made under the supervision of the signing person with a view to determining whether it has kept, observed, performed and fulfilled its obligations under the senior subordinated indenture and further stating, as to each Officer signing a certificate or counsel signing the opinion, that to the best of his or her knowledge Danka during such preceding fiscal year has kept, observed, performed and fulfilled each and every of its covenants contained in the senior subordinated indenture and no default or Event of Default occurred during the year or, if such signers do know of any, the certificate will describe it and its status with reasonable particularity. Payment of taxes and other claims. Danka will pay or discharge or cause to be paid or discharged, before any material penalty accrues the following: (1) all material taxes, assessments and governmental charges levied or imposed upon Danka or any subsidiary of Danka or upon the income, profits or property of Danka or any subsidiary of Danka, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of Danka or any subsidiary of Danka; provided however, that 94 Danka will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Maintenance of all registration, regulations and licenses. Danka will maintain all registrations, licenses, permits, privileges and franchises material to the conduct of its business and shall comply in all material respects with all laws, rules, regulations and orders of any government entity. Payment of principal and premium, if any. Danka will pay the principal and premium, if any on the new senior subordinated notes on the dates and in the manner provided in the new senior subordinated notes. Before each payment date, Danka will deposit in a separate account and hold in trust for the benefit of holders entitled to payment, a sum sufficient to pay the principal and/or premium then becoming due until such sum has been paid to holders or otherwise disposed of in accordance with the senior subordinated indenture. Reports to Holders. Whether or not Danka is required to file reports with the SEC, Danka will file with the SEC the quarterly and annual reports and the information or documents, if any, that Danka would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Securities Exchange Act. Holders can obtain copies of such reports and other information or documents from www.sec.gov. Definitions We have set forth below a summary of certain terms used in this description of the new senior subordinated notes. You should read the senior subordinated indenture for the full definition of all terms. "Acquired Debt" means: (1) Debt of a person existing at the time such person either becomes a subsidiary of Danka or merges or consolidates with Danka; or (2) Debt of a person assumed in connection with the acquisition of assets from such person, not incurred by such person in connection with becoming a subsidiary of Danka or merger or consolidation with Danka or acquisition by Danka. "Asset Acquisition" means: (1) an Investment by Danka or any Restricted Subsidiary of Danka in any other person pursuant to which such person: (a) becomes a Restricted Subsidiary of Danka; (b) is merged with or into Danka or any Restricted Subsidiary of Danka; or (2) the acquisition by Danka or any Restricted Subsidiary of Danka of the assets of any person, other than a subsidiary of Danka, which constitute all or substantially all of the assets of such person or comprises any division or line of business of such person or any other properties or assets of such person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease, assignment or other disposition for value by Danka or any of its Restricted Subsidiaries, including a sale and leaseback transaction, to any person other than Danka or a Restricted Subsidiary of Danka of: (1) any capital stock of any subsidiary of Danka; or (2) any other property or assets of Danka or any Restricted Subsidiary of Danka. 95 The term "Asset Sale" does not include: (1) a transaction or series of related transactions for which Danka or its subsidiaries receive aggregate consideration of less than $1 million; (2) the sale, lease, conveyance, transfer or other disposition of all or substantially all of the assets of Danka as permitted under "Limitations on Merger, Consolidation and Sale of Assets" above; or (3) any sale, lease, conveyance, transfer or other disposition in the ordinary course of business; (4) any operating lease in the ordinary course of business; or (5) any sale or other disposition of obsolete or unusable inventory or other assets. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value, discounted at the rate of interest implicit in such transaction, determined in accordance with United States GAAP, of the obligation of the lessee for rental payments during the remaining term of the lease included in the sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. "Capitalized Lease Obligation"means at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with United States GAAP. "change of control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer of all or substantially all the assets of Danka and its subsidiaries taken as a whole to any person or group of persons, other than Cypress Associates II LLC and its affilliates except to effect a change of domicile; (2) the approval by the holders of capital stock of Danka of a plan or proposal for the liquidation or dissolution of Danka except to effect a change of domicile; (3) a person or group of persons, other than Cypress Associates II LLC and its affilliates, is or becomes the beneficial owner of a majority of the securities of Danka ordinarily having the right to vote in the election of directors; (4) the replacement of a majority of the board of directors of Danka over a two-year period from the directors who constituted the board of directors of Danka at the beginning of the period, and the replacement was not approved by a majority vote of the directors then still in office who were either directors at the beginning of the period or whose election as a director was previously so approved; and (5) the merger or consolidation of Danka with or into another corporation or the merger of another corporation into Danka with the effect that immediately after such transaction any person or group of persons, other than Cypress Associates II LLC and its affilliates, becomes the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors. "change of domicile" means a transaction or a series of related transactions, including without limitation (i) a consolidation, amalgamation, or merger of Danka with or into any other person; (ii) acquisition of all of the capital stock of Danka; or (iii) sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of Danka's assets, determined on a consolidated basis for Danka and its subsidiaries, to another person, of which the sole purpose is to reincorporate Danka in a jurisdiction other than England and Wales or incorporate or organize a successor entity to Danka in a jurisdiction other than England and Wales. For the purposes of this definition of change of domicile, a "successor entity" shall mean an entity whose voting stock following the change of domicile is owned or beneficially owned by the same persons in the same proportions as owned or beneficially owned the voting stock of Danka immediately prior to the change of domicile. 96 "Consolidated EBITDA" means, with respect to any person, for any period, the sum of: (1) Consolidated Net Income of such person for such period; plus (2) to the extent Consolidated Net Income has been reduced or increased by the following: (a) all income taxes of such person and its subsidiaries paid or accrued in accordance with GAAP for such period, other than income taxes, or benefits, attributable to transactions the effect of which has been excluded from Consolidated Net Income; (b) Consolidated Interest Expense; and (c) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such person and its subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, the ratio of Consolidated EBITDA to Consolidated Fixed Charges, as measured for the four full fiscal quarters referred to as the four fiscal quarter period, ending on or before the transaction date to which the Consolidated Fixed Charge Coverage Ratio applies and for which financial statements are available. For purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" are calculated after giving effect on a pro forma basis for the period of the calculation to: (1) the incurrence or repayment of Debt of a person or any of its subsidiaries, and the application of the proceeds, giving rise to the calculation and any incurrence or repayment of other Debt, and the application of the proceeds, other than the incurrence or repayment of Debt in the ordinary course of business for working capital purposes occurring during the four quarter period or at any time after the last day of the four quarter period and on or before the transaction date, as if the incurrence or repayment, and the application of proceeds, had occurred on the first day of the four quarter period; and (2) any Asset Sales or Asset Acquisitions, including any Asset Acquisition giving rise to the calculation as a result of such person or one of its subsidiaries, including a person who becomes a subsidiary as a result of the Asset Acquisition, incurring, assuming or otherwise becoming liable for Acquired Debt and also including any Consolidated EBITDA, but only to the extent includable pursuant to the definition of "Consolidated Net Income," attributable to the assets that are the subject of the Asset Acquisition or Asset Sale during the four quarter period, occurring during the four quarter period or at any time after the last day of the four quarter period and on or before the transaction date, as if such Asset Sale or Asset Acquisition, including the incurrence, assumption or liability for any such Acquired Debt, had occurred on the first day of the four quarter period. If such person or its subsidiary guarantees the Debt of a third person, the preceding sentence will give effect to the incurrence of the guaranteed Debt as if such person or its subsidiary had directly incurred or otherwise assumed such guaranteed Debt. For purposes of this definition, in calculating "Consolidated Fixed Charges" for determining the denominator, but not the numerator, of the "Consolidated Fixed Charge Coverage Ratio": (1) interest on outstanding Debt determined on a fluctuating basis as of and after the transaction date will be deemed to have accrued at a fixed rate per year equal to the rate of interest on such Debt in effect on the transaction date, except that if the interest on such Debt is covered by interest swap obligation agreements, the interest will be deemed to have accrued at the rate per year after giving effect to those agreements; and (2) if any interest on any Debt actually incurred on the transaction date may optionally be determined at an interest rate based on a factor of a prime or similar rate, a eurocurrency interbank rate or other rates, then the interest rate in effect on the transaction date will be deemed to have been in effect during the four quarter period. 97 "Consolidated Fixed Charges" means for any period, the sum of: (1) Consolidated Interest Expense of such person, plus; (2) The product of: (a) the amount of all dividend payments on any series of preferred stock of a person and its Restricted Subsidiaries, other than dividends paid in Qualified Capital Stock or dividends to the extent payable to Danka or its Restricted Subsidiaries, paid, accrued or scheduled to be paid or accrued during such period, other than preferred stock of a person and its Restricted Subsidiaries for which the dividends are deductible for federal income tax purposes, which will be included in Consolidated Fixed Charges without being multiplied by the fraction below; and (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such person, expressed as a decimal. "Consolidated Interest Expense" means for any period, the sum of: (1) the aggregate of the interest expense of a person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, whether paid or accrued, including: (a) any amortization of Debt discount and amortization or write-off of deferred financing costs; (b) net costs under interest swap obligations; (c) all capitalized interest; and (d) the interest portion of any deferred payment obligation, including with respect to Attributable Debt; (2) the aggregate dividend payments of a person and its Restricted Subsidiaries for such period with respect to Disqualified Capital Stock; and (3) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by a person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means for any period, the aggregate net income, or loss, of a person and its subsidiaries for such period on a consolidated basis, before preferred stock, other than Disqualified Capital Stock, dividend requirements, determined in accordance with GAAP, excluding: (1) after-tax gains from Asset Sales or abandonments of reserves relating to Asset Sales; (2) after-tax items classified as extraordinary or nonrecurring gains or losses; (3) the net income of any person acquired in a "pooling of interests" transaction accrued before the date it becomes a subsidiary of the such person or is merged or consolidated with the such person or any subsidiary of such person; (4) the net income, but not loss, of any Restricted Subsidiary of such person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted, or subject to tax, by a contract, operation of law or otherwise; (5) the net income of any person other than the referent person or a Restricted Subsidiary of such person, except to the extent of cash dividends or distributions paid to the referent person or to a Restricted Subsidiary of the referent person by such person, subject to the limitation in (4) above; (6) any restoration to income of any contingency reserve, except to the extent that provision of such reserve reduced Consolidated Net Income accrued at any time following the issue date; (7) income or loss attributable to discontinued operations, whether or not such operations were classified as discontinued; 98 (8) in case of a successor to such person by consolidation or merger or as a transferee of such person's assets, any earnings of the successor corporation before such consolidation, merger or transfer or assets; (9) any gain realized in connection with the disposition of any marketable securities other than cash equivalents by such person or any of its Restricted Subsidiaries or the extinguishment of Debt of such person or any of its Restricted Subsidiaries; and (10) all gains or losses from the cumulative effect of any change in accounting principles. "Consolidated Non-cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of such person and its subsidiaries reducing Consolidated Net Income of such person for such period, determined on a consolidated basis in accordance with GAAP. "Credit Facility" means the Amended and Restated Credit Agreement dated as of June 29, 2001, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and Bank of America, N.A., as agent, as the same may be amended, modified supplemented, extended, renewed, restated, refunded, refinanced, restructured or replaced from time to time. "Debt" means, with respect to any person: (1) indebtedness, whether or not contingent, for borrowed money; (2) indebtedness evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations; (4) all indebtedness or other obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not in default or overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted); (5) all indebtedness for the reimbursement of any obligation on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of indebtedness referred to in (1) through (5) above and (8) and (9) below; (7) all indebtedness of any other person of the type referred to in (1) through (6) that are secured by any lien on any property or asset of the referent person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured; (8) all indebtedness under currency agreements and interest swap agreements; (9) all obligations under our tax retention operating leases; and (10) all Disqualified Capital Stock issued by such person with the amount of indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. The maximum fixed repurchase price of any Disqualified Capital Stock that does not have a fixed repurchase price is calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which the indebtedness is required to be determined pursuant to the senior subordinated indenture, and if such price is based upon or measured by the fair market value of such Disqualified Capital Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of the Disqualified Capital Stock. 99 The amount of any indebtedness, other than Disqualified Capital Stock, outstanding as of any date is: (1) the accreted value to the extent the indebtedness does not require current payments of interest; (2) the principal amount together with any interest that is more than 30 days past due in the case of any other indebtedness; (3) in the case of currency agreements and interest swap agreements, the amount that would appear on the consolidated balance sheet of the person in accordance with GAAP; and (4) in the case of any guarantee or other contingent obligation in respect of indebtedness of any other person, the maximum amount of such indebtedness, unless the liability is limited by the terms of the guarantee or contingent obligation, in which case the amount of such guarantee or other contingent obligation is deemed to equal the maximum amount of such liability. "Designated Senior Debt" means: (1) Debt under or in respect of the Credit Facility, and (2) any other Debt constituting Senior Debt, which at the time of determination has an aggregate principal amount of at least $50 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by Danka. "Disqualified Capital Stock" means any capital stock that, by its terms, or by the terms of any security into which it is convertible or for which it is exchangeable, or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Debt, or is redeemable at the option of the holder, in whole or in part, on or prior to the date that is 91 days after the date on which the new senior subordinated notes mature, excluding Danka's 6.50% senior convertible participating shares. "guarantor" means Danka Holding Company and Danka Office Imaging Company. "Guarantor Senior Debt" means: (1) the principal of, interest on and all other obligations of any guarantor relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility; (2) amounts payable in regard to any interest swap obligations and currency agreements; (3) existing various notes payable, as described in "Description of Indebtedness"; and (4) all other Debt of any guarantor, except for Debt identified below. The term "Guarantor Senior Debt" does not include: (1) any Debt of any guarantor to Danka or to a Restricted Subsidiary of Danka; (2) Debt to or guaranteed on behalf of any shareholders, directors, officers or employees of any guarantor or any Restricted Subsidiary of Danka, including amounts owed for compensation; (3) Debt to trade creditors and other amounts incurred in connection with obtaining goods, material or services; (4) Debt represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed by any guarantor; (6) Debt incurred in violation of the convenant below under "Limitation on Incurrence of Additional Debt;" (7) Debt that is without recourse to any guarantor; 100 (8) the new 10% notes; (9) the old notes; and (10) any other Debt that by its express terms ranks in right of payment equal to or junior to the new senior subordinated notes. "Investment" means any direct or indirect loan or other extension of credit or capital contribution to, or any purchase or acquisition by such person of any capital stock, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other person. The term "Investment" excludes extensions of trade credit by a person or its subsidiary on commercially reasonable terms in accordance with normal trade practices of that person or such subsidiary. For the purposes of the "Limitation on Restricted Payment" covenant, the amount of any Investment will be the original cost of such Investment plus the cost of all additional Investments by Danka, or any of its subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that the payment of dividends or distributions or receipt of any such other amounts will not reduce the amount of any Investment if the payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or cash equivalents including payments in respect of deferred payment obligations when received in the form of cash or cash equivalents, other than the portion of any such deferred payment constituting interest, that Danka or any of its Restricted Subsidiaries receive from the Asset Sale net of the following: (1) reasonable out-of-pocket expenses and fees relating to the Asset Sale, including, without limitation, legal, accounting and investment banking fees and sales commissions; (2) income taxes paid or payable after taking into account any reduction in consolidated income tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Debt that is required to be repaid in connection with the Asset Sale; (4) appropriate amounts to be provided by Danka or any Restricted Subsidiary as a reserve, in accordance with GAAP, against any liabilities associated with the Asset Sale and retained by Danka, or any Restricted Subsidiary after the Asset Sale; (5) proceeds required to be placed in escrow, provided, that upon the release of any of the proceeds from the escrow to Danka or a subsidiary of Danka the released proceeds will constitute Net Cash Proceeds; and (6) in the case of a sale by a Restricted Subsidiary that is not a wholly owned Restricted Subsidiary, the minority interests' proportionate share of the Net Cash Proceeds. "Permitted Business" means the business of Danka and its subsidiaries existing on the issue date or other businesses as the board of directors of Danka determines are businesses reasonably related thereto as evidenced by a board resolution. "Permitted Debt" means: (1) indebtedness under the new senior subordinated notes and its senior subordinated indenture; (2) indebtedness under the new 10% notes and its 10% indenture; (3) indebtedness in an aggregate principal amount at any time outstanding not to exceed the greater of (a) $150 million, and (b) the available borrowing base of the accounts receivable, inventory and other assets as determined under the Credit Facility; 101 (4) indebtedness in an aggregate principal amount at any time outstanding not to exceed $350 million, less the smaller of the amounts in clauses 3(a) and 3(b); (5) other indebtedness, other than the Credit Facility, of Danka and its subsidiaries outstanding on the issue date, including the old notes; (6) interest swap obligations of Danka covering indebtedness of Danka or any of its subsidiaries and interest swap obligations of any subsidiary of Danka covering indebtedness of such subsidiary; provided, however, that (a) the interest swap obligations are used for bona fide hedging, and not speculative, purposes, and (b) the notional principal amount of the interest swap obligations do not exceed the principal amount of the indebtedness to which the interest swap obligation relates; (7) indebtedness under currency agreements that (a) are used for bona fide hedging, and not speculative, purposes, and (b) in the case of currency agreements related to indebtedness, do not increase the indebtedness of Danka and its subsidiaries outstanding, other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (8) indebtedness of a Restricted Subsidiary of Danka to Danka or to a Restricted Subsidiary of Danka as so long as such indebtedness is held by Danka or a Restricted Subsidiary of Danka subject to no lien held by a person other than Danka or a Restricted Subsidiary of Danka; provided that if as of any date any person other than Danka or a Restricted Subsidiary of Danka owns or holds any such indebtedness or holds a lien in respect of such indebtedness, the incurrence of indebtedness not constituting Permitted Debt by the issuer of such indebtedness shall be deemed to have occurred on such date; (9) indebtedness of Danka to a Restricted Subsidiary of Danka as so long as such indebtedness is held subject to no lien; provided if as of any date any person other than a Restricted Subsidiary of Danka owns or holds any such indebtedness or any person holds a lien in respect of such indebtedness, the incurrence of indebtedness not constituting Permitted Debt by Danka shall be deemed to have occurred on such date; (10) indebtedness arising from the honoring by a bank or other financial institution of a check, draft, or similar instrument inadvertently, except in the case of daylight overdrafts, drawn against insufficient funds in the ordinary course of business; provided, however, the indebtedness is extinguished within two business days of incurrence; (11) indebtedness of Danka or any of its subsidiaries represented by letters of credit for the account of Danka or subsidiary in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (12) Refinancing Debt; (13) indebtedness incurred by Danka or any Restricted Subsidiary of Danka in connection with the purchase or improvement of property or equipment or other capital expenditures in the ordinary course of business or consisting of Capitalized Lease Obligations; provided at the time of the incurrence the indebtedness that is then outstanding does not exceed $40 million; (14) the tax retention operating leases and any refinancing of the tax retention operating leases; (15) indebtedness arising from agreements of Danka or a Restricted Subsidiary, for indemnification, adjustment of purchase price or similar obligations incurred in connection with the disposition of any business, assets or Restricted Subsidiary, other than guarantees of indebtedness incurred by any person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided the maximum aggregate liability with respect to all such indebtedness will at no time exceed the gross proceeds actually received by Danka and the Restricted Subsidiary in connection with such disposition; (16) obligations in respect of performance bonds and completion guarantees provided by Danka or any Restricted Subsidiary of Danka in the ordinary course of business; 102 (17) guarantees by Danka or a Restricted Subsidiary of Danka of indebtedness incurred by Danka or a Restricted Subsidiary of Danka so long as the incurrence of such indebtedness by Danka or any such Restricted Subsidiary of Danka is otherwise permitted by the terms of the senior subordinated indenture; and (18) additional indebtedness of Danka and its Restricted Subsidiaries in an aggregate principal amount not to exceed $50 million at any one time outstanding. "Permitted Investments" means: (1) Investments existing as of the issue date; (2) Investments in Danka; (3) Investments by Danka or any Subsidiary of Danka in any person engaged in a Permitted Business that is or will become immediately after such Investment a Restricted Subsidiary of Danka or that will merge or consolidate into Danka or a Restricted subsidiary of Danka; (4) Investments in cash and cash equivalents; (5) loans and advances to employees and officers of Danka and its subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $2.5 million at any one time outstanding; (6) currency agreements and interest swap obligations entered into in the ordinary course of Danka's or its subsidiaries' businesses and otherwise in compliance with the senior subordinated indenture; (7) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (8) Investments made by Danka or any of its subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with the "Asset Sales" covenant; and (9) other Investments in any person having an aggregate fair market value when taken together with all other Investments made pursuant to this (9) that are at the time outstanding, not to exceed $25 million, so long as that after giving effect to that Investment, no default or Event of Default will have occurred. "Permitted Liens" means: (1) liens for taxes, assessments or governmental charges or claims that are either (a) not delinquent or (b) being contested in good faith by appropriate proceedings and as to which Danka or its Restricted subsidiaries has set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory liens of landlords and liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve, as may be required by GAAP has been made; (3) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (4) liens securing letters of credit issued in the ordinary course of business consistent with past practice in connection with the items referred to in clause (3) or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations, exclusive of obligations for the payment of borrowed money; (5) judgment liens not giving rise to an Event of Default so long as the lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment will not have been finally terminated or the period within which such proceedings may be initiated has not expired; 103 (6) easements, right-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of Danka or any of its Restricted Subsidiaries; (7) liens upon specific items of inventory or other goods and proceeds of any person securing that person's obligations in respect of bankers' acceptances issued or created for the account of such person to facilitate the purchase, shipment or storage of the inventory or other goods; (8) liens securing reimbursement obligations for commercial letters of credit which encumber documents and other property relating to the letters of credit and products and proceeds; (9) liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of Danka or any of its Restricted Subsidiaries, including rights of offset and set-off; (10) liens securing interest swap obligations related to Debt that is otherwise permitted under the senior subordinated indenture; (11) liens securing Debt under currency agreements; (12) liens securing Acquired Debt incurred in accordance with the "Limitation on Incurrence of Additional Debt" covenant; provided that (a) the liens secured the Acquired Debt at the time of and prior to the incurrence of the Acquired Debt by Danka or a Restricted Subsidiary of Danka, and were not granted in connection with the incurrence of the Acquired Debt by Danka or a subsidiary of Danka, and (b) the liens do not extend to or cover any property or assets other than the property and assets that secured the Acquired Debt prior to the time such Debt became Acquired Debt of Danka or a Restricted Subsidiary of Danka, and are no more favorable to the lienholders than those securing the Acquired Debt before the incurrence of such Acquired Debt by Danka or a subsidiary of Danka; (13) leases or subleases granted to others not interfering in any material respect with the business of Danka or any of its Restricted Subsidiaries; (14) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating, other than any the interest or title resulting from or arising out of a default by Danka or any of its Restricted Subsidiaries of its obligations under the lease; (15) liens arising from filing UCC financing statements for precautionary purposes in connection with (a) true leases of personal property that are otherwise permitted under the senior subordinated indenture and under which Danka or any of its Restricted Subsidiaries is lessee, and (b) personal property held on consignment by Danka or any of its Restricted Subsidiaries; (16) liens arising by virtue of any statutory or common law provisions relating to banker's liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depositary institution; and (17) liens in favor of the trustee and any substantially equivalent lien granted to any trustee or similar institution under any indenture governing Indebtedness permitted to be incurred or outstanding under the senior subordinated indenture. "Qualified Capital Stock" means any capital stock that is not Disqualified Capital Stock. "Refinance" means, in respect to any security or Debt, to refinance, extend, renew, refund, repay, redeem, defease or retire, or to issue a security or Debt in exchange or replacement for, such security or Debt in whole or in part. The terms "Refinanced" and "Refinancing" have correlative meanings. "Refinancing Debt" means any Refinancing by a person of Debt incurred in accordance with the "Limitation on Incurrence of Additional Debt" covenant other than pursuant to clauses (1), (2), (5) or (12) of the definition of "Permitted Debt", in each case that does not: 104 (1) result in an increase in the aggregate principal amount of Debt of the person as of the date of the proposed Refinancing, plus the amount of any premium or penalty required to be paid and the amount of reasonable expenses incurred by Danka in connection with such Refinancing; or (2) create Debt with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Debt being Refinanced or (b) a final maturity earlier than the final maturity of the Debt being Refinanced; provided that (x) if the Debt being Refinanced is solely Debt of Danka, then the Refinancing Debt will be solely of Danka and (y) if the Debt being Refinanced is subordinate or junior to the new senior subordinated notes or any Subsidiary Guarantee, then the Refinancing Debt will require no prior principal payment prior to 91 days after the final maturity date of the new senior subordinated notes or will be subordinate to the new senior subordinated notes at least to the same extent and in the same manner as the Debt being Refinanced. "Restricted Subsidiary" of a person means any subsidiary of a person that is not an Unrestricted Subsidiary. "Senior Debt" means: (1) the principal of, interest on and all other obligations relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility; (2) amounts payable in respect of any interest swap obligations and currency agreements; (3) existing various notes payable, as described in "Description of Indebtedness"; and (4) all other Debt, except for any Debt which by its terms ranks equal to or behind the new senior subordinated notes in right of payment. The term "Senior Debt" does not include: (1) any Debt of Danka owing by Danka to any of its subsidiaries; (2) Debt to or guaranteed on behalf of any shareholders, directors, officers or employees of Danka or any subsidiary of Danka, including amounts owed for compensation; (3) Debt to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Debt represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed by Danka; (6) Debt incurred in violation of the "Limitation on Incurrence of Additional Debt" covenant; (7) Debt that is without recourse to Danka; (8) the new 10% notes; (9) the old notes; and (10) any other Debt that by its express terms ranks in right of payment equal to or behind the new senior subordinated notes. "Unrestricted Subsidiary" means any subsidiary that is designated by the board of directors of Danka as an Unrestricted Subsidiary pursuant to a board resolution, but only to the extent such subsidiary: (1) has no Debt other than non-recourse Debt; 105 (2) on the date of designation, is not a party to any agreement with Danka or a Restricted Subsidiary of Danka unless the terms of any such agreement are no less favorable to Danka or the Restricted Subsidiary than those that might be obtained at the time from persons who are not Affiliates or Danka or the Restricted Subsidiary; (3) is a person with respect to which neither Danka nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional capital stock or (b) to maintain or preserve such person's financial condition or to cause such person to achieve any specified levels of operating results; and (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Debt of Danka or any of its Restricted Subsidiaries, including a guarantee of the new senior subordinated notes. "Weighted Average Life to Maturity" means, when applied to any Debt at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying: (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years calculated to the nearest one-twelfth that will elapse between such date and the making of such payment, by (2) the then outstanding principal amount of such Debt. Events of Default Danka will be in default, and the noteholders can call the new senior subordinated notes, upon the occurrence of certain events. These include failure to pay principal of any note when due, breaches of covenants, defaults under other indebtedness, failure to pay judgments and bankruptcy. Any other Event of Default will give the trustee or 25% of the holders the right to call the new senior subordinated notes. The following are Events of Default: (1) failure to pay principal of, or premium, if any, on any new senior subordinated note when due; (2) failure to pay principal of, or premium, if any, on new senior subordinated notes required to be purchased pursuant to a net proceeds offer as described under "Asset Sales" or a change of control offer as described under "Change of Control" when due and payable; (3) failure to perform or breach of any other covenants or warranties of Danka in the senior subordinated indenture, continued for 30 days after written notice from the trustee or holders of at least 25% in aggregate principal amount of the outstanding new senior subordinated notes as provided in the senior subordinated indenture; (4) failure to perform or comply with the provisions described under "Limitations on Merger, Consolidation and Sale of Assets"; (5) the occurrence of a default under any Debt of Danka or any subsidiary of Danka, if both (a) the default either results from failure to pay any such Debt at its stated final maturity or relates to an obligation other than the obligation to pay such Debt at its stated final maturity and results in the holders of such Debt causing such Debt to become due before its stated final maturity, and (b) the principal amount of such Debt, together with the principal amount of any other such Debt in default for failure to pay principal at stated final maturity of the maturity of which has been accelerated, aggregates at least $25 million or more at any one time outstanding; 106 (6) the rendering of a final judgment or judgments, not subject to appeal, against Danka or any of its Restricted Subsidiaries in an aggregate amount in excess of $10 million that remain undischarged, unpaid or unstayed for a period of 60 consecutive days thereafter; (7) certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka; and (8) any guarantee ceases to be in full force and effect or any guarantee is declared to be null and void and unenforceable or any guarantee is found to be invalid or any guarantor denies its liability under its guarantee, other than by reason of release of such guarantor in accordance with the terms of the senior subordinated indenture. Subject to the provisions of the senior subordinated indenture relating to the duties of the trustee in case an Event of Default has occurred and is continuing, the trustee will be under no obligation to exercise any of its rights or powers under the senior subordinated indenture at the request or direction of any of the holders, unless such holders have offered to the trustee reasonable indemnity. Subject to such provisions for the indemnification of the trustee, the holders of a majority in aggregate principal amount of the outstanding new senior subordinated notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. If an Event of Default, other than Events of Default with respect to certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka, has occurred and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding new senior subordinated notes may accelerate the maturity of all new senior subordinated notes; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding new senior subordinated notes, may under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment accelerated principal, have been cured or waived as provided in the senior subordinated indenture. If a specified Event of Default with respect to certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka occurs, the principal of the new senior subordinated notes then outstanding will become immediately due and payable without any declaration or other act on the part of the trustee or any holder of the new senior subordinated notes. For information as to waiver of defaults, see "Modification and Waiver." No holder of any note will have any right to institute any proceeding with respect to the senior subordinated indenture or for any remedy thereunder, unless such holder will have previously given to the trustee written notice of a continuing Event of Default and unless also the holders of at least 25% in aggregate principal amount of the outstanding new senior subordinated notes will have made written request, and offered reasonable indemnity, to the trustee to institute such proceeding as trustee, and the trustee has not received from the holders of a majority in aggregate principal amount of the outstanding new senior subordinated notes a direction inconsistent with such request and will have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a note for enforcement of payment of the principal of, or premiums, if any, on such note or after the respective due dates expressed in such new senior subordinated note. Danka is required to furnish to the trustee annually a statement as to the performance by Danka of certain of its obligations under the senior subordinated indenture and as to any default in such performance. Additionally, Danka is required to notify the trustee within five business days of the occurrence of a default or an Event of Default. Defeasance Danka can be relieved of its obligations under the senior subordinated indenture if it deposits with the trustee sufficient money or government securities to pay the principal of the new senior subordinated notes when they become due. 107 The senior subordinated indenture provides (1) if applicable, Danka will be discharged from any and all obligations in respect of the outstanding new senior subordinated notes or (2) if applicable, and subject to compliance with the Trust Indenture Act, Danka may omit to comply with some of the restrictive covenants, and that such omission will not be deemed to be an Event of Default under the senior subordinated indenture and the new senior subordinated notes, in either case (1) or (2) upon irrevocable deposit with the trustee, in trust, of money and/or United States government obligations which will provide money in an amount sufficient in the opinion of a nationally recognized firm of independent certified public accountants to pay the principal of and premium, if any, on the outstanding new senior subordinated notes. With respect to clause (2), the obligations under the senior subordinated indenture other than with respect to such covenants and the Events of Default other than the Event of Default relating to such covenants will remain in full force and effect. Such trust may only be established if, among other things: . under clause (1), Danka has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which in an opinion of counsel to Danka provides that holders of the new senior subordinated notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and, with respect to clause (2), Danka has delivered to the trustee an opinion of counsel to Danka to the effect that the holders of the new senior subordinated notes will not recognize gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; . no default or Event of Default will have occurred and be continuing; . no default on any Senior Debt will have occurred and be continuing; and . certain other customary conditions precedent are satisfied. Modification and Waiver The senior subordinated indenture can generally be modified or its provisions waived, with the consent of holders of a majority of principal amount of the new senior subordinated notes. Some changes require the consent of all affected holders of new senior subordinated notes. Danka, the guarantors and the trustee may modify and amend the senior subordinated indenture with the consent of the holders of a majority in aggregate principal amount of the outstanding new senior subordinated notes, subject to the following conditions. Absent the consent of the holders of all outstanding new senior subordinated notes affected by the change, no modification or amendment may: (1) change the stated maturity of the principal on any new senior subordinated note; (2) reduce the principal amount of or the premium on, any new senior subordinated note; (3) change the place or currency of payment of principal of, or the premium on, any new senior subordinated note; (4) impair the right to institute suit for the enforcement of any payment on or with respect to any new senior subordinated note; (5) reduce the above-stated percentage of outstanding new senior subordinated notes necessary to modify or amend the senior subordinated indenture; (6) reduce the percentage of aggregate principal amount of outstanding new senior subordinated notes necessary for waiver of compliance with certain provisions of the senior subordinated indenture or for waiver of certain defaults; 108 (7) modify any provisions of the senior subordinated indenture relating to the modification and amendment of the senior subordinated indenture or the waiver of past defaults or covenants; (8) modify any of the provisions of the senior subordinated indenture relating to the subordination of the new senior subordinated notes in a manner adverse to such holders; or (9) following the mailing of an offer with respect to an offer to purchase the new senior subordinated notes as described under "Asset Sales" or a change of control offer as described under "Change of Control," modify the senior subordinated indenture with respect to such offer to purchase in a manner adverse to such holders. The holders of a majority in aggregate principal amount of the outstanding new senior subordinated notes may waive compliance by Danka with certain restrictive provisions of the senior subordinated indenture. The holders of a majority in aggregate principal amount of the outstanding new senior subordinated notes may waive any past default under the senior subordinated indenture, except a default in the payment of principal, or premium, if any. Consent of holders may be obtained by written consent or by a meeting of holders, as provided in the indenture. No Recourse Against Others Noteholders have no legal recourse under the new senior subordinated notes or the senior subordinated indenture against Danka's directors, officers, employees or stockholders. The senior subordinated indenture provides that a director, officer, employee or stockholder of Danka, as such, will not have any liability for any obligations of Danka under the new senior subordinated notes or the senior subordinated indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder, by accepting the new senior subordinated notes, waives and releases all such liability. The Trustee The duties, rights, powers and limitations of the indenture trustee, as trustee, are governed by the senior subordinated indenture. The senior subordinated indenture provides that, except during the continuance of an Event of Default, the trustee will perform only such duties as are specifically set forth in the senior subordinated indenture. During the continuance of an Event of Default, the trustee will exercise such rights and powers vested in it under the senior subordinated indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The senior subordinated indenture contains limitations on the rights of the trustee, should it become a creditor of Danka, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claim as security or otherwise. The trustee is permitted to engage in other transactions with Danka or any Affiliate; provided, however, that if it acquires any conflicting interest, as defined in the senior subordinated indenture or in the Trust Indenture Act, it must eliminate such conflict or resign. Satisfaction and Discharge The senior subordinated indenture will be discharged and will cease to be of further effect, except as to surviving rights or registration of transfer or exchange of the new senior subordinated notes, as expressly provided for in the senior subordinated indenture, as to all outstanding new senior subordinated notes when: (1) either (a) all the new senior subordinated notes theretofore authenticated and delivered, except lost, stolen or destroyed new senior subordinated notes which have been replaced or paid and new senior subordinated notes for whose payment money has previously been deposited in trust or segregated and 109 held in trust by Danka and later repaid to Danka or discharged from such trust, have been delivered to the trustee for cancellation, or (b) all new senior subordinated notes not previously delivered to the trustee for cancellation have become due and payable and Danka has irrevocably deposited or caused to be deposited with the trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the new senior subordinated notes not theretofore delivered to the trustee for cancellation, for principal of, premium, if any, on the new senior subordinated notes to the date of deposit together with irrevocable instructions from Danka directing the trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) Danka has paid all other sums payable under the senior subordinated indenture by Danka; and (3) Danka has delivered to the trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the senior subordinated indenture relating to the satisfaction and discharge of the senior subordinated indenture have been complied with. Governing Law The senior subordinated indenture, the new senior subordinated notes and the guarantees will be governed by and construed in accordance with the laws of the State of New York. 110 10% Subordinated Notes Due 2008 The following is a summary of the terms of the new 10% notes that Danka proposes to issue in this exchange offer. The new 10% notes will be issued under an indenture between Danka and HSBC Bank USA, indenture trustee for the notes. The terms of the new 10% notes include those terms stated in the 10% indenture and those terms made part of the 10% indenture by reference to the Trust Indenture Act of 1939. This section is only a summary of the material provisions of the indenture. This section, however, does not restate the 10% indenture in its entirety. We urge you to read the 10% indenture because the 10% indenture and not this description defines your rights as holders of the new 10% notes. You may obtain copies of the 10% indenture from Danka. See "Where You Can Find More Information." This section uses specific defined terms. See "Definitions" on page 118. Principal, Maturity and Interest The new 10% notes . have a maximum aggregate principal amount of $200.0 million; . will mature on April 1, 2008; and . accrue interest at 10% per year, payable semi-annually in cash on each of April 1 and October 1, beginning October 1, 2001. Danka will issue the notes in denominations of $1,000 and integral multiples of $1,000. Danka will pay interest on the new 10% notes in cash semi-annually in arrears on the interest payment date. Interest payments will be made to the persons in whose names the notes are held at the close of business on the preceding March 15 and September 15. Interest will accrue effective from April 1, 2001 in the case of the first interest payment on October 1, 2001 and, thereafter from the date interest was most recently paid. Danka will compute interest on the basis of a 360-day year of twelve 30-day months. The new 10% notes will initially be issued in the form of a global note in bearer form. See "Book Entry; Delivery and Form." If definitive registered notes are issued, the following will apply. Principal of, and premium, if any, and interest on each new 10% note will be payable and the new 10% notes may be presented for transfer or exchange at the office or agency of Danka maintained for those purposes. At its option, Danka may pay interest by check mailed to registered holders of the notes at the addresses stated on the registry books maintained by the trustee, who will initially act as paying agent and registrar for the new 10% notes. Danka will not charge a service fee for any exchange or registration of transfer of the new 10% notes, but Danka may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with any exchange or registration of transfer. Unless otherwise designated by Danka, Danka's office or agency will be the corporate trust office of the trustee. Ranking The new 10% notes rank below all of Danka's existing and future Senior Debt. Senior Debt includes our Credit Facilities and all of Danka's existing and future senior subordinated debt, including the new senior subordinated notes. The new 10% notes rank ahead of the old notes. This means that if Danka defaults, holders of Senior Debt are entitled to be paid in full before any payments are made on the new 10% notes. The new 10% notes are entitled to be paid in full before the old notes. In addition, the senior lenders will have the right to block current payments on the new 10% notes if there is a default under either the Senior Debt or senior subordinated debt. The new 10% notes are subordinate in right of payment to the prior payment in full of all existing and future Senior Debt. Upon any payment or distribution of assets of Danka to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets, 111 bankruptcy, insolvency or any similar proceedings of Danka, the holders of Senior Debt will first be paid in full of principal of, premium, if any, and interest on such Senior Debt before the holders of the new 10% notes are entitled to receive any payment of principal of, premium, if any, or interest on such notes or on account of the purchase or redemption or other acquisition of new 10% notes by Danka or any subsidiary of Danka, except for permitted insolvency payments. If the trustee or holder of any new 10% note receives any payment or distribution of assets of Danka before all the Senior Debt is paid in full, then such payment or distribution will be required to be paid over or delivered to the trustee in bankruptcy or other person making payment or distribution of assets of Danka to be applied to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in full. Danka may not make any payments on account of the new 10% notes or on account of the purchase or redemption or other acquisition of the new 10% notes if a default occurs and is continuing in the payment when due of principal of, premium, if any, or interest on any Senior Debt, including any default in the payment when due of any obligations, commitment or facility fees, letter of credit fees or agency fees under the Credit Facility, or any default in payment when due of any reimbursement obligation of Danka with respect to any letter of credit issued under the Credit Facility, referred to as a senior payment default. In addition, if a default, other than a senior payment default, occurs and is continuing with respect to the Credit Facility or any Designated Senior Debt that permits, or with the giving of notice or lapse of time or both would permit, the holders thereof, or a trustee on behalf thereof, to accelerate the maturity thereof, referred to as a senior nonmonetary default, and Danka and the trustee have received written notice thereof from the agent bank for the Credit Facility or from an authorized person on behalf of any Designated Senior Debt, then Danka may not make any payments on account of the new 10% notes or on account of the purchase or redemption or other acquisition of the new 10% notes for a period, a blockage period, commencing on the date Danka and the trustee receive such written notice and ending on the earlier of: .179 days after such date; or . the date, if any, on which the Senior Debt to which such default relates is discharged or such default is waived or otherwise cured. In any event, not more than one blockage period may be commenced during any period of 360 consecutive days, and there will be a period of at least 181 consecutive days in each period of 360 consecutive days when no blockage period is in effect. No senior nonmonetary default that existed or was continuing on the date of the commencement of any blockage period with respect to the Senior Debt initiating such blockage period will be, or can be, made the basis for the commencement of a subsequent blockage period, unless such default has been cured or waived for a period of not less than 90 consecutive days. If, notwithstanding the foregoing, Danka makes any payment to the trustee or the holder of any note prohibited by the subordination provisions, then such payment will be required to be paid over and delivered to the holders of the Senior Debt remaining unpaid, to the extent necessary to pay in full all the Senior Debt. Because of the subordination, in the event of insolvency of Danka, holders of the new 10% notes may recover less ratably than creditors of Danka who are holders of Senior Debt. The subordination provisions described above will cease to apply to the notes upon any defeasance or covenant defeasance of the notes as described below under "Defeasance." Optional Redemption Danka may redeem the new 10% notes in full or in part beginning on April 1, 2005. The redemption price for the new 10% notes is par plus a premium, declining ratably to par. On or before, April 1, 2005, Danka may use the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the principal amount of the new 10% notes. 112 Danka may redeem all or part of the new 10% notes with at least 30 but not more than 60 days' notice at the redemption prices expressed as percentages of principal amount as follows:
Redemption Twelve Month Period Commencing Price ------------------------------ ---------- April 1, 2005................................................... 105.000% April 1, 2006................................................... 102.500% April 1, 2007 and thereafter.................................... 100.000%
Danka will pay accrued and unpaid interest on the new 10% notes up to but not including the redemption date. The redemption prices listed above apply to any optional redemption of notes by Danka during the 12-month period beginning on April 1 of the years indicated above. Equity Offerings. On or before April 1, 2005, Danka may redeem up to 35% of the aggregate principal amount of the notes originally issued using the net cash proceeds of one or more Equity Offerings, if at least 65% of the aggregate principal amount of the new 10% notes originally issued remain outstanding immediately after the redemption. The redemption price is 110% of the principal amount of the new 10% notes. Danka will pay accrued and unpaid interest on the new 10% notes up to but not including the redemption date. Danka must make the redemption with net cash proceeds from a public Equity Offering not more than 90 days after the consummation of the public Equity Offering. Payment of Additional Amounts and Optional Tax Redemption If we are required by the laws or regulations of the United Kingdom to make any deduction or withholding for any present or future taxes, assessments or other governmental charges in respect of any amounts to be paid by us under the new 10% notes, we will pay owners of the new 10% notes, as additional interest, such additional amounts as may be necessary so that the net amounts paid to owners of the new 10% notes after that deduction or withholding will be not less than the amounts specified in the note to which owners of the new 10% notes are entitled. However, we are not required to make any payment of additional amounts in some limited circumstances, which are outlined in the indenture for the new 10% notes. We may redeem the new 10% notes in whole, but not in part, at any time, upon not less than 30 nor more than 60 days' notice if we are required to pay the additional amounts described above because of any change in the laws or regulations of the United Kingdom. The redemption price is 100.00% of the principal amount, plus accrued but unpaid interest up to but not including the redemption date. Selection and Notice of Redemption If Danka redeems or purchases less than all of the new 10% notes, the trustee will select the notes for redemption or purchase in compliance with the requirements of the principal national securities exchange, if any, on which the new 10% notes are listed, or, if the notes are not so listed, on a pro rata basis, by lot or any other method that the trustee deems fair and appropriate, subject to the following: . Danka will not redeem or purchase in part any notes with a principal amount of less than $1,000. . If a partial redemption is made with the proceeds of an Equity Offering, the trustee will select notes for redemption only on a pro rata basis or as nearly a pro rata basis as practicable. Subject to DTC procedures, unless that basis is not permitted. Danka will mail notice of redemption by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at the last address for that holder shown on the registry books. If Danka redeems any note in part only, the notice of redemption that relates to that note will state the portion of the principal amount to be redeemed, which portion will not be less than $1,000. Danka will issue a new note in principal amount equal to the unredeemed or unpurchased portion in the name of the holder upon cancellation of the original note, subject to DTC procedures. On and after the redemption or purchase date, 113 interest will no longer accrue on the notes or portions of the notes called for redemption or purchase, whether or not such notes are presented for payment at the office of the paying agent for the notes in New York City, so long as Danka has deposited funds in a sufficient amount to pay the redemption or purchase price. Mandatory Redemption or Sinking Fund Except in the event of a change of control offer, Danka is not required to make mandatory redemption or sinking fund payments for the new 10% notes. Repurchase at the Option of Holders Change of control. Upon a change of control, the holders of the new 10% notes have the right to require Danka to purchase their notes. The purchase price will equal 101% of the principal amount, plus any accrued and unpaid interest. A change of control includes: . disposition of all or substantially all of Danka's assets to a person or group, other than Cypress Associates II LLC and its affiliates, except to effect a change of domicile; . approval of a plan of liquidation or dissolution, except to effect a change of domicile; . acquisition of a majority of Danka's voting stock by a person or group, other than Cypress Associates II LLC and its affiliates; . replacement of a majority of the board of directors over a two year period by directors not approved by majority of the existing board; or . merger or consolidation that results in a person or group, other than Cypress Associates II LLC and its affiliates, acquiring a majority of Danka voting stock. Upon a change of control, each holder of the new 10% notes will have the right to require Danka to purchase the holder's new 10% notes in whole or in part at a purchase price in cash equal to 101% of their principal amount, plus accrued and unpaid interest, pursuant to the offer described in the next succeeding paragraph, referred to as a change of control offer. The definition of change of control includes any sale, lease, exchange or other transfer of "all or substantially all" the assets of Danka and its subsidiaries taken as whole to any person or group of persons. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of new 10% notes to require Danka to make a change of control offer as a result of the sale, lease, exchange or other transfer of less than all of the assets of Danka may be uncertain. Within 30 days following any change of control, Danka will mail a notice to each holder, with a copy to the trustee, stating: . that a change of control has occurred and that such holder has the right to require Danka to repurchase such holder's new 10% notes, in whole or in part, equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of repurchase; . the circumstances and relevant facts regarding such change of control; . the repurchase date, which will not be earlier than 30 days and not later than 60 days from the date such notice is mailed, the repurchase date; . that any note not tendered will continue to accrue interest; . that any note accepted for payment pursuant to the change of control offer will cease to accrue interest after the repurchase date unless Danka defaults in payment of the purchase price; 114 . that holders electing to have a note purchased pursuant to a change of control offer will be required to surrender the note, with the forms required by the indenture, to the paying agent, which may be Danka, at the address specified in the notice before the close of business on the repurchase date; . that holders will be entitled to withdraw their election if the paying agent receives, not later than the close of business on the third business day preceding the repurchase date, a telegram, telex, facsimile transmission or other written communication setting forth the name of the holder, the principal amount of new 10% notes the holder delivered for purchase, and a statement that such holder is withdrawing his election to have such new 10% notes purchased; and . that holders which elect to have their new 10% notes purchased only in part will be issued new 10% notes in a principal amount equal to the unpurchased portion of the new 10% notes surrendered. On the repurchase date, Danka will accept for payment new 10% notes or portions thereof tendered pursuant to the change of control offer, deposit with the trustee or a paying agent money sufficient to pay the purchase price of all new 10% notes or portions thereof so tendered and deliver or cause to be delivered to the trustee. Notes so accepted, together with an officers' certificate indicating the new 10% notes or portions thereof which have been tendered to Danka. The trustee or a paying agent will promptly mail to the holders of new 10% notes so accepted payment in an amount equal to the purchase price therefore and promptly authenticate and mail to such holders a new note in a principal amount equal to any unpurchased portion of the note surrendered. Danka will publicly announce the results of the change of control offer on or as soon as practicable after the repurchase date. In the event a change of control occurs and any repurchase pursuant to the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the Securities Exchange Act of 1934, Danka will comply with the requirements of Rule 14e-l as then in effect, to the extent applicable, and any other applicable securities laws or regulations with respect to such repurchase. The change of control provisions described above may deter certain mergers, tender offers and other takeover attempts involving Danka. Danka's ability to repurchase new 10% notes upon a change of control may be limited by the terms of its then existing contractual obligations. Repurchase of the new 10% notes upon a change of control may constitute a default under the Credit Facility, and any future credit agreements or other agreements relating to Senior Debt, including the new senior subordinated notes, may contain provisions that would restrict Danka's ability to repurchase new 10% notes upon a change in control. If Danka makes a change of control offer following a change of control, Danka may not have adequate financial resources to repurchase all notes tendered. Danka's failure to repurchase tendered notes or to make a change of control offer following a change of control would constitute an Event of Default under the indenture, but the subordination provisions in the 10% indenture may restrict payments to the holders of notes. The provisions of the 10% indenture may not afford holders of the new 10% notes protection in the event of a highly leveraged transaction involving Danka that may adversely affect the holders of the notes, if such transaction does not result in a change of control, violate the covenant described under "Limitation on Incurrence of Additional Debt," or otherwise violate the indenture. Covenants The 10% indenture contains covenants with which Danka must comply. We set forth below a summary and more detailed description of the material covenants. Limitation on transactions with affiliates. Danka and its Restricted Subsidiaries may not enter into transactions with persons it controls, is controlled by or is under common control with, unless Danka complies with specified procedures. 115 Danka will not, and will not permit any Restricted Subsidiary of Danka to, directly or indirectly, enter into any transaction or series of related transactions with or for the benefit of any affiliate of Danka or its Restricted Subsidiaries, other than affiliate transactions on terms that are no less favorable to Danka or such Restricted Subsidiary than those that could reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a person that is not an Affiliate of Danka or its Restricted Subsidiary and that satisfy the following: All affiliate transactions and each series of related affiliate transactions that are similar or part of a common plan involving aggregate payments or other property with a fair market value in excess of $5 million will be approved by the board of directors of Danka or such Restricted Subsidiary, as the case may be, which approval will be evidenced by a board resolution stating that the board of directors, including a majority of the disinterested directors, has determined that such transaction complies with the foregoing provisions. If Danka or any Restricted Subsidiary of Danka enters into an affiliate transaction, or a series of related affiliate transactions related to a common plan, that involves aggregate payments or other property with a fair market value of more than $20 million, Danka or the relevant Restricted Subsidiary will, before the consummation, obtain a favorable opinion as to the fairness of the transaction or series of related transactions to Danka or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an independent financial advisor and file the same with the trustee. The restrictions of this covenant will not apply to: (1) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors or employees of Danka or any subsidiary of Danka as determined in good faith by Danka's board of directors; (2) transactions between or among Danka and any of its Restricted Subsidiaries or between or among Restricted Subsidiaries; (3) any agreement in effect on the issue date and any modified or replacement agreement of an agreement in effect on the issue date that is not more disadvantageous to the holders of the new 10% notes in any material respect than the original agreement as in effect on the issue date; and (4) Dividends and distributions approved by the board of directors. Limitations on merger, consolidation and sale of all assets. Danka will not merge, amalgamate or consolidate with other companies or sell all or substantially all its assets unless the surviving corporation assumes all obligations under the indenture, Danka is not in default under the new 10% notes and Danka or the surviving corporation has provided an officer's certificate and opinion of counsel to the trustee to the effect of the foregoing. Danka will not, in a single transaction or series of related transactions: . consolidate, amalgamate or merge with or into any person; or . sell, assign, transfer, lease, convey or otherwise dispose of, or cause or permit any subsidiary of Danka to sell, assign, transfer, lease, convey or otherwise dispose of, all or substantially all of Danka's assets, determined on a consolidated basis for Danka and Danka's Subsidiaries; unless, in either case: (1) either: (a) Danka is the surviving or continuing corporation; or (b) the person, if other than Danka, formed by the consolidation or amalgamation or into which Danka is merged or the person that acquires the properties and assets of Danka and of Danka's 116 subsidiaries substantially as an entirety, the surviving entity, (x) except in the case of a transaction with the sole purpose of effecting a change of domicile of Danka as described below in the definition of "change of control", is a corporation organized and validly existing under the laws of England and Wales or the United States or any State thereof or the District of Columbia and (y) expressly assumes, by a supplemental indenture, the due and punctual payment of the principal of, and premium, if any, and interest on all of the new 10% notes and the performance of every covenant of the new 10% notes, and the 10% indenture on the part of Danka to be performed or observed; (2) immediately after giving effect to the transaction and the assumption contemplated by clause (1)(b)(y) above, no default or Event of Default has occurred or is continuing; (3) Danka or the surviving entity agrees to indemnify each holder of new 10% notes against any tax, levy, assignment or governmental change payable by withholding or deduction which may be imposed on the holder as a result of such merger or consolidation; and (4) Danka or the surviving entity will have delivered to the trustee an officers' certificate and an opinion of counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental 10% indenture is required in connection with the transaction, the supplemental 10% indenture will comply with the applicable provisions of the 10% indenture and that all conditions precedent in the 10% indenture relating to the transaction have been satisfied. Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of Danka in accordance with the foregoing, in which Danka is not the continuing corporation, the successor person formed by the consolidation or into which Danka is merged or to which such conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, Danka under both of the 10% indenture and new 10% notes, and except in the case of a lease, Danka will be released. Limitations on payment for consent. Neither Danka nor any of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any holder of any new 10% notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the 10% indenture or the new 10% notes unless such consideration is offered to be paid or is paid to all holders of the new 10% notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Limitation on business activities. Danka will not and will not permit any of its Restricted Subsidiaries to engage in any business other than Permitted Businesses, except to such extent as would not be material to the Danka and its Restricted Subsidiaries taken as a whole. Affirmative Covenants Maintenance of office or agency for notices and demands. Danka will maintain in New York, New York, an office or agency where the new 10% notes may be presented for payment, registration of transfer or exchange as provided in the 10% Indenture and an office or agency where notices and demands to or upon Danka in respect of such notes or of the 10% Indenture may be served. Danka may designate multiple offices for purposes of notices and demands. Maintenance of property and insurance. Danka agrees to maintain all material property, including equipment, in reasonable condition and order. Danka will provide or cause to be provided, for itself and each of its subsidiaries, insurance against loss or damage arising from the conduct of the business of Danka and its subsidiaries with reputable insurers in such amounts, with such deductibles, and by such methods as will be either (i) consistent in all material respects with past practices of Danka or the applicable subsidiary, or (ii) customary in the industry, unless the failure to provide such insurance would not have a material adverse effect on the financial condition or results of operations of Danka and its subsidiaries, taken as a whole or be a violation of applicable law or material agreement of Danka or its subsidiaries. 117 Compliance certificate and opinion of counsel. Danka will deliver to the trustee, within 120 days after the end of Danka's fiscal year, an officer's certificate, if given by one of Danka's officers, or an opinion of counsel, if it is given by counsel, stating that a review of its activities and the activities of its subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under the 10% Indenture and further stating, as to each such officer signing such certificate or such counsel signing the opinion, that to the best of his or her knowledge Danka during such preceding fiscal year has kept, observed, performed and fulfilled each and every of its covenants contained in the 10% Indenture and no default or Event of Default occurred during such year or, if such signers do not know of any, the certificate will describe such and its status with reasonable particularity. Payment of taxes and other claims. Danka will pay or discharge or cause to be paid or discharged, before any material penalty accrues the following: (1) all material taxes, assessments and governmental charges levied or imposed upon Danka or any subsidiary of Danka or upon the income, profits or property of Danka or any subsidiary of Danka, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of Danka or any subsidiary of Danka; provided however, that Danka will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Maintenance of all registration, regulations and licenses. Danka will maintain all registrations, licenses, permits, privileges and franchises material to the conduct of its business and shall comply in all material respects with all laws, rules, regulations and orders of any government entity. Payment on principal and interest. Danka will pay the principal and interest on the new 10% notes on the dates and in the manner provided in the new 10% notes. Before each payment date, Danka will segregate and hold in trust for the benefit of holders entitled to payment, a sum sufficient to pay the principal and/or interest then becoming due until such sum has been paid to holders or otherwise disposed of in accordance with the 10% indenture. Reports to Holders. Whether or not Danka is required to file reports with the SEC, Danka will file with the SEC the quarterly and annual reports and information or documents, if any, that Danka would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Securities Exchange Act of 1934. Holders can obtain copies of such reports and other information or documents from www.sec.gov. Definitions We have set forth below a summary of certain terms used in this description of both sets of notes. You should read the 10% indenture for the full definition of all terms. "Capitalized Lease Obligation" means at the time any determination is made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with United States GAAP. "change of control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer of all or substantially all the assets of Danka and its subsidiaries taken as a whole to any person or group of persons, other than Cypress Associates II LLC and its affiliates, except to effect a change of domicile; (2) the approval by the holders of capital stock of Danka of a plan or proposal for the liquidation or dissolution of Danka, except to effect a change of domicile; (3) a person or group of persons, other than Cypress Associates II LLC and its affiliates, is or becomes the beneficial owner, of a majority of the securities of Danka ordinarily having the right to vote in the election of directors; 118 (4) the replacement of a majority of the board of directors of Danka over a two-year period from the directors who constituted the board of directors of Danka at the beginning of the period, and the replacement was not approved by a majority vote of the directors then still in office who were either directors at the beginning of the period or whose election as a director was previously so approved; or (5) the merger or consolidation of Danka with or into another corporation or the merger of another corporation into Danka with the effect that immediately after such transaction any person or group of persons, other than Cypress Associates II LLC and its affiliates, becomes the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors. "change of domicile" means a transaction or a series of related transactions, including without limitation (i) a consolidation, amalgamation, or merger of Danka with or into any other person; (ii) acquisition of all of the capital stock of Danka; or (iii) sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of Danka's assets, determined on a consolidated basis for Danka and its subsidiaries, to another person, of which the sole purpose is to reincorporate Danka in a jurisdiction other than England and Wales or incorporate or organize a successor entity to Danka in a jurisdiction other than England and Wales. For the purposes of this definition of change of domicile, a "successor entity" shall mean an entity whose voting stock following the change of domicile is owned or beneficially owned by the same persons in the same proportions as owned or beneficially owned the voting stock of Danka immediately prior to the change of domicile. "Credit Facility" means the Amended and Restated Credit Agreement dated as of June 29, 2001, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and Bank of America, N.A., as agent, as the same may be amended, modified, supplemented, extended, renewed, restated, refunded, refinanced, restructured or replaced from time to time. "Debt" means, with respect to any person: (1) indebtedness, whether or not contingent, for borrowed money; (2) indebtedness evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations; (4) all indebtedness or other obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement, but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not in default or overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (5) all indebtedness for the reimbursement of any obligation on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent obligations in respect of indebtedness referred to in (1) through (5) above and (8) and (9) below; (7) all indebtedness of any other person of the type referred to in (1) through (6) that are secured by any lien on any property or asset of the referent person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured; (8) all indebtedness under currency agreements and interest swap agreements; (9) all obligations under our tax retention operating leases; and 119 (10) all Disqualified Capital Stock issued by such person with the amount of indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. The maximum fixed repurchase price of any Disqualified Capital Stock that does not have a fixed repurchase price is calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which the indebtedness is required to be determined pursuant to the indenture, and if such price is based upon or measured by the fair market value of such Disqualified Capital Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of the Disqualified Capital Stock. The amount of any indebtedness, other than Disqualified Capital Stock, outstanding as of any date is: (1) the accreted value to the extent the indebtedness does not require current payments of interest; (2) the principal amount together with any interest that is more than 30 days past due in the case of any other indebtedness; (3) in the case of currency agreements and interest swap agreements, the amount that would appear on the consolidated balance sheet of the person in accordance with GAAP; and (4) in the case of any guarantee or other contingent obligation in respect of indebtedness of any other person is deemed to equal the maximum amount of such indebtedness, unless the liability is limited by the terms of the guarantee or contingent obligation, in which case the amount of such guarantee or other contingent obligation is deemed to equal the maximum amount of such liability. "Designated Senior Debt" means (1) Debt under or in respect of the Credit Facility, and (2) any other Debt constituting Senior Debt, which at the time of determination has an aggregate principal amount of at least $50 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by Danka. "Disqualified Capital Stock" means any capital stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Debt, or is redeemable at the option of the holder, in whole or in part, on or prior to the date that is 91 days after the date on which the new 10% notes mature, excluding Danka's 6.50% senior convertible participating shares. "Equity Offering" means a public or private offering of Qualified Capital Stock. "Qualified Capital Stock" means any capital stock that is not Disqualified Capital Stock. "Restricted Subsidiary" of a person means any subsidiary of the such person that is not an Unrestricted Subsidiary. "Senior Debt" means: (1) the principal of, interest on and all other obligations relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility; (2) amounts payable in respect of any interest swap obligations and currency agreements; (3) the existing various notes payable, as described in "Description of Indebtedness;" (4) the new senior subordinated notes; and (5) all other Debt, except for any Debt which by its terms is made expressly equal to or behind the new 10% notes in right of payment. 120 The term "Senior Debt" does not include: (1) any Debt of Danka to a subsidiary of Danka; (2) Debt to or guaranteed on behalf of any shareholder, director, officer or employee of Danka or any subsidiary of Danka, including amounts owed for compensation; (3) Debt to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Debt represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed by Danka; (6) Debt that is without recourse to Danka; (7) the old notes; and (8) any other Debt that by its express terms ranks in right of payment equal to or behind the new 10% notes. "Unrestricted Subsidiary" means any subsidiary that is designated by the board of directors of Danka as an Unrestricted Subsidiary pursuant to a board resolution, but only to the extent such subsidiary: (1) has no Debt other than non-recourse Debt; (2) on the date of designation, is not a party to any agreement with Danka or a Restricted Subsidiary of Danka unless the terms of any such agreement are no less favorable to Danka or the Restricted Subsidiary than those that might be obtained at the time from persons who are not Affiliates or Danka or the Restricted Subsidiary; (3) is a person with respect to which neither Danka nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional capital stock or (b) to maintain or preserve such person's financial condition or to cause such person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Debt of Danka or any of its Restricted Subsidiaries; and (5) has at least one director on its board of directors that is not a director or executive officer of Danka or its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Danka or its Restricted Subsidiaries. Events of Default Danka will be in default, and the noteholders can call the new 10% notes, upon the occurrence of certain events. These include failure to pay principal of or interest on any new 10% note when due, breaches of covenants, defaults under other indebtedness, failure to pay judgments and bankruptcy. Danka will be in default if it does not make payments when due, violates covenants, fails to pay other debt when due, fails to pay judgments when due, or goes bankrupt. Bankruptcy causes automatic acceleration of the new 10% notes. Any other Event of Default will give the trustee or 25% of the holders the right to call the new 10% notes. The following are Events of Default: (1) failure to pay any interest on any new 10% note when due, and continuance of such failure for 30 days; (2) failure to pay principal of, or premium, if any, on any new 10% note when due; (3) failure to pay principal of, premium, if any, or interest on new 10% notes required to be purchased pursuant to a change of control offer as described under "Change of Control" when due and payable; 121 (4) failure to perform or breach of any other covenant or warranty of Danka in the indenture, continued for 30 days after written notice from the trustee or holders of at least 25% in aggregate principal amount of the outstanding new 10% notes as provided in the indenture; (5) failure to perform or comply with the provisions described under "Limitations on Merger, Consolidation and Sale of Assets"; (6) the occurrence of a default under any Debt of Danka or any subsidiary of Danka, if both (a) the default either results from failure to pay any such Debt at its stated final maturity or relates to an obligation other than the obligation to pay such Debt at its stated final maturity and results in the holders of such Debt causing such Debt to become due before its stated final maturity, and (b) the principal amount of such Debt, together with the principal amount of any other such Debt in default for failure to pay principal at stated final maturity of the maturity of which has been accelerated, aggregates at least $25 million or more at any one time outstanding; (7) the rendering of a final judgment or judgments, not subject to appeal, against Danka or any of its Restricted Subsidiaries in an aggregate amount in excess of $10 million that remain undischarged, unpaid or unstayed for a period of 60 consecutive days following; and (8) certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka. Subject to the provisions of the 10% indenture relating to the duties of the trustee in case an Event of Default has occurred and is continuing, the trustee will be under no obligation to exercise any of its rights or powers under the 10% indenture at the request or direction of any of the holders, unless such holders have offered to the trustee reasonable indemnity. Subject to such provisions for the indemnification of the trustee, the holders of a majority in aggregate principal amount of the outstanding new 10% notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. If an Event of Default, other than Events of Default with respect to certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka, will occur and be continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding new 10% notes may accelerate the maturity of all new 10% notes; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding new 10% notes, may under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non- payment of interest or accelerated principal, have been cured or waived as provided in the indenture. If a specified Event of Default with respect to certain events of bankruptcy, insolvency or reorganization affecting Danka or any significant subsidiary of Danka occurs, the principal of the new 10% notes then outstanding will become immediately due and payable without any declaration or other act on the part of the trustee or any holder of the new 10% notes. For information as to waiver of defaults, see "Modification and Waiver." No holder of any new 10% note will have any right to institute any proceeding with respect to the 10% indenture or for any remedy thereunder, unless such holder will have previously given to the trustee written notice of a continuing Event of Default and unless also the holders of at least 25% in aggregate principal amount of the outstanding new 10% notes will have made written request, and offered reasonable indemnity, to the trustee to institute such proceeding as trustee, and the trustee will not have received from the holders of a majority in aggregate principal amount of the outstanding new 10% notes a direction inconsistent with such request and will have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a note for enforcement of payment of the principal of, premiums, if any, or interest on such new 10% note or after the respective due dates expressed in such new 10% note. Danka is required to furnish to the trustee annually a statement as to the performance by Danka of certain of its obligations under the 10% indenture and as to any default in such performance. Additionally, Danka is required to notify the trustee within five business days of the occurrence of a default or an Event of Default. 122 Defeasance Danka can be relieved of its obligations under the 10% indenture if it deposits with the trustee sufficient money or government securities to pay the principal of and interest on the notes when they become due. The 10% indenture provides (1) if applicable, Danka will be discharged from any and all obligations in respect of the outstanding new 10% notes or (2) if applicable, and subject to compliance with the Trust Indenture Act, Danka may omit to comply with certain restrictive covenants, and that such omission will not be deemed to be an Event of Default under the 10% indenture and the notes, in either case (1) or (2) upon irrevocable deposit with the trustee, in trust, of money and/or U.S. government obligations which will provide money in an amount sufficient in the opinion of a nationally recognized firm of independent certified public accountants to pay the principal of and premium, if any, and each installment of interest, if any, on the outstanding notes. With respect to clause (2), the obligations under the 10% indenture other than with respect to such covenants and the Events of Default other than the Event of Default relating to such covenants will remain in full force and effect. Such trust may only be established if, among other things: . under clause (1), Danka has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which in an opinion of counsel to Danka provides that holders of the new 10% notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and, with respect to clause (2), Danka has delivered to the trustee an opinion of counsel to Danka to the effect that the holders of the new 10% notes will not recognize gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; . no default or Event of Default will have occurred and be continuing, . no default on any Senior Debt will have occurred and be continuing; and . certain other customary conditions precedent are satisfied. Modification and Waiver The 10% indenture can generally be modified or its provisions waived, with the consent of holders of a majority of principal amount of the new 10% notes. Some changes require the consent of all affected holders of new 10% notes. Danka and the trustee may modify and amend the 10% indenture with the consent of the holders of a majority in aggregate principal amount of the outstanding new 10% notes, subject to the following conditions. Absent the consent of the holders of all outstanding new 10% notes affected by the change, no modification or amendment may: (1) change the stated maturity of the principal of, or any installment of interest on, any new 10% note; (2) reduce the principal amount of or the premium or interest on, any new 10% note; (3) change the place or currency of payment of principal of or the premium or interest on, any new 10% note; (4) impair the right to institute suit for the enforcement of any payment on or with respect to any new 10% note; (5) reduce the above-stated percentage of outstanding new 10% notes necessary to modify or amend the indenture; 123 (6) reduce the percentage of aggregate principal amount of outstanding new 10% notes necessary for waiver of compliance with certain provisions of the 10% indenture or for waiver of certain defaults; (7) modify any provisions of the 10% indenture relating to the modification and amendment of the 10% indenture or the waiver of past defaults or covenants; (8) modify any of the provisions of the 10% indenture relating to the subordination of the notes in a manner adverse to such holders; or (9) following the mailing of an offer with respect to a change of control offer as described under "Change of Control," modify the 10% indenture with respect to such offer to purchase in a manner adverse to such holders. The holders of a majority in aggregate principal amount of the outstanding new 10% notes may waive compliance by Danka with certain restrictive provisions of the indenture. The holders of a majority in aggregate principal amount of the outstanding new 10% notes may waive any past default under the indenture, except a default in the payment of principal, premium, if any, or interest. Consent of the holders may be obtained by written consent or by a meeting of the holders as provided in the indenture. No Recourse Against Others Noteholders have no legal recourse under the new 10% notes or the 10% indenture against Danka's directors, officers, employees or stockholders. The 10% indenture provides that a director, officer, employee or stockholder of Danka, as such, will not have any liability for any obligations of Danka under the new 10% notes or the indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder, by accepting the new 10% notes, waives and releases all such liability. The Trustee The duties, rights, powers and limitations of the trustee are governed by the indenture. The 10% indenture provides that, except during the continuance of an Event of Default, the trustee will perform only such duties as are specifically set forth in the indenture. During the continuance of an Event of Default, the trustee will exercise such rights and powers vested in it under the 10% indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The 10% indenture contains limitations on the rights of the trustee, should it become a creditor of Danka, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claim as security or otherwise. The trustee is permitted to engage in other transactions with Danka or any Affiliate; provided, however, that if it acquires any conflicting interest, as defined in the 10% indenture or in the Trust Indenture Act, it must eliminate such conflict or resign. Satisfaction and Discharge The 10% indenture will be discharged and will cease to be of further effect, except as to surviving rights or registration of transfer or exchange of the new 10% notes, as expressly provided for in the indentures, as to all outstanding new 10% notes when: (1) either (a) all the new 10% notes theretofore authenticated and delivered (except lost, stolen or destroyed new 10% notes which have been replaced or paid and new 10% notes for whose payment money has previously been deposited in trust or segregated and held in trust by Danka and later repaid to Danka or discharged from such trust) have been delivered to the trustee for cancellation or (b) all new 124 10% notes not previously delivered to the trustee for cancellation have become due and payable and Danka has irrevocably deposited or caused to be deposited with the trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the new 10% notes not previously delivered to the trustee for cancellation, for principal of, premium, if any, and interest on the new 10% notes to the date of deposit together with irrevocable instructions from Danka directing the trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) Danka has paid all other sums payable under the 10% indenture by Danka; and (3) Danka has delivered to the trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the 10% indenture relating to the satisfaction and discharge of the 10% indenture have been complied with. Governing Law The 10% indenture and the new 10% notes will be governed by and construed in accordance with the laws of the State of New York. 125 DESCRIPTION OF EXISTING INDEBTEDNESS Credit Agreement We have a credit agreement with a consortium of international bank lenders. The credit agreement is made up of three portions, a revolving line, a term loan and an international swing line facility. As of March 31, 2001, we owed approximately $515.0 million under the credit agreement. The available unused commitments as of March 31, 2001 were $17.3 million. Our new borrowings are currently limited to amounts necessary for our ordinary operational needs. Our final installment of principal of approximately $30 million under the term loan portion of the credit agreement was paid on March 30, 2001. The balance outstanding under the credit agreement is scheduled for repayment on March 31, 2002. The credit agreement includes financial covenants which require us to comply with: . a minimum level of adjusted consolidated net worth; . a minimum level of cumulative consolidated EBITDA; . a ratio of consolidated EBITDA to interest expense; . a consolidated fixed charge coverage ratio; and . a consolidated total leverage ratio. In addition to the financial covenants, the credit agreement contains negative and affirmative covenants which place restrictions on us regarding: . disposing of assets; . making capital expenditures; . incurring additional indebtedness; . creating liens over our assets; . paying dividends, other than payment-in-kind dividends on our participating shares; and . acquiring new businesses. The credit agreement also prohibits us from repurchasing or redeeming the old notes until the indebtedness under the credit agreement is paid in full. Therefore, we are making this exchange offer conditional on the consent of our senior bank lenders. While we are generally prohibited from incurring new indebtedness other than under the credit agreement, we are permitted to borrow up to $40.0 million at any one time outside of the credit agreement to finance the purchase of high- volume digital copiers and to secure those loans with liens upon the financed equipment. These borrowings, if any, will constitute senior indebtedness and would therefore rank senior to the new notes. If we fail to comply with the covenants contained in the credit agreement, our lenders can demand repayment of our indebtedness and refuse to lend us any additional funds. Because of our financial condition, we had to obtain amendments to, or waivers of compliance with, the financial covenants contained in the credit agreement in June 1998, October 1998, February 1999, October 2000, December 2000, March 2001, and June 2001. The amendment to the credit agreement that we obtained in March 2001 modifies the financial covenants for the period from March 28, 2001 through July 16, 2001. Without this amendment, we would have been in violation of the financial covenants. As a result of the magnitude of the write-offs and charges taken in the 126 fourth quarter of our 2001 fiscal year and the explanatory paragraph contained in our independent auditors' report on our 2001 fiscal year financial statements, including that there is a substantial doubt about our ability to continue as a going concern, we were in non-compliance with the financial covenants and a covenant that our independent auditors' report must not contain such an explanatory paragraph. This non-compliance was cured by an amendment to the credit agreement in June 2001 excluding certain of the fourth quarter write-offs and charges from the calculation of the financial covenants effective through July 16, 2001, and waiving permanently the requirement that the auditors' report on our 2001 fiscal year financial statements must not include such an explanatory paragraph. We intend to refinance our indebtedness under the credit agreement before July 17, 2001. If we do not refinance our indebtedness under the credit agreement before July 17, 2001, we expect that we will require an additional amendment to, or further waiver of, the financial covenants that will be in effect under the credit agreement from that date. In the absence of an additional amendment or further waiver, after July 16, 2001, we will be in default under the credit agreement and lenders owning a majority of our outstanding indebtedness will be entitled to demand immediate repayment. We were required to pay our lenders a fee of approximately $1.5 million in consideration of the March 2001 amendment. We also paid our lenders fees in consideration of the earlier waivers of, and amendments to, the credit agreement. We were not required to pay a fee in consideration of the June 2001 amendment. However, we anticipate that we would be required to pay our lenders a fee in respect of any further waiver that we obtain of the financial covenants. See "Risk Factors." Our indebtedness under the credit agreement is secured by substantially all of our, and our subsidiaries, assets in the United States and is guaranteed by some of our subsidiaries and those guarantees are secured by pledges of stock in some of our operating subsidiaries located in Australia, Belgium, Brazil, Canada, Denmark, France, Germany, Italy, Luxembourg, Mexico, The Netherlands and Spain. We currently pay interest on our indebtedness under the credit agreement at a rate equal to IBOR or the applicable interbank rate for non-US dollars plus 2.75%. The credit agreement requires that if we sell any significant assets, we must apply substantially all of the proceeds to reduce our indebtedness under the credit agreement. Our lenders' commitments to provide funds would be permanently reduced by the amount of those payments. We intend to refinance our indebtedness under the credit agreement on or about June 29, 2001, but we cannot assure you that we will do so. We anticipate that we will use approximately $232.9 million of the net proceeds of the sale of DSI to repay part of the indebtedness. We will use the remainder of the net proceeds of the sale of DSI to fund the limited cash option under this exchange offer and to pay costs and taxes associated with this exchange offer. We anticipate we will refinance the remaining balance of our indebtedness under the credit agreement by drawing down a new revolving facility, term loan and letter of credit facility, which may be provided by some or all of our existing lenders under the credit agreement. See "New Credit Facility" for a description of the material terms of the new revolver, term loan and letter of credit commitments that we have agreed with the steering committee of our existing lenders. 6.75% Convertible Subordinated Notes See "Terms of the Old Notes" for a discussion of the terms of the 6.75% convertible subordinated notes. Tax Retention Operating Leases One of our principal United States subsidiaries, Danka Holding Company, is party to a number of agreements with a consortium of banks. We sometimes refer to these agreements collectively as the "tax retention operating leases." Under our tax retention operating leases, Danka Holding Company leases various properties in the United States. The leases of the properties expire on March 31, 2002. Danka Holding Company is required to pay rent for the leased properties, together with the taxes, maintenance, insurance and other operating costs of the leased properties. 127 Danka Holding Company has given a residual guarantee in respect of the properties, whereby it is obligated to pay the difference between the maximum amount of the residual guarantee which is equal to 87% of the total cost of the properties, and the fair market value of the properties at the termination of our tax retention operating leases. Danka Holding Company's maximum contingent liability on termination of the tax retention operating leases was approximately $42.5 million as of March 31, 2001. Danka Holding Company has purchased renewal options over the leased properties at fair market value and has the right to exercise purchase options for each property at the end of the lease term. Alternatively, the properties can be sold to third parties. As of March 31, 2001, Danka Holding Company was offering all the properties for sale to third parties. We anticipate that the realization of the aggregate fair market value of the properties will be less than Danka Holding Company's contingent liability under the residual guarantee. We incurred a charge of $11.4 million in our 2001 fiscal year to recognize Danka Holding Company's expected liability under the residual guarantee. Our tax retention operating leases incorporate the covenants from our credit agreement, including the financial covenants. One of the covenants incorporated into our tax retention operating leases prohibits us from repurchasing or redeeming the old notes. Therefore, we are making this exchange offer conditional on the consent of parties to our tax retention operating leases. If we breach the financial covenants contained in the credit agreement, we also breach a covenant contained in our tax retention operating leases. We are required to obtain an amendment to, or waiver of, the covenant in our tax retention operating leases whenever we are required to obtain an amendment to, or waiver of, the financial covenants of the credit agreement. We last obtained such amendments to the covenant in our tax retention operating leases when we obtained amendments to the financial covenants of the credit agreement in March and June 2001. We had to pay a fee of $106,000 for the March 2001 amendment. We did not pay any fee in connection with the June 2001 amendment. In the event that we are required to obtain further amendments to, or waivers of, the covenants of the credit agreement, we anticipate that we will seek amendments to, or waivers of, the corresponding covenants of our tax retention operating leases, but we cannot assure you that we would be able to obtain such waivers. Other Miscellaneous Notes Payable We had other miscellaneous notes payable of $2.6 million outstanding at March 31, 2001, which were comprised of the following: . $1.5 million of various bank overdraft accounts; . $0.9 million of outstanding notes payable related to two acquisitions completed in prior years; and . $0.2 million of outstanding capital leases. These notes bear interest from prime to 12% and will mature over the next five years. These notes constitute senior indebtedness and will therefore rank senior to the new notes. 128 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 500 million ordinary shares with a par value of UK(Pounds)0.0125 per share and 500,000 participating shares, with a par value of $1.00 per share. As of May 31, 2001, the following shares were issued and outstanding: . 247,570,566 ordinary shares; and . 238,813 participating shares. As of May 31, 2001, approximately 80.2% of our issued and outstanding ordinary shares were held in the form of American depositary shares. Each of the American depositary shares represents four ordinary shares. We are organized under the laws of England and Wales. Specific information regarding our capital stock can be found in our articles of association. Specific information regarding our American depositary shares can be found in the deposit agreement for the American depositary share program. A description of the material terms of our capital stock and the American depositary shares is set out below. Ordinary Shares . Holders of ordinary shares are entitled to one vote for each share held on all matters submitted to a vote of shareholders. . Holders of ordinary shares are entitled to receive proportionately any dividends that may be declared by our board of directors or by shareholder meeting, but not in excess of an amount recommended by the board of directors, subject to the preferential dividend rights of the issued and outstanding participating shares. . On our liquidation, dissolution or winding up, holders of ordinary shares are entitled to receive proportionately any of our assets remaining after payment of our liabilities and subject to the prior liquidation entitlement of the issued and outstanding participating shares. . Our articles of association require that one-third of our board of directors, excluding the directors elected by the holders of the participating shares, must retire and stand for re-election by the shareholders at each of our annual general meetings. Our board of directors may appoint new directors, but the new directors must stand for re-election by the shareholders at the annual general meeting next following their appointment. Holders of ordinary shares are not entitled to cumulative voting rights for the election of directors. . Holders of ordinary shares are entitled to preemptive rights under English law on the issuance by us of new equity securities for cash. The new equity securities must be offered to the holders of our existing equity securities in proportion to their existing holdings. Shareholders may waive their preemptive rights, both in relation to specific issuances of securities and generally. Preemptive rights do not apply on the issuance for cash of new equity securities to employee share plans. . There are no conversion rights or redemption or sinking fund provisions applicable to the ordinary shares. American Depositary Shares . Our American depositary shares have been issued pursuant to a deposit agreement dated as of June 25, 1992 between us and The Bank of New York, as the depositary. . Each American depositary share represents four ordinary shares. 129 . The Bank of New York, as the depositary of the American depositary share program, is the holder of the ordinary shares represented by the American depositary shares. The Bank of New York: . is required to the extent that it is able to convert into U.S. dollars the dividends and distributions that it receives in respect of the ordinary shares underlying the American depositary shares and to distribute the dividends and distributions converted into U.S. dollars less any applicable withholding and taxes to the holders of the American depositary shares in proportion to their holdings; . may and if we require shall, distribute additional American depositary shares to take account of any stock distribution or free distribution of ordinary shares that we might make; and . if we request and the Securities Act permits, will make available to the holders of the American depositary shares any right that we offer holders of ordinary shares to subscribe for additional shares. . The Bank of New York will mail information regarding meetings or votes of the holders of the ordinary shares to the holders of the American depositary shares. The holders of the American depositary shares are entitled to instruct The Bank of New York how to vote the ordinary shares that are represented by their respective American depositary shares. The Bank of New York will endeavor to vote the ordinary shares in respect of which it receives instructions from the holders of the American depositary shares. The deposit agreement permits our board of directors to instruct The Bank of New York how to vote the ordinary shares in respect of which it does not receive instructions from holders of American depositary shares. . The American depositary shares are transferable on the books of The Bank of New York. . Holders of American depositary shares can withdraw the underlying ordinary shares from the depositary arrangement at any time, subject to the payment of applicable charges, duties and taxes, certain temporary delays and applicable laws. . We may agree with The Bank of New York to amend the terms of the deposit agreement and the American depositary shares at any time. Participating Shares . The participating shares are entitled to dividends equal to the greater of 6.50% per annum, increasing to 8.50% if we are in default of any obligation to redeem any participating shares, or ordinary share dividends on an "as converted" basis. Dividends are cumulative and will be paid in the form of additional participating shares until December 2004, which is five years after the initial issuance of the shares, and thereafter in cash, unless our then existing principal indebtedness prohibits the payment of cash dividends, in which case we will continue to pay dividends in the form of additional participating shares until the prohibition no longer applies. . In the event of liquidation of Danka, participating shareholders will be entitled to receive a distribution equal to the greater of: . the liquidation return per share, initially $1,000 and subject to upward adjustment on certain default events by us, plus accumulated and unpaid dividends from the most recent dividend payment date; and . the amount that would have been payable on each participating share if it had been converted into ordinary shares. . The participating shares are convertible into ordinary shares at a current conversion price of $3.11 per ordinary share, which is equal to $12.44 per American depositary share. . The conversion price is subject to adjustment in certain circumstances to protect against dilution, primarily on issuances of our ordinary shares for less than market value. 130 . The ratio at which participating shares convert into ordinary shares is calculated by dividing the liquidation return for the participating shares, plus accumulated and unpaid dividends from the last participating share dividend payment date, by the conversion price. Therefore, because the amount of accumulated and unpaid dividends increases on a daily basis, the conversion ratio for the participating shares increases fractionally on a daily basis until the next dividend is paid. As of May 15, 2001, the last participating share dividend payment date, the conversion ratio was 321.543 ordinary shares per participating share. Assuming that no other events take place which require that the conversion price be adjusted, as of August 14, 2001, the date immediately prior to the next participating share dividend payment date, the conversion ratio will be 326.768 ordinary shares per participating share. On payment of the dividend due August 15, 2001, the conversion ratio will revert to 321.543 ordinary shares per participating share, assuming no other events take place which require that the conversion price be adjusted. . Holders of the participating shares have voting rights on an "as converted" basis with the holders of the ordinary shares on all matters submitted to a vote of shareholders. Holders of the participating shares are also entitled to vote as a separate class on matters directly relating to the rights attaching to the participating shares. . Holders of the participating shares are entitled to elect up to two nominees to our board of directors so long as they hold, in aggregate, voting shares, including participating shares, that represent at least 10 percent of the total voting rights. . Holders of participating shares are entitled to appoint one nominee director if they own in aggregate voting shares representing less than 10 percent but more than 5 percent of the total voting rights. . If the Cypress Group LLC or its affiliates transfer participating shares to a person who is not an affiliate of them without the consent of our board of directors and as a result The Cypress Group LLC and its affiliates hold in aggregate less than 50.01 percent of the participating shares in issue then the holders of the participating shares will be entitled to appoint a maximum of one nominee director. . Each committee of the board of directors must include at least one director nominated by the holders of the participating shares, except as prohibited by applicable law or regulation. . Holders of the participating shares may elect an additional two directors to our board if we are in default on our obligations to redeem participating shares on our obligation or to pay a cash dividend on the participating shares following December 2004. . Holders of the participating shares are entitled to vote with other shareholders on the appointment of directors generally in addition to their right to elect nominee directors. . On or after December 17, 2003, and prior to December 17, 2010, we have the option to redeem the participating shares, in whole but not in part, for cash at the greater of: . the redemption price per share as set out in the table below, based on the liquidation return per participating share described below plus accumulated and unpaid dividends, from the most recent dividend payment date; and . the then market value of the ordinary shares into which the participating shares are convertible, plus accumulated and unpaid dividends from the most recent dividend payment date. Instead of redemption in cash at the market value of the ordinary shares, we may decide to convert the participating shares into the number of ordinary shares into which they are convertible.
Percentage of Year Liquidation return ---- ------------------ 2003-2004............................................. 103.250% 2004-2005............................................. 102.167% 2005-2006............................................. 101.083% 2006 and thereafter................................... 100.000%
131 . If we are subject to a change of control event, holders of the participating shares will be entitled to have their shares redeemed if we are subject to a change of control event for cash at the greater of: . 101% of the then liquidation return per share plus accumulated and unpaid dividends from the most recent dividend payment date; and . the then market value of the ordinary shares into which the participating shares are convertible, plus accumulated and unpaid dividends from the most recent dividend payment date. Instead of redemption in cash at the market value of the ordinary shares, we may decide to convert the participating shares into the number of ordinary shares into which they are convertible, and pay in cash any accumulated and unpaid dividends from the most recent dividend payment date. . In addition, if the change of control event takes place within three and a half years from the initial issuance date of the participating shares, which was December 17, 1999, the participating shareholders are entitled to receive an additional cash payment equal to the dividends that would have been paid on the participating shares up to the date three and a half years after the initial issuance date. We are also obligated to pay a penalty to the holders of the participating shares in certain circumstances if we fail to redeem the participating shares following a change of control event. . If by December 17, 2010, the participating shares have not been converted or otherwise redeemed, we are obligated to redeem the participating shares for cash at the greater of: . the then liquidation return per share plus, accumulated and unpaid dividends from the most recent dividend payment date; and . the then market value of the ordinary shares into which the participating shares are convertible, plus accumulated and unpaid dividends from the most recent dividend payment date. Instead of redemption in cash at the market value of the ordinary shares, we may decide to convert the participating shares into the number of ordinary shares into which they are convertible. . We may redeem the participating shares in limited circumstances before the fourth anniversary of their initial issuance date if we are obligated by law or regulation to make withholdings or deductions of United Kingdom taxes or other charges on payments on the participating shares. Dividend Policy We most recently paid a dividend on our ordinary shares on July 28, 1998. We have paid payment-in-kind dividends on our participating shares quarterly from their initial issuance date in December 1999. We are currently prohibited by our credit agreement from paying dividends, except for payment-in-kind dividends on our participating shares. Any determination to pay cash dividends after the refinancing of the indebtedness outstanding under the credit agreement will be made by the board of directors in light of our earnings, financial position, capital requirements, credit agreements and other such factors as the board of directors deems relevant. We are an English company and under English law, we are allowed to pay dividends to shareholders only if: . we have accumulated, realized profits that have not been previously distributed or capitalized, in excess of our accumulated, realized losses that have not previously been written off in a reduction or reorganization of capital; and . our net assets are not less than the aggregate of our share capital and our non-distributable reserves, either before or as a result of the dividend. As of the date of this prospectus, we have insufficient profits to pay dividends. Since December 2000, we have satisfied our obligation to make payment-in-kind dividends on our participating shares by capitalizing part of our share premium account, which is a reserve required by English company law consisting of the premium paid to us on issuance of our shares. 132 Limitation on Directors' Liability Our articles of association allow us to indemnify each of our directors, officers and auditor for the time being out of our assets against all costs, charges, expenses, losses or liabilities which he or she may incur performing his or her duties, including liabilities incurred by him or her in defending legal proceedings in which judgment is given in his or her favor or in which he or she is acquitted or in connection with any application in which a court grants relief for the director, officer or auditor from liability for negligence, default, breach of duty or breach of trust in relation to our affairs. English company law imposes restrictions on indemnifying directors, officers and the auditor of a company against liabilities resulting from their own negligence, default or breach of duty, but allows a company to purchase insurance for its directors, officers and auditors against those liabilities. Registrar The registrar for our ordinary shares is Computershare Services PLC, P.O. Box 82, Caxton House, Redcliffe Way, Bristol BS99 7YA, England. 133 BOOK-ENTRY; DELIVERY AND FORM General Both the new senior subordinated notes and the new 10% notes will be represented initially by one or more global notes in bearer form without interest coupons. We will issue the global notes in denominations equal to the outstanding principal amount of the notes that they represent. On the closing date of this exchange offer, we will deposit the global notes with HSBC Bank USA as the book-entry depositary. We will make this deposit pursuant to the terms of note deposit agreements, to be dated the closing date of this exchange offer, between the book-entry depositary and us, for the limited purposes set forth in the deposit agreements. The book-entry depositary will issue a certificateless interest for each global note to DTC. The certificateless interest for each global note will represent a 100% interest in the underlying global note. The book-entry depositary will record the interest in its books and records in the name of Cede & Co., as a nominee of DTC. The records that DTC, with respect to its participants, and its participants maintain in book-entry form will show the beneficial interests in the global notes. Any transfer of the global notes will only be effected through these records. In this prospectus, we refer to the beneficial interests in the global notes as "book-entry interests." All interests in the global notes will be subject to the procedures and requirements of DTC. Definitive Registered Notes Under the terms of each of the deposit agreements and the indentures, you, as an owner of book-entry interests in the global notes, will receive definitive registered notes only if any of the three following events occurs: . DTC notifies us or the book-entry depositary in writing that it, or its respective nominee, is unwilling or unable to continue to act as a depositary registered under the Securities Exchange Act of 1934 and we do not appoint a successor depositary registered as a clearing agency under the Securities Exchange Act of 1934 within 90 days. . At any time if we determine that the global notes, in whole but not in part, should be exchanged for definitive registered notes, but only if, such exchange is required by any applicable law, any event beyond our control, or payments of interest on any global note, depositary interest or book-entry interest are, or would become, subject to any deduction or withholding for taxes. . The book-entry depositary is at any time unwilling or unable to continue as book-entry depositary and we do not appoint a successor book-entry depositary within 90 days. In addition to those circumstances, during the continuance of an event of default, you, as a holder of book entry interests, will be entitled to request and receive definitive registered notes. We will issue the definitive registered notes to you, and register them in your name, or as you direct, only if we receive a request in writing by the book-entry depositary, based upon the instructions of DTC. In the event that definitive registered notes are issued, and if required by applicable law, we will appoint HSBC Bank USA, or another suitable person, as an independent transfer agent for the notes. In no event will we issue definitive securities in bearer form. Any definitive registered notes we issue will be fully registered in denominations of $1,000 in principal amount, and integral multiples of $1,000, except that we may issue definitive registered senior subordinated notes in denominations of less than $1,000. The trustee will register the definitive registered notes in the name or names that DTC will instruct the trustee to use, through the book- entry depositary. We expect that DTC will base its instructions on directions it receives from participants, including Euroclear and Clearstream, reflecting the beneficial ownership of book-entry interests. To the extent permitted by law, we, the trustee and any paying agent will be entitled to treat the person in whose name any definitive registered note is registered as the absolute owner of the note. 134 While any global note for the new senior subordinated notes or the new 10% notes is outstanding, you may exchange any definitive registered senior subordinated or 10% notes you may have for a corresponding book-entry interest in the appropriate global note by surrendering your definitive registered notes to the book-entry depositary and providing the certificates and opinions that the indentures require. The book-entry depositary will make the appropriate adjustments to the global note underlying that book-entry interest to reflect any issue or surrender of definitive registered notes. The indentures contain provisions relating to the maintenance by a registrar of registers reflecting ownership of definitive registered notes, if any, and other provisions customary for a registered debt security. We will pay principal and interest on each definitive registered note to the holder appearing on the applicable register at his or her address at the close of business on the record date. If a mutilated definitive registered note is surrendered to the registrar or if the holder of a note claims that such note has been lost, destroyed or wrongfully taken, we will issue and the trustee will authenticate a replacement note if the holder satisfies any reasonable requirements of the trustees, the registrar or us. If required by the trustee, the registrar or us such holder must provide an indemnity bond or other indemnity, sufficient in the judgment of us, the registrar and the trustee, to protect us, the trustee and any agent from any loss which any of them may suffer if the note is replaced. We may charge such holder for reasonable, out-of-pocket expenses in replacing a note, including reasonable fees and expenses of counsel. Description of Book-Entry System When it receives the global notes, the book-entry depositary will issue the certificateless interest for each of the global notes to DTC representing a 100% interest in the respective underlying global note. The book-entry depositary will issue the certificateless interest by recording the interest in its books and records in the name of Cede & Co., as a nominee of DTC. Ownership of book-entry interests will be limited to persons who have accounts with DTC, including Euroclear and Clearstream, or persons who have accounts through organizations that are participants. When the book-entry depositary issues such interests in the global notes to DTC, DTC will credit, on its internal book- entry registration and transfer system, its participants' accounts with the respective interests owned by each participant. Ownership of book-entry interests will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee with respect to interests of participants and the records of participants with respect to interests of indirect participants. No beneficial owner of an interest in the global notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the indentures with respect to the global notes. The laws of some countries and some states in the United States may require that some purchasers of securities take physical delivery of the securities in definitive form. These limits and laws may impair the ability to own, transfer or pledge the book-entry interests in the global notes. So long as HSBC Bank USA, or its nominee, is the holder of the global notes, the book-entry depositary or its nominee, as the case may be, will be considered the sole holder of the global notes for all purposes under the indentures and the notes. Except as we mentioned earlier in this section, participants or indirect participants will not: . Be entitled to have notes or book-entry interests registered in their names. . Receive or be entitled to receive physical delivery, of notes or book- entry interests in definitive bearer or registered form. . Be considered the owners or holders of the notes or book-entry interests under the indentures. Accordingly, each person owning a book-entry interest must rely on the procedures of the book-entry depositary and DTC to exercise any rights and remedies of a holder under the indentures. If a person is an indirect participant in DTC, it must also rely on the procedures of the participant in DTC, through which that person owns its interest. If we issue any definitive notes to participants or indirect participants, we will issue 135 them in registered form, as described above. Unless and until book-entry interests are exchanged for definitive registered notes, the certificateless interest that DTC holds may not be transferred except as a whole between DTC or nominees of DTC, between nominees of DTC by DTC, or any such nominee to a successor of DTC or a successor of such nominee. Payments on the Global Notes We will make any payments we owe in respect of the global notes through one or more paying agents to the book-entry depositary as the holder of the global notes. The paying agent will be appointed under the indentures, and initially the paying agents will be the trustee for the new notes. Payment by us to the holder of the relevant notes will validly discharge the relevant payment obligation in respect of those notes for all purposes. All amounts payable under the notes will be payable in United States dollars. Upon receipt of any payment amounts in respect of the global notes, the book-entry depositary will pay those amounts to DTC or its nominee in proportion to their interests, as shown on the book-entry depositary's records. We expect that when DTC or its nominee receives any payment made in respect of the global notes, it will credit its participants' accounts with those payments in amounts proportionate to the participants' respective interest in the principal amount of that global note as shown on the records of DTC or its nominee. We expect that payments by participants to owners of book-entry interests held through those participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the account of customers in bearer form or registered in street name, and will be the responsibility of such participants. Neither we, the trustee, the book-entry depositary, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of book-entry interests or for maintaining, supervising or reviewing all records relating to such book-entry interests or beneficial ownership interests. Investors may be subject to foreign exchange risks as to payments of principal and interest that may have important economic and tax consequences to them. Redemption of Global Notes In the event that we redeem any global note, or any portion of it, the book- entry depositary will through DTC redeem, from the amount it receives in respect of the redemption of that global note, an equal amount of the book- entry interests in that global note. The redemption price payable in connection with the redemption of the book-entry interest will be equal to the amount the book-entry depositary receives in connection with the redemption of the global note, or any portion of it. We understand that under existing DTC practices, if fewer than all of the senior subordinated or 10% global notes are to be redeemed at any time, DTC will credit senior subordinated or 10% note participants' accounts on a proportionate basis or by lot or on such other basis as DTC deems fair and appropriate. However, no beneficial interests of less than $1,000 in principal amount at maturity may be redeemed in part. Transfers HSBC Bank USA has agreed, pursuant to the deposit agreement, that the global notes will not be transferred except to the successor to the book-entry depositary. All transfers of book-entry interests between participants in DTC will be effected by DTC pursuant to customary procedures established by DTC and its participants. 136 Action by Owners of Book-Entry Interests As soon as practicable after the book-entry depositary receives notice of any solicitation of consents or request for a waiver of other action by the holders of notes, or of any offer to purchase the notes upon a change of control the book-entry depositary will mail to DTC a notice containing: . the information contained in the notice the book-entry depositary received; . a statement that at the close of business on a specified record date DTC will be entitled to instruct the book-entry depositary as to the consent, waiver or other action, if any, pertaining to those notes; and . a statement as to the manner in which those instructions may be given. In addition, the book-entry depositary will forward to DTC all materials pertaining to any such solicitation, request, offer or other action. Upon the written request of DTC, the book-entry depositary will take all reasonable steps regarding the requested consent, waiver, offer or other action in respect of the notes in accordance with any instructions set forth in the request. DTC may grant proxies or otherwise authorize DTC participants or indirect participants to provide such instructions to the book-entry depositary so that it may exercise any rights of a holder or take any other actions which a holder is entitled to take under the indentures. Under its usual procedures, DTC would mail an omnibus proxy to us and the book-entry depositary assigning Euroclear's and Clearstream's consenting or voting rights to those DTC participants to whose accounts such book-entry interests are credited on a record date. It would mail the omnibus proxy as soon as possible after that record date. The book-entry depositary will not exercise any discretion in granting consents or waivers or taking any other action relating to the indentures. We understand that DTC will take any action that a holder of notes is permitted to take, including the presentation of notes for exchange as described above, only: . At the direction of one or more participants to whose account the DTC interests in the global notes are credited. . In respect of the portion of the aggregate principal amount of notes as to which the participant or participants has or have given direction. Reports The book-entry depositary will immediately send to DTC a copy of any notices, reports and other communications received relating to us, the notes or the book-entry interests. Notices So long as the notes are listed on the Luxembourg Stock Exchange, all notices to holders of the notes, including any notices with respect to the redemption of all or a portion of the notes by us or notices with respect to the redemption of all or a portion of the notes by us or notices with respect to this exchange offer, will be given by publication in a daily newspaper in Luxembourg, which we expect to be the Luxemburger Wort. So long as the notes are listed on the Luxembourg Stock Exchange, in the event of a change of control or other redemption event, including and, in the case of the new senior subordinated notes, an asset sale, we will provide notice to holders of the notes of an offer to purchase the appropriate number of notes then outstanding by publication in a daily newspaper in Luxembourg, which we expect to be the Luxemburger Wort. Business Day If the day for any payment of principal, premium, if any, or interest is not a business day in the location of each payment agent, that payment will be made on the next following day that is a business day in each location. 137 Action by Book-entry Depositary If a default occurs with respect to the notes, or in connection with any other right of the holder of a global note under the indentures, and if the DTC so requests in writing, the book-entry depositary will take any action as will be requested in that notice. The book-entry depositary must be offered reasonable security or indemnity, against the costs, expenses and liabilities that might be incurred by it in compliance with such request by the owners of book-entry interests. Resignation of Book-entry Depositary The book-entry depositary may resign at any time as book-entry depositary by written notice to us and DTC. This resignation would become effective upon the appointment of a successor book-entry depositary, in which case the global notes will be delivered to that successor. If we have not appointed a successor within 90 days, the book-entry depositary may request that we issue definitive registered notes as described earlier in this section. If at any time DTC is unwilling or unable to continue as a depositary for the book-entry interests and we do not appoint a successor depositary within 90 days, DTC may request that we issue definitive registered notes in exchange for the book-entry interests. Expenses of Book-entry Depositary We have agreed to indemnify the book-entry depositary against certain liabilities incurred by it and pay the charges of the book-entry depositary as agreed between us and the book-entry depositary. Amendment and Termination of the Deposit Agreements We and the book-entry depositary may amend a deposit agreement without notice to or consent of DTC or any owner of a book-entry interest to: . cure any ambiguity, defect or inconsistency, so long as such amendment or supplement does not adversely affect the rights of DTC or any holder of book-entry interests; . evidence the succession of another person to us, when a similar amendment with respect to the indentures are being executed, and the assumption by any such successor of our covenants in the indentures; . evidence or provide for a successor book-entry depositary; . make any amendment, change or supplement that does not adversely affect DTC or any owner of book-entry interests; . add to our covenants or the covenants of the book-entry depositary; . add a guarantor when a guarantor is made a party, to the indentures pursuant to the indentures; or . comply with the United States federal and United Kingdom securities laws. Except as provided in the relevant deposit agreement, no amendment that adversely affects DTC, and no amendment that adversely affects the holders of book-entry interests may be made without the consent of a majority of the aggregate principal amount of book-entry interests outstanding in respect of the new senior subordinated notes or new 10% notes, as appropriate. Upon the issuance of definitive registered notes in exchange for book-entry interests constituting the entire principal amount of notes, the relevant deposit agreement will terminate. A deposit agreement may be terminated upon the resignation of the book-entry depositary if we do not appoint a successor within 90 days as described earlier in this section. 138 Information Concerning DTC, Euroclear and Clearstream We understand as follows with respect to DTC, Euroclear and Clearstream: DTC is: . a limited purpose trust company organized under the New York Banking Law; . a banking organization within the meaning of the New York Banking Law; . a member of the Federal Reserve System; . a clearing corporation within the meaning of the New York Uniform Commercial Code; and . a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of transactions among its participants in those securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, including the initial purchasers, banks, trust companies, clearing corporations and certain other organizations, some of whom own DTC. Access to the DTC book- entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of an owner of a book-entry interest to pledge its interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interest, may be limited by the lack of a definitive certificate for such interest. The laws of some states require that some persons take physical delivery of securities in definitive form. Consequently, the ability to transfer book-entry interests to those persons may be limited. In addition, beneficial owners of book-entry interests through the DTC system will receive distributions attributable to the global notes only through DTC participants. Euroclear and Clearstream hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. As participants in DTC, Euroclear and Clearstream provide an interface between non-U.S. investors and the United States securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with a Euroclear or Clearstream participant, either directly or indirectly. Global Clearance and Settlement Under Book-entry System Initial settlement. Initial settlement for the new senior subordinated notes and the new 10% notes will be made in United States dollars. Book-entry interests owned through DTC, other than through accounts at Euroclear or Clearstream, will follow the settlement applicable to United States corporate debt obligations. The securities custody accounts of investors will be credited with their holdings against payment in same-day funds on the settlement date. Book-entry interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional eurobonds in registered form. Book-entry interests will be credited to the securities custody accounts of Euroclear and Clearstream holders on the business day following the settlement date against payment for value on the settlement date. 139 Secondary market trading. The book-entry interests will trade in DTC's Same- Day Funds Settlement System, and secondary market trading activity in such book-entry interests will therefore settle in same-day funds. Since the purchaser determines the place of delivery, it is important to establish at the time of trading of any book-entry interests where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. 140 MATERIAL UNITED STATES FEDERAL AND UNITED KINGDOM TAX CONSEQUENCES Material United States Federal Income Tax Consequences The following discussion is the opinion of Altheimer & Gray, our counsel, regarding the material federal income tax consequences to you if you tender your old notes in this exchange offer. This discussion is based upon current provisions of the Internal Revenue Code, Treasury Regulations, proposed regulations, Internal Revenue Service rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively. We have not sought and will not seek any rulings from the Internal Revenue Service with respect to the consequences discussed below. There can be no assurance that the Internal Revenue Service will not take a different position concerning the tax consequences of this exchange offer or that any such position would not be sustained. The discussion below is not binding on the Internal Revenue Service or the courts. The tax treatment of a holder who tenders old notes in this exchange offer may vary depending on such holder's particular situation or status. This discussion is limited to note holders who hold their old notes as capital assets and it does not address aspects of United States federal income taxation that may be relevant to persons who are subject to special treatment under United States federal income tax laws, such as dealers in securities, financial institutions, insurance companies, tax-exempt entities, persons that hold notes as part of a hedge, conversion transaction, straddle or other risk reduction transaction, and persons that are subject to loss disallowance rules with respect to their notes such as, but not limited to, the wash sale rules (which disallow losses on the sale of securities when the taxpayer acquires substantially identical securities within 30 days). In addition, the discussion does not consider the effect of any applicable foreign, state, or local or other tax laws or estate or gift tax considerations or the alternative minimum tax. For purposes of this discussion, a "United States holder" is a holder that exchanges its old notes for cash and/or new notes pursuant to this exchange offer, and that is: . a citizen or resident of the United States, including, in some cases, former citizens and former long-time residents; . a corporation, partnership or other entity created or organized under the laws of the United States or any political subdivision thereof; . an estate, if its income is subject to United States federal income taxation; or . a trust if (1) a United States court is able to exercise primary supervision over the administration of the trust and (2) one or more United States persons have the authority to control all substantial decisions of the trust. A "non-United States holder" is a holder that is not a United States holder and that exchanges its old notes for cash and/or new notes pursuant to this exchange offer. Holders of old notes should consult their own tax advisors as to the particular tax consequences to them of tendering old notes in this exchange offer, including the applicability and effect of any state, local or foreign tax laws and of changes in applicable tax laws. Federal Income Tax Consequences to United States Holders of Participating in this Exchange Offer A United States holder's tax consequences from participation in this exchange offer will depend upon the form of consideration that the holder chooses to receive for tendering old notes. The exchange of old notes for new notes, cash, or a combination of both will be a taxable disposition for purposes of United States federal income taxation unless such an exchange qualifies as a recapitalization under section 368(a)(1)(E) of the Internal Revenue Code. 141 Whether an exchange will qualify as a recapitalization will depend on whether both the old notes and the new notes received in exchange therefor are considered "securities" for United States federal income tax purposes. The term "securities" is not defined in the Internal Revenue Code or the applicable Treasury regulations, and it has not been clearly defined by judicial decisions. Whether a debt instrument is a "security" for United States federal income tax purposes depends upon an overall evaluation of the nature of the debt instrument, with one of the most significant factors being the term of that instrument. Generally, a debt evidenced by a written instrument with an original maturity of 10 years or more constitutes a "security," while a debt instrument with an original maturity of 5 years or less or arising out of the extension of trade credit does not. Exchange solely for new senior subordinated notes, cash, or a combination of both. The receipt of cash in exchange for old notes will be a taxable event. The receipt of new senior subordinated notes in exchange for old notes will also be a taxable event, provided the new senior subordinated notes are not considered "securities" for United States federal income tax purposes. In the opinion of Altheimer & Gray, our counsel, the new senior subordinated notes should not be considered "securities" for United States federal income tax purposes. While the general rule that has emerged from judicial decisions discussing the definition of "security" is that a debt instrument with an original maturity of less than 5 years is not a "security," the facts and circumstances nature of the inquiry and the absence of direct authority with respect to these specific facts do not permit a more definitive opinion. Assuming that the new senior subordinated notes do not qualify as "securities," and subject to the discussion below under "Accrued Interest," a United States holder making an exchange of old notes solely for cash, new senior subordinated notes, or a combination of both will recognize capital gain or loss equal to the difference between (1) the issue price of the new notes (as discussed below in "Original Issue Discount") plus any cash received and (2) the holder's tax basis in the old notes exchanged therefor. Some or all of any gain recognized will, however, be treated as ordinary income if the holder acquired old notes with market discount and did not elect to include that market discount in income currently. See discussion below under "Market Discount." For purposes of determining the character of any gain or loss as short-term or long-term, the holding period rules will apply to each note that a holder owns on an individual basis, and, therefore, a holder may have different holding periods in old notes acquired at different times. A United States holder's tax basis in the new senior subordinated notes will equal the issue price of the new senior subordinated notes, as defined below under "Original Issue Discount," and the holding period of the new senior subordinated notes will begin on the day following the day of the exchange. If the new senior subordinated notes were to qualify as securities for federal income tax purposes, the exchange of old notes solely for new senior subordinated notes or a combination of cash and new senior subordinated notes would be treated as a recapitalization. Subject to the discussion under "Accrued Interest" and "Market Discount," under the recapitalization rules, a United States holder making such an exchange may not recognize loss but could recognize gain equal to the lesser of the amount of cash received or the gain realized (if any) on the exchange. Unless clearly stated to the contrary, for purposes of the remainder of this discussion of the "Material United States Federal Income Tax Consequences," it is assumed that the new senior subordinated notes will not be considered "securities" for United States federal income tax purposes. Exchange solely for new 10% notes. Whether the old notes (with an original term of approximately 7 years) and the new 10% notes (with a term of approximately 6 1/2 years) qualify as securities, and hence whether the exchange of old notes solely for new 10% notes will qualify as a recapitalization, is not entirely clear. The lack of certainty results from the fact that the stated original maturity of each instrument is between 5 and 10 years and that (1) the determination as to whether an instrument is a "security" is a facts and circumstances inquiry, (2) there is a lack of judicial authority as to our exact factual situation, and (3) there is conflicting judicial authority as to analogous situations. Moreover, it is arguable that the optional redemption 142 provision operates to change the original maturity date from April 1, 2008 to the day after the fourth anniversary of the initial issue date (i.e., less than 5 years) for purposes of determining whether the new 10% notes are "securities." We believe, however, that the possibility of an optional redemption occurring is remote, primarily because such a redemption would not be permitted under our existing credit agreement and we expect that it will not be permitted under any agreement we enter into to extend or refinance the indebtedness under the credit agreement, and because a payment of a premium is required. It is accordingly the opinion of Altheimer & Gray, our counsel, that (1) such a remote contingency is insufficient to alter the original maturity date of the new 10% notes for purposes of the definition of "security," and (2) the old notes and the new 10% notes should be treated as "securities" for United States federal income tax purposes. We intend to report the exchange of old notes solely for new 10% notes as a recapitalization based upon the opinion of our counsel that both the old notes and the new 10% notes should be treated as securities for United States federal income tax purposes. Assuming that this exchange does qualify as a recapitalization and subject to the discussion below under "Accrued Interest," a United States holder that exchanges old notes for new 10% notes will not recognize loss as a result of the exchange and will recognize gain only if the principal amount of the securities received exceeds the principal amount of the securities surrendered. It is not clear for this purpose whether the term "principal amount" refers to the stated face amount of a debt instrument or its adjusted issue price under the original issue discount provisions of the Internal Revenue Code. Although the plain meaning of the term "principal amount" suggests that it refers to the stated face amount of a debt instrument, some have argued that the term "principal amount" should be read to refer to a debt instrument's adjusted issue price. At the present time, there is no authority that definitively resolves this issue. Altheimer & Gray, our counsel, is of the opinion that the term "principal amount" should refer to the stated face amount of the old notes and the new 10% notes, and accordingly United States holders exchanging old notes solely for new 10% notes should not recognize any taxable gain. A holder's tax basis in the new 10% notes will equal its tax basis in the old notes surrendered in the exchange, and the holder's holding period for the new 10% notes will include the holding period of the old notes. Due to the facts and circumstances nature of the determination of whether a debt instrument is a "security" for federal income tax purposes, the Internal Revenue Service or a court could determine that either or both of the old notes or the new 10% notes do not constitute "securities." In that event, a United States holder would recognize a capital gain or loss on the exchange equal to the difference between the fair market value of the new notes received, as measured by their issue price (as discussed below under "Original Issue Discount"), and the holder's tax basis in its old notes, subject to the discussion under "Accrued Interest" and "Market Discount" below. Unless clearly stated to the contrary, for purposes of the remainder of this discussion of the "Material United States Federal Income Tax Consequences," it is assumed that both the old notes and the new 10% notes will be considered "securities" for United States federal income tax purposes. Exchange for a mix of (1) new 10% notes and (2) new senior subordinated notes, cash, or a combination of both. A United States holder receiving a mix of (1) new 10% notes and (2) new senior subordinated notes, cash, or a combination of both may not recognize any loss but could recognize gain on the exchange. This is because the old notes and the new 10% notes should constitute securities for federal income tax purposes as described above and, accordingly, the exchange of old notes for (1) new 10% notes and (2) new senior subordinated notes, cash, or a combination of both should qualify as a recapitalization. A United States holder making such an exchange will recognize gain, if any, equal to the lesser of (1) the issue price of the new senior subordinated notes (as discussed below in "Original Issue Discount") plus the amount of any cash received, or (2) the gain realized on the exchange. The gain realized will be the excess of (1) the aggregate issue price of all of the new notes plus the amount of any cash received by such holder, over (2) the holder's tax basis in the old notes. Subject to the discussion under "Market Discount" and "Accrued Interest," any gain recognized by a United States holder will be capital gain. For purposes of determining the character of any gain or loss as short-term or long-term capital gain, the holding period rules will apply to each note that a holder owns on an 143 individual basis, and therefore a holder may have different holding periods in notes that such holder acquired at different times. A United States holder will have an aggregate tax basis in its new 10% notes equal to the holder's tax basis in the old notes, decreased by the amount of money and the issue price of any new senior subordinated notes received, and increased by the amount of gain, if any, recognized on the exchange. A holder's holding period in the new 10% notes will include the period during which the old notes were held, and therefore a holder's holding period in the new notes may not be uniform if old notes were acquired at different times. A holder will have a tax basis in its new senior subordinated notes equal to their issue price, which will be determined as described below, and the holding period of the new senior subordinated notes will begin on the date of exchange. If either the old notes or the new 10% notes fail to qualify as securities for federal income tax purposes, a United States holder exchanging old notes for a mix of (1) new 10% notes and (2) new senior subordinated notes, cash, or a combination of both would recognize gain or loss based on the difference between (1) the aggregate issue price of the new notes plus the amount of any cash received, and (2) the United States holder's tax basis in the old notes exchanged therefor. Accrued Interest We will not pay accrued interest on the old notes accepted in this exchange offer. The consideration received by United States holders receiving solely cash, new senior subordinated notes or a combination of both in exchange for their old notes will, however, be allocated first to accrued but unpaid interest. United States holders making such an exchange will recognize ordinary income to the extent of any accrued but unpaid interest on their old notes that was not previously included in income. In the case of United States holders receiving solely new 10% notes or new 10% notes together with cash, new senior subordinated notes, or a combination of both, the tax consequences are not entirely clear. For purposes of the information reporting and backup withholding rules, we intend to allocate the new 10% notes issued in the exchange offer entirely to the principal of the old notes for which they are exchanged. If this allocation is respected, accrual- basis holders that exchange old notes solely for new 10% notes may be able to recognize a loss to the extent of any interest income on the old notes previously accrued by the holder but which is not treated as paid in the exchange. We cannot assure you, however, that the Internal Revenue Service will respect our allocation for federal income tax purposes. If the new 10% notes were treated as received by an exchanging holder of old notes in whole or in part in satisfaction of accrued but unpaid interest on the old notes, then the amount so treated would be taxable to the holder as interest income if it has not been previously included in the holder's gross income. In addition, the Internal Revenue Service could assert that the right to a portion of the interest on the new 10% notes from April 1, 2001 through the date of issuance of the new 10% notes is attributable to accrued but unpaid interest on the old notes. In such a case, holders that exchange old notes solely for new 10% notes would recognize income in an amount equal to the accrued but unpaid interest to the extent that this interest has not previously been included in the holder's gross income. United States holders exchanging old notes for new 10% notes together with cash, new senior subordinated notes, or a combination of both will recognize ordinary income to the extent that the cash or new senior subordinated notes are allocated to accrued but unpaid interest on the old notes and this interest has not previously been included in the holder's income. Such United States holders will also be required to recognize ordinary income to the extent of any accrued but unpaid interest not previously included in income on old notes that are exchanged for new 10% notes if the Internal Revenue Service does not respect our allocation of new 10% notes solely to the principal of the old notes for which they are exchanged. Holders should consult their tax advisors regarding the allocation of consideration to, and taxation of, accrued but unpaid interest on their old notes. 144 Allocations of consideration to accrued but unpaid interest would reduce the amount of the gain, or increase the amount of loss, realized by the holders. If such loss were a capital loss, the loss would not offset any amount treated as ordinary interest income (except, in the case of individuals, to the limited extent that capital losses may be deducted against ordinary income). If an exchange is not a taxable transaction--i.e., if the United States holder receives solely new 10% notes in the exchange--then that holder's basis in the new 10% notes will be increased by the amount of accrued but unpaid interest recognized as ordinary income. Federal Income Tax Consequences to United States Holders of Owning and Disposing of New Notes Qualified Stated Interest. A United States holder will be taxed on any "qualified stated interest" on the new notes as ordinary income at the time it is paid or accrued in accordance with the holder's method of accounting for tax purposes. Qualified stated interest is stated interest that is unconditionally payable at least annually at a single fixed rate that appropriately takes into account the length of the interval between payments. New senior subordinated notes. No interest payments will be made on the new senior subordinated notes, and therefore the new senior subordinated notes will not have any qualified stated interest. New 10% notes. The new 10% notes will accrue interest at a stated rate of 10% per year from April 1, 2001. This interest will be paid semi-annually in cash on each April 1 and October 1, beginning October 1, 2001. All interest on the new 10% notes accruing from the issue date of the new 10% notes will be qualified stated interest. A United States holder owning new 10% notes will be required to include this qualified stated interest as ordinary income at the time the interest is paid or accrued in accordance with the holder's method of accounting for federal income tax purposes. None of the interest accruing on the new 10% notes from April 1, 2001 until the issue date will be qualified stated interest. See "Pre-Issuance Accrued Interest" below for a discussion of the treatment of interest accruing prior to issuance. Original Issue Discount. The new notes will be subject to the original issue discount rules. The original issue discount rules are at issue only for United States holders who exchange old notes for new notes in the exchange. The original issue discount rules will not affect a holder if the holder receives only cash in exchange for its old notes. A note has original issue discount if the note's stated redemption price at maturity exceeds its issue price. The stated redemption price at maturity of a debt obligation is the sum of all payments, whether denominated as interest or principal, required to be made on the debt obligation, other than payments of qualified stated interest. The issue price of a debt obligation is determined based on whether the debt obligation is issued in exchange for cash or other property and whether such debt obligation or the property for which it is exchanged is "publicly traded" as that term is used in the applicable Treasury Regulations. If a new debt obligation is part of an issue a substantial amount of which is issued for cash, the issue price of each new debt obligation in the issue is the first price at which a substantial amount of the debt obligations in the issue is sold for money. If a new debt obligation is issued in exchange for an existing debt obligation and is part of an issue a substantial amount of which is considered publicly traded during the 60-day period ending 30 days after the issue date, then the issue price of the new debt obligation is the fair market value of the new debt obligation as of the issue date. If a substantial amount of an issue of new debt obligations is not publicly traded but is issued in exchange for debt obligations that are publicly traded, then the issue price of each new debt obligation is the fair market value of the publicly traded debt obligation for which the new debt obligations are exchanged, again determined as of the issue date. We cannot predict whether the new notes will be considered "publicly traded" (as that term is used in the applicable Treasury Regulations) at any time during the 60-day period ending 30 days after the exchange. This will depend on whether (1) the new notes appear on a system of general circulation that disseminates either recent price quotations of identified brokers, dealers or traders or actual prices of recent sales transactions, or (2) price quotations for the new notes are otherwise readily available from dealers, brokers or traders. If the 145 new notes are considered publicly traded during the relevant period, the issue price of the new notes will be the fair market value of the new notes as of the date of the exchange. If the new notes are not considered publicly traded, the issue price of the new notes will be the fair market value of the old notes, which are considered publicly traded because they are listed on the London Stock Exchange, as of the date of the exchange. The issue price of the new notes will affect the amount of taxable gain or loss, if any, a United States holder recognizes on the exchange and will affect the amount of original issue discount, if any, that a United States holder must include in income. We will file the appropriate information return as required by the Treasury Regulations disclosing our determination of the issue price. Except as described below under "Acquisition Premium" and "Amortizable Bond Premium," each United States holder of a new note must include in gross income the portion of the original issue discount that accrues on the new note during each taxable year, beginning with the date the new note is acquired, determined by using a constant yield to maturity method, regardless of whether the holder receives cash payments attributable to this original issue discount. The original issue discount included in income for each year will be calculated under a compounding formula that will result in the allocation of less original issue discount to the earlier years of the term of the new note and more original issue discount to later years. Cash payments received by a holder, other than qualified stated interest payments, are not taxable. The holder's tax basis in the note is increased by the amount of original issue discount included in income and decreased by the amount of any cash payments (other than qualified stated interest) received. Pre-Issuance Accrued Interest. The new 10% notes will begin accruing interest on April 1, 2001. The interest accrued from April 1, 2001 until the date of issuance of the new 10% notes will be pre-issuance accrued interest. Absent election of the optional issue price determination rule discussed below, this pre-issuance accrued interest will not affect the issue price of the new 10% notes. It will, however, result in the portion of the October 1, 2001 interest payment that exceeds the interest accrued from the issue date not being treated as qualified stated interest. This portion of the October 1, 2001 interest payment will instead be included in the stated redemption price at maturity of the new 10% notes and will be taken into account in accordance with the original issue discount rules. See "Application of original issue discount rules to new 10% notes." However, if the Internal Revenue Service does not respect our allocation of the new notes and cash issued in the exchange offer entirely to the principal of the old notes, some portion of the interest accrued from April 1, 2001 until the date of the issuance of the new 10% notes may be treated as accrued interest on the old notes. As an alternative, a United States holder may elect to determine the issue price of the new 10% notes by subtracting from the issue price, as determined under the general rules described above, the amount of the pre-issuance accrued interest. If the issue price of the new 10% notes were determined in this manner, a portion of the October 1, 2001 interest payment would be treated as a return of the pre-issuance accrued interest, rather than an amount payable on the new 10% notes. Application of original issue discount rules to the new senior subordinated notes. The new senior subordinated notes will have original issue discount if and to the extent that the amount payable upon maturity of the new senior subordinated notes exceeds the issue price of the new senior subordinated notes, as determined under the rules described above. The Treasury Regulations provide that the amount of original issue discount on a note and the yield used to determine the amount of income holders are required to include each year may be affected by contingencies in the terms of the note. However, payments which are contingent in time or amount will not be taken into account for purposes of original issue discount calculations if such contingencies are remote or incidental. The new senior subordinated notes are subject to (1) an optional redemption by us at any time for their principal amount, (2) prepayment at the option of holders in the event of an Asset Sale, after several other conditions (e.g., payment of senior debt) are met, as described in "Terms of the New Notes," and (3) a put right of the holder in the event of a change in control for 109% of the principal. We intend to take the position that the likelihood of our making an optional redemption or prepayment or the put rights being exercised is remote, and hence that these contingencies should not affect the amount of original issue discount on the new senior 146 subordinated notes. Our determination that a contingency is either remote or incidental is binding on holders, unless they explicitly disclose a different determination to the Internal Revenue Service, generally on a statement attached to a timely filed federal income tax return for the tax year of the acquisition of the note. Because our conclusion regarding the treatment of these payments as remote or incidental is not free from doubt, holders should consult their tax advisors on this issue. A United States holder that exchanges old notes for new senior subordinated notes will be required to include original issue discount on the new senior subordinated notes in income under the rules described above. Such a holder would not be eligible to reduce the amount of original issue discount to be included in income under the rules applicable to notes having acquisition premium or amortizable bond premium, as discussed below under "Acquisition Premium" and "Amortizable Bond Premium." Application of original issue discount rules to new 10% notes. The new 10% notes will have original issue discount if the issue price of the new 10% notes is lower than their stated redemption price at maturity, i.e., their stated principal amount. As discussed above, the Treasury Regulations provide that the amount of original issue discount, and the yield used to determine the amount of income holders are required to include each year, could be affected by contingencies in the terms of the new 10% notes. The new 10% notes are subject to (1) optional redemption by us, full or partial, at any time on or after April 1, 2005 for their principal amount and possibly a premium, plus accrued and unpaid interest, (2) optional redemption by us of up to 35% of the aggregate principal amount of the new 10% notes for 110% of the principal, plus accrued and unpaid interest, provided we use any net cash proceeds from any equity offering to fund such redemption, (3) optional redemption in whole, but not in part, at any time for their principal amount, plus accrued but unpaid interest, if we are required to withhold or deduct any amount for payment to any United Kingdom government entity, and (4) a put right of the holder in the event of a change of control for 101% of the principal plus accrued and unpaid interest. We intend, however, to take the position that these contingencies qualify as being remote and incidental, and hence that they will not affect the amount of original issue discount on the new 10% notes. As previously discussed, this determination is binding on holders unless they disclose a contrary determination. If the new 10% notes are issued with original issue discount, holders of the new 10% notes will be required to include that original issue discount in income under the rules described above. A United States holder receiving new 10% notes in exchange for old notes will, however, be eligible to exclude some or all of the original issue discount it would otherwise be required to report if the holder acquires the new 10% notes with acquisition premium or amortizable bond premium. See "Acquisition Premium" and "Amortizable Bond Premium." Acquisition Premium. A note has "acquisition premium" if a holder's adjusted tax basis in the note immediately after acquisition exceeds its adjusted issue price but is less than or equal to the sum of all amounts payable on the note after its acquisition by the holder other than qualified stated interest. If a United States holder acquires a note with acquisition premium, the amount of original issue discount that the holder must include in income is reduced by the amount of the original issue discount multiplied by a fraction, the numerator of which is the excess of the holder's adjusted tax basis in the note immediately after its acquisition over its adjusted issue price, and the denominator of which is the excess of the sum of all amounts payable on the note after it is acquired by the holder (other than qualified stated interest) over the adjusted issue price. This fraction is referred to as the "acquisition premium fraction." A United States holder receiving new senior subordinated notes in the exchange will not acquire the new senior subordinated notes with acquisition premium because the holder's tax basis in the new senior subordinated notes immediately after the exchange will equal the notes' adjusted issue price. A United States holder receiving new 10% notes in the exchange may acquire the new 10% notes with acquisition premium. Whether a United States holder acquires a new 10% note with acquisition premium, and if so, the determination of the acquisition premium fraction, will depend upon the facts and circumstances of the particular holder, and in particular on the holder's basis in the new 10% notes. 147 For example, if a United States holder purchased old notes at their stated principal amount and exchanges the old notes solely for new 10% notes, the holder's basis in the old notes (which will equal their stated principal amount) will carry over to the new 10% notes and will not be altered by the exchange. If the issue price of the new 10% notes, determined by reference to the fair market value of the new notes or the fair market value of the old notes as described above, is less than the stated principal amount of those new 10% notes, the holder's basis in the new 10% notes will then be greater than their issue price and equal to the sum of all amounts payable after acquisition of the new 10% notes other than qualified stated interest. The holder will therefore acquire the new 10% notes at an acquisition premium, and the amount of original issue discount that the holder must include in income will be reduced by the amount of the original issue discount multiplied by the acquisition premium fraction. Under these circumstances, the holder will have an acquisition premium fraction of one and therefore not be required to include any original issue discount in income. As an alternative to applying the acquisition premium fraction, a holder of a new note with acquisition premium may elect to reduce original issue discount accruals by treating the new note as having an issue price equal to the holder's adjusted basis immediately after acquisition of the note and applying the mechanics of the constant yield method (a "constant yield election"). United States holders should consult their tax advisors concerning the desirability and effects of making such an election. Amortizable Bond Premium. A note has "amortizable bond premium" if the holder's adjusted basis in the note immediately after its acquisition is greater than the sum of all amounts payable on the note after the acquisition date, other than qualified stated interest. In such a case, the holder is not required to include any original issue discount in income. A United States holder will acquire a new note with amortizable bond premium, and hence would not be required to include original issue discount in income, only if the United States holder (1) receives new 10% notes in the exchange, and (2) purchased the old notes exchanged for those new 10% notes after the original issuance of the old notes at a premium in a taxable transaction. A United States holder of a new 10% note with amortizable bond premium may elect to amortize the premium over the remaining term of the new 10% note, based on the United States holder's yield to maturity with respect to the note as determined under applicable Internal Revenue Code provisions. A United States holder may use the amortizable bond premium allocable to an accrual period to offset qualified stated interest required to be included in the United States holder's income with respect to the new 10% note in that accrual period. Under Treasury Regulations, if the amortizable bond premium allocable to an accrual period exceeds the amount of qualified stated interest allocable to the accrual period, the excess would be allowed as a deduction for the accrual period, but only to the extent of the United States holder's prior interest inclusions on the new 10% note. Any excess is carried forward and allocable to the next accrual period. An election to amortize bond premium generally applies to all taxable debt obligations held by the United States holder during or after the taxable year to which the election applies and may be revoked only with the consent of the Internal Revenue Service. If a United States holder makes a constant yield election (as described above under "Acquisition Premium") for a new 10% note with amortizable bond premium, the United States holder will be deemed to make the election to amortize bond premium for all of the United States holder's debt instruments with amortizable bond premium, which election may not be revoked unless approved by the Internal Revenue Service. Market Discount. If a United States holder acquires a note subsequent to its original issuance for an amount that is less than its adjusted issue price, the note will be considered to have "market discount" equal to that difference (unless the difference is less than a de minimis amount). A United States holder is required to treat any gain recognized on the disposition of a note having market discount as ordinary income to the extent of the market discount that accrued on the note while held by the holder. Alternatively, the United States holder may elect to include market discount in income currently over the life of the note. This election will apply to all market discount notes the holder acquires on or after the first day of the first taxable year to which the election applies and is revocable only with the consent of the Internal Revenue Service. Market discount 148 accrues on a straight-line basis unless the holder elects to accrue the market discount on a constant yield method. A constant yield election will apply only to the notes for which it is made and is irrevocable. Unless a United States holder elects to include market discount, if any, in income on a current basis, the holder could be required to defer the deduction of a portion of the interest paid on any indebtedness incurred or maintained to purchase or carry the note. Applying the market discount rules to this exchange offer, if a United States holder acquired its old notes at a market discount, did not elect to include market discount in income currently, and exchanges those old notes for new notes, cash, or a combination of both, any gain that the holder recognizes on the exchange will be treated as ordinary income to the extent of the market discount accrued on the old notes but not yet included in income. The exact amount of the accrued market discount that such a holder would be required to recognize as ordinary income would depend on which accrual method the holder selected. In the case of a holder receiving new 10% notes in the exchange, any accrued market discount that is not recognized by the holder (e.g., because the exchange qualifies as a recapitalization and the accrued market discount exceeds the gain the holder is required to recognize) will carry over to, and be treated as, accrued market discount on the holder's new 10% notes. If a United States holder acquired its old notes at a market discount and elected to include market discount in income currently, the character of the gain or loss, if any, that the holder is required to recognize upon the exchange of old notes for new notes, cash, or a combination of both would not be affected by the market discount rules. A United States holder that receives new 10% notes in the exchange, however, would be required to accrue market discount currently on those new 10% notes if and to the extent that the new 10% notes qualify as market discount bonds. The Internal Revenue Service has not issued regulations concerning aspects of the market discount rules relevant to holders receiving new 10% notes in this exchange offer. Holders should consult their tax advisors concerning the effect of the market discount provisions and the associated elections. Exercise of Conversion Rights. If the new senior subordinated notes are not paid on their maturity date of April 1, 2004, each holder will have the right, subject to certain restrictions as described in "Terms of the New Notes," to convert the new senior subordinated notes into common stock. The conversion of new senior subordinated notes into common stock would not be a taxable event for a United States holder. The United States holder's tax basis in the common stock would equal the holder's adjusted tax basis in the new senior subordinated notes immediately prior to conversion. The holder's holding period for the common stock received upon conversion would include the holding period of the new senior subordinated notes. Sale, Exchange and Retirement of New Notes or Common Stock Received Pursuant to Conversion. Subject to the discussion above under "Market Discount," when a United States holder disposes of a new note or common stock received pursuant to conversion of a new senior subordinated note, the holder will recognize capital gain or loss equal to the difference between: (1) the amount of cash and the fair market value of any property received, except to the extent that amount is attributable to accrued and unpaid interest which is taxable as ordinary income; and (2) the holder's adjusted tax basis in the new note or the common stock. The capital gain or loss will be long-term capital gain or loss if the holding period of the new note or the common stock exceeds one year at the time of the disposition. Some noncorporate taxpayers, including individuals, are eligible for preferential rates of taxation of long-term capital gain. The deductibility of capital losses is subject to limitations. A United States holder's adjusted basis in the new notes at the time of such disposition will be equal to the basis initially allocated to the new notes, increased by any original issue discount and market discount previously included in income by the holder, and reduced by any principal and other payments not treated as 149 qualified stated interest that the holder receives. At the time of such disposition, a United States holder's adjusted tax basis in the common stock received pursuant to the conversion of a new senior subordinated note will be equal to the basis in the new senior subordinated note immediately prior to conversion, reduced by distributions, if any, received on the common stock that are not required to be included in income. While the law is not clear, a United States holder may be required to apply the rules discussed in "Original Issue Discount," "Market Discount," and "Acquisition Premium" to each note that a holder owns on an individual basis rather than to a holder's notes in the aggregate. A United States holder may therefore be required to apply different rules to notes acquired at different times. Foreign Tax Credit Considerations--Effect of United Kingdom Withholding Taxes. For purposes of the United States foreign tax credit limitations, original issue discount with respect to the new notes will be foreign source income and, subject to the factual circumstances of the particular holder, will generally be "passive income" (or "financial services income" in the hands of certain persons engaged in financial businesses). In addition, in the event that payments on the notes become subject to United Kingdom withholding taxes and we accordingly are required to pay additional amounts, such payments will be treated as additional ordinary income. United States holders will be treated as actually receiving any amount withheld by us from a payment with respect to notes and then as having paid over such amount to the United Kingdom taxing authorities. As a result, the amount includible in the income of a United States holder for United States federal income tax purposes may be greater than the amount actually received by such United States holder from us with respect to such payment. Subject to certain limitations and depending upon the factual circumstances of the particular holder, a United States holder will be entitled to a credit against its United States federal income tax liability, or deduction in computing its United States federal taxable income, in respect of United Kingdom income taxes withheld by us. United States holders should consult their own tax advisors as to the consequences of United Kingdom withholding taxes and the availability of a foreign tax credit or deduction. Information Reporting and Backup Withholding. Information reporting requirements will apply with respect to payment of principal and interest on notes to non-corporate United States holders and with respect to proceeds received by non-corporate United States holders upon a sale of notes. Unless the United States holder otherwise qualifies for an exemption, backup withholding at a rate of 31% will apply to payments of interest on the notes if the United States holder fails to provide an accurate taxpayer identification number or is notified by the Internal Revenue Service that it has failed to report all interest and dividends required to be shown on its federal income tax returns. Federal Income Tax Consequences to non-United States Holders The following discussion is limited to the United States federal income tax consequences relevant to non-United States holders. Payments of principal, premium (if any) and interest (including original issue discount) on the new notes will not be subject to United States federal income tax, including United States withholding tax, if paid to a non-United States holder, unless, in the case of interest (including original issue discount), the non-United States holder is: . a corporation that is an insurance company carrying on a United States trade or business to which the interest (including original issue discount) is attributable within the meaning of the Internal Revenue Code; or . an individual or corporation with an office or other fixed place of business in the United States to which the interest is attributable, the interest either is derived in the active conduct of a banking, financing or similar business within the United States or is received by a corporation, the principal business of which is trading in stock or securities for its own account, and certain other conditions exist. 150 Gain, including premium (if any), realized on the sale, retirement or other disposition of notes, or of common stock received upon conversion of new senior subordinated notes, by a non-United States holder including on the disposition of old notes in the exchange, will not be subject to United States federal income tax, including withholding tax, unless the gain is required to be recognized for United States federal income tax purposes and: . the gain is effectively connected with the conduct by such holder of a trade or business within the United States; or . in the case of an individual, the holder has been present in the United States for 183 days or more during the taxable year of the sale or retirement and certain other conditions are satisfied. Depending on their own particular factual circumstances, certain non-United States holders (for example, foreign pension plans and foreign governments) may not be subject to United States federal income tax, including United States withholding tax, even if one or more of the conditions specified above for taxation of interest (including original issue discount) or gain is satisfied. Non-United States holders should consult their own tax advisors regarding whether they are subject to United States federal income tax with respect to payments on, or gain from the disposition of, notes or common stock. Information reporting and backup withholding requirements. Under current law, information reporting and backup withholding will not apply to payments of principal, premium (if any) and interest (including original issue discount) made by a United States paying agent to a non-United States holder of a note, provided that: . the beneficial owner of such note certifies to such paying agent, under penalties of perjury, that it is not a United States holder and provides its name and address; or . a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the notes certifies to such paying agent under penalties of perjury that such statement has been received from the beneficial owner of such note by it or by a financial institution between it and the beneficial owner and furnishes such paying agent with a copy thereof; and, in either case, such paying agent does not have actual knowledge that such beneficial owner is a United States person. Payments of the proceeds from the sale by a non-United States holder of a note or common stock to or through the United States office of a broker are subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. Payments of the proceeds from the sale by a non-United States holder of a note or common stock made to or through a non-United States office of a broker will not be subject to information reporting or backup withholding unless the broker is a: . United States person (including a foreign branch or office of such person); . controlled foreign corporation for United States federal income tax purposes; . foreign partnership, one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership that is engaged in the conduct of a trade or business in the United States; . foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three- year period; or . a United States branch of a foreign bank or a foreign insurance company; in which case, information reporting may apply to such payments. 151 Amounts withheld under the backup withholding rules do not constitute a separate United States federal income tax. Rather, any amounts withheld under the backup withholding rules will be refunded or allowed as a credit against the non-United States holder's United States federal income tax liability, if any, provided that the required information or appropriate claim for refund is filed with the Internal Revenue Service. The foregoing discussion may not apply to all new note holders. Holders should therefore consult their own tax advisors as to the tax consequences to them of acquiring, holding or disposing of the new notes. Material United Kingdom Tax Consequences The following discussion is the opinion of Clifford Chance, our counsel, regarding material general United Kingdom tax consequences of this exchange offer. It relates only to persons who are the absolute beneficial owners of their old notes who hold their notes as investments and does not deal with special situations, such as those of dealers in securities. The statements regarding United Kingdom tax set forth below are based on United Kingdom tax laws as in force on the date of this document and United Kingdom Inland Revenue practice as at that date and such provisions may be repealed, revoked or modified possibly with retrospective effect, so as to result in United Kingdom tax consequences different from those discussed below. Noteholders will need to consult their own tax advisers covering the United Kingdom tax consequences in light of their particular situations. Withholding Taxes The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States to opt instead for a withholding system for a transitional period in relation to such payments and subject to the proposals not being required to be applied to notes issued before March 1, 2001. The proposals are not yet final, as they may be subject to further amendment and/or clarification. Payments of interest on the new 10% notes after April 1, 2001, may be made without withholding or deduction for or on account of United Kingdom income tax provided that, at the time of payment, the new notes are listed on a recognized stock exchange, as defined in section 841 of the United Kingdom Income and Corporation Taxes Act (the Luxembourg Stock Exchange on which application will be made to list the new notes is currently recognized for these purposes). Amounts payable in respect of the new senior subordinated notes will not be liable to United Kingdom withholding tax, except any interest on overdue payments. In all cases falling outside the exemptions described above, United Kingdom interest on the 10% notes may be paid under deduction of United Kingdom income tax at the lower rate (currently 20 per cent), subject to such relief as may be available under the provisions of any applicable double taxation treaty. Interest on the new 10% notes will constitute United Kingdom source income for United Kingdom tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding. However, interest with a United Kingdom source received without deduction or withholding on account of United Kingdom tax will not be chargeable to United Kingdom tax in the hands of a noteholder who is not resident for tax purposes in the United Kingdom unless that noteholder carries on a trade, profession or a vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the notes are attributable. There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers). 152 Tax Treatment of United Kingdom Corporation Tax Payers For corporate note holders within the charge to United Kingdom corporation tax, the new 10% notes will, and the new senior subordinated notes will probably, constitute "qualifying corporate bonds" and accordingly, no chargeable gain or loss will arise on the disposal of the new notes. The position regarding the new senior subordinated notes is not entirely certain given their convertibility. However, as they will probably be relevant discounted securities, it is probable that they will constitute "qualifying corporate bonds." A noteholder which is a company within the charge to corporation tax will generally be charged to (or, as the case may be, eligible for relief from) United Kingdom corporation tax on income in respect of all profits, gains and losses, including gains or losses attributable to dollar/sterling exchange rate differences, arising from its holding or disposal of the new notes. These profits, gains or losses will in general be computed for each accounting period (or part period), on either an accruals or mark-to- market basis, broadly in accordance with the holder's statutory accounting treatment, provided that such treatment is, in the circumstances, authorized for the purposes of, and in accordance with the requirements of, the taxation legislation relating to loan relationships, and exchange gains and losses. The exchange of old notes for cash or new notes will constitute a disposal of the old notes for the purposes of United Kingdom corporation tax on chargeable gains. For corporate noteholders within the charge to United Kingdom corporation tax the old notes will probably not constitute qualifying corporate bonds and accordingly: (a) any amounts relating to interest will be dealt with as described above for the new notes; and (b) the exchange of the old notes for cash or new notes will be as described below for noteholders other than companies within the charge to United Kingdom corporation tax, save that indexation allowance will be available up to the month of disposal, rather than ceasing in April 1988. Tax treatment of other United Kingdom Tax Payers Exchange of old notes for cash For United Kingdom tax paying note holders other than companies within the charge to corporation tax, the old notes do not constitute "qualifying corporate bonds" and accordingly the exchange of old notes for cash will constitute a disposal or part disposal of the old notes for the purposes of the Taxation of Chargeable Gains Act 1992 ("TCGA") which may, depending on the holder's particular circumstances (including the availability of exemptions and allowable losses) give rise to a chargeable gain or allowable loss for the purpose of United Kingdom taxation of chargeable gains equal to the difference between (1) the original cost to the holder of acquiring the old notes and (2) the cash received. Indexation allowance on that cost should be available (when calculating a chargeable gain but not an allowable loss) in respect of the period of ownership of the old notes up to April 1998. Thereafter, taper relief may be available to reduce the amount of the chargeable gain. Broadly speaking, taper relief operates to reduce the amount of the chargeable gain realized on the disposal of an asset, in this case, the old notes, by reference to the length of time the asset has been held. Exchange of old notes for new notes It is likely that the exchange of old notes for new notes will constitute a disposal of the old notes for the purposes of United Kingdom tax on chargeable gains which may give rise to a chargeable gain or allowable loss equal to the difference between the (1) original cost to the holder of acquiring the old notes, adjusted by reference to the indexation allowance (see above) and (2) the market value of the new notes. Taper relief, as described above, may be available to reduce the amount of the chargeable gain. The exchange of old notes for new notes may not constitute a disposal for the purposes of the TCGA. This will depend on whether the exchange constitutes a "conversion of securities" for United Kingdom capital gains tax purposes. If it can be shown that the exchange constitutes a "conversion of securities," a note holder will not be treated as having made a disposal of his notes to the extent he receives new notes in exchange for his old notes. Any gain or loss which would otherwise have arisen on a disposal of the old notes will be "rolled over" into the new notes and the new notes will be treated as the same asset as the old notes, acquired at the same time and for the same consideration as he acquired his notes. However, it is unlikely that the Inland Revenue would accord it this treatment. 153 Tax treatment of new notes The tax position of United Kingdom tax paying note holders other than companies within the charge to corporation tax who exchange their old notes for new senior subordinated notes is not entirely certain but is likely to be as follows. The exchange will be treated for tax purposes as described above. The new senior subordinated notes acquired will probably be relevant discounted securities so that such note holders will, upon the transfer or redemption of such notes, be subject to United Kingdom income tax on the difference between: . the issue price, likely to be the market value of the new notes on issue; and . the amount payable on the transfer or redemption. For United Kingdom tax paying note holders other than companies within the charge to corporation tax, the new 10% notes will not constitute "qualifying corporate bonds." Accordingly, the disposal of such notes may, depending on the holder's particular circumstances, including the availability of exemptions and allowable losses, give rise to a chargeable gain or allowable loss for the purpose of United Kingdom taxation of chargeable gains equal to the difference between: . the original cost to the holder of acquiring the new notes, being the market value of the old notes; and . the cash received. Taper relief, as described above, may be available to reduce the amount of the chargeable gain. For United Kingdom tax paying note holders other than companies within the charge to corporation tax, interest paid on the new 10% notes will constitute taxable income for the purposes of United Kingdom income tax, and for such note holders a transfer of new notes may give rise to tax on income in an amount representing interest on the new notes which has accrued since the preceding interest date. United Kingdom Stamp Duty and Stamp Duty Reserve Tax No United Kingdom stamp duty or stamp duty reserve tax is payable by note holders on the exchange of old notes, the issue of the new notes, or the transfer by delivery or redemption of new notes, provided the notes, and any stock into which they may be converted, are listed on a recognized stock exchange and any transfer of the notes is not made in contemplation of a takeover of Danka. PLAN OF DISTRIBUTION We will receive no proceeds in connection with this exchange offer. We will distribute the new notes in the manner described in "This Exchange Offer" above. LEGAL MATTERS The validity of the new notes and certain other legal matters have been passed upon for us by Altheimer & Gray, Chicago, Illinois. Richard F. Levy, one of our directors, is a partner at the law firm of Altheimer & Gray and beneficially owns 40,000 ordinary shares of Danka. The information set out in the section headed "Material United Kingdom Tax Consequences" has been passed upon for us by Clifford Chance Limited Liability Partnership. EXPERTS The consolidated financial statements and schedule of Danka Business Systems PLC as of March 31, 2001 and 2000, and for each of the years in the three-year period ended March 31, 2001, have been incorporated by reference herein and in the Registration Statement in reliance upon the report of KPMG Audit Plc, Chartered 154 Accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Audit Plc covering the March 31, 2001 consolidated financial statements contains an explanatory paragraph that states the Company has a substantial amount of indebtedness maturing on March 31, 2002 and April 1, 2002. The Company's need to restructure its indebtedness in order to meet its obligations and repay such indebtedness when it matures raises substantial debt about the Company's ability to continue as a going concern. The consolidated financial statements and schedule do not include any adjustments that might result from the outcome of that uncertainty. WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement on Form S-4 under which we are registering the new notes to be issued in this exchange offer. This prospectus forms a part of that registration statement and does not contain all of the information in the registration statement. For further information with respect to us and our new notes, we refer you to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete and, in each instance, we qualify our statement by reference to the copy of the contract or other document filed as an exhibit to the registration statement. We have also filed a Schedule TO with respect to this exchange offer, which contains additional information required by the tender offer rules under the Securities Exchange Act. We are currently subject to the informational requirements of the Securities Exchange Act, and file reports, proxy statements and other information with the SEC. You may read and copy the registration statement, the documents that we incorporate by reference into this prospectus, the Schedule TO as well as our other reports, proxy statements and other information that we file with the SEC at the public reference facilities maintained by the SEC at: Room 124 Room 1400 13th Floor 450 Fifth Street, S.W. Northwest Atrium Center Seven World Trade Center Judiciary Plaza 500 West Madison Street New York, New York 10048 Washington, D.C. 20549 Chicago, Illinois 60661
Copies of material can be obtained at prescribed rates from the Public Reference Section of the SEC at: 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov. Our ordinary shares are quoted for trading on the London Stock Exchange. Our American depositary shares are quoted for trading on the Nasdaq SmallCap Market. You may request copies of the documents that we have filed with the SEC. Requests should be directed to: Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, Florida 33716 Attn: Treasurer Telephone: (727) 578-4766 Facsimile: (727) 577-4802 In order to assure timely delivery of the requested materials before the expiration of this exchange offer, any request should be made prior to June 27, 2001. 155 The dealer manager, exchange agent and information agent will answer questions from you with respect to this exchange offer solely by reference to the terms of this prospectus. You may contact the dealer manager, exchange agent and information agent at the addresses and telephone numbers below. If you have questions regarding the mechanics of this exchange offer, you should contact the exchange agent or information agent. Please note that Nebraska residents should contact Banc of America Securities LLC with any questions or requests for assistance. Dealer Manager Banc of America Securities LLC 100 North Tryon Street, 7th Floor Charlotte, North Carolina 28255 Attention: High Yield Special Products (704) 388-1457 (collect) (888) 292-0070 (toll free) Exchange Agent HSBC Bank USA One Hanson Place Lower Level Brooklyn, New York 11243 (718) 488-4475 (telephone) (718) 488-4488 (facsimile) Information Agent D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Banks and Brokers, call collect: (212) 269-5550 Others, call toll free: (800) 769-4414 No person has been authorized to give any information or to make any representations other than those contained in this exchange offer and, if given or made, such information or representations must not be relied upon as having been authorized. This statement and any related documents do not constitute an offer to buy or the solicitation of an offer to sell notes in any circumstances in which such offer or solicitation is unlawful. In those jurisdictions where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on our behalf by the dealer manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. CERTAIN UNITED KINGDOM REGULATORY ISSUES The new senior subordinated notes and the new 10% notes will only be available for exchange in the United Kingdom pursuant to this exchange offer to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995. No document issued in connection with this exchange offer, including this prospectus, may be passed on to any person in the United Kingdom unless that person is as described in article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or is a person to whom the document may otherwise lawfully be issued or passed on. Accordingly, by accepting delivery of this prospectus, the recipient warrants and acknowledges that it is such a person. 156 We have not authorized any dealer, salesperson or other person to give you any information or represent anything to you other than the information contained in this prospectus. You must not rely on unauthorized information or representations. This prospectus does not offer to sell or ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who can not legally be offered the securities. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $200,000,000 [LOGO OF DANKA BUSINESS SYSTEMS PLC] DANKA BUSINESS SYSTEMS PLC Exchange Offer for all Outstanding 6.75% Convertible Subordinated Notes Due 2002 --------------- PROSPECTUS --------------- June 27, 2001 In order to tender, a holder must send or deliver a properly completed and signed Letter of Transmittal and any other required documents to the exchange agent at its address set forth below or tender pursuant to DTC's Automated Tender Offer Program. The exchange agent for this exchange offer is: HSBC BANK USA One Hanson Place Lower Level Brooklyn, New York 11243 By facsimile (for eligible For information or institutions only): confirmation by: (718) 488-4488 (718) 488-4475 Any questions or requests for assistance or for additional copies of this prospectus, the letter of transmittal or related documents may be directed to the information agent at its telephone number set forth below, except that Nebraska residents should contact Banc of America Securities LLC at (888) 292- 0070 for any questions or requests for assistance or for additional copies. A holder may also contact the dealer manager at its telephone number set forth below or such holder's broker, dealer, commercial bank, trust company or other nominee for assistance concerning this exchange offer. The information agent for this exchange offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Bankers and brokers call collect: (212) 269-5550 All others call toll-free (800) 769-4414 The exclusive dealer manager for this exchange offer is: Banc of America Securities LLC 100 North Tryon Street, 7th Floor Charlotte, North Carolina 28255 Attention: High Yield Special Products (704) 388-1457 (collect) (888) 292-0070 (toll free) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Article 154 of our current Articles of Association provides: "Subject to the provisions of the Statutes, any director, other officer or Auditor for the time being of the Company shall be indemnified out of the assets of the Company against all costs, charges, expenses, losses or liabilities which he may sustain or incur in or about the actual or purported execution of the duties of his office or otherwise in relation thereto, including (without prejudice to the generality of the foregoing) any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or in connection with any application in which relief is granted to him by the Court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company." The "provisions of the Statutes" are Section 310 and 727 of the United Kingdom Companies Act 1985, as amended by the United Kingdom Companies Act 1989. Section 310 provides: (1) This section applies to any provision, whether confined in a company's articles or in any contract with the company or otherwise, for exempting any officer of the company or any person (whether an officer or not) employed by the company as auditor from, or indemnifying him against any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company. (2) Except as provided by the following subsection, any such provision is void. (3) This section does not prevent a company: (a) from purchasing and maintaining for any such officer or auditor insurance against any such liability, or (b) from indemnifying any such officer or auditor against any liability incurred by him: (i) in defending any proceedings (whether civil or criminal) in which judgment is given in his favor or he is acquitted, or (ii) in connection with any application under Section 144(3) or (4) (acquisition of shares by innocent nominee) or Section 727 (general power to grant relief in case of honest and reasonable conduct) in which relief is granted to him by the court. Section 727 provides: (1) If in any proceedings for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that the officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him either wholly or partly, from his liability on such terms as it thinks fit. (2) If any such officer or person as above mentioned has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the court for relief; and the court on the application has the same power to relieve him as under II-1 this section it would have had if it had been a court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought. (3) Where a case to which subsection (1) applies is being tried by a judge with a jury, the judge, after hearing the evidence, may, if he is satisfied that the defendant or defender ought in pursuance of that subsection to be relieved either in whole or in part from the liability sought to be enforced against him, withdraw the case in whole or in part from the jury and forthwith direct judgment to be entered for the defendant or defender on such terms as to costs or otherwise as the judge may think proper. Our directors and officers are, subject to policy terms and limitations, indemnified against directors' and officers' liability under insurance contracts. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit Number Description of Document ------- ----------------------- 1.1* Form of Dealer Manager Agreement. (Exhibit 1.1 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 2.1* Asset Purchase Agreement between Eastman Kodak Company and Danka Business Systems PLC dated as of September 6, 1996, including Exhibit 5.19 (a) which is a form of Amended and Restated Supply Agreement. (Exhibit 2.1 to the Company's Form 8-K dated November 14, 1996.) 2.2* Amendment No. 1 to Asset Purchase Agreement between Eastman Kodak Company and Danka Business Systems PLC dated December 20, 1996. (Excluding schedules and similar attachments). (Exhibit 2.2 to the Company's Form 8-K dated January 15, 1997.) 3.1* Memorandum of Association of the Company. (Exhibit 3.1 of Company's Registration Statement on Form 20-F, No. 0-20828, filed on November 10, 1992.) 3.2* Articles of Association of the Company. (Exhibit 4.2 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.1* Memorandum of Association of the Company, including paragraphs 5 and 6. (Exhibit 2.1 to the 1992 Registration Statement on Form 20-F, No. 0-020828, filed November 10, 1992.) 4.2* Articles of Association of the Company, including sections relating to Shares, Variation of Rights and Votes of Members. (Exhibit 4.2 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.3* Form of Ordinary Share certificate. (Exhibit 4.3 of Company's Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993.) 4.4* Form of American Depositary Receipt. (Exhibit 4.4 to the Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993.) 4.5* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated February 26, 1993 and Amendment No. 2 dated July 2, 1993 (Exhibit 4.9 to the Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993.) and Amendment No. 3 dated August 16, 1994 between The Bank of New York, Company and Owners and Owners of American Depositary Receipts. 4.6* Indenture dated March 13, 1995 between the Company and The Bank of New York, as Trustee. (Exhibit 2 to the Company's Form 8-K dated March 21, 1995.) 4.7* Deposit and Custody Agreement dated March 13, 1995, between The Bank of New York as Depositary and the Company. (Exhibit 3 to the Company's Form 8-K dated March 21, 1995.)
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Exhibit Number Description of Document ------- ----------------------- 4.8* Registration Rights Agreement dated as of March 13, 1995 relating to $175,000,000 in Aggregate Principal Amount of 6.75% Convertible Subordinated Notes Due 2002 by and among the Company and Prudential Securities Incorporated and Smith Barney, Inc. and Robert W. Baird & Co. and Raymond James & Associates, Inc. (Exhibit 4.12 to the Company's 1995 Form 10-K). 4.9* Resolution No. 7 adopted by shareholders at the 1997 annual general meeting waiving pre-emptive rights of shareholders under certain circumstances filed with the Company's 1997 Proxy Statement. 4.10* Credit Agreement dated December 5, 1996, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and NationsBank, N.A., as agent. (Exhibit 4 to the Company's Form 8-K dated December 16, 1996.) 4.11* First Amendment to Credit Agreement dated December 5, 1997 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, Nationsbank, National Association, each other Bank signatory thereto and Nationsbank, National Association, as agent. (Exhibit 4.9 to the Company's Form 10-Q dated February 12, 1998.) 4.12* Second Amendment to Credit Agreement dated July 28, 1998 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, Nationsbank, National Association, each other Bank signatory thereto and Nationsbank, National Association, as agent. (Exhibit 4.10 to the Company's Form 8-K dated July 28, 1998.) 4.13* Waiver dated October 20, 1998, of certain financial covenants contained in the Credit Agreement among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, NationsBank, N.A., each other Bank signatory to the Credit Agreement and NationsBank, N.A., as agent. (Exhibit 4.11 to the Company's Form 8-K dated October 21, 1998.) 4.14* Waiver dated February 26, 1998, of certain financial covenants contained in the Credit Agreement among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, NationsBank, N.A., each other Bank signatory to the Credit Agreement and NationsBank, N.A., as agent. (Exhibit 4.12 to the Company's Form 8-K dated March 5, 1999.) 4.15* Fifth Amendment to Credit Agreement dated June 15, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.16 to the Company's Form 8-K dated July 15, 1999.) 4.16* Sixth Amendment to Credit Agreement dated July 9, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.17 to the Company's Form 8-K dated July 15, 1999.) 4.17* Seventh Amendment to Credit Agreement dated December 1, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.18 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.18* Subscription Agreement dated November 2, 1999 among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.1 to the Company's Form 8-K dated November 2, 1999.)
II-3
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 4.19* Amendment, dated December 16, 1999, to Subscription Agreement dated November 2, 1999 among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.2 to the Company's Form 8-K dated December 17, 1999.) 4.20* Registration Rights Agreement dated December 17, 1999, among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.3 to the Company's Form 8-K dated December 17, 1999.) 4.21* Eighth Amendment to Credit Agreement dated March 24, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.22 to Company's Form 10-K dated June 6, 2000.) 4.22* Ninth Amendment to Credit Agreement dated October 31, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.23 to Company's Form 10-Q for the quarter ended September 30, 2000.) 4.23* Tenth Amendment to Credit Agreement dated December 15, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.25 to Company's Form 8-K dated January 12, 2001.) 4.24 Indenture between Danka Business Systems PLC and HSBC Bank USA for the zero coupon senior subordinated notes due April 1, 2004. 4.25 Indenture between Danka Business Systems PLC and HSBC Bank USA for the 10% subordinated notes due April 1, 2008. 4.26* Eleventh Amendment to Credit Agreement dated March 28, 2001 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.26 to Company's Form 8-K dated April 9, 2001.) 4.27* Note Depositary Agreement between Danka Business Systems PLC and HSBC Bank USA regarding the zero coupon senior subordinated notes due April 1, 2004. (Exhibit 4.27 to Amendment No. 5 to the Company's Registration Statement on Form S-4 filed June 22, 2001.) 4.28* Note Depositary Agreement between Danka Business Systems PLC and HSBC Bank USA regarding the 10% subordinated notes due April 1, 2008. (Exhibit 4.28 to Amendment No. 5 to the Company's Registration Statement on Form S-4 filed June 22, 2001.) 4.29* Twelfth Amendment to Credit Agreement dated June 6, 2001 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A. as agent. (Exhibit 4.25 to Company's Form 8-K dated June 11, 2001.) 5* Opinion of Altheimer & Gray. (Exhibit 5 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 8.1 Opinion of Altheimer & Gray regarding United States tax matters. 8.2 Opinion of Clifford Chance, L.L.P. regarding United Kingdom tax matters.
II-4
Exhibit Number Description of Document ------- ----------------------- 10.1* Office Building Lease dated May 1, 1992 between Daniel M. Doyle and Francis J. McPeak, Jr., and Gulf Coast Business Machines. (Exhibit 3.5 to the 1993 Form 20-F.) 10.2* Office Building Lease dated April 1, 1990 between Daniel M. Doyle and Francis J. McPeak, Jr., and Danka. (Exhibit 3.6 to the 1993 Form 20- F.) 10.3* Lease Agreement dated December 22, 1986, and Addendum Lease Agreement dated March 1, 1987, between Daniel M. Doyle and Francis J. McPeak and Danka. (Exhibit 3.7 to the 1993 Form 20-F.) 10.4* U.K. Executive Share Option Scheme. (Exhibit 3.11 to the 1993 Form 20- F.) 10.5* U.S. Executive Incentive Stock Option Plan. (Exhibit 3.12 to the 1993 Form 20-F.) 10.6* Form of Stock Option Agreement. (Exhibit 3.13 to the 1993 Form 20-F.) 10.7* Addendum to Lease Agreement dated September 1, 1992, between Mid- County Investments, Inc. and Danka. (Exhibit 3.38 to the 1993 Form 20- F.) 10.8* Lease Agreement dated November 12, 1992 and Lease Commencement Agreement dated April 7, 1993 between PARD, Inc. and Danka. (Exhibit 10.41 to the 1993 Form 20-F.) 10.9* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated February 26, 1993 and Amendment No. 2 dated July 2, 1993, between The Bank of New York, Company and Owners and Holders of American Depositary Receipts. (Exhibit 4.25 to Company's Form 8-K dated January 12, 2001.) 10.10* Danka Business Systems PLC 1994 Executive Performance Plan. (Exhibit 10.52 to the 1994 Form 10-K.) 10.11* Indenture dated March 13, 1995 between the Company and The Bank of New York, as Trustee. (Exhibit 2 to the Company's Form 8-K dated March 21, 1995.) 10.12* Purchase Agreement dated October 25, 1995 between ABN AMRO Bank N.V. and Credit Lyonnais Bank Nederland N.V. and Danka Europe B.V. (Exhibit 2 to the Company's Form 8-K dated November 3, 1995.) 10.13* The Danka 1996 Share Option Plan filed as Appendix 1 of the 1996 Annual Proxy Statement and approved by shareholders under Resolution 10. 10.14* Amendments to the Danka 1996 Share Option Plan filed as Appendix A of the 1998 Annual Proxy Statement and approved by shareholders under Resolution 9. 10.15* The Danka 1999 Share Option Plan filed as Appendix B of the 1999 Annual Proxy Statement and approved by shareholders under Resolution 12. 10.16* Employment Agreement dated March 1, 2001 between Danka and P. Lang Lowrey III. (Exhibit 10.16 to Amendment No. 2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.17* Change of Control Agreement dated March 1, 2001 between Danka and P. Lang Lowrey III. (Exhibit 10.17 to Amendment No. 2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.18* Agreement dated November 20, 2000 between Danka and Michael Gifford. (Exhibit 10.18 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 10.19* Employment Agreement dated March 1, 2001 between Danka and Michael Gifford. (Exhibit 10.19 to Amendment No. 2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.)
II-5
Exhibit Number Description of Document ------- ----------------------- 10.20* Amended and Restated Employment Agreement dated September, 1999 between Danka and Larry K. Switzer. (Exhibit 10.13 to Company's Form 10-Q for the quarter ended September 30, 1999.) 10.21* Amendments dated May 30, 2000 to the Amended and Restated Employment Agreement dated September 20, 1999 between Danka and Larry K. Switzer. (Exhibit 10.36 to Company's Form 10-Q for the quarter ended June 30, 2000.) 10.22* Change of Control Agreement dated November 6, 1998 between Danka and Larry K. Switzer. (Exhibit 10.10 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.23* Amended and Restated Employment Agreement dated September, 1999 between Danka and Brian L. Merriman. (Exhibit 10.14 to Company's Form 10-Q for the quarter ended September 30, 1999.) 10.24* Amendments dated May 30, 2000 to the Amended and Restated Employment Agreement dated September 20, 1999 between Danka and Brian L. Merriman. (Exhibit 10.37 to Company's Form 10-Q for the quarter ended June 30, 2000.) 10.25* Change of Control Agreement dated November 6, 1998 between Danka and Brian L. Merriman. (Exhibit 10.11 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.26* Amended and Restated Employment Agreement dated July, 2000 between Danka and F. Mark Wolfinger. (Exhibit 4.24 to Company's Form 10-Q for the quarter ended September 30, 2000.) 10.27* Change of Control Agreement dated November 6, 1998 between Danka and F. Mark Wolfinger. (Exhibit 10.12 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.28* Employment Agreement dated July 27, 1998 between Danka and David P. Berg. (Exhibit 10.7 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.29* Amendments dated February 2, 1999 to the Employment Agreement dated July 27, 1998 between Danka and David P. Berg. (Exhibit 10.7 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.30* Change of Control Agreement dated November 6, 1998 between Danka and David P. Berg. (Exhibit 10.9 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.31* Amended and Restated Global Operating Agreement dated March 31, 2000 between Danka and General Electric Capital Corporation. (Exhibit 10.31 to Amendment No. 2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.32* First Amendment to Amended and Restated Global Operating Agreement dated February 1, 2001 between Danka and General Electric Capital Corporation. (Exhibit 10.32 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 10.33* Purchase Agreement dated April 9, 2001 between Danka and Pitney Bowes Inc. (Exhibit 10.33 to the Company's Form 8-K dated May 1, 2001.) 10.34* Change of Control Agreement dated February 13, 2001 between Danka and Ernest R. Miller. (Exhibit 10.34 to Company's Form 10-K for the year ended March 31, 2001.) 10.35* Severance Agreement dated January 14, 2000 between Danka and Ernest R. Miller. (Exhibit 10.34 to Company's Form 10-K for the year ended March 31, 2001.) 12* Statement of Ratio of Earnings to Fixed Charges. 13* Annual Report to Shareholders of the Company for the year ended March 31, 2001. (Exhibit 13 to the Company's Form 10-K filed June 11, 2001.) 21* List of Current Subsidiaries of the Company (Exhibit 21 to Company's Form 10-K for the year ended March 31, 2001.)
II-6
Exhibit Number Description of Document ------- ----------------------- 23 Consent of Chartered Accountants. 24* Power of Attorney. (Included in the signature page of Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 25.1* Form T-1 Statement of Eligibility of Trustee under the Indenture with respect to the New Zero Coupon Senior Subordinated Note. (Exhibit 25.1 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 25.2* Form T-1 Statement of Eligibility of Trustee under the Indenture with respect to the New 10% Subordinated Note. (Exhibit 25.2 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 27.1* Financial Data Schedule. (Exhibit 27.1 to Company's Form 10-Q for the quarter ended December 31, 2000.) 27.2* Financial Data Schedule (Exhibit 27 to Company's Form 10-K for the year ended March 31, 2001.) 27.3* Financial Data Schedule Restated and Amended (March 31, 1999 Form 10- K). (Exhibit 27.1 to Company's Form 10-K for the year ended March 31, 2000.) 27.4* Financial Data Schedule Restated and Amended (March 31, 1998 Form 10- K). (Exhibit 27.2 to Company's Form 10-K for the year ended March 31, 2000.) 99.1 Form of Letter of Transmittal. 99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. 99.3 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. - -------- * Incorporated by reference.
II-7 ITEM 22. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (d) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Amendment No. 6 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in St. Petersburg, Florida on the 27th day of June, 2001. Danka Business Systems PLC /s/ Keith J. Nelsen By: _________________________________ Keith J. Nelsen Senior Vice President and General Counsel II-9 SIGNATURES Pursuant to the requirements of the Securities Act, the Co-Registrant has duly caused this Amendment No. 6 to Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on the 27th day of June 2001. Danka Holding Company /s/ P. Lang Lowrey III By: _________________________________ Name: P. Lang Lowrey III Title: President and Chief Executive Officer and Director Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ P. Lang Lowrey III President and Chief June 27, 2001 ____________________________________ Executive Officer and P. Lang Lowrey III Director (principal executive officer) /s/ F. Mark Wolfinger Vice President (principal June 27, 2001 ____________________________________ financial and accounting F. Mark Wolfinger officer)
II-10 SIGNATURES Pursuant to the requirements of the Securities Act, the Co-Registrant has duly caused this Amendment No. 6 to Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on the 27th day of June 2001. Danka Office Imaging Company /s/ P. Lang Lowrey III By: _________________________________ Name: P. Lang Lowrey III Title: Chief Executive Officer and Director Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ P. Lang Lowrey III Chief Executive Officer and June 27, 2001 ____________________________________ Director (principal P. Lang Lowrey III executive officer) /s/ F. Mark Wolfinger Vice President (principal June 27, 2001 ____________________________________ financial and accounting F. Mark Wolfinger officer)
II-11 EXHIBIT INDEX
Exhibit Number Description of Document ------- ----------------------- 1.1* Form of Dealer Manager Agreement. (Exhibit 1.1 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 2.1* Asset Purchase Agreement between Eastman Kodak Company and Danka Business Systems PLC dated as of September 6, 1996, including Exhibit 5.19 (a) which is a form of Amended and Restated Supply Agreement. (Exhibit 2.1 to the Company's Form 8-K dated November 14, 1996.) 2.2* Amendment No. 1 to Asset Purchase Agreement between Eastman Kodak Company and Danka Business Systems PLC dated December 20, 1996. (Excluding schedules and similar attachments). (Exhibit 2.2 to the Company's Form 8-K dated January 15, 1997.) 3.1* Memorandum of Association of the Company. (Exhibit 3.1 of Company's Registration Statement on Form 20-F, No. 0-20828, filed on November 10, 1992.) 3.2* Articles of Association of the Company. (Exhibit 4.2 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.1* Memorandum of Association of the Company, including paragraphs 5 and 6. (Exhibit 2.1 to the 1992 Registration Statement on Form 20-F, No. 0-020828, filed November 10, 1992.) 4.2* Articles of Association of the Company, including sections relating to Shares, Variation of Rights and Votes of Members. (Exhibit 4.2 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.3* Form of Ordinary Share certificate. (Exhibit 4.3 of Company's Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993.) 4.4* Form of American Depositary Receipt. (Exhibit 4.4 to the Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993.) 4.5* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated February 26, 1993 and Amendment No. 2 dated July 2, 1993 (Exhibit 4.9 to the Registration Statement on Form S-1, No. 33-68278, filed on October 8, 1993) and Amendment No. 3 dated August 16, 1994 between The Bank of New York, Company and Owners and Owners of American Depositary Receipts. 4.6* Indenture dated March 13, 1995 between the Company and The Bank of New York, as Trustee. (Exhibit 2 to the Company's Form 8-K dated March 21, 1995.) 4.7* Deposit and Custody Agreement dated March 13, 1995, between The Bank of New York as Depositary and the Company. (Exhibit 3 to the Company's Form 8-K dated March 21, 1995.) 4.8* Registration Rights Agreement dated as of March 13, 1995 relating to $175,000,000 in Aggregate Principal Amount of 6.75% Convertible Subordinated Notes Due 2002 by and among the Company and Prudential Securities Incorporated and Smith Barney, Inc. and Robert W. Baird & Co. and Raymond James & Associates, Inc. (Exhibit 4.12 to the Company's 1995 Form 10-K). 4.9* Resolution No. 7 adopted by shareholders at the 1997 annual general meeting waiving pre-emptive rights of shareholders under certain circumstances filed with the Company's 1997 Proxy Statement. 4.10* Credit Agreement dated December 5, 1996, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and NationsBank, N.A., as agent. (Exhibit 4 to the Company's Form 8-K dated December 16, 1996.)
1
Exhibit Number Description of Document ------- ----------------------- 4.11* First Amendment to Credit Agreement dated December 5, 1997 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, Nationsbank, National Association, each other Bank signatory thereto and Nationsbank, National Association, as agent. (Exhibit 4.9 to the Company's Form 10-Q dated February 12, 1998.) 4.12* Second Amendment to Credit Agreement dated July 28, 1998 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, Nationsbank, National Association, each other Bank signatory thereto and Nationsbank, National Association, as agent. (Exhibit 4.10 to the Company's Form 8-K dated July 28, 1998.) 4.13* Waiver dated October 20, 1998, of certain financial covenants contained in the Credit Agreement among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, NationsBank, N.A., each other Bank signatory to the Credit Agreement and NationsBank, N.A., as agent. (Exhibit 4.11 to the Company's Form 8-K dated October 21, 1998.) 4.14* Waiver dated February 26, 1998, of certain financial covenants contained in the Credit Agreement among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, NationsBank, N.A., each other Bank signatory to the Credit Agreement and NationsBank, N.A., as agent. (Exhibit 4.12 to the Company's Form 8-K dated March 5, 1999.) 4.15* Fifth Amendment to Credit Agreement dated June 15, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.16 to the Company's Form 8-K dated July 15, 1999.) 4.16* Sixth Amendment to Credit Agreement dated July 9, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.17 to the Company's Form 8-K dated July 15, 1999.) 4.17* Seventh Amendment to Credit Agreement dated December 1, 1999 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.18 to the Company's Form 10-Q December 31, 1999 dated February 11, 2000.) 4.18* Subscription Agreement dated November 2, 1999 among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.1 to the Company's Form 8-K dated November 2, 1999.) 4.19* Amendment, dated December 16, 1999, to Subscription Agreement dated November 2, 1999 among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.2 to the Company's Form 8-K dated December 17, 1999.) 4.20* Registration Rights Agreement dated December 17, 1999, among Danka Business Systems PLC, Cypress Merchant Banking Partners II L.P., a Delaware limited partnership, Cypress Merchant Banking II C.V., a limited partnership organized and existing under the laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited partnership. (Exhibit 99.3 to the Company's Form 8-K dated December 17, 1999.)
2
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 4.21* Eighth Amendment to Credit Agreement dated March 24, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA, and Danka Holding Company, NationsBank, National Association, each other Bank signatory thereto and NationsBank, National Association, as agent. (Exhibit 4.22 to Company's Form 10-K dated June 6, 2000.) 4.22* Ninth Amendment to Credit Agreement dated October 31, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.23 to Company's Form 10-Q for the quarter ended September 30, 2000.) 4.23* Tenth Amendment to Credit Agreement dated December 15, 2000 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.25 to Company's Form 8-K dated January 12, 2001.) 4.24 Indenture between Danka Business Systems PLC and HSBC Bank USA for the zero coupon senior subordinated notes due April 1, 2004. 4.25 Indenture between Danka Business Systems PLC and HSBC Bank USA for the 10% subordinated notes due April 1, 2008. 4.26* Eleventh Amendment to Credit Agreement dated March 28, 2001 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A., as agent. (Exhibit 4.26 to Company's Form 8-K dated April 9, 2001.) 4.27* Note Depositary Agreement between Danka Business Systems PLC and HSBC Bank USA regarding the zero coupon senior subordinated notes due April 1, 2004. (Exhibit 4.27 to Amendment No. 5 to the Company's Registration Statement on Form S-4 filed June 22, 2001.) 4.28* Note Depositary Agreement between Danka Business Systems PLC and HSBC Bank USA regarding the 10% subordinated notes due April 1, 2008. (Exhibit 4.28 to Amendment No. 5 to the Company's Registration Statement on Form S-4 filed June 22, 2001.) 4.29* Twelfth Amendment to Credit Agreement dated June 6, 2001 among Danka Business Systems PLC, Dankalux Sarl & Co., SCA and Danka Holding Company, Bank of America, N.A., each other Bank signatory to the Credit Agreement and Bank of America, N.A. as agent. (Exhibit 4.25 to Company's Form 8-K dated June 11, 2001.) 5* Opinion of Altheimer & Gray. (Exhibit 5 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 8.1 Opinion of Altheimer & Gray regarding United States tax matters. 8.2 Opinion of Clifford Chance, L.L.P. regarding United Kingdom tax matters. 10.1* Office Building Lease dated May 1, 1992 between Daniel M. Doyle and Francis J. McPeak, Jr., and Gulf Coast Business Machines. (Exhibit 3.5 to the 1993 Form 20-F.) 10.2* Office Building Lease dated April 1, 1990 between Daniel M. Doyle and Francis J. McPeak, Jr., and Danka. (Exhibit 3.6 to the 1993 Form 20- F.) 10.3* Lease Agreement dated December 22, 1986, and Addendum Lease Agreement dated March 1, 1987, between Daniel M. Doyle and Francis J. McPeak and Danka. (Exhibit 3.7 to the 1993 Form 20-F.) 10.4* U.K. Executive Share Option Scheme. (Exhibit 3.11 to the 1993 Form 20- F.) 10.5* U.S. Executive Incentive Stock Option Plan. (Exhibit 3.12 to the 1993 Form 20-F.)
3
Exhibit Number Description of Document ------- ----------------------- 10.6* Form of Stock Option Agreement. (Exhibit 3.13 to the 1993 Form 20-F.) 10.7* Addendum to Lease Agreement dated September 1, 1992, between Mid- County Investments, Inc. and Danka. (Exhibit 3.38 to the 1993 Form 20- F.) 10.8* Lease Agreement dated November 12, 1992 and Lease Commencement Agreement dated April 7, 1993 between PARD, Inc. and Danka. (Exhibit 10.41 to the 1993 Form 20-F.) 10.9* Deposit Agreement dated June 25, 1992, Amendment No. 1 dated February 26, 1993 and Amendment No. 2 dated July 2, 1993, between The Bank of New York, Company and Owners and Holders of American Depositary Receipts. (Exhibit 4.9 to Company's Form S-1 dated September 2, 1993.) 10.10* Danka Business Systems PLC 1994 Executive Performance Plan. (Exhibit 10.52 to the 1994 Form 10-K.) 10.11* Indenture dated March 13, 1995 between the Company and The Bank of New York, as Trustee. (Exhibit 2 to the Company's Form 8-K dated March 21, 1995.) 10.12* Purchase Agreement dated October 25, 1995 between ABN AMRO Bank N.V. and Credit Lyonnais Bank Nederland N.V. and Danka Europe B.V. (Exhibit 2 to the Company's Form 8-K dated November 3, 1995.) 10.13* The Danka 1996 Share Option Plan filed as Appendix 1 of the 1996 Annual Proxy Statement and approved by shareholders under Resolution 10. 10.14* Amendments to the Danka 1996 Share Option Plan filed as Appendix A of the 1998 Annual Proxy Statement and approved by shareholders under Resolution 9. 10.15* The Danka 1999 Share Option Plan filed as Appendix B of the 1999 Annual Proxy Statement and approved by shareholders under Resolution 12. 10.16* Employment Agreement dated February 19, 2001 between Danka and P. Lang Lowrey III. (Exhibit 10.16 to amendment No.2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.17* Change of Control Agreement dated February 19, 2001 between Danka and P. Lang Lowrey III. (Exhibit 10.17 to amendment No.2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.18* Agreement dated November 20, 2000 between Danka and Michael Gifford. (Exhibit 10.19 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 10.19* Employment Agreement dated March 1, 2001 between Danka and Michael Gifford. (Exhibit 10.19 to amendment No.2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.20* Amended and Restated Employment Agreement dated September, 1999 between Danka and Larry K. Switzer. (Exhibit 10.13 to Company's Form 10-Q for the quarter ended September 30, 1999.) 10.21* Amendments dated May 30, 2000 to the Amended and Restated Employment Agreement dated September 20, 1999 between Danka and Larry K. Switzer. (Exhibit 10.36 to Company's Form 10-Q for the quarter ended June 30, 2000.) 10.22* Change of Control Agreement dated November 6, 1998 between Danka and Larry K. Switzer. (Exhibit 10.10 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.23* Amended and Restated Employment Agreement dated September, 1999 between Danka and Brian L. Merriman. (Exhibit 10.14 to Company's Form 10-Q for the quarter ended September 30, 1999.) 10.24* Amendments dated May 30, 2000 to the Amended and Restated Employment Agreement dated September 20, 1999 between Danka and Brian L. Merriman. (Exhibit 10.37 to Company's Form 10-Q for the quarter ended June 30, 2000.)
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Exhibit Number Description of Document ------- ----------------------- 10.25* Change of Control Agreement dated November 6, 1998 between Danka and Brian L. Merriman. (Exhibit 10.11 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.26* Amended and Restated Employment Agreement dated July, 2000 between Danka and F. Mark Wolfinger. (Exhibit 4.24 to Company's Form 10-Q for the quarter ended September 30, 2000.) 10.27* Change of Control Agreement dated November 6, 1998 between Danka and F. Mark Wolfinger. (Exhibit 10.12 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.28* Employment Agreement dated July 27, 1998 between Danka and David P. Berg. (Exhibit 10.7 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.29* Amendments dated February 2, 1999 to the Employment Agreement dated July 27, 1998 between Danka and David P. Berg. (Exhibit 10.7 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.30* Change of Control Agreement dated November 6, 1998 between Danka and David P. Berg. (Exhibit 10.9 to Company's Form 10-Q for the quarter ended June 30, 1999.) 10.31* Amended and Restated Global Operating Agreement dated March 31, 2000 between Danka and General Electric Capital Corporation. (Exhibit 10.31 to amendment No.2 to the Company's Registration Statement on Form S-4 filed May 16, 2001.) 10.32* First Amendment to Amended and Restated Global Operating Agreement dated February 1, 2001 between Danka and General Electric Capital Corporation. (Exhibit 10.32 to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 10.33* Purchase Agreement dated April 9, 2001 between Danka and Pitney Bowes Inc. (Exhibit 10.33 to the Company's Form 8-K dated May 1, 2001.) 10.34* Change of Control Agreement dated February 13, 2001 between Danka and Ernest R. Miller. (Exhibit 10.34 to Company's Form 10-K for the year ended March 31, 2001.) 10.35* Severance Agreement dated January 14, 2000 between Danka and Ernest R. Miller. (Exhibit 10.34 to Company's Form 10-K for the year ended March 31, 2001.) 12* Statement of Ratio of Earnings to Fixed Charges. 13* Annual Report to Shareholders of the Company for the year ended March 31, 2001. (Exhibit 13 to the Company's Form 10-K filed June 11, 2001.) 21* List of Current Subsidiaries of the Company (Exhibit 21 to Company's Form 10-K for the year ended March 31, 2001.) 23 Consent of Chartered Accountants. 24* Power of Attorney. (Included in the signature page to Amendment No. 1 to the Company's Registration Statement on Form S-4 filed April 17, 2001.) 25.1* Form T-1 Statement of Eligibility of Trustee under the Indenture with respect to the New Zero Coupon Senior Subordinated Note. (Exhibit 25.1 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 25.2* Form T-1 Statement of Eligibility of Trustee under the Indenture with respect to the New 10% Subordinated Note. (Exhibit 25.2 to Amendment No. 3 to the Company's Registration Statement on Form S-4 filed June 11, 2001.) 27.1* Financial Data Schedule. (Exhibit 27.1 to Company's Form 10-Q for the quarter ended December 31, 2000.) 27.2* Financial Data Schedule (Exhibit 27 to Company's Form 10-K for the year ended March 31, 2001.)
5
Exhibit Number Description of Document ------- ----------------------- 27.3* Financial Data Schedule Restated and Amended (March 31, 1999 Form 10- K). (Exhibit 27.1 to Company's Form 10-K for the year ended March 31, 2000.) 27.4* Financial Data Schedule Restated and Amended (March 31, 1998 Form 10- K). (Exhibit 27.2 to Company's Form 10-K for the year ended March 31, 2000.) 99.1 Form of Letter of Transmittal. 99.2 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. 99.3 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. * Incorporated by reference.
6 EX-4.24 2 dex424.txt INDENTURE Exhibit 4.24 FORM OF DANKA BUSINESS SYSTEMS PLC Zero Coupon Senior Subordinated Notes due 2004 INDENTURE Dated as of __________, 2001 HSBC BANK USA as Trustee DANKA OFFICE IMAGING COMPANY as Guarantor DANKA HOLDING COMPANY as Guarantor CROSS-REFERENCE TABLE Indenture --------- TIA Section Section - ----------- --------- SECTION 310 (a)(1)................................................... 7.10 (a)(2)................................................... 7.10 (a)(3)................................................... N.A. (a)(4)................................................... N.A. (a)(5)................................................... 7.10 (b)...................................................... 7.8 ......................................................... 7.10 ......................................................... 13.2 (c)...................................................... N.A. SECTION 311 (a)...................................................... 7.11 (b)...................................................... 7.11 (c)...................................................... N.A. SECTION 312 (a)...................................................... 2.6 (b)...................................................... 13.3 (c)...................................................... 13.3 SECTION 313 (a)...................................................... 7.6 (b)(1)................................................... 7.6 (b)(2)................................................... 7.6 (c)...................................................... 7.6 13.2 (d)...................................................... 7.6 SECTION 314 (a)...................................................... 4.4 ......................................................... 4.7 ......................................................... 13.2 (b)...................................................... N.A. (c)(1)................................................... 13.4 (c)(2)................................................... 13.4 (c)(3)................................................... N.A. (d)...................................................... N.A. (e)...................................................... 13.5 (f)...................................................... N.A. SECTION 315 (a)...................................................... 7.1(b) (b)...................................................... 7.5 ......................................................... 13.2 (c)...................................................... 7.1(a) (d)...................................................... 7.1(c) (e)...................................................... 6.11 SECTION 316 (a)(last sentence)....................................... 2.12 (a)(1)(A)................................................ 6.5 ......................................................... 6.6 (a)(1)(B)................................................ 6.4 (a)(2)................................................... N.A. (b)...................................................... 6.7 i (c)...................................................... 9.4 SECTION 317 (a)(1)................................................... 6.2 ......................................................... 6.3 (a)(2)................................................... 6.2 ......................................................... 6.9 (b)...................................................... 2.5 SECTION 318 (a)...................................................... 13.1 SECTION 318 (c)...................................................... 13.1 - ------------------------ N.A. means not applicable. NOTE: This Cross-Reference Table is not part of the Indenture. ii TABLE OF CONTENTS
Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE....................................................... 1 Section 1.1. Definitions............................................................................ 1 Section 1.2. Other Definitions...................................................................... 13 Section 1.3. Incorporation by Reference of Trust Indenture Act...................................... 14 Section 1.4. Rules of Construction.................................................................. 14 Section 1.5. Acts of Holders........................................................................ 14 ARTICLE 2 THE NOTES........................................................................................ 15 Section 2.1. Form and Dating........................................................................ 15 Section 2.2. Denominations.......................................................................... 16 Section 2.3. Execution and Authentication........................................................... 16 Section 2.4. Registrar and Paying Agent............................................................. 16 Section 2.5. Paying Agent to Hold Money in Trust.................................................... 16 Section 2.6. Noteholder Lists....................................................................... 17 Section 2.7. Transfer and Exchange.................................................................. 17 Section 2.8. Book-Entry Provisions for Global Notes................................................. 17 Section 2.9. Deposit of Monies...................................................................... 18 Section 2.10. Replacement Notes...................................................................... 18 Section 2.11. Outstanding Notes...................................................................... 19 Section 2.12. Treasury Notes......................................................................... 19 Section 2.13. Temporary Notes........................................................................ 19 Section 2.14. Cancellation........................................................................... 19 Section 2.15. [Intentionally Omitted]................................................................ 20 Section 2.16. Persons Deemed Owners.................................................................. 20 Section 2.17. CUSIP, CINS and ISIN Numbers........................................................... 20 Section 2.18. Issuance of Additional Notes........................................................... 20 ARTICLE 3 REDEMPTION....................................................................................... 20 Section 3.1. Notices to Trustee..................................................................... 20 Section 3.2. Selection of Notes to Be Redeemed...................................................... 21 Section 3.3. Notice of Redemption................................................................... 21 Section 3.4. Effect of Notice of Redemption......................................................... 22 Section 3.5. Deposit of Redemption Price............................................................ 22 Section 3.6. Notes Redeemed in Part................................................................. 22 Section 3.7. Optional Redemption.................................................................... 22 ARTICLE 4 COVENANTS........................................................................................ 22 Section 4.1. Payment of Principal................................................................... 22 Section 4.2. Maintenance of Office or Agency for Notices and Demands................................ 23 Section 4.3. Property and Insurance Matters......................................................... 23 Section 4.4. Compliance Certificate and Opinion of Counsel; Notice of Default....................... 23 Section 4.5. Corporate Existence.................................................................... 23 Section 4.6. Payment of Taxes and Other Claims...................................................... 23 Section 4.7. Reports................................................................................ 24 Section 4.8. Waiver of Stay, Extension or Usury Laws................................................ 24 Section 4.9. Limitation on Incurrence of Additional Debt............................................ 24 Section 4.10. Limitation on Other Subordinated Debt.................................................. 24 Section 4.11. Limitation on Restricted Payments...................................................... 25
i Section 4.12. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.......... 25 Section 4.13. Limitation on liens.................................................................... 26 Section 4.14. Limitation on Transactions with Affiliates and Related Persons......................... 26 Section 4.15. Limitation on Certain Asset Sales...................................................... 26 Section 4.16. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries.......... 28 Section 4.17. Change of Control...................................................................... 28 Section 4.18. Limitations on Payments for Consent.................................................... 29 Section 4.19. Limitation on Business Activities...................................................... 29 Section 4.20. Limitation on Restricted and Unrestricted Subsidiaries................................. 29 Section 4.21. Subsidiary Guarantee................................................................... 29 Section 4.22. Maintenance of All Registration, Regulations and Licenses.............................. 33 Section 4.23. Payment of Additional Amounts.......................................................... 33 Section 4.24. Internal Revenue Service Filing........................................................ 34 ARTICLE 5 SUCCESSORS....................................................................................... 34 Section 5.1. Limitation on Mergers, Consolidations and Sales of All Assets in respect to the Company................................................................................ 34 Section 5.2. Successor Corporation Substituted...................................................... 34 Section 5.3. Limitations on Mergers, Consolidations and Sales of All Assets in respect to Guarantors............................................................................. 35 ARTICLE 6 DEFAULTS AND REMEDIES............................................................................ 35 Section 6.1. Events of Default...................................................................... 35 Section 6.2. Acceleration........................................................................... 37 Section 6.3. Other Remedies......................................................................... 37 Section 6.4. Waiver of Past Defaults................................................................ 37 Section 6.5. Control by Majority.................................................................... 37 Section 6.6. Limitation on Suits.................................................................... 38 Section 6.7. Rights of Holders to Receive Payment................................................... 38 Section 6.8. Collection Suit by Trustee............................................................. 38 Section 6.9. Trustee May File Proofs of Claim....................................................... 38 Section 6.10. Priorities............................................................................. 39 Section 6.11. Undertaking for Costs.................................................................. 39 Section 6.12. Reports to the Trustee................................................................. 39 ARTICLE 7 TRUSTEE.......................................................................................... 40 Section 7.1. Duties of Trustee...................................................................... 40 Section 7.2. Rights of Trustee...................................................................... 40 Section 7.3. Individual Rights of Trustee........................................................... 41 Section 7.4. Trustee's Disclaimer................................................................... 41 Section 7.5. Notice of Defaults..................................................................... 41 Section 7.6. Reports by Trustee to Holders.......................................................... 41 Section 7.7. Compensation and Indemnity............................................................. 41 Section 7.8. Replacement of Trustee................................................................. 42 Section 7.9. Successor Trustee by Merger, Etc....................................................... 43 Section 7.10. Eligibility; Disqualification.......................................................... 43 Section 7.11. Preferential Collection of Claims Against Company...................................... 43 Section 7.12. Permitted Transactions................................................................. 43 ARTICLE 8 DISCHARGE OF INDENTURE........................................................................... 44 Section 8.1. Legal Defeasance and Covenant Defeasance of the Notes.................................. 44 Section 8.2. Termination of Obligations Upon Cancellation of the Notes.............................. 45 Section 8.3. Survival of Certain Obligations........................................................ 46 Section 8.4. Acknowledgment of Discharge by Trustee................................................. 46
ii Section 8.5. Application of Trust Assets............................................................ 46 Section 8.6. Repayment to the Company; Unclaimed Money.............................................. 46 Section 8.7. Reinstatement.......................................................................... 46 ARTICLE 9 AMENDMENTS....................................................................................... 47 Section 9.1. Without Consent of Holders............................................................. 47 Section 9.2. With Consent of Holders................................................................ 47 Section 9.3. Compliance with Trust Indenture Act.................................................... 48 Section 9.4. Revocation and Effect of Consents...................................................... 48 Section 9.5. Notation on or Exchange of Notes....................................................... 49 Section 9.6. Trustee to Sign Amendments............................................................. 49 ARTICLE 10 CONVERSION RIGHTS............................................................................... 49 Section 10.1. Conversion Rights...................................................................... 49 Section 10.2. Conversion Price....................................................................... 50 Section 10.3. Conversion Notice...................................................................... 50 Section 10.4. Approvals and Notices.................................................................. 50 Section 10.5. Payments by the Holder................................................................. 51 Section 10.6. Cancellation of Note................................................................... 51 Section 10.7. Conversion Right Not Exercisable....................................................... 51 Section 10.8. Responsibility of Trustee for Conversion Provisions.................................... 51 ARTICLE 11 SUBORDINATION................................................................................... 51 Section 11.1. Ranking................................................................................ 51 Section 11.2. Priority and Payment Over of Proceeds in Certain Events................................ 52 Section 11.3. Payments May Be Made Prior to Notice................................................... 54 Section 11.4. Rights of Holders of Senior Debt Not to Be Impaired.................................... 54 Section 11.5. Authorization to Trustee to Take Action to Effectuate Subordination.................... 54 Section 11.6. Subrogation............................................................................ 54 Section 11.7. Obligations of Company Unconditional................................................... 55 Section 11.8. The Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice............ 55 Section 11.9. Right of Trustee to Hold Senior Debt................................................... 55 Section 11.10. No Implied Covenants by or Obligations of the Trustee.................................. 55 ARTICLE 12 MEETINGS OF HOLDERS OF THE NOTES................................................................ 56 Section 12.1. Purposes of the Meetings............................................................... 56 Section 12.2. Place of Meetings; Expenses............................................................ 56 Section 12.3. Call and Notice of Meetings............................................................ 56 Section 12.4. Voting at Meetings..................................................................... 56 Section 12.5. Voting Rights, Conduct and Adjournment................................................. 56 Section 12.6. Revocation of Consent by Holders....................................................... 57 ARTICLE 13 MISCELLANEOUS................................................................................... 57 Section 13.1. Trust Indenture Act Controls........................................................... 57 Section 13.2. Notices................................................................................ 57 Section 13.3. Communication by Holders with Other Holders............................................ 58 Section 13.4. Certificate and Opinion as to Conditions Precedent..................................... 59 Section 13.5. Statements Required in Certificate or Opinion.......................................... 59 Section 13.6. Rules by Trustee and Agents............................................................ 59 Section 13.7. Legal Holidays......................................................................... 59 Section 13.8. No Recourse Against Others............................................................. 59 Section 13.9. Governing Law.......................................................................... 59 Section 13.10. No Adverse Interpretation of Other Agreements.......................................... 59 Section 13.11. Successors............................................................................. 60
iii Section 13.12. Severability........................................................................... 60 Section 13.13. Counterpart Originals.................................................................. 60 Section 13.14. Variable Provisions.................................................................... 60 Section 13.15. Qualification of Indenture............................................................. 60 Section 13.16. Table of Contents, Headings, Etc....................................................... 60 Section 13.17. Indenture Controls over Form of Note................................................... 60
EXHIBIT A. Form of Note EXHIBIT B. Form of Notation of Subsidiary Guarantee EXHIBIT C. Form of Supplemental Indenture EXHIBIT D. Form of Conversion Notice iv INDENTURE dated as of ____________, 2001 between Danka Business Systems PLC, a public limited company organized under the laws of England and Wales (the "Company"), HSBC Bank USA, a banking corporation and trust company organized and existing under the laws of the State of New York, as trustee (the "Trustee") and Danka Office Imaging Company, a corporation organized under the laws of the State of Delaware and Danka Holding Company, organized under the laws of Delaware, as guarantors (collectively, the "Guarantors"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined below) of the Company's Zero Coupon Senior Subordinated Notes due April 1, 2004 (the "Notes"). ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. Definitions. The term "ACQUIRED DEBT" shall mean, with respect to any Person, (a) Debt of such Person existing at the time such Person becomes a Subsidiary of the Company (or such Person is merged into or consolidated with the Company) or (b) Debt assumed in connection with the acquisition of assets from such Person, in each case not incurred by such Person in connection with or in contemplation of such Person becoming a Subsidiary of the Company or such merger, consolidation, or acquisition, as the case may be. The term "AFFILIATE" shall mean with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided, that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. The terms "controlling" and "controlled" have meaning correlative to the foregoing. The term "AGENT" shall mean any registrar or paying agent, custodian for the Notes, or authenticating agent or co-registrar. The term "ASSET ACQUISITION" shall mean: (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person: (i) becomes a Restricted Subsidiary of the Company; (ii) is merged with or into the Company or any Restricted Subsidiary of the Company; or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Subsidiary of the Company), which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. The term "ASSET SALE" shall mean any direct or indirect sale, issuance, conveyance, transfer, lease, assignment or other disposition for value by the Company or any of its Restricted Subsidiaries, including a sale and leaseback transaction to any Person other than the Company or a Restricted Subsidiary of the Company of: (a) any Capital Stock of any Subsidiary of the Company; or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company. The term "Asset Sale" does not include: (a) a transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $1 million; (b) the sale, lease, conveyance, transfer or other disposition of all or substantially all of the assets of the Company as permitted under Sections 4.15 and Article 5 hereof; (c) any sale, lease, conveyance, transfer or other disposition in the ordinary course of business; (d) any operating lease in the ordinary course of business; or (e) any sale or other disposition of obsolete or unusable inventory or other assets. The term "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction shall mean, at the time of determination, the present value (discounted at the interest rate implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. The term "BANKRUPTCY LAW" shall mean the United Kingdom Insolvency Act 1986, as supplemented or amended, together with all rules, regulations and instruments made thereunder and applicable United Kingdom law related to bankruptcy, insolvency, winding up, administration, receivership and other similar matters, the United States Bankruptcy Code or any similar federal, state or foreign law for the relief of creditors. The term "BOARD OF DIRECTORS," when used with reference to a Person, shall mean the board of directors or equivalent governing body of the Person or any duly authorized committee of the board of directors or equivalent governing body of the Person. The term "BOARD RESOLUTION" shall mean a duly adopted resolution of a Board of Directors of a Person in full force and effect on the date of certification certified by any Director, Secretary or Assistant Secretary of such Person. The term "BOOK-ENTRY DEPOSITARY" shall mean the book-entry depositary or its nominee or the custodian of either, designated by the Company in the Depositary Agreement until a successor depositary shall have become such pursuant to the applicable provisions of the Depositary Agreement, and thereafter "Book-Entry Depositary" shall mean such successor book-entry depositary or its nominee or the custodian of either. The term "BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. The term "CAPITAL STOCK" shall mean, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of corporate stock of such Person and all other equity interests in such Person. The term "CAPITALIZED LEASE OBLIGATION" shall mean as to any Person, the obligations of such Person under a lease of real or personal property of such Person that are required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with GAAP. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The term "CHANGE OF CONTROL" shall mean the occurrence of one or more of the following events: (a) any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to any Person or group of Persons (as those terms are used in Section 13(d) of the Exchange Act) (other than Permitted Holders), except to effect a Change of Domicile; (b) the approval by the holders of Capital Stock of the Company of a plan or proposal for the liquidation or dissolution of the Company, other than to effect a Change of Domicile; (c) a Person or group of Persons (as those terms are used in Section 13(d) of the Securities Exchange Act of 1934, as amended) (other than Permitted Holders) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of a majority of the securities of the Company ordinarily having the right to vote in the election of directors of the Company; (d) the replacement of a majority of the Board of Directors over a two- year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, by persons who were not 2 approved by a majority vote of the directors then still in office who were either directors at the beginning of such period or whose election as a director was previously so approved; or (e) the merger or consolidation of the Company with or into another corporation or the merger of another corporation into the Company with the effect that immediately after such transaction any Person or group of Persons (other than Permitted Holders) becomes the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors. The term "CHANGE OF DOMICILE" shall mean a transaction or a series of related transactions, including without limitation (i) a consolidation, amalgamation, or merger of the Company with or into any other Person; (ii) acquisition of all of the Capital Stock of the Company; or (iii) sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries) to another Person, of which the sole purpose is to reincorporate the Company in a jurisdiction other than England and Wales or incorporate or organize a Successor Entity to the Company in a jurisdiction other than England and Wales. For the purposes of this definition of Change of Domicile, a "Successor Entity" shall mean an entity whose Voting Stock following the Change of Domicile is owned or beneficially owned by the same Persons in the same proportions as owned or beneficially owned the Voting Stock of the Company immediately prior to the Change of Domicile. The term "CLEARSTREAM" shall mean Clearstream International. The term "CLOSING DATE" shall mean the date on which the Notes are originally issued under this Indenture. The term "COMMISSION" shall mean the Securities and Exchange Commission. The term "COMPANY" shall mean Danka Business Systems, PLC and, subject to the provisions of Article 5 hereof, shall also include its successors and assigns. The term "CONSOLIDATED EBITDA" shall mean, with respect to any Person, for any period, the sum (without duplication) of: (a) Consolidated Net Income of such Person for such period; plus (b) to the extent Consolidated Net Income has been reduced or increased by the following: (i) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to transactions the effect of which has been excluded from Consolidated Net Income); (ii) Consolidated Interest Expense; and (iii) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP. The term "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any Person, the ratio of Consolidated EBITDA to Consolidated Fixed Charges, as measured for the four full fiscal quarters (the "Four Quarter Period") ending on or before the date of the transaction to which the Consolidated Fixed Charge Coverage Ratio applies and for which financial statements are available (the "Transaction Date"). For purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" are calculated after giving effect on a pro forma basis for the period of the calculation to: (a) the incurrence or repayment of Debt of such Person or any of its Subsidiaries (and the application of the proceeds) giving rise to the calculation and any incurrence or repayment of other Debt (and the application of the proceeds), other than the incurrence or repayment of Debt in the ordinary course of business for working capital purposes occurring during the Four Quarter Period or at any time after the last day of the Four Quarter Period and on or before the Transaction Date, as if the incurrence or repayment (and the application of proceeds) had occurred on the first day of the Four Quarter Period; and (b) any Asset Sales or Asset Acquisition (including any Asset Acquisition giving rise to the calculation as a result of such Person or one of its Subsidiaries (including a Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise becoming liable for Acquired Debt and also including any Consolidated EBITDA, but only to the extent includable pursuant to the definition of "Consolidated Net Income," attributable to the assets that are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time after the last day of the Four Quarter Period and on or before the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Debt) had occurred on the first day of the Four Quarter Period. If such Person or its Subsidiary guarantees the Debt of a third Person, the preceding sentence will give effect to the incurrence of the guaranteed Debt as if such Person or its Subsidiary had directly incurred or otherwise assumed such guaranteed Debt. For purposes of this definition, in calculating "Consolidated Fixed Charges" for determining the denominator (but not the numerator) of the "Consolidated Fixed Charge Coverage Ratio": (a) interest on outstanding Debt determined on a fluctuating basis as of and after the Transaction Date will be deemed to have accrued at a fixed rate per year equal to the rate of interest on such Debt in effect on the Transaction Date, except that if the interest on such Debt is covered by interest swap obligation agreements, the interest will be deemed to have accrued at the rate per year after giving effect to those agreements; and (b) if any interest on any Debt actually incurred on the Transaction Date may optionally be determined at an interest rate based on a factor of a prime or similar rate, a eurocurrency interbank rate or other 3 rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period. The term "CONSOLIDATED FIXED CHARGES" shall mean, with respect to any Person, for any period, the sum (without duplication) of: (a) Consolidated Interest Expense of such Person, plus (b) the product of: (i) the amount of all dividend payments on any series of Preferred Stock of such Person and its Restricted Subsidiaries (other than dividends paid in Qualified Capital Stock or dividends to the extent payable to the Company or its Restricted Subsidiaries) paid, accrued or scheduled to be paid or accrued during such period (other than Preferred Stock of such Person and its Restricted Subsidiaries for which the dividends are deductible for federal income tax purposes, which will be included in Consolidated Fixed Charges without being multiplied by the fraction below); and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. The term "CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to any Person, for any period, the sum (without duplication) of: (a) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, whether paid or accrued, including: (i) any amortization of Debt discount and amortization or write-off of deferred financing costs; (ii) net costs under interest swap obligations; (iii) all capitalized interest; and (iv) the interest portion of any deferred payment obligation, including with respect to Attributable Debt; (b) the aggregate dividend payments of such Person and its Restricted Subsidiaries for such period with respect to Disqualified Capital Stock; and (c) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. The term "CONSOLIDATED NET INCOME" shall mean with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis (before Preferred Stock (other than Disqualified Capital Stock) dividend requirements), determined in accordance with GAAP, excluding: (a) after-tax gains from Asset Sales or abandonments of reserves relating to Asset Sales; (b) after-tax items classified as extraordinary or nonrecurring gains or losses; (c) the net income of any Person acquired in a "pooling of interests" transaction accrued before the date it becomes a Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Subsidiary of the referent Person; (d) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted (or subject to tax) by a contract, operation of law or otherwise; (e) the net income of any Person other than the referent Person or a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Restricted Subsidiary of the referent Person by such Person (subject to the limitation in (d)); (f) any restoration to income of any contingency reserve, except to the extent that provision of such reserve reduced Consolidated Net Income accrued at any time following the Issue Date; (g) income or loss attributable to discontinued operations, whether or not such operations were classified as discontinued; (h) in case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation before such consolidation, merger or transfer or assets; (i) any gain realized in connection with the disposition of any marketable securities other than cash equivalents by such Person or any of its Restricted Subsidiaries or the extinguishments of Debt of such Person or any of its Restricted Subsidiaries; and (j) all gains or losses from the cumulative effect of any change in accounting principles. The term "CONSOLIDATED NON-CASH CHARGES" shall mean, with respect to any Person, for any period, the aggregate depreciation, amortization and other non- cash expenses of such Person and its Subsidiaries reducing Consolidated Net Income of such Person for such period, determined on a consolidated basis in accordance with GAAP. The term "CONVERSION AGENT" shall mean, with respect to any person, that person designated by the Company who assists and represents the Company with respect to any conversion pursuant to Article 10 of this Indenture. The Company may serve as Conversion Agent and will serve as Conversion Agent in the absence of designation of any other person. The term "CORPORATE TRUST OFFICE" shall mean the principal corporate trust office of the Trustee at which, at any particular time, its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at c/o Issuer Services, 452 Fifth Avenue, New York, New York 10018. 4 The term "CREDIT FACILITY" shall mean the Amended and Restated Credit Agreement dated as of June 29, 2001, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and Bank of America, N.A., as agent, as the same may be amended, modified, supplemented, extended, renewed, restated, refunded, refinanced, restructured or replaced from time to time. The term "CUSTODIAN" shall mean any receiver, trustee, assignee, liquidator, custodian, or similar official under any Bankruptcy Law. The term "DEBT" shall mean, with respect to any Person (without duplication): (a) indebtedness of such Person, whether or not contingent, for borrowed money; (b) indebtedness of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all indebtedness or other obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not in default or overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted); (e) all indebtedness for the reimbursement of any obligation on any letter of credit, banker's acceptance or similar credit transaction; (f) guarantees and other contingent obligations in respect of indebtedness referred to in (a) through (e) above and (h) and (i) below; (g) all indebtedness of any other Person of the type referred to in (a) through (f) that are secured by any Lien on any property or asset of the referent Person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured; (h) all indebtedness under currency agreements and interest swap agreements of such Person; (i) all obligations under the TROL; and (j) all Disqualified Capital Stock issued by such Person with the amount of indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. "Maximum fixed repurchase price'' of any Disqualified Capital Stock that does not have a fixed repurchase price is calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which the indebtedness is required to be determined pursuant to this Indenture, and if such price is based upon or measured by the fair market value of such Disqualified Capital Stock, such fair market value will be determined reasonably and in good faith by the Board of Directors of the issuer of the Disqualified Capital Stock. The amount of any indebtedness (other than Disqualified Capital Stock) outstanding as of any date is: (a) the accreted value to the extent the indebtedness does not require current payments of interest; (b) the principal amount together with any interest that is more than 30 days past due in the case of any other indebtedness; (c) in the case of currency agreements and interest swap agreements, the amount that would appear on the consolidated balance sheet of the Person in accordance with GAAP; and (d) in the case of any guarantee or other contingent obligation in respect of indebtedness of any other Person, the maximum amount of such indebtedness, unless the liability is limited by the terms of the guarantee or contingent obligation, in which case the amount of such guarantee or other contingent obligation is deemed to equal the maximum amount of such liability. The term "DEFAULT" shall mean any event or condition the occurrence of which is, or with the lapse of time or the giving of notice (as provided in this Indenture), or both, would be, an Event of Default. The term "DEPOSITARY" shall mean The Depository Trust Company, its nominees, and their respective successors, until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder. The term "DEPOSITARY AGREEMENT" shall mean the Note Depositary Agreement dated as of the date of this Indenture between the Company and the Book-Entry Depositary. The term "DESIGNATED SENIOR DEBT" shall mean (a) Debt under or in respect of the Credit Facility, and (b) any other Debt constituting Senior Debt, which at the time of determination has an aggregate principal amount of at least $50 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. The term "DISQUALIFIED CAPITAL STOCK" shall mean, with respect to any Person, any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon 5 the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Debt, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, excluding the Senior Convertible Participating Shares. The term "DTC" shall mean the Depository Trust Company, a New York corporation. The term "EUROCLEAR" shall mean the Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. The term "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. The term "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the date on which the Notes are first authenticated and delivered under this Indenture and from time to time thereafter in force. The term "GUARANTOR" shall mean Danka Office Imaging Company, Danka Holding Company and any other Subsidiary of the Company that guarantees the Notes in the future. The term "GUARANTOR SENIOR DEBT" shall mean (a) the principal of, interest on and all other obligations of any Guarantor relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility, (b) amounts payable in regard to any interest swap obligations and currency agreements, (c) the Miscellaneous Notes Payable, and (d) except as provided in the succeeding sentence all other Debt of any Guarantor. The term "Guarantor Senior Debt" shall not include: (a) any Debt of any Guarantor to the Company or to a Restricted Subsidiary of the Company, (b) Debt to or guaranteed on behalf of any shareholders, directors, officers or employees of any Guarantor or any Restricted Subsidiary of the Company, including amounts owed for compensation, (c) Debt to trade creditors and other amounts incurred in connection with obtaining goods, material or services, (d) Debt represented by Disqualified Capital Stock, (e) any liability for federal, state, local or other taxes owed by any Guarantor; (f) Debt incurred in violation of Section 4.9, herein, (vii) Debt that is without recourse to any Guarantor, (g) the 10% Notes, (h) the 6.75% Notes, and (i) any other Debt that by its express terms ranks in right of payment equal to or junior to the Notes. The term "GUARANTY" by any Person shall mean any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Debt of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (b) to purchase property, securities or services for the purpose of assuring the holder of such Debt of the payment of such Debt, or (c) to maintain working capital, equity capital or other financial condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt (and "Guarantee," "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guaranty by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. The term "HOLDER," "HOLDER OF NOTES" or other similar terms, shall mean (a) for so long as the Notes are represented by Global Notes, the bearer thereof, which initially shall be the Book-Entry Depositary and (b) in the event Physical Notes are issued, the person in whose name a particular Note shall be registered on the books of the Company kept for that purpose in accordance with the terms hereof, and the word "majority," used in connection with the terms "Holder," "Holder of Notes," or other similar terms, shall mean the "majority in principal amount of Notes outstanding" whether or not so expressed. The term "INCUR" shall mean, with respect to any Debt or other obligation of any Person, to directly or indirectly, create, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable 6 contingently or otherwise in respect of such Debt or other payment obligation, or otherwise become responsible for, (and "Incurrence," "Incurred," "Incurable" and "Incurring" have meanings, correlative to the foregoing). The term "INDENTURE" shall mean this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. The term "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time hereafter, or any successor federal income tax laws. The term "INVESTMENT" shall mean, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, Notes, debentures or other securities or evidence of Indebtedness issued by, any other Person (including a Subsidiary of the referent Person). The term "Investment" excludes extensions of trade credit by a Person or its Subsidiary on commercially reasonable terms in accordance with normal trade practices of that Person or such subsidiary. For the purposes of Section 4.11 of this Indenture, the amount of any Investment will be the original cost of such Investment plus the cost of all additional Investments by the Company, or any of its Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts will reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. The term "ISSUE DATE" shall mean _______________________, 2001. The term "LIEN" shall mean any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest. The term "MATURITY" when used with respect to any Note, shall mean the date on which the principal of such Note or an installment of principal becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, call for redemption or otherwise. The term "MISCELLANEOUS NOTES PAYABLE" shall mean the miscellaneous notes payable of the Company totaling in the aggregate $2.6 million outstanding at March 31, 2001, which were comprised of the following: (a) $1.5 million of various bank overdraft accounts, (b) $0.9 million of outstanding notes payable related to two acquisitions completed in prior years, and (c) $0.2 million of outstanding capital leases. The term "NET CASH PROCEEDS" shall mean with respect to any Asset Sale, the proceeds in the form of cash or cash equivalents including payments in respect of deferred payment obligations when received in the form of cash or cash equivalents (other than the portion of any such deferred payment constituting interest) that the Company or any of its Restricted Subsidiaries receive from such Asset Sale net of the following: (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (b) income taxes paid or payable after taking into account any reduction in consolidated income tax liability due to available tax credits or deductions and any tax sharing arrangements; (c) repayment of Debt that is required to be repaid in connection with such Asset Sale; (d) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company, or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post- employment benefit liabilities, liabilities related to environmental matters and liabilities under any warranty or indemnification obligations associated with such Asset Sale; (e) proceeds required to be placed in escrow, provided that upon the release of any such proceeds from such escrow to the Company or a Subsidiary of the Company such released proceeds will constitute "Net Cash Proceeds"; and (f) in the case of a sale by a Restricted Subsidiary that is not a wholly owned Restricted Subsidiary, the minority interest's proportionate share of such Net Cash Proceeds. 7 The term "NOTES" shall mean the Zero Coupon Senior Subordinated Notes due April 1, 2004 that are issued under this Indenture. The term "NOTEHOLDER" shall mean a Holder of one or more Notes. The term "OBLIGATIONS" shall mean, collectively, all advances, debts, liabilities, obligations, covenants and duties arising under the Credit Facility (or any other document, agreement or instrument delivered to the agent or any lender under the Credit Facility in connection with the transactions contemplated by the Credit Facility) owing by any borrower under the Credit Facility to the agent, any lender or any person entitled to indemnification from any borrower under the Credit Facility, or arising under any Swap Contract or treasury services contract between any borrower under the Credit Facility and the agent or any lender under the Credit Facility, in any case, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. For the purposes of this definition, the term "SWAP CONTRACT" shall mean any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. The term "OFFICER" shall mean any of the Chairman of the Board of Directors of the Company, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer or the Secretary of the Company. The term "OFFICERS' CERTIFICATE" shall mean a certificate signed by two Officers of the Company complying with the applicable provisions of Sections 13.4 and 13.5 hereof. The term "OPINION OF COUNSEL" shall mean, with respect to any Person, an opinion in writing signed by legal counsel (who may be an employee of or counsel to such Person) who is reasonably acceptable to the Trustee and complying with the applicable provisions of Sections 13.4 and 13.5 hereof. The term "PERMITTED BUSINESS" shall mean the business of the Company and its Subsidiaries existing on the Issue Date or such other businesses as the Board of Directors of the Company determines are businesses reasonably related thereto as evidenced by a Board Resolution. The term "PERMITTED DEBT" shall mean: (a) indebtedness under the Notes and this Indenture; (b) indebtedness under the 10% Notes and the 10% Indenture; (c) indebtedness in an aggregate principal amount at any time outstanding not to exceed the greater of: (i) $150 million and (ii) the available borrowing base of the accounts receivable, inventory and other assets as determined under the Credit Facility; (d) indebtedness in an aggregate principal amount at any time outstanding not to exceed $350 million, less the smaller of the amounts in clauses (c)(i) and (c)(ii) above; (e) other indebtedness (other than the Credit Facility) of the Company and its Subsidiaries outstanding on the Issue Date, including the 6.75% Notes; (f) interest swap obligations of the Company covering indebtedness of the Company or any of its Subsidiaries and interest swap obligations of any Subsidiary of the Company covering indebtedness of such Subsidiary; provided, however, that (i) such interest swap obligations are used for bona fide hedging, and not speculative, purposes and (ii) the notional principal amount of such interest swap obligations does not exceed the principal amount of the indebtedness to which such interest swap obligation relates; (g) indebtedness under currency agreements that (i) are used for bona fide hedging, and not speculative, purposes, and (ii) in the case of currency agreements related to indebtedness, do not increase the indebtedness of the Company and its Subsidiaries outstanding, other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (h) indebtedness of a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company as long as such indebtedness is held by the Company or a Restricted Subsidiary of the Company subject to no Lien held by a Person other than the Company or a Restricted Subsidiary of the Company; provided that if as of any date any Person other than the Company or a Restricted Subsidiary of the Company owns or holds any such indebtedness or holds a Lien in respect of such indebtedness, the incurrence of indebtedness not constituting Permitted Debt by the issuer of such indebtedness shall be deemed to have occurred on such date; (i) indebtedness of the Company to a Restricted Subsidiary of the Company for as long as such indebtedness is held subject to no Lien; provided, if as of any date any Person other than a Restricted Subsidiary of the Company owns or holds any such indebtedness or any Person holds a Lien in respect of such indebtedness, the incurrence of indebtedness not constituting Permitted Debt by the Company shall be deemed to have occurred on such date; (j) indebtedness arising from the honoring by a bank or other financial institution of a check, draft, or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such indebtedness is extinguished within two business days of incurrence; (k) indebtedness of the Company or any of its Subsidiaries represented by letters of credit for the account of the Company or such Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (l) Refinancing Debt; (m) indebtedness incurred by the Company or any Restricted Subsidiary of the Company in connection with the purchase or improvement of property (real or personal) or equipment or other capital expenditures in the ordinary course of business or consisting of Capitalized Lease Obligations; provided that at the time of the incurrence thereof, such indebtedness that is then outstanding does not exceed $40 million; (n) the TROL and any refinancing of the TROL; (o) indebtedness arising from agreements of the Company or a Restricted Subsidiary, for indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any 8 business, assets or Restricted Subsidiary, other than guarantees of indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect to all such indebtedness will at no time exceed the gross proceeds actually received by the Company and the Restricted Subsidiary in connection with such disposition; (p) obligations in respect of performance bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (q) guarantees by the Company or a Restricted Subsidiary of the Company of indebtedness incurred by the Company or a Restricted Subsidiary of the Company so long as the incurrence of such indebtedness by the Company or any such Restricted Subsidiary of the Company is otherwise permitted by the terms of this Indenture; and (r) additional indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $50 million at any one time outstanding. The term "PERMITTED HOLDER" shall mean Cypress Associates II LLC and its Affiliates. The term "PERMITTED INVESTMENTS" shall mean: (a) Investments existing as of the Issue Date; (b) Investments in the Company; (c) Investments by the Company or any Subsidiary of the Company in any Person engaged in a Permitted Business that is or will become immediately after such Investment a Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company; (d) Investments in cash and cash equivalents; (e) loans and advances to employees and Officers of the Company and its Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $2.5 million at any one time outstanding; (f) currency agreements and interest swap obligations entered into in the ordinary course of the Company's or its Subsidiaries' businesses and otherwise in compliance with this Indenture; (g) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (h) Investments made by the Company or any of its Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.15 in the Indenture; and (i) other Investments in any Person having an aggregate fair market value (measured on the date such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (i) that are at the time outstanding, not to exceed $25 million, so long as that after giving effect to any such Investment, no Default or Event of Default will have occurred. The term "PERMITTED LIENS" shall mean: (a) Liens for taxes, assessments or governmental charges or claims that are either (i) not delinquent or (ii) being contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries, as the case may be, has set aside on its books such reserves as may be required pursuant to GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, material men, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums that are either (i) not yet delinquent or (ii) being contested in good faith, and as to which the Company or its Restricted Subsidiary, as the case may be, has set aside on its books such reserves as may be required by GAAP; (c) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (d) Liens securing letters of credit issued in the ordinary course of business consistent with past practice in connection with the items referred to in clause (c) above or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (e) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated has not expired; (f) easements, right-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (g) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (h) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds; (i) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (j) Liens securing interest swap obligations related to Debt that is otherwise permitted under this Indenture; (k) Liens securing Debt under currency agreements; (l) Liens securing Acquired Debt incurred in accordance with Section 4.9 of this Indenture; provided that (i) such 9 Liens secured such Acquired Debt at the time of and prior to the incurrence of such Acquired Debt by the Company or a Restricted Subsidiary of the Company, and were not granted in connection with the incurrence of such Acquired Debt by the Company or a Subsidiary of the Company, and (ii) such Liens do not extend to or cover any property or assets other than the property and assets that secured the Acquired Debt prior to the time such Debt became Acquired Debt of the Company or a Restricted Subsidiary of the Company, and are no more favorable to the lien holders than those securing the Acquired Debt before the incurrence of such Acquired Debt by the Company or a Subsidiary of the Company; (m) leases or subleases granted to others not interfering in any material respect with the business of the Company or any of its Restricted Subsidiaries; (n) any interest or title of a lessor in the property subject to any lease, whether characterized as capitalized or operating, other than any such interest or title resulting from or arising out of a default by the Company or any of its Restricted Subsidiaries of its obligations under such lease; (o) Liens arising from filing UCC financing statements for precautionary purposes in connection with true leases of personal property that are otherwise permitted under this Indenture and under which the Company or any of its Restricted Subsidiaries is lessee, and personal property held on assignment by the Company or any of its Restricted Subsidiaries; (p) Liens arising by virtue of any statutory or common law provisions relating to banker's Liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depositary institution; and (q) Liens in favor of the Trustee and any substantially equivalent Lien granted to any trustee or similar institution under any indenture governing Indebtedness permitted to be incurred or outstanding under this Indenture. The term "PERSON" shall mean an individual, partnership, corporation, limited liability company, trust or unincorporated organization, trust or joint venture, a governmental agency or political subdivision thereof or any other entity. The term "PHYSICAL NOTES" shall mean any Notes transferred or issued pursuant to Section 2.8 in exchange for interests in the Global Notes. The Physical Notes shall be issued in the form of permanent certificated Notes in fully registered form without interest coupons in substantially the form set forth in Exhibit A. --------- The term "PREFERRED STOCK," as applied to the Capital Stock of any Person, shall mean Capital Stock of such Person of any class or classes (however designated) that ranks ahead, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. The term "QUALIFIED CAPITAL STOCK" shall mean any Capital Stock that is not Disqualified Capital Stock. The term "REDEMPTION DATE", when used with respect to any Note to be redeemed, shall mean the date fixed for such redemption or repurchase by or pursuant to this Indenture. The term "REDEMPTION PRICE" shall mean the amount payable for the redemption of any Note pursuant to this Indenture. The term "REFINANCE" shall mean, in respect to any security or Debt, to refinance, extend, renew, refund, repay, redeem, defease or retire, or to issue a security or Debt in exchange or replacement for, such security or Debt in whole or in part. The terms "Refinanced" and "Refinancing" have correlative meanings. The term "REFINANCING DEBT" shall mean any Refinancing by a Person of Debt incurred in accordance with Section 4.9 of this Indenture (other than pursuant to clauses (a), (b), (e) or (l) of the definition of "Permitted Debt"), in each case that does not: (a) result in an increase in the aggregate principal amount of Debt of such Person as of the date of such proposed Refinancing (plus the amount of any premium or penalty required to be paid under the terms of the instrument governing such Debt and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing); or (b) create Debt with (i) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Debt being Refinanced or (ii) a final maturity earlier than the final maturity of the Debt being Refinanced; provided that (x) if such Debt being Refinanced is solely Debt of the Company, then such Refinancing Debt will be solely of the Company and (y) if such Debt being Refinanced is subordinate or junior to the Notes or any Subsidiary Guarantee, then such Refinancing Debt will require no prior principal payment prior to 91 days after the final maturity date of the Notes or will be subordinate to the Notes at least to the same extent and in the same manner as the Debt being Refinanced. 10 The term "REGISTRAR" shall mean any Person, which may be the Company, authorized by the Company to exchange or register the transfer of Notes. The term "RESPONSIBLE OFFICER" shall mean any officer within the Issuer Services office of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject, or any officer of the Trustee with direct responsibility for the administration of this Indenture. The term "RESTRICTED PAYMENTS" shall mean those payments that the Company or any of its Subsidiaries or Restricted Subsidiaries make in connection with the following: (a) the declaration or payment of any dividend or any distribution (other than dividends or distributions payable in the form of Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock or any Restricted Subsidiary or Subsidiary's Capital Stock; (b) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary or Subsidiary of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (c) any Investment (other than Permitted Investments); or (d) any payment on or with respect to, or purchase, redemption, defeasement or other acquisition or retirement for value of any of the Debt that ranks below the Notes in right of payment, except a payment of interest or principal at stated maturity and except an offer to purchase the 10% Notes made in accordance with their terms upon a change of control, provided such offer is consummated after the corresponding offer on the Notes has been consummated and the purchase price for any tendered Notes has been paid in full. The term "RESTRICTED SUBSIDIARY" of a Person shall mean any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. The term "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. The term "SENIOR CONVERTIBLE PARTICIPATING SHARES" shall mean the 6.50% senior convertible participating shares of the Company with par value $1.00 each. The term "SENIOR DEBT" shall mean: (a) the principal of, interest on and all other Obligations relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility; (b) amounts payable in respect of any interest swap obligations and currency agreements; (c) the Miscellaneous Notes Payable; and (d) all other Debt, except for any Debt which by its terms ranks equal to or behind the Notes in right of payment and except as otherwise provided below. Notwithstanding the foregoing, the term ''Senior Debt" does not include: (a) any Debt of the Company to any Subsidiary of the Company; (b) Debt to or guaranteed on behalf of any shareholder, director, officer or employee of the Company or any Subsidiary of the Company, including amounts owed for compensation; (c) Debt to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (d) Debt represented by Disqualified Capital Stock; (e) any liability for federal, state, local or other taxes owed by the Company; (f) Debt incurred in violation of Section 4.9 of this Indenture; (g) Debt that is without recourse to the Company; (h) the 10% Notes; (i) the 6.75% Notes; and (j) any other Debt that by its express terms ranks in right of payment equal to or behind the Notes. The term "SENIOR REPRESENTATIVE" shall mean any trustee, agent or representative, if any, for the holders of any Designated Senior Debt. The term "SIGNIFICANT SUBSIDIARY" shall have the meaning given to it by Article 1.02(w) of Regulation S-X under the Securities Exchange Act of 1934, as amended. The term "6.75% NOTES" shall mean the Company's 6.75% Convertible Subordinated Notes due April 1, 2002. 11 The term "STATED MATURITY" when used with respect to any security or Debt, or any installment of interest thereon, shall mean the date specified in such security or the instrument relating to such Debt as the fixed date on which the principal of such security or Debt or such installment of interest is due and payable. The term "SUBSIDIARY" of any Person shall mean: (a) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances is owned, directly or indirectly, by such Person; or (b) any other Person of which at least a majority of the voting interest under ordinary circumstances is owned, directly or indirectly, by such Person. The term "Subsidiary" does not include an Unrestricted Subsidiary for purposes of this Indenture. The term "SUBSIDIARY GUARANTEE" shall mean any Guarantee by a Guarantor, as defined further in Section 4.21 hereof. The term "10% INDENTURE" shall mean the indenture for the 10% Notes executed on the Issue Date. The term "10% NOTES" shall mean the Company's 10% Subordinated Notes due April 1, 2008. The term "TROL" shall mean the tax retention operating lease arrangements of the Company in effect on February 19, 2001. The term "TRUSTEE" shall mean HSBC Bank USA or any successor thereto. The term "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent such Subsidiary: (a) has no Debt other than non-recourse Debt; (b) on the date of designation, is not a party to any agreement with the Company or a Restricted Subsidiary of the Company unless the terms of any such agreement are no less favorable to the Company or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates or the Company or the Restricted Subsidiary; (c) is a Person with respect to which neither the Company or any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Capital Stock or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Debt of the Company or any of its Restricted Subsidiaries, including a guarantee of the Notes. The term "U.S. GOVERNMENT OBLIGATIONS" shall mean securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality, of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligations or a specific payment of interest on or principal of any such U.S. Government Obligations held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of interest on or principal of the U.S. Government Obligations evidenced by such depository receipt. The term "VOTING STOCK" of any Person shall mean Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. The term "WEIGHTED AVERAGE LIFE TO MATURITY" shall mean, when applied to any Debt at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Debt. 12 SECTION 1.2. Other Definitions. Term Defined in Section ---- ------------------ "Acceleration Due to Blockage" 6.2 "Act" 1.5(a) "Additional Amounts" 4.23 "ADS Conversion Price" 10.2 "Agent Members" 2.8(b) "Approvals and Notices" 10.4 "Blockage Period" 11.2 "Change of Control Offer" 4.17 "Conversion Notice" 10.3 "Conversion Price" 10.2 "Conversion Right" 10.1 "covenant defeasance" 8.1 "Default" 6.1 "Event of Default" 6.1 "Excluded Holder" 4.23 "Global Notes" 2.1 "legal defeasance" 8.1 "Ordinary Shares Conversion Price" 10.2 "Net Proceeds Offer" 4.15(b) "Net Proceeds Offer Amount" 4.15(b) "Net Proceeds Offer Payment Date" 4.15(b) "Net Proceeds Offer Trigger Date" 4.15(b) "Paying Agent" 2.4 "Registrar" 2.4 "Repurchase Date" 4.17 "Required Filing Dates" 4.7 13 "Security Register" 2.7 "Senior Nonmonetary Default" 11.2 "Senior Payment Default" 11.2 "Shares" 10.1 "Surviving Entity" 5.1 "Taxes" 4.23(a) "TIA" 1.3 SECTION 1.3. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act of 1939 ("TIA"), the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITYHOLDER" means a Noteholder; "INDENTURE TO BE QUALIFIED" means this Indenture; and "OBLIGOR" on the Notes means the Company, any other obligor upon the Notes or any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. SECTION 1.4. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) "including" means including without limitation; (e) words in the singular include the plural, and words in the plural include the singular; (f) provisions apply to successive events and transactions; and (g) references to sections of or rules under the Securities Act and the Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time. SECTION 1.5. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Written actions so taken by the Holders or actions taken by the Holders at a meeting in accordance with Article 12 hereof, are herein collectively referred to as the "Act" of Holders of signing such instrument or instruments or taking such actions at a meeting of the Holders. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.1 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.5. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law 14 to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his or her authority. (c) Pursuant to Article 2, if Global Notes are transferred into registered Physical Notes, the ownership of those registered Notes shall be proved by the register maintained by the Registrar. (d) Subject to the provisions of Section 9.4, any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer therefor or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. However, any such Holder or subsequent Holder may revoke the request, demand, authorization, direction, notice, consent, waiver or other Act as to his or her Note or portion thereof if the Trustee receives written notice of revocation before the date such Act becomes effective. (e) The principal amount and serial numbers of Physical Notes held by any Person, and the date of holding the same, shall be proved by the Security Register. The principal amount and serial numbers of Global Notes held by any Person, and the date of holding the same, may be proved by the production of such Global Notes or by a certificate executed, as depositary, by any trust company, bank, banker or other depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Global Notes therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Global Notes, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Global Note continues until (i) another certificate or affidavit bearing a later date issued in respect of the same Global Note is produced, or (ii) such Global Note is produced to the Trustee by some other Person, or (iii) such Global Note is surrendered in exchange for a Physical Note, or (iv) such Global Note is no longer outstanding. The principal amount and serial numbers of Global Notes held by any Person, and the date of holding the same, may also be proved in any other manner which the Trustee deems sufficient. ARTICLE 2 THE NOTES SECTION 2.1. Form and Dating. (a) The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth in Exhibit A. The Company shall approve the form of the Notes --------- and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. The Notes shall be issuable and initially represented by one or more global notes in bearer form without interest coupons in substantially the form set forth in Exhibit A (the "Global Notes"). --------- (b) The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (c) The aggregate principal amount of Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) The Physical Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on 15 which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. Physical Notes shall be issued in registered form only and in no event shall Physical Notes be issued in bearer form. SECTION 2.2. Denominations. The Notes shall initially be issued in denominations of $1,000 and integral multiples of $1,000; provided, however, the Company may issue Notes in denominations of less than $1,000. SECTION 2.3. Execution and Authentication. (a) Two Officers (each of whom shall have been duly authorized by all requisite corporate actions) shall sign the Notes for the Company by manual or facsimile signature. (b) If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. (c) A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. (d) The Trustee shall authenticate Notes for original issue upon a written order of the Company executed by two Officers. The written order shall specify the amount and type of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and the legends, if any, to be placed on the Notes. (e) The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. SECTION 2.4. Registrar and Paying Agent. (a) The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York where (i) Notes, if in registered form, may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (ii) Notes may be presented or surrendered for payment ("Paying Agent") and (iii) notices and demands in respect of the Notes and this Indenture may be served. The Company or any Subsidiary or Affiliate of the Company may serve as the Agent referred to in clause (i), (ii) or (iii) above, except the Company, or such Subsidiary or Affiliate may not act as Paying Agent for purposes of the repurchase under Sections 4.15 or 4.17. The Registrar shall keep a register of the Notes, in registered form, and of their transfer and exchange. The Company, upon written notice to and approval of the Trustee, may appoint one or more co-registrars and one or more additional paying agents. The Company may change any Registrar or Paying Agent without notice to any Noteholder. The term "Paying Agent" includes any additional paying agent reasonably acceptable to the Trustee. The term "Registrar" includes any appointed co-registrar. The Company initially appoints the Trustee as Registrar and Paying Agent and agent to receive notices and demands in respect of the Notes until such time as the Trustee has resigned or a successor has been appointed in accordance with the terms of this Indenture. For so long as the Notes are listed on the Luxembourg Stock Exchange, the Company shall maintain a Paying Agent in Luxembourg. The Company shall appoint Banque Internationale a Luxembourg S.A. as its Paying Agent in Luxembourg until such time as Banque Internationale a Luxembourg has resigned or a successor has been appointed. (b) The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee in writing, in advance, of the name and address of any such Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.5. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of, and premium, if any, on, the Notes (whether such money has been distributed to it by the 16 Company or any other obligor on the Notes), and shall notify the Trustee in writing of any Default by the Company (or any other obligor upon the Notes) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate such money and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization procedures relating to the Company, the Trustee shall serve as Paying Agent for the Notes. While any such Default continues, the Trustee may require a Paying Agent to pay all such money held by it to the Trustee. The Company (or any other obligor upon the Notes) at any time may require a Paying Agent to pay all such money held by it to the Trustee and account for any funds disbursed. Upon such payment to the Trustee, the Paying Agent (if other than the Company, a Subsidiary or any other obligor upon the Notes) shall have no further liability for such money. SECTION 2.6. Noteholder Lists. In the event that Physical Notes are issued, the Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company (or any other obligor upon the Notes) shall furnish to the Trustee at least seven (7) Business Days before any payment date (and in all events at intervals of not more than six months) and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.7. Transfer and Exchange. (a) Physical Notes shall be transferable only upon the surrender of a Physical Note for registration of transfer. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 4.2 hereof being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Physical Notes and of transfers of Physical Notes. Where Notes in registered form are presented to the Registrar or a co-registrar with a request to register the transfer of such Notes or exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange if its requirements for such transactions are met, provided that any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar or co-registrar and the Trustee, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate the Notes at the Registrar's or co- registrar's request. (b) The Registrar or co-registrar shall not be required to register the transfer of or exchange any Note in registered form (i) during a period beginning at the opening of business on a Business Day fifteen (15) days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article 3 hereof, except the unredeemed portion of any Note being redeemed in part. (c) No service charge shall be made for any registration of transfer or exchange; provided however, that the Company, Registrar or Trustee, as appropriate, may require payment of a sum sufficient to pay any taxes or similar governmental charges that may be imposed in connection with the transfer or exchange of Notes in registered form from the Noteholder requesting such transfer or exchange (other than any such transfer taxes or similar governmental charges arising under the laws of the United Kingdom or the United States or of any State thereof payable upon transfers or exchanges pursuant to Sections 2.10, 2.13, 3.6, 4.15, 4.17 or 9.5 hereof). SECTION 2.8. Book-Entry Provisions for Global Notes (a) The Global Notes initially shall (i) be in bearer form in accordance with Section 2.1(a) of this Indenture and (ii) be delivered to the Trustee as custodian for such Depositary. (b) Rights of members of, or participants in DTC or the Depositary ("Agent Members") shall be limited with respect to any Global Note held on their behalf by the Trustee in accordance with Section 2.16 hereof. 17 (c) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depositary or, if applicable, those of Euroclear and Clearstream, and the provisions of this Article 2. (d) Physical Notes shall be transferred to all beneficial owners, as definitive registered Notes, in exchange for their beneficial interests in the Global Notes, only if (i) the Depositary notifies the Company or the Trustee that it is unwilling or unable to continue as Depositary for the Global Notes, as the case may be, and a successor depositary is not appointed by the Company within 90 days of such notice; (ii) at any time, the Company determines that the Global Notes, in whole but not in part, should be exchanged for definitive registered Notes, but only if, such exchange is required by any applicable law, any event beyond the control, or payments on any Global Note, depositary interest or book-entry interest, or would become, subject to any deduction or withholding for taxes; (iii) the Trustee is at any time unwilling or unable to continue as book-entry depositary and the Company does not appoint a successor within 90 days; or (iv) an Event of Default has occurred and is continuing and the Trustee has received a request to the foregoing effect from the Holder. (e) In connection with any transfer of a portion of the beneficial interests in a Global Note to beneficial owners pursuant to paragraph (d) of this Section 2.8, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in such Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to each beneficial owner identified by the Depositary or, if applicable, by Euroclear or Clearstream, in exchange for its beneficial interest in the Global Note an equal aggregate principal amount of Physical Notes of authorized denominations. (f) In connection with the transfer of the entire Global Note to beneficial owners pursuant to paragraph (b) of this Section, the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary or, if applicable, by Euroclear or Clearstream, in exchange for its beneficial interest in the Global Note an equal aggregate principal amount of Physical Notes of authorized denominations. (g) The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (h) Beneficial owners of interests in a Global Note may receive Physical Notes in accordance with the procedures of the Depositary. In connection with the execution, authentication and delivery of such Physical Notes, the Registrar shall reflect on its books and records a decrease in the principal amount of the relevant Global Note, in registered form, equal to the principal amount of such Physical Notes and the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Notes having an equal aggregate principal amount. SECTION 2.9. Deposit of Monies. In accordance with the procedures set forth in Section 4.1 of this Indenture, one Business Day prior to the date of any Stated Maturity, the Company or Guarantor shall have irrevocably deposited with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments for the principal and premium, if any, due on the Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on the Maturity Date, as the case may be. SECTION 2.10. Replacement Notes. If any mutilated Physical Note is surrendered to the Trustee or if any mutilated Global Note is surrendered to the Company or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, and the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company in the form of an Officers' Certificate, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond or other form of indemnification must be supplied by the Holder that is sufficient in 18 the judgment of the Trustee and the Company to protect the Company, the Trustee, or any Agent from any loss which any of them may suffer if a Note is replaced. The Company may charge the Holder for its reasonable out-of-pocket expenses in replacing a Note. The Company shall remain obligated under any replacement Note to the same extent as the original Note surrendered. SECTION 2.11. Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled or those delivered to it for cancellation and those described in this Section 2.11 as not outstanding. (b) If a Note is replaced pursuant to Section 2.10 hereof (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.10 hereof. (c) If an amount of money necessary to pay or redeem any Note shall be deposited in trust with the Trustee (and in the case of a Note which is to be redeemed prior to the Stated Maturity thereof, notice of such redemption shall be duly given or provision satisfactory to the Trustee shall be made for giving such notice), it ceases to be outstanding on and after the Redemption Date. (d) If a Note is cancelled by the Trustee or delivered to the Trustee for cancellation, it ceases to be outstanding. (e) A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note, except as otherwise provided in Section 2.12 hereof. SECTION 2.12. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any other obligor upon the Notes or an Affiliate of the Company or such other obligor shall be considered as though not outstanding, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to so act with respect to such Notes and that the pledgee is not the Company or any Affiliate of the Company. SECTION 2.13. Temporary Notes. Until Physical Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Physical Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Physical Notes to be authenticated and the date on which the temporary Physical Notes are to be authenticated. Temporary Physical Notes shall be substantially in the form of Physical Notes but may have variations that the Company considers appropriate for temporary Physical Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company pursuant to Section 2.3(d) hereof, shall authenticate Physical Notes in exchange for temporary Physical Notes. Until such exchange, temporary Physical Notes shall be entitled to the same rights, benefits and privileges as Physical Notes. SECTION 2.14. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee for cancellation any Physical Notes surrendered to them for registration of transfer, exchange, payment, repayment or redemption. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or a Subsidiary of the Company), and no one else, shall promptly cancel all Notes (in registered form) so delivered to the Trustee or surrendered for registration of transfer, exchange, payment, repayment, redemption, replacement or cancellation and shall destroy cancelled Notes in accordance with the usual destruction procedures of the Trustee and a record of their destruction shall be maintained by the Trustee. 19 If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Debt represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.14. SECTION 2.15. [Intentionally Omitted] SECTION 2.16. Persons Deemed Owners. (a) Members of, or participants in, DTC shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Trustee, and the Trustee may be treated by the Depositary, the Company and any agent of the Company as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Depository or any agent of such, from giving effect to any written certification, proxy or other authorization furnished by the Trustee or the Depository regarding the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) The Holder may grant proxies and otherwise authorize any Person, including Agents and persons that may hold interests through Agents, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17. CUSIP, CINS and ISIN Numbers. The Company in issuing the Notes may use "CUSIP", "CINS", "ISIN" or other identification numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers, CINS numbers, ISIN numbers or other identification numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders, provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only to the other identification numbers printed on the Notes, provided further that failure to use "CUSIP", "CINS", "ISIN" or other identification numbers in any notice of redemption or exchange shall not effect the validity or sufficiency of such notice. SECTION 2.18. Issuance of Additional Notes. The Company may not issue additional Notes under this Indenture. ARTICLE 3 REDEMPTION SECTION 3.1. Notices to Trustee. (a) If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a Redemption Date, an Officers' Certificate setting forth the Section of this Indenture pursuant to which the redemption shall occur, the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price. If the Company elects to have the Trustee furnish notice of redemption (as described above) of the Notes to the Holders, the Company shall notify the Trustee in writing and provide all the information and documentation required by this paragraph, at least 45 days but not more than 60 days before a Redemption Date. (b) If the Registrar is not the Trustee, the Company shall, concurrently with each notice of redemption, cause the Registrar to deliver to the Trustee a certificate (upon which the Trustee may rely) setting forth the principal amounts of Notes held by each Holder. 20 SECTION 3.2. Selection of Notes to Be Redeemed. (a) If less than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange or if no such requirements exist, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that any Notes with a principal amount of less than $1,000 shall not be redeemed in part. (b) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of them selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes, held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.3. Notice of Redemption. (a) At least 30 days but not more than 60 days before a Redemption Date, the Company shall (i) if the Notes are represented by a Global Note, publish in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) and, so long as the Notes are listed on the ------------------- Luxembourg Stock Exchange and the rules of such Exchange so require, shall publish in a daily newspaper in Luxembourg (which is expected to be the Luxemburger Wort) or (ii) if the Notes are represented by Physical Notes, mail - ---------------- or cause to be mailed by first class mail, a notice of redemption to each Holder of the Notes to be redeemed, at the last address for that holder shown on the registry books with a copy to the Trustee and for so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange so require, publish in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). If the Company redeems any Note ---------------- in part only, the notice of redemption that relates to that Note will state the portion of the principal amount to be redeemed, which portion will not be less than $1,000. The Company will issue a new Note in principal amount equal to the unredeemed portion in the name of the Holder upon cancellation of the original Note (subject to DTC procedures). (b) The notice shall identify the Notes to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed in integral multiples of $1,000, and not less than $1,000 and that, after the Redemption Date, upon surrender of such Note, a new note or notes in principal amount equal to the unredeemed portion will be issued in the name of the holder upon cancellation of the original note (subject to DTC procedures); (iv) the name and address of the Paying Agent; (v) that Notes called for redemption must be surrendered to the Paying Agent at its address to collect the Redemption Price; (vi) that, unless the Company defaults in making the redemption payment, the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price upon surrender to the Paying Agent of such Notes; (vii) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption; (viii) the paragraph of this Indenture pursuant to which the Notes called for redemption are being redeemed; and 21 (ix) the CUSIP, CINS or ISIN number of the Notes, as the case may be. (c) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense, provided that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in Section 3.3(b). SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date at the Redemption Price. Upon surrender to any Paying Agent, such Notes shall be paid at the Redemption Price, on condition that sufficient funds to pay the Redemption Price of such Notes have been deposited with the Paying Agent. SECTION 3.5. Deposit of Redemption Price. At least one Business Day prior to the Redemption Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or if the Company is its own Paying Agent, shall, on or before the redemption date, segregate and hold in trust) money sufficient to pay the Redemption Price of all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. SECTION 3.6. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.7. Optional Redemption. The Company may redeem all or any part of the Notes at any time, for a Redemption Price equal to 100% of their principal amount. The Company must provide at least 30 but no more than 60 days' notice to the Holders. Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof. ARTICLE 4 COVENANTS Subject to the provisions of Section 8.1 hereof, so long as Notes are outstanding hereunder, the Company covenants for the benefit of the Holders that: SECTION 4.1. Payment of Principal. The Company shall duly and punctually pay the principal, and premium, if any, on the Notes on the date and in the manner provided in the Notes and this Indenture. One Business Day prior to the date of any Stated Maturity, the Company shall irrevocably deposit with the Trustee or with the Paying Agent money in immediately available funds sufficient to pay such principal and premium, if any, on the Maturity Date. An installment of principal (or a payment of premium, if applicable) shall be considered paid on the date due if the Trustee or the Paying Agent (other than the Company, a Subsidiary of the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay the installment in full. If the Company or any Subsidiary of the Company or any Affiliate of either the Company or any Subsidiary, acts as Paying Agent, an installment of principal or premium, if any, shall be considered paid on the due date if the entity acting as Paying Agent complies with Section 2.5. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. 22 SECTION 4.2. Maintenance of Office or Agency for Notices and Demands. The Company shall maintain in New York, New York, an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where the Notes may be presented for payment, registration of transfer or exchange and an office or agency where notices and demands to or upon the Company in respect of such Notes or of this Indenture may be served. Until otherwise designated by the Company in a written notice to the Trustee, such office or agency in The City of New York shall be the Corporate Trust Office, which shall be, until further notice to the Company by the Trustee, at c/o Issuer Services, 452 Fifth Avenue, New York, New York 10018. The Company may designate multiple offices for purposes of notices and demands. The Company may designate multiple offices for purposes of notices and demands. SECTION 4.3. Property and Insurance Matters. The Company shall maintain all material property, including equipment, in reasonable condition and order. The Company shall provide or cause to be provided for itself and each of its Subsidiaries insurance (including appropriate self-insurance) against loss or damage arising from the conduct of the business of the Company and its Subsidiaries with reputable insurers in such amounts, with such deductibles, and by such methods as will be either (a) consistent in all material respects with past practices of the Company or the applicable Subsidiary, or (b) customary in the industry, unless the failure to provide such insurance would not have a material adverse effect on the financial condition or results of operations taken as a whole or be a violation of applicable law or material agreement of the Company or its Subsidiaries. SECTION 4.4. Compliance Certificate and Opinion of Counsel; Notice of Default. (a) The Company shall deliver to the Trustee, within 90 days after the end of the Company's fiscal year, an Officers' Certificate, if given by one of the Company's Officers, or an Opinion of Counsel, if it is given by counsel, stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Person with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate or such counsel signing the opinion, that to the best of his or her knowledge the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and no Default or Event of Default occurred during such year or, if such signers do know of any Default or Event of Default, the certificate shall describe such Default or Event of Default and its status with reasonable particularity. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five (5) Business Days after becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, a notice identifying in reasonable detail the circumstances relating to such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.5. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, material rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such material right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders of the Notes. SECTION 4.6. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before any material penalty accrues thereon the following: (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary of the Company or upon the income, profits or property of the Company or any Subsidiary of the Company, and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, 23 assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.7. Reports. So long as any of the Notes are outstanding, whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall file with the Commission the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to such Sections 13(a) or 15(d) of the Exchange Act if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required to file such documents if the Company were so subject. The Company shall also in any event within 15 days after each Required Filing Date mail to the Trustee, copies of the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to Sections 13(a) or 15(d) of the Exchange Act if the Company were subject so such Sections. Upon qualification of this Indenture under the TIA, the Company shall also comply with the other provisions of TIA Section 314(a). Notwithstanding anything to the contrary herein, the Trustee shall have no duty to review such documents for purposes of determining compliance with any provisions of this Indenture. SECTION 4.8. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, and premium, if any, on, the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.9. Limitation on Incurrence of Additional Debt. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries, including the Guarantors, to directly or indirectly, Incur any Debt other than Permitted Debt, provided, however that (a) the Company and its Restricted Subsidiaries, including the Guarantors, may Incur Debt (including Acquired Debt) if there is no Default or Event of Default, at the time or as a consequence of the incurrence of the Debt and on the date of incurrence of the Debt, if after giving effect to the incurrence of the Debt, the Consolidated Fixed Charge Coverage Ratio of the Company would be equal to or greater than 2.0 to 1. The accretion of original issue discount and accrual of interest do not constitute the Incurrence of Debt. (b) For purposes of determining compliance with this Section 4.9, (i) in the event that an item of Debt meets the criteria of more than one of the categories of Debt set forth in Section 4.9(a) or in the definition of Permitted Debt, the Company, in its sole discretion, shall classify such item of Debt and shall only be required to include the amount and category of such Debt in one such category set forth in Section 4.9(a) or in such definition and (ii) Debt permitted by this Section 4.9 need not be permitted solely by reference to one provision permitting such Debt but may be divided and classified in more than one category of Permitted Debt set forth in the definition of Permitted Debt and permitted in part by one provision and in part by one or more other provisions of this Section 4.9 that would permit incurrence of such Debt. SECTION 4.10. Limitation on Other Subordinated Debt. So long as any of the Notes are outstanding, the Company shall not Incur any Debt that is by its terms subordinated to Senior Debt, unless such Debt so Incurred ranks pari passu in right of payment with the Notes, or is subordinated in right of payment to the Notes. For purposes of this Section 4.10, Debt which is secured by a junior Lien is not deemed subordinate or junior merely by virtue of such junior priority. 24 SECTION 4.11. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make, declare or pay any Restricted Payment, unless if at the time of such Restricted Payment or immediately after giving effect thereto: (i) no Default or Event of Default has occurred or is continuing; (ii) the Company can Incur at least $1.00 of additional Debt in addition to Permitted Debt, pursuant to Section 4.9 hereof; and (iii) the aggregate of all Restricted Payments (including the proposed Restricted Payment) after the Issue Date do not exceed the sum of: (A) 50% of the cumulative Consolidated Net Income (or if a loss, minus 100% of such loss) of the Company earned during the period after the Issue Date and on or before the date the Restricted Payment occurs (excluding any partial fiscal quarter or quarters); plus (B) 100% of the aggregate net cash proceeds received by the Company from any Person other than a Subsidiary of the Company from the issuance and sale after the Issue Date, and on or before the date the Restricted Payment occurs, of Qualified Capital Stock; and (C) 100% of the net cash proceeds from the sale of Investments by the Company (other than Permitted Investments) if such Investment was made after the Issue Date. (b) The foregoing provisions will not be violated by reason of: (i) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (ii) if no Default or Event of Default has occurred or is continuing, acquisition of any shares of Qualified Capital Stock of the Company or payment, redemption, acquisition or defeasance of Debt that ranks below the Notes in right of payment, either (A) solely in exchange for shares of Qualified Capital Stock of the Company and in the case of payment, redemption, acquisition or defeasance of Debt for Refinancing Debt, or (B) through the application of net proceeds of a substantially concurrent sale for cash of shares of Qualified Capital Stock of the Company; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Debt with the net cash proceeds from Refinancing Debt; (iv) the payment of a dividend or distribution by any of the Company's Restricted Subsidiaries to the Company or any one of the Company's wholly owned Restricted Subsidiaries; (v) if no Default or Event of Default has occurred or is continuing, repurchases of Capital Stock deemed to occur upon the exercise of stock options held by current or former employees or directors if such Capital Stock represents a portion of the exercise price; and (vi) if no Default or Event of Default has occurred or is continuing, dividends and distributions by a Restricted Subsidiary or Subsidiary of the Company pro rata to the holders of the Company's Capital Stock. SECTION 4.12. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. (a) The Company may not, and may not permit any Restricted Subsidiary of the Company to create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company: (i) to pay dividends or make any other distributions in respect of its Capital Stock or pay any Debt or other obligation owed to the Company or any other Restricted Subsidiary of the Company; (ii) to make loans or advances to the Company or any Restricted Subsidiary of the Company; or (iii) to transfer any of its property or assets to the Company or another of the Company's Restricted Subsidiaries. (b) Notwithstanding anything to the contrary in Section 4.12(a), the Company may and may permit its Restricted Subsidiaries, to create, assume, otherwise suffer to exist any such encumbrance or restriction on the ability of any Restricted Subsidiary of the Company if and to the extent that such encumbrance or restriction exist under or by reason of the following: (i) applicable law; (ii) this Indenture; (iii) the 10% Indenture; (iv) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Subsidiary of the Company; (v) any instrument governing Acquired Debt, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (vi) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (vii) purchase money obligations for property acquired that impose restrictions of the nature described in clause (v) above on the property so acquired; (viii) any instrument or agreement governing Senior Debt; (ix) any instrument or agreement governing any other Debt permitted to be incurred under this Indenture, provided that the encumbrances or restrictions that exist in such instrument or agreement are similar to those in this Indenture; or (x) any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or property of any Restricted Subsidiary that apply pending the closing of such sale or disposition. 25 SECTION 4.13. Limitation on Liens. (a) The Company shall not, and shall not permit any Restricted Subsidiary of the Company to, directly or indirectly, create, incur, assume or suffer to exist any Liens (other than Permitted Liens) upon or in respect of any of its property or assets of the Company or any of its Restricted Subsidiaries, whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefore, or assign or otherwise convey any right to receive payment or profits therefrom, in order to secure any Debt that ranks pari passu with or subordinate in right of payment to the Notes, unless: (i) for Liens securing Debt that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien that is senior in priority to the Liens securing Debt which is subordinated to the Notes; and (ii) in all other cases, the Notes are equally and ratably secured. (b) The restrictions of Section 4.13(a) shall not apply to: (i) Liens existing as of the Issue Date; (ii) Liens securing Senior Debt; (iii) Liens in favor of the Company or a wholly owned Restricted Subsidiary of the Company on assets of any Restricted Subsidiary of the Company; (iv) Liens securing Refinancing Debt that is incurred to Refinance Debt that is secured by a Lien permitted under this Indenture and that has been incurred in accordance with this Indenture; provided, however that the effect of the Liens is no more unfavorable to the Holders of the Notes than the Liens for the Debt being Refinanced and do not extend to any property or assets not securing the Debt so Refinanced; and (v) Permitted Liens. SECTION 4.14. Limitation on Transactions with Affiliates and Related Persons. (a) The Company may not, and may not permit any Restricted Subsidiary of the Company to, directly or indirectly, enter into any transaction or series of related transactions on or after the Issue Date with or for the benefit of any Affiliate of the Company or its Restricted Subsidiaries, unless: (i) such transactions or series of transactions are on terms that are no less favorable to the Company or its Restricted Subsidiary than those that could be reasonably obtained in a comparable arm's length transaction with a Person that is not an Affiliate of the Company or its Restricted Subsidiary; and (ii) with respect to any such transaction or series of transactions, the following terms shall have been satisfied: (A) any transaction with Affiliates or a series of related transactions with Affiliates that are similar or part of a common plan involving aggregate payments or other property with a fair market value in excess of $5 million shall be approved by the Board of Directors of the Company or of its Restricted Subsidiary, as the case may be, which approval shall be evidenced by a Board Resolution stating that the Board of Directors, including a majority of the disinterested directors has determined that the transaction complies with the foregoing provisions, or (B) if the Company or any Restricted Subsidiary of the Company enters into a transaction with an Affiliate, or a series of related transactions with Affiliates that are similar or part of a common plan involving aggregate payments or other property with a fair market value at more than $20 million, the Company or the relevant Restricted Subsidiary shall, before the consummation of the transaction or transactions, have obtained a favorable opinion as to the fairness of the transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an independent financial advisor and file the same with the Trustee. (b) Section 4.14(a) shall not apply to: (i) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, or employees of the Company or any Subsidiary of the Company as determined in good faith by the Board of Directors; (ii) transactions between or among the Company and any of its Restricted Subsidiaries or between or Restricted Subsidiaries; (iii) any agreement in effect on the Issue Date and any modified or replacement agreement of an agreement in effect on the Issue Date that is not more disadvantageous to the Holders of the Notes in any material respect than the original agreement as in effect on the Issue Date; and (d) Restricted Payments and Permitted Investments permitted by this Indenture. SECTION 4.15. Limitation on Certain Asset Sales. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (i) the Company or the applicable Restricted Subsidiary (as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Board of Directors) and (ii) upon the consummation of the Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds of the Asset Sale within 360 days of receipt to either (A) prepay Senior Debt; (B) make an investment in properties and assets (other than cash, cash equivalents or inventory) that replace the properties and assets that were the subject of the 26 Asset Sale or in properties and assets that will be used in a Permitted Business; or (C) a combination of prepayment and investment permitted by (A) and (B) above. (b) On the 360th day after an Asset Sale (the "Net Proceeds Offer Trigger Date"), the portion of the aggregate amount of Net Cash Proceeds not applied on or before the Net Proceeds Offer Trigger Date multiplied by a fraction the numerator of which is equal to the principal amount of the Notes and the denominator of which is equal to the sum of the principal amount of the Notes and all Debt ranking equal to the Notes (each a "Net Proceeds Offer Amount") will be applied by the Company or the Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") at least 30 but not more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of the Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased. If any non-cash consideration received is converted into or sold or otherwise disposed of for cash or cash equivalents (other than interest received with respect to any such non-cash consideration), then the conversion or disposition will be deemed to be an Asset Sale and the Net Cash Proceeds of which will be applied in accordance with this Section 4.15. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5 million, will be applied). (c) Notice of each Net Proceeds Offer shall be given to each Holder in accordance with Section 13.2, within 30 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee. Such notice shall state: (i) an Asset Sale has occurred and that the Holder has the right to require the Company to repurchase such Holder's Notes, in whole or in part, and if in part equal to $1,000 or integral multiples of $1,000 at a repurchase price equal to 100% of the principal amount thereof; (ii) the circumstances and relevant facts of the Asset Sale; (iii) the Repurchase Date (which shall be not earlier than 30 days or later than 60 days from the date such notice is mailed) (the "Repurchase Date"); (iv) that Holders electing to have a Note purchased pursuant to a Net Proceeds Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent (which may be the Company) at the address specified in the notice prior to the close of business on the Repurchase Date; (v) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Repurchase Date, a telegram, telex, facsimile transmission or other written communication setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, and a statement that such Holder is withdrawing his or her election to have such Notes purchased; and (vi) that Holders which elect to have their Notes purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered. (d) If the Company is required to repurchase Notes pursuant to the provisions of this Section 4.15 hereof, it shall notify the Trustee in writing, at least 30 days before a Redemption Date, of the Section of this Indenture pursuant to which the repurchase shall occur, the Redemption Date, the principal amount of Notes to be repurchased and the Redemption Price and shall furnish to the Trustee an Officers' Certificate to the effect that the Company is required to make or has made a Net Proceeds Offer. If the Company elects to have the Trustee furnish notice of repurchase (as described above) of the Notes to the Holders, the Company shall notify the Trustee in writing and provide all the information and documentation required by this paragraph, at least 45 days but not more than 60 days before a Redemption Date. (e) Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part, and if in part, equal to $1,000 or in integral multiples of $1,000, in exchange for cash. To the extent holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, tendered Notes will be purchased on a pro rata basis based on amounts tendered. (f) A Net Proceeds Offer will remain open for a period of 20 Business Days or such longer period as may be required by law. To the extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for 27 general corporate purposes subject to the provisions of this Indenture, and the Net Proceeds Offer Amount will return to zero. (g) The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended, and any other securities laws and regulations thereunder to the extent they apply in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.15, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.15. (h) In the event the Company is required to make an offer to redeem Notes pursuant to this Section 4.15 and the amount of the Net Cash Proceeds from the Asset Sale are not evenly divisible by $1,000, upon written instructions from the Company, the Trustee shall hold the remaining portion of such Net Available Proceeds that are not so divisible until such amount, together with the Net Cash Proceeds from any subsequent Asset Sale, may be applied to make an offer to redeem Notes pursuant to this Section 4.15. SECTION 4.16. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary of the Company to, issue, transfer, convey, sell, lease or otherwise dispose of any Capital Stock (other than directors' qualifying shares) of any Restricted Subsidiary of the Company to any Person (other than the Company or another of the Company's Restricted Subsidiaries), unless the disposition complies with Section 4.15 of this Indenture. SECTION 4.17. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of the Notes shall have the right to require that the Company repurchase such Holder's Notes, in whole or in part, and if in part, equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 109% of the principal amount thereof, pursuant to the offer described in clause (b) below (the "Change of Control Offer"). (b) Notice of each Change of Control Offer shall be given to each Holder in accordance with Section 13.2, within 30 days following any Change of Control, with a copy to the Trustee. Such notice shall state: (i) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Notes, in whole or in part, and if in part equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 109% of the principal amount thereof; (ii) the circumstances and relevant facts regarding such Change of Control (including, to the extent known to the Company, relevant information with respect to the transaction giving rise to such Change of Control, and if applicable, information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (iii) the repurchase date (which shall be not earlier than 30 days or later than 60 days from the date such notice is mailed) (the "Repurchase Date"); (iv) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent (which may be the Company) at the address specified in the notice prior to the close of business on the Repurchase Date; (v) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Repurchase Date, a telegram, telex, facsimile transmission or other written communication setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, and a statement that such Holder is withdrawing his or her election to have such Notes purchased; and (vi) that Holders which elect to have their Notes purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered. (c) If the Company is required to repurchase Notes pursuant to the provisions of this Section 4.17, it shall notify the Trustee in writing, at least 30 days before a Redemption Date, of the Section of this Indenture pursuant to which the repurchase shall occur, the Redemption Date, the principal amount of Notes to be repurchased and the Redemption Price and shall furnish to the Trustee an Officers' Certificate to the effect that (a) the Company is required to make or has made a Change of Control Offer and (b) the conditions set forth in Section 5.1 hereof have been satisfied, as the case may be. If the Company elects to have the Trustee furnish notice of repurchase (as described above) of the Notes to the Holders, the Company shall notify the Trustee in writing and provide all the information and documentation required by this paragraph, at least 45 days but not more than 60 days before a Redemption Date. 28 (d) On the Repurchase Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Trustee or a Paying Agent (or segregate, if the Company is acting as its own Paying Agent) money in immediately available funds sufficient to pay the purchase price of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted, together with an Officers' Certificate indicating the Notes or portions thereof which have been tendered to the Company. The Trustee or a Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price therefor and promptly authenticate and mail to such Holders a new Note in a principal amount equal to any unpurchased portion of the Note surrendered. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Repurchase Date. (e) In the event a Change of Control occurs and any repurchase pursuant to the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act, the Company will comply with the requirements of Rule 14e-1 as then in effect, to the extent applicable, and any other applicable securities laws or regulations with respect to such repurchase. SECTION 4.18. Limitations on Payments for Consent. Neither the Company nor any of its Restricted Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Note for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.19. Limitation on Business Activities. The Company shall not and shall not permit any of its Restricted Subsidiaries to engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.20. Limitation on Restricted and Unrestricted Subsidiaries. (a) The Board of Directors may, if no Default or Event of Default shall have occurred and be continuing or would arise therefrom, designate an Unrestricted Subsidiary to be a Restricted Subsidiary, provided however, that: (i) any such redesignation will be deemed to be an incurrence as of the date of such redesignation by the Company and its Restricted Subsidiaries of the Debt (if any) of such redesignated Subsidiary for purposes of Section 4.9 of this Indenture; and (ii) unless such redesignated Subsidiary does not have any Debt outstanding (other than Permitted Debt), no such designation will be permitted if immediately after giving effect to such redesignation and the incurrence of any such additional Debt (other than Permitted Debt) the Company could not incur $1.00 of additional Debt (other than Permitted Debt) pursuant to Section 4.9 of this Indenture. (b) The Board of Directors of the Company may, if no Default or Event of Default shall have occurred and be continuing or would arise therefrom, designate any Restricted Subsidiary to be an Unrestricted Subsidiary if: (i) such designation is at that time permitted under Section 4.11 of this Indenture (for purposes of this clause (i), the Company will be deemed to have made an Investment (other than a Permitted Investment) in that amount of the fair market value of the equity of such Subsidiary held directly or indirectly by the Company); (ii) immediately after giving effect to such designation, the Company could incur $1.00 of additional Debt (in addition to Permitted Debt) pursuant to Section 4.9 of this Indenture; (iii) such Subsidiary meets the requirements of the definition of the term Unrestricted Subsidiary; and (iv) any Subsidiary of such designated Restricted Subsidiary is designated as, and meets the requirements of, an Unrestricted Subsidiary. (c) Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the conditions of this Section 4.20 and was in accordance with Section 4.11 of this Indenture. (d) Notwithstanding anything to the contrary in this Section 4.20, in no event shall the Company designate a Guarantor as an Unrestricted Subsidiary. SECTION 4.21. Subsidiary Guarantee 29 (a) Guarantee. Each of the Guarantors fully and unconditionally and jointly and severally, guarantee to each Holder the obligations of the Company under this Indenture and the Notes in accordance with this Section 4.21(a). (i) Subject to this Section 4.21, each of the Guarantors hereby, fully and unconditionally and jointly and severally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, including, that: (a) the principal on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Maturity, by acceleration, redemption or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, each Guarantor shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (ii) The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever, and covenants that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (iii) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (iv) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (b) Subordination of Subsidiary Guarantee. The obligations of each Guarantor shall be general unsecured obligations of each Guarantor. The Subsidiary Guarantees shall rank in priority in accordance with this Section 4.21(b). (i) The obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Section 4.21 are general unsecured obligations of each Guarantor. Payment on the Notes and under the guarantees thereof shall be subordinated to payment in full in cash or cash equivalents of (A) all existing and future Senior Debt and (B) existing and future Guarantor Senior Debt, each on terms identical, mutatis mutandis, to the subordination provisions applicable to the Notes set forth in Article 11. The Subsidiary Guarantees shall rank junior in right of payment to all guarantees by each Guarantor of existing and future Senior Debt. The Subsidiary Guarantee ranks pari passu or senior to any existing and future senior subordinated debt of the Guarantor. The Subsidiary Guarantee shall rank senior in right of payment to all other existing and future subordinated obligations of such Guarantor. 30 (ii) No Guarantor shall incur or permit to exist any debt that shall be by its terms subordinated in right of payment to Guarantor Senior Debt but ranks senior in right of payment to such Guarantor's Subsidiary Guarantee of the Notes. For purposes of this Section 4.21(b)(ii), Debt which is secured by a junior Lien is not deemed subordinate and junior merely by virtue of such junior priority. (iii) Each Guarantor may incur additional indebtedness, including Guarantor Senior Debt, as permitted under and in accordance with Section 4.9 hereof. (c) [Intentionally Omitted] (d) Execution and Delivery of Subsidiary Guarantee. Each Guarantor shall evidence its Subsidiary Guarantee in the form included in Exhibit B of this Indenture and in accordance with this Section --------- 4.21(d). (i) To evidence its Subsidiary Guarantee set forth in this Section 4.21, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit B shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. (ii) Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in this Section 4.21 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (iii) If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (iv) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. (e) Limitation on Consolidation or Merger or Sale of Assets. No Guarantor shall in a single transaction or a series of transactions consolidate with, merge with or into, or sell, transfer, lease, convey or otherwise dispose of all or substantially all its assets to any Person other than the Company or any other Guarantor that is a Restricted Subsidiary except in accordance with, and as permitted by, this Section 4.21(e), Section 4.15, and Article 5 hereof. (i) Subject to and except as provided in, and as permitted by, this Section 4.21, 4.15 and Article 5, each Guarantor, other than any Guarantor whose Subsidiary Guarantee is to be released in accordance with the terms of that Subsidiary Guarantee and Section 4.21(g), shall not and the Company shall not cause or permit any Guarantor, in a single transaction or a series of transactions, to consolidate with or merge with or into or sell, transfer, lease, convey or otherwise dispose of all or substantially all its assets to any Person other than the Company or any other Guarantor that is a Restricted Subsidiary unless: (A) the entity formed by or surviving any such consolidation or merger if other than the Guarantor, is a corporation organized and existing under the laws of England and Wales or the United States or any state thereof or the District of Columbia; (B) such surviving entity, if other than the Guarantor fully and unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (C) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. (ii) Any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the 31 Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (iii) Any merger or consolidation of a Guarantor with or into the Company, with the Company being the surviving entity, or with or into another Guarantor that is a Restricted Subsidiary shall be permitted if the Guarantor delivers to the Trustee an Officers' Certificate stating that such consolidation or merger, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with the applicable provisions of this Indenture and that all conditions precedent in this Indenture, including without limitation, this Section 4.21 and Article 5 herein, relating to such transaction shall be satisfied. (iv) Except as set forth in Articles 4 and 5 hereof, and notwithstanding anything to the contrary above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger, or sale of assets of a Guarantor with or into the Company or another Guarantor that is a Restricted Subsidiary, nor shall it prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor in accordance with this Indenture. (f) Contribution. Each Guarantor that makes a payment or distribution under a Subsidiary Guarantee shall be entitled to a pro rata contribution from each other Guarantor; such pro rata contributions shall be calculated on the basis of the net assets of each other Guarantor. (g) Release. Subject to the conditions set forth in this Section 4.21(g), each Guarantor shall be automatically released from its respective Subsidiary Guarantee under the following circumstances: (i) Guarantor will be automatically released and relieved of any obligations under its Subsidiary Guarantee under the following circumstances: (A) a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or disposition of all or substantially all of the assets or a sale or other disposition of all the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Restricted Subsidiary of the Company, in accordance with Section 4.21(e) and Article 5 hereof, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor); provided that the Net Proceeds of such sale or other disposition are applied in accordance with Section 4.15 of this Indenture; (B) dissolution or liquidation of the Guarantor in accordance with this Indenture. (ii) Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that any event set forth in clause (i) above has occurred in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (iii) Any Guarantor not released from its obligations in accordance with clause (ii) above under its Subsidiary Guarantee shall remain liable for the full amount of principal of the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Section 4.21. (h) Subsidiary Guarantees for Other Subordinated Debt. 32 The Company shall not permit any Restricted Subsidiary to guarantee other indebtedness that is subordinate or junior to the Notes in right of payment or that ranks equally with the Notes in right of payment unless the Restricted Subsidiary guarantor shall fully and unconditionally guarantee jointly and severally, to each Holder of the Notes and the Trustee, the payment of the principal of, and premium, if any, on the Notes as follows: If the other subordinated debt that is being guaranteed is expressly subordinate or junior in right of payment to the Notes, the Notes shall be guaranteed by a guarantee which is senior in right of payment to the Restricted Subsidiary guarantees of the other subordinated debts. In other cases, the Notes shall be equally and ratably guaranteed. Any such guarantee shall be pursuant to a supplemental indenture in form and substance satisfactory to the Trustee and pursuant to which such Restricted Subsidiary shall execute and deliver, in accordance with Section 4.21(d) hereof, a notation of such Subsidiary Guarantee substantially in the form of Exhibit B attached hereto, and all other existing Guarantors shall --------- execute and deliver a supplemental indenture substantially in the form of Exhibit C attached hereto for the purpose of amending their respective - --------- notation of the Subsidiary Guarantee so as to have the effect of amending Schedule I to the notation of such Guarantor to add such new Guarantor. SECTION 4.22. Maintenance of All Registration, Regulations and Licenses. The Company shall maintain registrations, licenses, permits, privileges and franchises material to the conduct of its business and shall comply in all material respects with all laws, rules, regulations and orders of any government entity. SECTION 4.23. Payment of Additional Amounts. (a) All payments made by or on behalf of the Company under or with respect to the Notes shall be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of the United Kingdom or of any territory thereof, by any authority or agency therein or thereof having power to tax (hereinafter "Taxes"), unless the Company is required to withhold or deduct any amount for or on account of Taxes by law or by the interpretation or administration thereof by the relevant government authority or agency. If the Company is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, the Company shall pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction shall not be less than the amount the Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts shall be payable with respect to payments made to a Holder (an "Excluded Holder") in respect of a beneficial owner (i) which is subject to such Taxes by reason of its being connected with the United Kingdom otherwise than by the mere holding of Notes or the receipt of payments thereunder; (ii) with respect to any Taxes that would not have been imposed, due or payable but for a failure by the Holder to comply with a request by the Company to satisfy any certification, identification or other reporting requirements, whether imposed by statute, regulation, treaty or administrative practice concerning nationality, residence or connection with the United Kingdom; (iii) with respect to any Taxes that would not have been imposed, due or payable but for the Holder's presentation of a Note for payment more than 30 days after the relevant payment is first made available to the Holder (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on any day (including the last day) within such 30-day period); or (iv) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. The Company shall make any such withholding or deduction as required and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law. (b) The Company shall furnish to the Holder, within 30 days after the date the payment of any Taxes referred to in Section 4.23(a) above is due pursuant to applicable law, evidence of such payment by the Company. 33 (c) The foregoing obligations shall survive any termination, defeasance or discharge of the Indenture. SECTION 4.24. Internal Revenue Service Filing. The Company shall file a United States Internal Revenue Service Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments, with the United States Internal Revenue Service within the time and in the manner required by law and shall mail a copy of such filing to the Trustee within 15 days after such filing with the Internal Revenue Service. ARTICLE 5 SUCCESSORS SECTION 5.1. Limitation on Mergers, Consolidations and Sales of All Assets in respect to the Company. The Company shall not, in a single transaction or a series of related transactions, (i) consolidate with, amalgamate, or merge with or into any other Person or permit any other Person to consolidate with or merge into the Company or any Subsidiary of the Company (in a transaction in which such Subsidiary remains a Subsidiary of the Company); or (ii) sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries), unless, in the case of either clause (i) or clause (ii): (A) either: (1) the Company is the surviving or continuing corporation; or (2) the Person (if other than the Company) formed by the consolidation or amalgamation or into which the Company is merged or the Person that acquires the properties and assets of the Company and of the Company's Subsidiaries substantially as an entirety (the "Surviving Entity") (x) is a corporation organized and validly existing under the laws of England and Wales or the United States or any State thereof or the District of Columbia and (y) expressly assumes, by a supplemental indenture, the due and punctual payment of the principal of, and premium, if any, on all of the Notes and the performance of every covenant of the Notes and this Indenture on the part of the Company or Subsidiary Guarantee on the part of Guarantor, to be performed or observed; (B) immediately after giving effect to the transaction and the assumption contemplated by clause (A)(2)(y) above (including giving effect to any Debt and Acquired Debt incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or Surviving Entity, as the case may be (1) can incur at least $1.00 of additional Debt (in addition to Permitted Debt) pursuant to Section 4.9 of this Indenture, or, alternatively (2) the Consolidated Fixed Charge Coverage Ratio is not reduced as a result of the transaction; (C) immediately before and immediately after giving effect to the transaction and the assumption contemplated by clause (A)(2)(y) above (including giving effect to any Debt and Acquired Debt Incurred or anticipated to be Incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default has occurred or is continuing; (D) the Company or the Surviving Entity agree to indemnify each Holder of the Notes against any tax, levy, assignment or governmental change payable by withholding or deduction which may be imposed on the Holder as a result of such an amalgamation, merger or consolidation; and (E) the Company or the Surviving Entity shall have delivered to the Trustee, prior to the consummation of the proposed transaction, an Officers' Certificate, and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture to this Indenture is required in connection with such transaction, such supplemental indenture shall comply with the applicable provision of this Indenture and all conditions precedent in this Indenture relating to such transaction shall have been satisfied; provided that clause (A)(2)(x) above shall not apply to a Change of Domicile. SECTION 5.2. Successor Corporation Substituted. Upon any consolidation, amalgamation, or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, in accordance with Section 5.1 hereof, in which the Company is not the continuing corporation or the successor Person formed or surviving any such consolidation, amalgamation, 34 or merger, or to which a sale, lease, conveyance or other disposal of all or substantially all of the Company's assets is made the Surviving Entity shall succeed to and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Entity has been named as the Company herein, and, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes. SECTION 5.3. Limitations on Mergers, Consolidations and Sales of All Assets in respect to Guarantors. In accordance with Section 4.21 hereof, a Guarantor shall not, in a single transaction or a series of related transactions consolidate with, amalgamate, or merge with or into any other Person or permit any other Person to consolidate with or merge into the Guarantor or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Guarantor's assets, except as permitted under this Article 5 as if the Guarantor were deemed to be the Company. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1. Events of Default. (a) A "DEFAULT" or "EVENT OF DEFAULT" shall occur if: (i) the Company fails to pay principal of, or premium, if any, on any of the Notes when the same becomes due; (ii) the Company fails to pay principal of, or premium, if any, on Notes required to be purchased pursuant to a Change of Control Offer as described in Section 4.17 hereof or pursuant to Net Proceeds Offer as described in Section 4.15 hereof, when due and payable; (iii) the Company fails to perform any other covenant, warranty, term, condition, provision or agreement (other than the provisions of Article 5 hereof) of the Company contained in the Notes or this Indenture and such failure continues for 30 days after the notice specified below; (iv) the Company fails to perform or comply with the provisions described under Article 5 herein; (v) the occurrence of a default under any Debt of the Company or any Subsidiary of the Company if both (A) such default either results from failure to pay any such Debt at its Stated Maturity or relates to an obligation other than the obligation to pay such Debt at its Stated Maturity and results in the holders of such Debt causing such Debt to become due before its stated maturity and (B) the principal amount of such Debt, together with the principal amount of any other such Debt is in default for failure to pay principal at the Stated Maturity of the maturity of which has been accelerated, aggregated at least $25 million or more at any one time outstanding; (vi) the rendering of a final judgment or judgments (not subject to appeal) by a court of competent jurisdiction against the Company or any of its Restricted Subsidiaries in an aggregate amount at any one time in excess of $10 million and shall not have been vacated, discharged, satisfied or stayed within 60 consecutive days thereafter; (vii) any Subsidiary Guarantee ceases to be in full force and effect or any Subsidiary Guarantee is declared to be null and void and unenforceable or any Subsidiary Guarantee shall be found to be invalid or any Guarantor shall deny its liability under its Subsidiary Guarantee, other than by reason of release of such Guarantor in accordance with Section 4.21 of this Indenture; 35 (viii) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; (D) makes a general assignment for the benefit of its creditors; (E) files a petition in bankruptcy or an answer or consent seeking reorganization or relief; or (F) consents to the filing of such petition in bankruptcy or the appointment of or taking possession by a Custodian; and (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary; and the order or decree remains unstayed and in effect for 60 days. The foregoing provisions in this Section 6.1(a) shall constitute Defaults or Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. (b) Subject to the provisions of this Indenture relating to the duties of the Trustee, set forth in Section 7 hereof, in case an Event of Default shall occur and be continuing, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee indemnity reasonably satisfactory to the Trustee, in accordance with Sections 6.6 and 7.1(5) hereof. Subject to Section 7.7 and in accordance with Section 6.5 hereof, the Holders of a majority in aggregate principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. (c) A Default under Section 6.1(a)(ii) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the outstanding Notes notify the Company and the Trustee, of the Default, and the Company or the applicable Subsidiary of the Company does not cure the Default within 60 days after receipt of such notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default" under this Section 6.1. Such notice shall be given by the Trustee if so requested by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding. When a Default is cured or waived, it ceases. (d) The Company shall notify the Trustee in writing within five (5) Business Days of the occurrence of a Default or an Event of Default, in accordance with Section 4.4(b) hereof. (e) For purposes of Section 6.1(a)(viii) and Section 6.1(a)(ix), it shall not be a Default or Event of Default if such proceedings are commenced under applicable United Kingdom laws or such orders or decrees are issued under United Kingdom laws, in each case solely for the purpose of giving effect to a Change of Domicile. 36 SECTION 6.2. Acceleration. (a) If an Event of Default (other than an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) hereof, with respect to the Company or any Significant Subsidiary of the Company occurs and is continuing, either (i) the Trustee may, by written notice to the Company or (ii) the Holders of at least 25% in aggregate principal amount of the outstanding Notes may, by written notice to the Company and the Trustee, and upon such request of such Holders the Trustee shall (by notice as provided in clause (i) above), declare the aggregate principal amount of the Notes outstanding to be due and payable and, upon any such declaration the same shall become due and payable; provided however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of the outstanding Notes, may under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in this Indenture. If an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) hereof with respect to the Company or any Significant Subsidiary of the Company occurs, the aggregate principal amount of the Notes outstanding shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of the Notes. (b) After a declaration of acceleration has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of at least a majority in aggregate principal amount of Notes outstanding, by written notice to the Company and the Trustee, may annul such declaration if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all sums paid or advanced by the Trustee, its agents and counsel under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7, (B) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes, and (C) principal due otherwise than by acceleration; and (ii) all Events of Default, other than the nonpayment of principal of the Notes which have become due solely by such declaration of acceleration, have been cured or waived. Notwithstanding the foregoing, any acceleration of payment of the Notes from the failure of the Company to make a payment on the Notes during a Blockage Period (an "Acceleration Due to Blockage") automatically shall be rescinded if and when the following conditions are satisfied within five Business Days following the end of such Blockage Period: (A) the payment in respect of the Notes, the failure of which gave rise to such Event of Default, is made; and (B) no other Event of Default, other than an Event of Default which has occurred solely as a result of the acceleration of other Debt of the Company or any Subsidiary prior to its express maturity that was caused solely by an Acceleration Due to Blockage, shall have occurred and be continuing. SECTION 6.3. Other Remedies. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, and premium, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.4. Waiver of Past Defaults. Subject to Sections 6.7 and 9.2, the Holders of a majority in aggregate principal amount of the Notes outstanding may on behalf of the Holders of all the Notes waive any past defaults under this Indenture and its consequences, except a default in the payment of the principal of, and premium, if any, on any Note, or in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Note outstanding. SECTION 6.5. Control by Majority. The Holders of a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or 37 power conferred on it including, without limitation, any remedies provided for in Section 6.3. Subject to Section 7.1, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, or that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may involve the Trustee in personal liability, provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.6. Limitation on Suits. (a) No Holder of any Note will have any right to institute any proceeding with respect to this Indenture for any remedy thereunder, unless: (i) such Holder previously has given to the Trustee written notice of a continuing Event of Default; (ii) the Holder or Holders of at least 25% in aggregate principal amount of the outstanding Notes will have made written request to the Trustee to institute such proceeding as trustee; (iii) such Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (iv) the Trustee fails to institute such proceeding within 60 days after receipt of such request and the offer of reasonable indemnity; and (v) during such 60-day period the Trustee has not received from Holders of a majority in aggregate principal amount of the outstanding Notes a direction which, in the opinion of the Trustee, is inconsistent with the request. (b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. (c) This Section 6.6 does not apply to a suit instituted by a Holder of a Note for enforcement of payment of the principal of, and premiums, on such Note or after the respective due dates expressed in such Note. SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, and premium, if any, on, a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.8. Collection Suit by Trustee. If an Event of Default in payment of principal, and premium, if any, specified in clause (i) or (ii) of Section 6.1 occurs and is continuing, or if any other Event of Default has occurred and the amounts due have been accelerated, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount of principal, and premium, if any, as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Company or any other obligor upon the Notes, any of their respective creditors or any of their respective property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the 38 Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including without limitation payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to holders of Senior Debt to the extent required by Article 11 hereof; Third: to Holders for amounts due and unpaid on the Notes for principal, and premium, if any, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, and premium, if any, respectively; Fourth: to holders of any other subordinated Debt of the Company for amounts due and unpaid on such subordinated Debt, including the 10% Notes for principal, and premium, if any, and interest, ratably, in accordance with the appropriate preferences and priorities of such subordinated Debt, according to the amounts due and payable on such subordinated debt for principal, premium, if any, and interest respectively; and Fifth: to the Company. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 hereof, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the outstanding Notes. SECTION 6.12. Reports to the Trustee. In accordance with Section 4.4(a) of this Indenture, the Company shall furnish to the Trustee a statement annually of (a) the Company's performance of certain obligations under this Indenture and (b) any Default in such performance, including any Default identified in a notice made pursuant to Section 4.4(b) hereof. The Company shall provide written notice of Default or Event of Default in accordance with Section 6.1(d) hereof. 39 ARTICLE 7 TRUSTEE SECTION 7.1. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee, subject to subparagraph (e) below, shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (i) The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) This paragraph does not limit the effect of paragraph (b) of this Section 7.1. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to the terms of this Indenture. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. (e) No provision of this Indenture shall require the Trustee to (i) expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive indemnity reasonably satisfactory to the Trustee against such expense, risk or liability or (ii) take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it does not receive an indemnity against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2. Rights of Trustee. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 40 (c) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Paying Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. SECTION 7.4. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes, other than its certificate of authentication. SECTION 7.5. Notice of Defaults. If a Default or an Event of Default known to the Trustee occurs and is continuing, the Trustee shall mail to each Noteholder a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default in payment on any Note (including the failure to make a mandatory redemption pursuant hereto), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. For purposes of Section 6.2, Section 7.1 and this Section 7.5, the Trustee shall not be deemed to have knowledge of a Default or an Event of Default unless a Responsible Officer has actual knowledge thereof or unless written notice of such Default or Event of Default is received by the Trustee and such notice refers to the Notes or this Indenture. SECTION 7.6. Reports by Trustee to Holders. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as the Notes remain outstanding, the Trustee shall mail to all Holders a brief report dated as of such reporting date that complies with TIA Section 313(a), if such a report is required pursuant to TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). (b) Commencing at the time this Indenture is qualified under the TIA, a copy of each such report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange, if any, on which the Notes are listed. The Company or any other obligor upon the Notes shall promptly notify the Trustee if the Notes become listed on any stock exchange or of any delisting thereof. SECTION 7.7. Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation 41 of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include reasonable compensation, disbursements and expenses of the Trustee's agents and counsel, except as set forth in Section 7.7(d). (b) The Company shall indemnify the Trustee and its officers, directors, employees and agents against any loss, liability or expense incurred by the Trustee or such person arising out of or in connection with the offer and sale of the Notes or the acceptance or administration of its duties under this Indenture (including but not limited to its services of Registrar and Paying Agent), including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.7) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except as set forth in Section 7.7(d). The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity; provided, that failure to so notify the Company shall not affect the Company's indemnity obligations hereunder. (c) The obligations of the Company under this Section 7.7 to compensate and indemnify the Trustee and its agents and to reimburse the Trustee for its reasonable expenses shall survive the resignation or removal of the Trustee, the termination of the Company's obligations hereunder and the satisfaction and discharge of this Indenture. (d) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or willful misconduct. (e) The obligations of the Company under this Section shall not be subordinated to the payment of Senior Debt pursuant to Article 11. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except that held in trust to pay principal, and premium, if any, on particular Notes. Such Lien shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8. Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. (b) The Trustee may resign in writing at any time, in accordance with the requirements of the TIA, and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing at least 30 days prior to the date or proposed removal; provided that at such date no Default or Event of Default shall have occurred and be continuing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company and any other obligor upon the Notes shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. 42 (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least a majority in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to each Noteholder. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.9. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee, provided that such successor is eligible and qualified under this Article 7. SECTION 7.10. Eligibility; Disqualification. (a) There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee powers, shall be subject to supervision or examination by federal or state authority and shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. (b) This Indenture shall always have a Trustee which satisfies the requirements of TIA Sections 310(a)(1). The Trustee is subject to TIA Section 310(a)(5) concerning inability of a trustee to be a direct or indirect obligor of the Notes and is subject to TIA Section 310(b) regarding disqualification of a trustee upon acquiring any conflicting interest. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in this Article 7. Nothing contained herein shall prevent the Trustee from filing the application in TIA Section 310(b) regarding resignation. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee, in its capacity as Trustee hereunder, is subject to TIA Section 311(a), subject to the creditor relationship provisions listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 7.12. Permitted Transactions. (a) The Trustee shall be limited, should it become a creditor of the Company, in its ability to obtain payment of claims or to realize on certain property received by it in respect of any such claim as security or otherwise. (b) The Trustee is permitted to engage in other transactions with the Company or any of its Affiliates; provided, however, that if it acquires any conflicting interest, as defined under the TIA, the Trustee must eliminate such conflict or resign. 43 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1. Legal Defeasance and Covenant Defeasance of the Notes. (a) The Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Notes upon compliance with the conditions set forth in paragraph (d). (b) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (b), the Company shall be deemed to have been released and discharged from its obligations with respect to the outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of the Sections of and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned, except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph, payments in respect of the principal of, and premium, if any, on such Notes when such payments are due and (ii) obligations listed in Section 8.3. (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company shall be released and discharged from its obligations under any covenant contained in Section 5.1 hereof and in Sections 4.2 through 4.24 hereof (subject to compliance with the Company's obligations under the TIA), with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent, declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1(a)(iii), nor shall any event referred to in Section 6.1(a)(viii) or Section 6.1(a)(ix) thereafter constitute a Default or an Event of Default thereunder but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. (d) The following shall be the conditions to application of either paragraph (b) or paragraph (c) above to the outstanding Notes: (i) The Company shall have irrevocably deposited in trust with the Trustee, pursuant to an irrevocable trust and security agreement in form and substance satisfactory to the Trustee, cash or U.S. Government Obligations maturing as to principal and interest at such times, or a combination thereof, in such amounts as are sufficient, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof (in form and substance reasonably satisfactory to the Trustee) delivered to the Trustee, to pay the principal of, and premium, if any, on the outstanding Notes on the dates on which any such payments are due and payable in accordance with the terms of this Indenture and of the Notes; (ii) (A) No Event of Default or Default shall have occurred and be continuing on the date of such deposit, and (B) no Default or Event of Default under Section 6.1(v) or 6.1(vi) shall occur on or before the 123rd day after the date of such deposit; 44 (iii) Such deposit will not result in a Default under this Indenture or a breach or violation of, or constitute a default under, any other instrument or agreement to which the Company is a party or by which it or its property is bound; (iv) No default on any Senior Debt shall have occurred and be continuing; (v) In the case of a legal defeasance under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and, in the case of a covenant defeasance under paragraph (c) above, the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (vi) The Holders shall have a perfected security interest under applicable law in the cash or U.S. Government Obligations deposited pursuant to Section 8.1(d)(i) above, or such cash or U.S. Government Obligations shall be held in irrevocable trust for the benefit of all Holders; (vii) The Company shall have delivered to the Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that (A) after the passage of 123 days following the deposit, the trust funds will not be subject to any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally, and (B) neither the Company, the Trustee nor the trust is an investment company under the Investment Company Act of 1940, or has been registered as an investment company; and (viii) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating, to the defeasance contemplated by this Section 8.1 have been complied with; provided however, that no deposit under clause (i) above shall be effective to terminate the obligations of the Company under the Notes or this Indenture prior to 123 days following any such deposit. In connection with the issuance of debt securities the proceeds of which will be used to redeem all the Notes then outstanding, none of Section 4.9, 4.10, 4.11 or 4.12 hereof shall be violated by the issuance of such debt securities to the extent the Company complies with all of the provisions of this Section 8.1(d) other than Section 8.1(d)(ii)(B) hereof. The Company shall use its best efforts to ensure that the deposit referred to in Section 8.1(d)(i) hereof does not result in the Company, the Trustee or the trust becoming or being deemed an investment company under the Investment Company Act of 1940. In the event that such deposit does result in the Company, the Trustee or the trust becoming, or being deemed an investment company, the Company shall bear all related expenses of registration and reporting under the Investment Company Act of 1940 for the duration of the trust. SECTION 8.2. Termination of Obligations Upon Cancellation of the Notes. In addition to the Company's rights under Section 8.1 hereof, the Company may terminate all of its obligations under this Indenture and this Indenture shall cease to be of further effect (subject to Sections 8.3 and 2.7 hereof) when: (a) either (i) all Notes theretofore authenticated and delivered (other than Notes which have been destroyed, lost or stolen and which have been replaced or paid and the Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) hereof have been delivered to the Trustee for cancellation; or (ii) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge 45 the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal of and premium, if any, on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption as the case may be. (b) the Company has paid or caused to be paid all other sums payable hereunder and under the Notes by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, stating that all conditions precedent specified in this Section 8 relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 8.3. Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture and of the Notes referred to in Sections 8.1 or 8.2 hereof, the respective obligations of the Company and the Trustee, as applicable, under Sections 1.5, 2.3, 2.4, 2.5, 2.6, 2.7, 2.9, 2.10, 2.11, 2.14, 2.17, 4.1, 4.2, 4.23, 6.7, 7.7, 7.8, 8.5, 8.6, 8.7and Article 13 hereof shall survive until the Notes are no longer outstanding, and thereafter the obligations of the Company under Sections 7.7, 8.5, 8.6 and 8.7 hereof shall survive. Nothing contained in this Article 8 shall abrogate any of the obligations or duties of the Trustee as set forth in this Indenture. SECTION 8.4. Acknowledgment of Discharge by Trustee. Subject to Section 8.7 hereof, after (i) the conditions of Sections 8.1 or 8.2 hereof have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon written request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.3 hereof. SECTION 8.5. Application of Trust Assets. The Trustee shall hold any cash or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.1 hereof. The Trustee shall apply the deposited cash or the U.S. Government Obligations, together with earnings thereon, through the Paying Agent, in accordance with this Indenture and the terms of the irrevocable trust agreement established pursuant to Section 8.1 hereof, to the payment of principal of, and premium, if any, on the Notes. The cash or U.S. Government Obligations so held in trust and deposited with the Trustee in compliance with Section 8.1 hereof, shall not be part of the trust estate under this Indenture, but shall constitute a separate trust fund for the benefit of all Holders entitled thereto. SECTION 8.6. Repayment to the Company; Unclaimed Money. Upon termination of the trust established pursuant to Section 8.1, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess cash or U.S. Government Obligations held by them. Additionally, the Trustee and the Paying Agent shall pay to the Company upon request, and, if applicable, in accordance with the irrevocable trust established pursuant to Section 8.1, any cash or U.S. Government Obligations held by them for the payment of principal of, and premium, if any, on the Notes that remain unclaimed for two years after the date on which such payment shall have become due unless otherwise required by law. After payment to the Company, all liability of the Trustee and such Paying Agent with respect to such cash or U.S. Government Obligations shall cease and Holders entitled to such payment must look to the Company for such payment as general creditors unless an applicable abandoned property law expressly provides otherwise. SECTION 8.7. Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or U.S. Government Obligations in accordance with Section 8.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to 46 Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply all such cash or U.S. Government Obligations in accordance with Section 8.1, provided that if the Company makes any payment of principal of, and premium, if any, on any Notes following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash or U.S. Government Obligations, and proceeds thereof, held by the Trustee or the Paying Agent. ARTICLE 9 AMENDMENTS SECTION 9.1. Without Consent of Holders. (a) The Company, when authorized by a Board Resolution, the Trustee and (as applicable) any Guarantor, together, may amend or supplement this Indenture or the Notes without the consent of any Noteholder: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 hereof; (iii) (A) to add guarantees with respect to the Notes, or (B) to confirm and evidence the release, termination, or discharge of any Guarantee with respect to the Notes when such release, termination or discharge is permitted under and subject to the satisfaction of the conditions precedent set forth in Section 4.21(g) hereof; (iv) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA as then in effect; (v) to make any change that does not adversely affect the legal rights hereunder of any Noteholder under this Indenture or the Notes; (vi) to evidence or to provide for a replacement Trustee under Section 7.8 hereof; or (vii) to add to the covenants and agreements of the Company for the benefit of the Holders and to surrender any right or power herein reserved to or conferred upon the Company, provided that, in such case except in the case of clause (vi) above, where the Trustee has resigned, the Company has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.1. (b) Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of any amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture which affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2. With Consent of Holders. (a) Subject to Section 9.2(e), the Company, when authorized by a Board Resolution, the Trustee, and (as applicable) any Guarantor together, may amend this Indenture or the Notes with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (such consent to be evidenced by an Act of such Holders in accordance with Section 1.5 hereof). The Holders of at least a majority in aggregate principal amount of the Notes then outstanding (by an Act of such Holders in accordance with Section 1.5 hereof), or the Trustee, with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (such consent to be evidenced by an Act of such Holders in accordance with Section 1.5 hereof) may, waive compliance in a particular instance by the Company, any past default under this Indenture or the Notes, except for as provided in Section 9.2(e)(vii). 47 (b) Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders pursuant to Section 9.2(a), and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture but the Trustee shall not be obligated to enter into such amended or supplemental Indenture which affects its own rights, duties or immunities under this Indenture or otherwise. (c) It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. (d) After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to each Holder affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. (e) Notwithstanding Section 9.2(a), without the consent of each Holder affected, an amendment, supplement or waiver under this Section may not: (i) reduce the percentage stated in Section 9.2(a) of aggregate principal amount of outstanding Notes necessary to consent to an amendment, supplement or waiver of this Indenture; (ii) reduce the percentage of aggregate principal amount of outstanding Notes necessary consent for waiver of certain defaults provided for in this Indenture; (iii) reduce the principal amount of (or the premium, if any, of) on any Note or change the Stated Maturity of the principal of the Notes; (iv) change place or currency of payment of principal of, and premium, if any, on, any Note; (v) change the stated maturity of the principal of any Note; (vi) impair the right to institute suit for the enforcement of any payment of principal of, and premium, if any, on, any Note; (vii) waive a continuing past Default or Event of Default in the payment of principal of, and premium, if any, on, the Notes; (viii) modify or amend any of the provisions of this Indenture relating to the subordination of the Notes in a manner adverse to Holders; (ix) modify or amend any of the provisions of this Indenture relating to the modification and amendment of this Indenture or the waiver of past defaults or covenants; or (x) following the mailing of an offer with respect to a Change of Control Offer pursuant to Section 4.17 or Net Proceeds Offer pursuant to Section 4.15, modify this Indenture with respect to such Change of Control Offer or Net Proceeds Offer in a manner adverse to such Holders. SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.4. Revocation and Effect of Consents. (a) Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any 48 such Holder or subsequent Holder may revoke the consent as to his or her Note or portion of a Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. Any amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any Act of Holders, including any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last two sentences of Section 9.4(a), those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such Act of Holders, including an amendment, supplement or waiver, or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an Act of Holders, including an amendment, supplement or waiver becomes effective, it shall bind every Noteholder, unless it is an amendment, supplement or waiver that makes a change described in Section 9.2(e), in which case the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, provided, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.5. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6. Trustee to Sign Amendments. The Trustee shall sign any amendment, waiver or supplemental indenture authorized pursuant to this Article 9 if the amendment, waiver or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, waiver, or supplemental Indenture, the Trustee shall be entitled to receive and, subject to Section 7.1, shall be fully authorized and protected in relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment, waiver or supplemental Indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign any amendment or supplemental Indenture until the Board of Directors approves it. SECTION 9.7. Conformity with TIA. Every amendment or supplemental indenture executed pursuant to this Article 9 shall conform to the requirements of the TIA as then in effect. ARTICLE 10 CONVERSION RIGHTS SECTION 10.1. Conversion Rights (a) If the Company fails to repay the Notes at Maturity, then, subject to and upon compliance with the provisions of this Section 10.1, Holders shall be entitled at their option and in addition to all other rights and remedies, to convert in whole or part of their Notes, at the principal amount thereof, into the number of fully paid American depositary shares or ordinary shares of the Company (the "Shares") (rounded down to the nearest Share if not an integral number of Shares) obtained by dividing the aggregate principal amount of such Note surrendered for conversion by the Conversion Price, determined pursuant to the applicable clause of Section 10.2, in effect at the Maturity Date (the "Conversion Right"). 49 (b) The Conversion Right shall only be exercisable if: (i) at Maturity, the Company fails to repay the Notes and the Guarantors fail to repay the Notes pursuant to the Subsidiary Guarantee; (ii) the issuance of the requisite number of Shares to satisfy the Conversion Right, in exchange for the Notes is approved by the Company's shareholders and (iii) exercise of the Conversion Right and issuance of the Shares complies with applicable laws and regulations, including, without limitation, the securities laws and regulations of the United States and the United Kingdom. SECTION 10.2. Conversion Price (a) The price at which the Notes shall be convertible into American depositary shares (the "ADS Conversion Price") shall be equal to the average closing market price for the Company's American depository shares on the Nasdaq Small Cap Market, or if the American depository shares are listed on another United States exchange, that other exchange, for the period of twenty trading days ending on the Stated Maturity. (b) The price at which the Notes shall be convertible into ordinary shares (the "Ordinary Shares Conversion Price') shall be equal to the ADS Conversion Price divided by the number of ordinary shares then represented by one American depositary share. (c) The ADS Conversion Price and the Ordinary Shares Conversion Price are collectively referred to in this Article 10 as the "Conversion Price". (d) Fractions of ordinary shares or American depositary shares shall not be issued and no cash adjustments shall be made. (e) The Conversion Price shall be determined by the Conversion Agent whose determination shall be final and binding upon the Company and the Noteholders. (f) In the event that the Ordinary Shares Conversion Price is less than the stated value of the ordinary shares of the Company on the date of issuance of the Shares, the Ordinary Shares Conversion Price shall equal the stated value of the ordinary shares of the Company on the date of issuance of the Shares (at the date hereof, UK (Pounds) 0.0125) and the ADS Conversion Price shall equal the Ordinary Share Conversion Price multiplied by the number of ordinary shares of the Company then represented by one American depositary share of the Company. SECTION 10.3. Conversion Notice. In order to cause the Conversion Right with respect to any Note to be exercised, the Holder of such Note or any other Person acting on its behalf shall within twenty (20) Business Days after Maturity deliver or cause to be delivered to the Company and to any office or agency of the Trustee, maintained for that purpose, a written notice requesting that such Note be converted in the form of Exhibit D attached hereto (the "Conversion Notice"). The Conversion --------- Notice must specify whether the Holder requires to be issued American depositary shares or ordinary shares. A Conversion Notice shall be accompanied by (i) surrender of the Note to the Trustee or, the if Note is in the form of a Global Note, surrender of the beneficial interest in the Note to the Trustee (which may be by book-entry delivery, if the Notes are held in book-entry form) and surrender of the Note for annotation to the Company or its agent; (ii) if required, appropriate endorsements and any transfer documents requested by the Conversion Agent; (iii) if required, payment of any taxes and capital, stamp, issue and registration duties arising on conversion and deemed disposition of a Note in connection with such conversion; and (iv) subject to satisfying the conditions of Section 10.1(b), designation of DTC account or address for delivery of Shares upon conversion. The Conversion Right must be exercised by Holders and the Conversion Notice delivered to the Company and the Trustee in accordance with this Section 10.3 within a period of twenty (20) Business Days following Maturity. SECTION 10.4. Approvals and Notices. Upon receipt of a Conversion Notice and subject to Section 10.7 hereof, the Company shall take all steps (including any issuance or purchase of Shares and obtaining or giving of any consent, approval, authorization, registration, filing or notice from or to any governmental authority, shareholders or other third parties (collectively the "Approvals and Notices")) necessary to ensure that, upon every conversion of a Note, Shares will be available for issue, and will be issued, upon such conversion promptly and to a DTC account or address specified on the Conversion Notice. The Company shall use its reasonable efforts to obtain shareholder approval for the new share issuance, as set forth below in this Section 10.4. and the Company shall take all steps necessary to comply with 50 applicable securities laws in connection with the issuance as soon as reasonably practicable after Maturity. The Company hereby represents that, upon conversion, the Shares to be issued to the Holder shall be duly authorized, duly and validly issued, fully paid and nonassessable, free and clear of any preemption rights or Liens. Upon Maturity and if Company or Guarantors fail to repay the Notes, the Company shall undertake to secure shareholder approval to maintain lawful access to the maximum number of Shares that would be needed to meet its obligations hereunder to issue the Shares on conversion of all outstanding Notes after Maturity and the Company shall use its reasonable efforts to obtain all Approvals and Notices necessary at Maturity for it, and to perform its obligations under this Section 10. SECTION 10.5. Payments by the Holder The Holder exercising a Conversion Right shall be required to pay any taxes and capital, stamp, issue and registration duties arising on conversion and all, if any, taxes arising by reference to any disposition or deemed disposition of a Note (or a beneficial interest in a Note) in connection with such conversion. SECTION 10.6. Cancellation of Note All Notes delivered for conversion shall be delivered to the Trustee to be cancelled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 2.14 hereof. SECTION 10.7. Conversion Right Not Exercisable (a) The Conversion Right shall not be exercisable if, following Maturity, but prior to the date on which the Company obtains shareholder approval for the issuance of the Shares, the Company or a Guarantor repays the principal amount of the Notes in full. (b) The Conversion Right shall not be exercisable in the event that the Company does not obtain shareholder approval for the issuance, or is unable without undue expenditure or effort to comply with applicable laws and regulations in connection with the issuance. (c) In no event shall the Conversion Right be exercisable by any Holder prior to the Maturity Date of the Notes. SECTION 10.8. Responsibility of Trustee for Conversion Provisions The Trustee may be appointed as Conversion Agent but shall not be obligated to accept such appointment. In the event that the Trustee is not the Conversion Agent, it shall not be responsible for determination of the Conversion Price. Neither the Trustee nor the Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock or of any securities or property or cash which may at any time be issued or delivered upon the conversion of any Note; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Note for the purpose of conversion, or, subject to Section 7.1, to comply with any of the covenants of the Company contained in this Article 10. ARTICLE 11 SUBORDINATION SECTION 11.1. Ranking. (a) Notwithstanding the provisions of Sections 6.2 and 6.3, the Company covenants and agrees, and the Trustee and each Holder of the Notes by his or her acceptance thereof likewise covenants and agrees, that all 51 payments of the principal of, and premium, if any, on the Notes by the Company shall be subordinated in accordance with the provisions of this Article 11 to the prior payment in full of all amounts payable under existing and future Senior Debt of the Company. (b) The Company also covenants and agrees not to Incur any Debt that is both (a) subordinate or junior in right of payment to any Senior Debt of the Company and (b) senior in any respect in right of payment to the Notes. For purposes of this restriction, Debt which is secured by a junior Lien does not constitute subordinated Debt by virtue of such junior priority. (c) The Notes shall rank in right of payment junior to all of the Company's existing and future Senior Debt. The Notes rank or shall rank in right of payment pari passu or senior to the Company's existing and future senior subordinated Debt. The Notes will rank in right of payment senior to the 10% Notes and any 6.75% Notes. (d) The Notes are unsecured obligations of the Company. SECTION 11.2. Priority and Payment Over of Proceeds in Certain Events. (a) Subordination on Dissolution, Liquidation or Reorganization of the Company. (i) In the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, or any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary, or any assignment for the benefit of creditors or other marshalling of assets or liabilities of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties substantially as an entirety, upon the terms and conditions described under Article 5 hereof), all Senior Debt due and owing (including, in the case of Designated Senior Debt and Senior Debt under the Credit Facility, interest accruing after the commencement of any such case or proceeding at the rate specified in the instrument evidencing such Senior Debt, whether or not a claim therefor is allowed in such proceeding, to the date of payment of such Senior Debt) must be paid in full before any payment or distribution of any assets of the Company of any kind or character (excluding shares of Capital Stock of the Company or securities of the Company provided for in a plan of reorganization or readjustment which are subordinate in right of payment to all Senior Debt to substantially the same extent as the Notes are so subordinated) is made on account of principal of, and premium, if any, on, the Notes, including repurchase, purchase, redemption or other acquisition of the Notes. (ii) Before any payment may be made by the Company of the principal of, and premium, if any, on the Notes, and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee on their behalf would be entitled, except for the provisions of this Article 11, shall be made by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, directly to the holders of the Senior Debt of the Company or any Senior Representative thereof to the extent necessary to pay all such Senior Debt in full after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. (b) Subordination on Default in Senior Debt. (i) During the continuance of any default in the payment when due of principal of, reimbursement obligation under, premium, if any, on, or interest on, any Senior Debt, including without limitation any default in the payment when due of any Obligations or commitment or facility fees, letter of credit fees or agency fees under the Credit Facility, or any default in payment when due of any reimbursement obligation of the Company with respect to any letter of credit issued under the Credit Facility (a "Senior Payment Default"), no direct or indirect payment or distribution of any assets of the Company of any kind or character may be made on account of the principal of, and premium, if any, on, or other amounts payable in respect of, the Notes or on account of the purchase, redemption or other acquisition of or in respect of the Notes unless and until such Senior Payment Default has been cured, waived or has ceased to exist or such Senior Debt shall have been discharged or paid in full or when the right under this Indenture to prevent any such payment is waived by or on behalf of the holders of such Senior Debt. 52 (ii) During the continuance of any default (other than a Senior Payment Default) with respect to the Credit Facility or any Designated Senior Debt, the occurrence of which entitles, or with the giving of notice or lapse of time (or both) would entitle, one or more Persons to accelerate the maturity thereof (a "Senior Nonmonetary Default") pursuant to which the Trustee and the Company have received from the agent bank for the Credit Facility or from any authorized person on behalf of any Designated Senior Debt a written notice of such Senior Nonmonetary Default, no direct or indirect payment or distribution of any assets of the Company of any kind or character may be made on account of the principal of, and premium, if any, on, or other amounts payable in respect of, the Notes or on account of the purchase, redemption or other acquisition of, or in respect of, the Notes for the period specified below (the "Blockage Period"). (iii) The Blockage Period shall commence upon the receipt of notice of a Senior Nonmonetary Default by the Trustee and the Company and shall end (subject to any blockage of payment that may be in effect in respect of a Senior Payment Default or insolvency) on the earlier of (A) 179 days after the receipt of such notice, provided such Senior Debt shall not theretofore have been accelerated and no Senior Payment Default shall be in effect; or (B) the date on which such Senior Nonmonetary Default is cured, waived or ceases to exist or such Senior Debt is discharged or paid in full. In no event will a Blockage Period extend beyond 179 days from the date of the receipt by the Trustee and the Company of the notice initiating such Blockage Period. Any number of notices of a Senior Nonmonetary Default may be given during a Blockage Period, provided, that no such notice shall extend such Blockage Period, only one Blockage Period may be commenced within any 360-day period and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Blockage Period is in effect. No Senior Nonmonetary Default with respect to Senior Debt that existed or was continuing on the date of the commencement of any Blockage Period and that was known to the holders of or the Senior Representative for such Senior Debt will be, or can be, made the basis for the commencement of a subsequent Blockage Period, whether or not within a period of 360 consecutive days, unless such Senior Nonmonetary Default has been cured or waived for a period of not less than 90 consecutive days. The Company shall deliver an Officers' Certificate to the Trustee promptly after the date on which any Senior Nonmonetary Default is cured or waived or ceases to exist or on which the Senior Debt related thereto is discharged or paid in full. (c) Rights and Obligations of Holders of Notes and Trustee. (i) In the event that, notwithstanding the foregoing provisions prohibiting such payment or distribution, the Trustee or any Holder shall have received any payment on account of the principal of, and premium, if any, on the Notes at a time when such payment is prohibited by this Section 11.2 and before the principal of, premium, if any, and interest on Senior Debt is paid in full, then and in such event (subject to the provisions of Section 11.8) such payment or distribution shall be received and held in trust for the holders of Senior Debt and shall be paid over or delivered (A) to the trustee in bankruptcy, liquidating trustee, receiver, custodian, assignee, agent or other person making any such payment or distribution of assets of the Company, or (B) in the event that no such trustee or other person under clause (A) has been appointed, then to the holders of the Senior Debt (or to their Senior Representatives in the case of Designated Senior Debt) remaining unpaid promptly at the written direction of such holders of Senior Debt or their designees to the extent necessary for application to the payment in full of the principal of, premium, if any, and interest on such Senior Debt in accordance with its terms after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. (ii) Nothing contained in this Article 11 will limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.2 hereof or to pursue any rights or remedies hereunder against the Company, provided, that, to the extent provided in this Article 11, all Senior Debt of the Company then or thereafter due or declared to be due shall first be paid in full before the Holders or the Trustee are entitled to receive any payment from the Company of principal of, and premium, if any, on the Notes. (iii) Upon any payment or distribution of assets or Notes referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and upon any certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making any such payment or distribution delivered to the Trustee, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Debt and other Debt of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. In the absence of such order, decree or certificate, the Trustee and the Holders shall be entitled to request and rely upon an 53 Officers' Certificate from the Company. The Company shall provide to the Trustee, in the form of an Officers' Certificate, the names and addresses of the holders of such Senior Debt, the amount of the Senior Debt outstanding to each such holder of Senior Debt and any necessary information to calculate the daily increase in indebtedness to such holders of Senior Debt. The Trustee shall be entitled to rely conclusively on any such order, decree or certificate (including any such Officers' Certificate) in making any disbursements to the holders of Senior Debt, without making any independent verification of the information contained therein. (d) The subordination provisions of this Section 11.2 shall cease to apply to the Notes upon any defeasance or covenant defeasance of the Notes pursuant to Article 8 hereof. SECTION 11.3. Payments May Be Made Prior to Notice. Nothing contained in this Article 11 or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Section 11.2 hereof, from making payments at any time of principal of, and premium, if any, on, the Notes, or from depositing with the Trustee any monies for such payments or (ii) the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of, and premium, if any, on, the Notes, to the Holders entitled thereto, unless by noon Eastern time one Business Day prior to the date upon which such payment would otherwise (except for the prohibitions contained in Section 11.2 hereof) become due and payable, the Trustee shall have received the written notice provided for in Section 11.2(b) hereof (or there shall have been an acceleration of the Notes prior to such application), subject to Section 11.8 hereof. SECTION 11.4. Rights of Holders of Senior Debt Not to Be Impaired. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions and covenants herein, regardless of any knowledge thereof any such holder may have or otherwise be charged with. (b) The provisions of this Article 11 are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt. SECTION 11.5. Authorization to Trustee to Take Action to Effectuate Subordination. Each Holder of Notes by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination as provided in this Article 11 and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 11.6. Subrogation. (a) Subject to the payment in full of all amounts payable under or in respect of Senior Debt, the Holders shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of assets of the Company made on such Senior Debt until the Notes shall be paid in full in cash; and for the purposes of such subrogation, no payments or distributions to holders of such Senior Debt of any cash, property or securities to which Holders of the Notes would be entitled except for the provisions of this Article 11, and no payment pursuant to the provisions of this Article 11 to holders of such Senior Debt by the Holders, shall, as between the Company, its creditors other than holders of such Senior Debt and the Holders, be deemed to be a payment by the Company to or on account of such Senior Debt, it being understood that the provisions of this Article 11 are solely for the purpose of defining the relative rights of the holders of such Senior Debt, on the one hand, and the Holders, on the other hand. (b) If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article 11 shall have been applied, pursuant to the provisions of this Article 11, to the payment of all amounts payable under the Senior Debt, then and in such case, the Holders shall be entitled to receive from the holders of such Senior Debt at the time outstanding any payments or distributions received by such holders of Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Debt in full. 54 SECTION 11.7. Obligations of Company Unconditional. (a) Nothing contained in this Article 11 or elsewhere in this Indenture or in any Note is intended to or shall impair, as between the Company and the Holders, the obligations of the Company, which are absolute and unconditional to pay to the Holders the principal of, and premium, if any, on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article 11 of the holders of such Senior Debt in respect of cash, property or Notes of the Company received upon the exercise of any such remedy. (b) The failure to make a payment on account of principal of, and premium, if any, on, the Notes by reason of any provision of this Article 11 shall not be construed as preventing the occurrence of an Event of Default under Section 6.1. SECTION 11.8. The Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Trustee or Paying Agent shall not at any time be charged with the knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee or Paying Agent, unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company or one or more holders of Senior Debt or from any trustee or agent therefor, including Senior Representatives; and, prior to the receipt of any such written notice, the Trustee or Paying Agent shall be entitled to assume conclusively that no such facts exist. Unless by noon Eastern time one Business Day prior to the date on which by the terms of this Indenture any monies are to be deposited by the Company with the Trustee or any Paying Agent (whether or not in trust) for any purpose (including, without limitation, the payment of the principal of, and premium, if any, on, any Note), the Trustee or Paying Agent shall have received with respect to such monies the notice provided for in the preceding sentence, the Trustee or Paying Agent shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such date, except for an acceleration of the Notes prior to such application. The foregoing shall not apply to the Paying Agent if the Company is acting as Paying Agent. Nothing contained in this Section 11.8 shall limit the right of the holders of Senior Debt to recover payments as contemplated by Section 11.2 hereof. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself or itself to be a holder of such Senior Debt (or a trustee on behalf of, or other representative of, such holder, including Senior Representatives) to establish that such notice has been given by a holder of such Senior Debt or a trustee on behalf of any such holder. Nothing in this Article 11 shall apply to amounts due the Trustee pursuant to Section 7.7 hereof. SECTION 11.9. Right of Trustee to Hold Senior Debt. The Trustee and any agent (including Senior Representatives) for the holders of Senior Debt shall be entitled to all of the rights set forth in this Article 11 in respect of any Senior Debt at any time held by it to the same extent as any other holder of such Senior Debt, and nothing in this Indenture shall be construed to deprive the Trustee or any agent for the holders of Senior Debt of any of its rights as such holder. SECTION 11.10. No Implied Covenants by or Obligations of the Trustee. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Article 11 against the Trustee. The Trustee shall not be deemed to have any fiduciary duty to the holders of the Senior Debt. 55 ARTICLE 12 MEETINGS OF HOLDERS OF THE NOTES SECTION 12.1. Purposes of the Meetings. A meeting of the Holders may be called at any time from time to time pursuant to this Article 12 for any of the following purposes: (a) to give any notice to the Company, the Guarantors or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to Article 9 hereof; (b) to remove the Trustee and appoint a successor trustee pursuant to Article 7 hereof; or (c) to consent to the execution of an indenture supplemental hereto pursuant to Article 9 hereof. SECTION 12.2. Place of Meetings; Expenses. Meetings of Holders may be held at such place or places in the Borough of Manhattan, The City of New York, as the Trustee or, in case of its failure to act, the Company or the Holders calling the meeting, in accordance with Section 12.3(b) hereof, shall from time to time determine. Except for a meeting requested by the Company pursuant to a Board Resolution or by the Trustee, all expenses (other than the expenses of the Company and the Trustee) of any meetings called or held pursuant to this Article 12 shall be borne by the Holders who call such meeting and the Company and the Trustee shall be entitled to indemnification from such Holders in respect of the costs thereof. SECTION 12.3. Call and Notice of Meetings. (a) The Trustee may at any time (upon not less than 20 days' notice) call a meeting of Holders to be held at such time and at such place in the location determined by the Trustee pursuant to Section 12.2 hereof. Notice of every meeting of Holders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given to the Company and each Holder, in accordance with Section 13.2 hereof. (b) In case at any time the Company pursuant to a Board Resolution, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, shall have requested the Trustee to call a meeting of the Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first giving of the notice of such meeting within 20 days after receipt of such request, then the Company or the Holders in the amount above specified may determine the time (not less than 20 days after notice is given) and the place in the location determined by the Company or the Holders pursuant to Section 12.2 hereof for such meeting and may call such meeting to take any action authorized in Section 12.1 hereof by giving notice thereof as provided in Section 12.3(a) hereof. SECTION 12.4. Voting at Meetings. To be entitled to vote at any meeting of Holders, a Person shall be (i) a Holder or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons so entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 12.5. Voting Rights, Conduct and Adjournment. (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding of Notes and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Notes shall be proved in the manner specified in Section 1.5 hereof and the appointment 56 of any proxy shall be proved in such manner as is deemed appropriate by the Trustee or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company customarily authorized to certify to the holding of a security such as a Global Note. (b) At any meeting of Holders, the presence of Persons holding or representing Notes in an aggregate principal amount sufficient under the appropriate provision of this Indenture to take action upon the business for the transaction of which such meeting was called shall constitute a quorum. Any meetings of Holders duly called pursuant to Section 12.3 hereof may be adjourned from time to time by vote of the Holders (or proxies for the Holders) of a majority of the Notes represented at the meeting and entitled to vote, whether or not a quorum shall be present; and the meeting may be held as so adjourned without further notice. No action at a meeting of Holders shall be effective unless approved by Persons holding or representing Notes in the aggregate principal amount required by the provision of this Indenture pursuant to which such action is being taken. (c) At any meeting of the Holders, each Holder or proxy shall be entitled to one vote for each $1,000 principal amount at maturity of outstanding Notes held or represented. (d) Any resolution duly passed or decision or action duly taken at any meeting of the Holders duly held in accordance with this Article 12 shall be binding on all Holders whether or not present or represented at the meeting; provided, however, that the requisite number of Holders necessary to approve such resolution, decision or action required by Article 9 shall have voted in favor of such resolution, decision or action at such meeting. The Company shall furnish to the Trustee a written copy of any resolution passed or decision or action taken at any meeting of the Holders. SECTION 12.6. Revocation of Consent by Holders. Any revocation of consent by Holders shall be made pursuant to Section 9.4 of this Indenture. ARTICLE 13 MISCELLANEOUS SECTION 13.1. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required or deemed to be included in this Indenture by the TIA, the provision so required or deemed shall control; and if any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 13.2. Notices. Any notice or communication by the Company, the Trustee or any Senior Representative to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telex, facsimile or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company: Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, Florida 33716 Telephone: (727) 579-2801 Facsimile: (727) 579-2880 Attn: Keith J. Nelsen, Esquire With a copy to: Altheimer & Gray 10 South Wacker Drive, Suite 4000 Chicago, Illinois 60606 57 Telephone: (312) 715-4000 Facsimile: (312) 715-4800 Attn: Jonathan Baird, Esquire If to a Guarantor: To the address provided on Schedule I to the Notation of Guarantee in the form attached hereto as Exhibit B --------- If to the Trustee: HSBC Bank USA Issuer Services 452 Fifth Avenue New York, New York 10018 Attention: Frank J. Godino If to any Senior Representative, to such address as such Senior Representative may by notice to the others designate. The Company, any other obligor upon the Notes, or the Trustee or any Senior Representative by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Noteholders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Noteholder shall be made (i) if the Notes are represented by a Global Note, by publishing such in a leading newspaper having a general circulation in New York (which is expected to be the Wall ---- Street Journal) (and, so long as the Notes are listed on the Luxembourg Stock - -------------- Exchange and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)), and (ii) if the Notes are represented by Physical Notes, by - ---------------- mailing such notice or other communication by first-class mail to his or her address shown on the register kept by the Registrar and, with respect to a notice of redemption or repurchase under this Indenture, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange so require, publishing in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). Copies of any notice or ---------------- communication by the Company, or any other obligor upon the Notes, shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed and published in the manner provided in this Section 13.2, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 13.3. Communication by Holders with Other Holders. Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and other applicable Persons shall have the protection of TIA Section 312(c). 58 SECTION 13.4. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company (or any other obligor upon the Notes) to the Trustee to take any action under this Indenture, the Company (or such other obligor) shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.5) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.5) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with. SECTION 13.5. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 13.6. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Noteholders. Any Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.7. Legal Holidays. If any specified date for making payment is not a Business Day, subject to Section 4.1 hereof, the action may be taken on the next succeeding Business Day without penalty of any kind. SECTION 13.8. No Recourse Against Others. A director, officer, employee or stockholder of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or this Indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. Each Noteholder, by accepting a Note, waives and releases all such liability. SECTION 13.9. Governing Law. The laws of the State of New York shall govern and be used to construe this Indenture and the Notes. SECTION 13.10. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 59 SECTION 13.11. Successors. All agreements of the Company in this Indenture and in the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.13. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.14. Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar. SECTION 13.15. Qualification of Indenture. The Company shall qualify this Indenture under the TIA and shall pay all reasonable costs and expenses (including attorneys' fees for the Company and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of the Indenture and the Notes and printing this Indenture and the Notes. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA and the registration and exchange of the Notes. SECTION 13.16. Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only and are not intended to describe, interpret, define, limit or modify any of the terms or provisions of this Indenture. SECTION 13.17. Indenture Controls over Form of Note. If any provision of a Note conflicts with the terms of this Indenture, the terms of this Indenture shall control. [SIGNATURE PAGES FOLLOW] 60 IN WITNESS WHEREOF, the Company and the Trustee have caused this Indenture to be duly executed and delivered as of the date first written above. DANKA BUSINESS SYSTEMS PLC By: _____________________________________ Name: _____________________________________ Title: _____________________________________ HSBC Bank USA, as Trustee By: _____________________________________ Name: _____________________________________ Title: _____________________________________ Signature Page One of Two to Danka Business Systems PLC Zero Coupon Senior Subordinated Notes Due 2004 IN WITNESS WHEREOF, the undersigned subsidiary Guarantors have caused this Indenture to be duly executed and delivered as of the date first written above. DANKA OFFICE IMAGING COMPANY By: _____________________________________ Name: _____________________________________ Title: _____________________________________ DANKA HOLDING COMPANY By: _____________________________________ Name: _____________________________________ Title: _____________________________________ Signature Page Two of Two to Danka Business Systems PLC Zero Coupon Senior Subordinated Notes Due 2004 EXHIBIT A FORM OF NOTE [FRONT SIDE] ZERO COUPON SENIOR SUBORDINATED NOTES [CUSIP NO.] [CINS NO.] [ISIN NO.] DUE APRIL 1, 2004 DANKA BUSINESS SYSTEMS PLC, a public limited company organized under the laws of England and Wales (the "Company," which term includes any successor corporation under the indenture hereinafter referred to), for value received promises to pay to [If Physical Note: _______, or registered assigns], [If Global Note: the bearer upon surrender hereof], the principal sum [If Physical Note: of _______ dollars ($ _____)], [If Global Note: of the amount indicated on Schedule A hereof], on April 1, 2004. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted herein. Dated: DANKA BUSINESS SYSTEMS PLC By: _________________________________ Name: _________________________________ Title: _________________________________ Attest: ___________________________ DANKA BUSINESS SYSTEMS PLC By: _________________________________ Name: _________________________________ Title: _________________________________ Attest: ___________________________ CERTIFICATE OF AUTHENTICATION This is one of the Zero Coupon Senior Subordinated Notes due 2004 referred to in the within mentioned Indenture. HSBC Bank USA, as Trustee By: _________________________________ Authorized Officer A-1 [REVERSE SIDE] ZERO COUPON SENIOR SUBORDINATED NOTES DUE 2004 1. Principal. The Company will pay the principal of this Note on April 1, 2004 ("Maturity"). 2. Method of Payment. One Business Day prior to Maturity, the Company shall irrevocably deposit with the Trustee or the Paying Agent money in immediately available funds sufficient to pay such principal, and premium, if any. The Holder must surrender this Note to a Paying Agent to collect principal payments. The Company will pay principal, and premium, if any, in money of the United States that at the time of payment is legal tender for payment of public and private debts. [If Global Note: Payments in respect of Notes represented by global notes (including principal and premium, if any) will be made by wire transfer of immediately available funds to the accounts specified by the bearer hereof.] [If Physical Note: With respect to Physical Notes, the Company will make all payments of principal and premium, if any, by wire transfer of immediately available funds to the U.S. dollar accounts maintained by the Holders with banks in the United States, or, if no such account is designated by any Holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such Holder.] If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. The Company, at its option, may pay principal, and premium, if any, by check payable in such money mailed to a Holder's registered address or at the office or agency of the Company maintained for such purpose in the City of New York. 3. Paying Agent and Registrar. Initially, HSBC Bank, USA, as Trustee ("Trustee," which term shall include any successor trustee under the Indenture hereinafter referred to), will act as Paying Agent and Registrar. Banque Internationale a Luxembourg S.A. will also be appointed as a Paying Agent in Luxembourg. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Noteholder. The Company, any Subsidiary or any Affiliate or any of them may act as Paying Agent, Registrar or co-Registrar, except for purposes of redemption under Sections 4.15 and 4.17, neither the Company nor any Affiliate of the Company may act as Paying Agent. 4. Indenture. The Company issued the Notes under an Indenture dated as of __________, 2001 (as it may be amended from time to time in accordance with the terms thereof, the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (Title 15, United States Code, Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company. The Company may not issue additional Notes under the Indenture. 5. Optional Redemption. (a) The Company may redeem all or any of the Notes at any time in whole or part for 100% their principal amount, to the date of redemption. The Company may redeem the Notes upon not less than 30 days nor more than 60 days' prior notice in whole or in part, and if in part equal to $1,000 or integral multiples thereof. 6. Mandatory Redemption. Except for in the event of a Change of Control Offer or a Net Proceeds Offer, the Company is not required to make any mandatory redemption or sinking fund payments with respect to the Notes. 7. Notice of Redemption. Notice of redemption will be given at least 30 days but not more than 60 days before the Redemption Date, (i) if the Notes are represented by a Global Note, notice shall be made by publishing in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) (and, so long as the Notes are listed on the Luxembourg - ------------------- Stock Exchange and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort), or (ii) if the Notes are represented by Physical Notes, ---------------- notice shall be made by mailing such notice by first-class mail to each Holder of Notes to be redeemed at such Holder's last address as shown on the registry books, with A-2 a copy to the Trustee (and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require, published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)). Notes in denominations larger than $1,000 may be ---------------- redeemed in whole or in part, and if in part, equal to $1,000 or integral multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. 8. Redemption of Notes at the Option of the Holder. (a) Subject to the terms and conditions of the Indenture, if any Change of Control (as defined in the Indenture) occurs on or prior to maturity, the Company will be required, subject to its prior compliance with certain covenants in respect of Senior Debt, to offer to purchase each Holder's Notes as provided in the Indenture for a purchase price equal to 109% of the principal amount thereof. (b) If the Company consummates any Asset Sale (as such term is defined in the Indenture), the Company may under certain circumstances be required to utilize a certain portion of the proceeds received from such Asset Sale to offer to repurchase Notes at a price equal to 100% of the principal amount, as provided in the Indenture. (c) In accordance with Section 13.2 of the Indenture, a notice of a Change of Control or an Asset Sale will be given within 30 days after any Change of Control occurs: (i) if the Notes are represented by a Global Note, by publishing in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) (and, so long as the Notes are listed on ------------------- the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort), and (ii) if the Notes are represented by ---------------- Physical Notes, by mailing notice by first-class mail to each Holder of Notes to be redeemed at such Holder's registered address (and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange shall so require, published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)). ---------------- 9. Subordination. The Notes are subordinated to Senior Debt (as defined in the Indenture) which includes (with certain exceptions) the principal of, and premium, if any, and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding) on, any Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Debt, the instrument creating or evidencing, or the agreement governing, such Debt or pursuant to which such Debt is outstanding expressly provides that such Debt shall not be senior in right of payment to the Notes. To the extent provided in the Indenture, such Debt must be paid before the Notes may be paid. The Company agrees, and each Noteholder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 10. Denominations, Transfer, Exchange. The Notes are in bearer form without coupons which shall be issuable in registered form of Physical Notes only in the limited circumstances set forth in the Indenture. [If Physical Note: A Holder may register the transfer or exchange of Physical Notes in accordance with the Indenture. The Registrar may require a Holder of a Physical Note, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Physical Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made.] The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements, certificates, opinions and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed. 11. Persons Deemed Owners. [If Physical Note: a Holder] [If Global Note: the bearer of this Note:] shall be treated as the absolute owner of the Note for all purposes. 12. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented, or compliance by the Company with any provision of the Indenture or the Notes may be waived, with the Act of the Holders, in accordance with Section 1.5 of the Indenture, of a majority in aggregate principal amount of the Notes then outstanding; provided, however, that without the consent of each Holder affected thereby, A-3 the Company and any Guarantor may not (1) reduce the percentage stated in the Indenture of aggregate principal amount of outstanding Notes necessary to consent to an amendment, supplement or waiver of the Indenture; (2) reduce the percentage of aggregate principal amount of outstanding Notes necessary consent for waiver of certain defaults as defined in the Indenture; (3) reduce the principal amount of (or the premium of, if any) any Note or change the stated maturity of the principal of the Notes; (4) change place or currency of payment of principal of, and premium, if any, on, any Note; (5) change the Stated Maturity of the principal of any Note; (6) impair the right to institute suit for the enforcement of any payment of principal of, and premium, if any, on, any Note; (7) waive a continuing past Default or Event of Default in the payment of principal of, and premium, if any, on, the Notes; (8) modify or amend any of the provisions of the Indenture relating to the subordination of the Notes in a manner adverse to the Holders; (9) modify or amend any of the provisions of the Indenture relating to the modification and amendment of the Indenture or the waiver of past defaults or covenants; or (10) following the mailing of an offer with respect to a Change of Control Offer pursuant to Section 4.17 of the Indenture or Net Proceeds Offer pursuant to Section 4.15 of the Indenture, modify the Indenture with respect to such Change of Control Offer or Net Proceeds Offer to purchase in a manner adverse to such Holders. Notwithstanding the foregoing, without the consent of any Holder of Notes and subject to certain requirements set forth in Section 9.1 of the Indenture, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, omission, defect or inconsistency, to comply with Article 5 of the Indenture, to add guarantees with respect to the Notes or to confirm and evidence the release, termination, or discharge of any Guarantee with respect to the Notes when such release, termination or discharge is permitted under and subject to the satisfaction of the conditions precedent set forth in Section 4.21(g) of the Indenture, to make any changes that do not adversely affect the legal rights under the Indenture of any such Holder, to evidence or to provide for a replacement Trustee, to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act as then in effect, or to add to the covenants and agreements of the Company for the benefit of the Holders and to surrender any right or power reserved in the Indenture to the Company. 13. Defaults and Remedies. An Event of Default shall occur if: (1) the Company fails to pay principal of, or premium, if any, on any of the Notes when the same becomes due and payable, at maturity, upon acceleration, redemption or otherwise; (2) or the Company fails to pay the principal of, or premium, if any, on any Notes required to be purchased pursuant to a Change of Control Offer pursuant to Section 4.17 of the Indenture or Net Proceeds Offer pursuant to Section 4.15 of the Indenture, as provided in such Section; (3) the Company fails to perform any other covenant, warranty, term, condition, provision or agreement (other than the provisions of Article 5 of the Indenture) of the Company contained in the Notes or the Indenture and such failure continues for 30 days after the notice specified below; (4) the Company fails to perform or comply with the provisions described under Article 5 or Section 4.15 of the Indenture; (5) the occurrence of a default under any Debt of the Company or any Subsidiary of the Company if both (A) the default either results from failure to pay any such Debt at its Stated Maturity and (B) the principal amount of such Debt, together with the principal amount of any other such Debt is in default for failure to pay principal at the Stated Maturity of the maturity of which has been accelerated, aggregated at least $25 million or more at any one time outstanding; (6) the rendering of a final judgment or judgments (not subject to appeal) by a court of competent jurisdiction against the Company or any of its Restricted Subsidiaries in an aggregate amount at any one time in excess of $10 million and shall not have been vacated, discharged, satisfied or stayed within 60 consecutive days thereafter; and (7) any Subsidiary Guarantee ceases to be in full force and effect or any Subsidiary Guarantee is declared to be null and void and unenforceable or any Subsidiary Guarantee shall be found to be invalid or any Guarantor shall deny its liability under its Subsidiary Guarantees other than by reason of release or such Guarantor in accordance with Section 4.21 of the Indenture; and (8) certain events of bankruptcy, insolvency or reorganization affecting the Company or any significant Subsidiary of the Company as set forth in Section 6.1 of the Indenture. If an Event of Default shall occur and be continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable as provided in the Indenture, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes become due and payable immediately without further action or notice. The Trustee may require indemnity reasonably satisfactory to the Trustee before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Company must furnish an annual compliance certificate to the Trustee. The Company must also furnish a notice of any Default (as provided in the Indenture) to the Trustee within five business days after such occurrence. A-4 14. Subsidiary Guarantees. Subject to Section 4.21 of the Indenture, each of the Guarantors shall, jointly and severally, unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Maturity, by acceleration, redemption or otherwise. The guarantees are subject to subordination as set forth in Section 4.21(b) of the Indenture. The Guarantors are subject to limitations on incurrence of additional indebtedness and limitations on consolidation, merger or sale of assets as set forth in Section 4.21 of the Indenture. The guarantees are subject to release in certain circumstances set forth in Section 4.21(g) of the Indenture. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be fully and unconditionally and jointly and severally obligated to pay the same immediately. Each Guarantor agrees that the guarantee is a guarantee of payment and not a guarantee of collection. 15. Trustee Dealings with Company. Subject to certain limitations, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 16. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. Unclaimed Money. If money for the payment of principal remains unclaimed for two years, the Trustee or Paying Agent will pay the money over to the Company, unless otherwise required by law. After that, Holders entitled to money must look to the Company for payment, unless otherwise required by law. 20. Discharge Prior to Maturity. If the Company irrevocably deposits with the Trustee or Paying Agent in trust cash or U.S. Government Obligations sufficient to pay the principal of on the Notes to maturity and satisfies certain conditions specified in the Indenture, the Company shall be discharged from the Indenture except for certain Sections thereof. 21. Successor. When a successor to the Company assumes all the obligations of its predecessor under the Notes and the Indenture, such predecessor shall be released from those obligations. 22. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. 23. Conversion Rights. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Note shall have the right (the "Conversion Right"), at its option, at any time on or after Maturity, if the Company defaults in making a payment in respect of this Note to convert the Note into American depositary shares or ordinary shares of the Company. This Conversion Right may be exercised during the period of twenty Business Days following the Maturity Date. The Note may be converted, in whole or in part, and if in part, equal to $1,000 or integral multiples of $1,000. The price at which the Notes shall be convertible into American depositary shares shall be equal to the average closing market price for the Company's American depositary shares on the Nasdaq SmallCap Market (or, if the American Depositary Shares are listed on another United States exchange, that other exchange) for the period of twenty trading days ending on the Stated Maturity. The price at which the Notes shall be convertible into ordinary shares shall be equal to the American depositary share conversion price divided by the number of ordinary shares then represented by one American depositary share. In the event that the Ordinary Shares Conversion Price is less than the stated value of the ordinary shares of the Company on the date of issuance of the Shares, the Ordinary Shares Conversion Price shall equal the stated value of the ordinary shares of the Company on the date of issuance of the Shares (at the date hereof, UK (Pounds) 0.0125) and the ADS Conversion Price shall equal the Ordinary Shares Conversion Price multiplied by the number of ordinary shares of the Company then represented by one American depositary share of the Company. A-5 Subject to the conditions set forth in the Indenture, conversion shall be effected by giving written notice to the Trustee, indicating that the Holder hereof elects to convert this Note, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted. Notwithstanding any provision hereof, the Conversion Right shall not be exercisable nor will securities be delivered on conversion of this Note or any portion hereof unless the approvals and other requirements described in the Indenture are satisfied. 24. Information. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Danka Business Systems, PLC Attention: Keith J. Nelsen, Esquire 11201 Danka Circle North St. Petersburg, Florida 33716 A-6 [SCHEDULE A - TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE The initial principal amount at maturity of this Global Note is as shown by the latest entry made or on behalf of the Company in the fourth column below. Reductions in the principal amount of this Global Note following exchange of this Global Note for registered notes or purchase and cancellation of Notes, and increases in the principal amount of this Global Note, are entered in the second and third columns below.
Initial principal amount and Reason for outstanding reduction/ principal amount increase in the of this Global principal Note amount of this Amount of such following such Notation made Global reduction/ reduction/ by or on behalf Date Security increases increases of the Issuer -------- -------- --------- --------- ------------- , 2001 Not applicable Not applicable [ ] Not applicable __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
*State (a) whether reduction following (i) exchange for Notes in a different form; or (ii) conversion of Notes; or (iii) purchase and cancellation of Notes; or (b) circumstances relating to increase. A-7 ASSIGNMENT FORM FOR PHYSICAL NOTES AND GLOBAL NOTES TO ASSIGN THIS NOTE, FILL IN THE FORM BELOW: (I) OR (WE) ASSIGN AND TRANSFER THIS NOTE TO (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her. Date: _______________ Your Signature: __________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: _____________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15) Date: _______________ Your Signature: __________________________________ NOTICE: To be executed by an executive officer A-8 Signature Guarantee: ____________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15) A-9 Option of Holder to Elect Purchase: (1) If you wish to elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.17 ("Change of Control Offer") of the Indenture, check the applicable boxes: [ ] Change of Control Offer: in whole [ ] in part [ ] Amount to be purchased: $ Date: ____________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan with membership in an pursuant to Securities associations and credit unions) approved guarantee and Exchange Commission medallion program Rule 17Ad-15) Social Security Number or Taxpayer Identification Number: ______________ (2) If you wish to elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.15 ("Net Proceeds Offer") of the Indenture, check the applicable boxes: [ ] Net Proceeds Offer: in whole [ ] in part [ ] Amount to be purchased: $ Date: ____________ Your Signature: ____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan with membership in an pursuant to Securities associations and credit unions) approved guarantee and Exchange Commission medallion program Rule 17Ad-15) Social Security Number or Taxpayer Identification Number: ______________ A-10 EXHIBIT B FORM OF NOTATION OF SUBSIDIARY GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of _________________, 2001 (the "Indenture") among Danka Business Systems PLC (the "Company"), the Guarantors listed on Schedule I thereto and HSBC Bank USA, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of and premium, if any, on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, and to the extent permitted by law, the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. The obligations of the Guarantors of the Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Section 4.21 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [SIGNATURES ON FOLLOWING PAGE] B-1 IN WITNESS WHEREOF, the undersigned subsidiary Guarantors have caused this Subsidiary Guarantee to be duly executed and delivered as of the date first written above. DANKA OFFICE IMAGING COMPANY By: _______________________________ Name: _______________________________ Title: _______________________________ DANKA HOLDING COMPANY By: _______________________________ Name: _______________________________ Title: _______________________________ SCHEDULE I LIST OF GUARANTORS
Primary State of Standard Industrial IRS Employee Name and Contact Information of Incorporation Classification Code Identification Code ------------------------------- ------------- ------------------- ------------------- Guarantor --------- Danka Office Imaging Company United States--Delaware 5040 59-3407614 11201 Danka Circle North St. Petersburg, Florida 33716 (727) 576-6003 Attn: Treasurer (727) 578-4766 (phone) (727) 577-4802 (fax) Danka Holding Company United States--Delaware 5040 59-3498367 11201 Danka Circle North St. Petersburg, Florida 33716 (727) 576-6003 Attn: Treasurer (727) 578-4766 (phone) (727) 577-4802 (fax)
Primary State of Standard Industrial IRS Employee Name and Contact Information of Incorporation Classification Code Identification Code ------------------------------- ------------- ------------------- ------------------- Guarantor ---------
EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE IN RESPECT OF SUBSIDIARY GUARANTEE SUPPLEMENTAL INDENTURE, dated as of [______________] (this "Supplemental Indenture"), among [name of [New Guarantor[s]/1/] (the "New ---------------------- ---------------- --- Guarantor[s]"), Danka Business Systems PLC (the "Company"), Danka Office Imaging - ------------ Company, Danka Holding Company and any other guarantors of the Notes (collectively, the "Guarantors" under the Indenture referred to below and the "Existing Guarantor[s]" herein) and HSBC Bank USA, as Trustee (the "Trustee") --------------------- ------- under the Indenture referred to below. W I T N E S S E T H: WHEREAS, the Company, [the] [any] Existing Guarantor[s] and the Trustee have heretofore become parties to an Indenture, dated as of ___________, 2001 (as amended, supplemented, waived or otherwise modified, the "Indenture"), --------- providing for the issuance of Zero Coupon Senior Subordinated Notes due April 1, 2004 of the Company (the "Notes"); ----- WHEREAS, Section 4.21(h) of the Indenture provides that the Company is required to, or may cause the New Guarantor[s] to, execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor[s] shall guarantee the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein and in Section 4.21 of the Indenture; WHEREAS, [the] [each] New Guarantor desires to enter into this Supplemental Indenture for good and valuable consideration, including substantial economic benefit in that the financial performance and condition of such New Guarantor is dependent on the financial performance and condition of the Company; and WHEREAS, pursuant to Section 4.21(h) and Section 9.1 of the Indenture, the parties hereto are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Holder; NOW , THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor[s], the Company, [the Existing Guarantors[s]] and the Trustee mutually covenant and agree for the benefit of the Holders of the Notes as follows: 1. Defined Terms. As used in this Supplemental Indenture, terms defined in the ------------- Indenture or in the preamble or recital hereto are used herein as therein defined. The words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. 2. Agreement to Guarantee. [The] [Each] New Guarantor hereby agrees, jointly ---------------------- and severally with [all] [any] other New Guarantor[s] and [all] [any] Existing Guarantor[s], fully and unconditionally, to guarantee the obligations of the Company under the Indenture and the Notes on the terms and subject to the conditions set forth in Section 4.21 of the Indenture and to be bound by (and shall be entitled to the benefits of) all other applicable provisions of the Indenture as a Guarantor. The Subsidiary Guarantee of each New Guarantor is subject to the subordination provisions of the Indenture. 3. Termination, Release and Discharge. [The] [Each] New Guarantor's Subsidiary ---------------------------------- Guarantee shall terminate and be of no further force or effect, and [the] [each] New Guarantor shall be released and discharged from all obligations in respect of such Subsidiary Guarantee, as and when provided in Section 4.21(g) of the Indenture. _________________________________ /1/ Insert as appropriate. 4. Parties. Nothing in this Supplemental Indenture is intended or shall be ------- construed to give any Person, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of [the] [each] New Guarantor's Subsidiary Guarantee or any provision contained herein or in Section 4.21 of the Indenture. 5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE TO SUBMIT TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES. 6. Ratification of Indenture; Supplemental Indentures Part of Indenture. -------------------------------------------------------------------- Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture. 7. Counterparts. The parties hereto may sign one or more copies of this ------------ Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement. 8. Headings. The section headings herein are for convenience of reference only -------- and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. DANKA BUSINESS SYSTEMS PLC By: ________________________________ Name: Title HSBC Bank USA, as Trustee By: ________________________________ Name: Title Danka Office Imaging Company, as Existing Guarantor By: ________________________________ Name: Title Danka Holding Company, as Existing Guarantor By: ________________________________ Name: Title [NAME OF NEW GUARANTOR],/2/ As New Guarantor __________________________________ /2/ Add a signature block for each New Guarantor. By: ________________________________ Name: Title: EXHIBIT D FORM OF CONVERSION NOTICE TO CONVERT THIS NOTE, FILL IN THE FORM BELOW: (I) OR (WE) ELECT TO TRANSFER THIS NOTE, PURSUANT TO THE TERMS AND CONDITIONS SET FORTH IN THE INDENTURE (Insert Holder's soc. sec. or tax I.D. no.) (Print or type Holder's name, address and zip code) Assignment and Transfer of Note as Requested by the Conversion Agent: The Holder of the Note hereby irrevocably appoints agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her. Date: ____________ Your Signature: ___________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ________________________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15)
Social Security Number or Taxpayer Identification Number: ______________ Option of Holder to Convert Notes into Ordinary Shares or American Depository Shares: (1) If you wish to convert this Note into either ordinary shares or American depository shares of the Company pursuant to Article 10 ("Conversion") of the Indenture, check the applicable boxes: [ ] Ordinary Shares: in whole [ ] in part[ ] Amount to be converted: $ [ ] American Depository Shares: in whole [ ] in part[ ] Amount to be converted: $ Date: ____________ Your Signature: ___________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ________________________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15)
Social Security Number or Taxpayer Identification Number: ______________ Surrender of the Note to the Trustee The Holder of the Note hereby surrenders the Note (in whole or in part, and if in part the part to be converted) to the Trustee for purposes of conversion, under Article 10 of the Indenture. The surrender of the Note shall be annotated to the Company or its agent Date: ____________ Your Signature: ___________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ________________________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15)
Social Security Number or Taxpayer Identification Number: ______________ Designation of Delivery for Conversion Pursuant to Section 10.3 of the Indenture, the Holder designates: [ ] DTC or [ ] the address below as the address for which the delivery of shares upon conversion should occur. Holder's Address:_____________________________________________________ Date: ____________ Your Signature: ___________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ________________________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15)
Social Security Number or Taxpayer Identification Number: ______________ Payment of taxes, capital, stamp, issue and registration duties The Holder hereby accompanies this Conversion Notice with any required taxes and capital, stamp, issue and transfer documents as requested by the Conversion Agent.
Date: ____________ Your Signature: ___________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ________________________________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15)
Social Security Number or Taxpayer Identification Number: ______________ EX-4.25 3 dex425.txt INDENTURE Exhibit 4.25 FORM OF DANKA BUSINESS SYSTEMS PLC 10% Subordinated Notes due 2008 INDENTURE Dated as of _____ __, 2001 HSBC BANK USA as Trustee CROSS-REFERENCE TABLE
Indenture TIA Section Section - ----------- --------- SECTION 310 (a)(1)........................................................................ 7.10 (a)(2)........................................................................ 7.10 (a)(3)........................................................................ N.A. (a)(4)........................................................................ N.A. (a)(5)........................................................................ 7.10 (b)........................................................................... 7.8 ........................................................................... 7.10 ........................................................................... 13.2 (c)........................................................................... N.A. SECTION 311 (a)........................................................................... 7.11 (b)........................................................................... 7.11 (c)........................................................................... N.A. SECTION 312 (a)........................................................................... 2.6 (b)........................................................................... 13.3 (c)........................................................................... 13.3 SECTION 313 (a)........................................................................... 7.6 (b)(1)........................................................................ 7.6 (b)(2)........................................................................ 7.6 (c)........................................................................... 7.6 ........................................................................... 13.2 (d)........................................................................... 7.6 SECTION 314 (a)........................................................................... 4.4 ........................................................................... 4.7 ........................................................................... 13.2 (b)........................................................................... N.A. (c)(1)........................................................................ 13.4 (c)(2)........................................................................ 13.4 (c)(3)........................................................................ N.A. (d)........................................................................... N.A. (e)........................................................................... 13.5 (f)........................................................................... N.A. SECTION 315 (a)........................................................................... 7.1(b) (b)........................................................................... 7.5 ........................................................................... 13.2 (c)........................................................................... 7.1(a) (d)........................................................................... 7.1(c) (e)........................................................................... 6.11 SECTION 316 (a)(last sentence)............................................................ 2.12 (a)(1)(A)..................................................................... 6.5 ........................................................................... 6.6 (a)(1)(B)..................................................................... 6.4 (a)(2)........................................................................ N.A. (b)........................................................................... 6.7 (c)........................................................................... 9.4
Indenture TIA Section Section - ----------- --------- SECTION 317 (a)(1)........................................................................ 6.2 ........................................................................... 6.3 (a)(2)........................................................................ 6.2 ........................................................................... 6.9 (b)........................................................................... 2.5 SECTION 318 (a)........................................................................... 13.1 SECTION 318 (c)........................................................................... 13.1
_______________________ N.A. means not applicable. NOTE: This Cross-Reference Table is not part of the Indenture. ii TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE......................................................... 1 SECTION 1.1 Definitions................................................................................ 1 SECTION 1.2 Other Definitions.......................................................................... 6 SECTION 1.3 Incorporation by Reference of Trust Indenture Act.......................................... 7 SECTION 1.4 Rules of Construction...................................................................... 8 SECTION 1.5 Acts of Holders............................................................................ 8 ARTICLE 2 THE NOTES.......................................................................................... 9 SECTION 2.1 Form and Dating............................................................................ 9 SECTION 2.2 Denominations.............................................................................. 9 SECTION 2.3 Execution and Authentication............................................................... 9 SECTION 2.4 Registrar and Paying Agent................................................................. 10 SECTION 2.5 Paying Agent to Hold Money in Trust........................................................ 10 SECTION 2.6 Noteholder Lists........................................................................... 10 SECTION 2.7 Transfer and Exchange...................................................................... 11 SECTION 2.8 Book-Entry Provisions for Global Notes..................................................... 11 SECTION 2.9 Deposit of Monies.......................................................................... 12 SECTION 2.10 Replacement Notes....................................................................... 12 SECTION 2.11 Outstanding Notes....................................................................... 12 SECTION 2.12 Treasury Notes.......................................................................... 13 SECTION 2.13 Temporary Notes......................................................................... 13 SECTION 2.14 Cancellation............................................................................ 13 SECTION 2.15 Defaulted Interest...................................................................... 13 SECTION 2.16 Persons Deemed Owners................................................................... 14 SECTION 2.17 CUSIP, CINS and ISIN Numbers............................................................ 14 SECTION 2.18 Issuance of Additional Notes............................................................ 14 ARTICLE 3 REDEMPTION......................................................................................... 14 SECTION 3.1 Notices to Trustee......................................................................... 14 SECTION 3.2 Selection of Notes to Be Redeemed.......................................................... 15 SECTION 3.3 Notice of Redemption....................................................................... 15 SECTION 3.4 Effect of Notice of Redemption............................................................. 16 SECTION 3.5 Deposit of Redemption Price................................................................ 16 SECTION 3.6 Notes Redeemed in Part..................................................................... 16 SECTION 3.7 Optional Redemption........................................................................ 16 SECTION 3.8 [Intentionally Omitted].................................................................... 17 SECTION 3.9 Optional Tax Redemption.................................................................... 17 SECTION 3.10 Optional Redemption Following an Equity Offering........................................ 18 ARTICLE 4 COVENANTS.......................................................................................... 18 SECTION 4.1 Payment of Principal and Interest.......................................................... 18 SECTION 4.2 Maintenance of Office or Agency for Notices and Demands.................................... 19 SECTION 4.3 Property and Insurance Matters............................................................. 19 SECTION 4.4 Compliance Certificate and Opinion of Counsel; Notice of Default.......................... 19 SECTION 4.5 Corporate Existence........................................................................ 19 SECTION 4.6 Payment of Taxes and Other Claims.......................................................... 19 SECTION 4.7 Reports.................................................................................... 20 SECTION 4.8 Waiver of Stay, Extension or Usury Laws.................................................... 20 SECTION 4.9 Payment of Additional Amounts.............................................................. 20
i SECTION 4.10 [Intentionally Omitted]................................................................. 21 SECTION 4.11 [Intentionally Omitted]................................................................. 21 SECTION 4.12 [Intentionally Omitted]................................................................. 21 SECTION 4.13 [Intentionally Omitted]................................................................. 21 SECTION 4.14 Limitation on Transactions with Affiliates.............................................. 21 SECTION 4.15 [Intentionally Omitted]................................................................. 21 SECTION 4.16 [Intentionally Omitted]................................................................. 21 SECTION 4.17 Change of Control....................................................................... 22 SECTION 4.18 Limitations on Payments for Consent..................................................... 22 SECTION 4.19 Limitation on Business Activities....................................................... 23 SECTION 4.20 [Intentionally Omitted]................................................................. 23 SECTION 4.21 [Intentionally Omitted]................................................................. 23 SECTION 4.22 Maintenance of All Registration, Regulations and Licenses............................... 23 SECTION 4.23 Internal Revenue Service Filing......................................................... 23 ARTICLE 5 SUCCESSORS......................................................................................... 23 SECTION 5.1 Limitation on Mergers, Consolidations and Sales of All Assets in respect to the Company.... 23 SECTION 5.2 Successor Corporation Substituted.......................................................... 24 ARTICLE 6 DEFAULTS AND REMEDIES.............................................................................. 24 SECTION 6.1 Events of Default.......................................................................... 24 SECTION 6.2 Acceleration............................................................................... 26 SECTION 6.3 Other Remedies............................................................................. 26 SECTION 6.4 Waiver of Past Defaults.................................................................... 27 SECTION 6.5 Control by Majority........................................................................ 27 SECTION 6.6 Limitation on Suits........................................................................ 27 SECTION 6.7 Rights of Holders to Receive Payment....................................................... 27 SECTION 6.8 Collection Suit by Trustee................................................................. 28 SECTION 6.9 Trustee May File Proofs of Claim........................................................... 28 SECTION 6.10 Priorities.............................................................................. 28 SECTION 6.11 Undertaking for Costs................................................................... 29 SECTION 6.12 Reports to the Trustee.................................................................. 29 ARTICLE 7 TRUSTEE............................................................................................ 29 SECTION 7.1 Duties of Trustee.......................................................................... 29 SECTION 7.2 Rights of Trustee.......................................................................... 30 SECTION 7.3 Individual Rights of Trustee............................................................... 30 SECTION 7.4 Trustee's Disclaimer....................................................................... 30 SECTION 7.5 Notice of Defaults......................................................................... 31 SECTION 7.6 Reports by Trustee to Holders.............................................................. 31 SECTION 7.7 Compensation and Indemnity................................................................. 31 SECTION 7.8 Replacement of Trustee..................................................................... 32 SECTION 7.9 Successor Trustee by Merger, Etc........................................................... 32 SECTION 7.10 Eligibility; Disqualification........................................................... 33 SECTION 7.11 Preferential Collection of Claims Against Company....................................... 33 SECTION 7.12 Permitted Transactions.................................................................. 33 ARTICLE 8 DISCHARGE OF INDENTURE............................................................................. 33 SECTION 8.1 Legal Defeasance and Covenant Defeasance of the Notes...................................... 33 SECTION 8.2 Termination of Obligations Upon Cancellation of the Notes.................................. 35 SECTION 8.3 Survival of Certain Obligations............................................................ 35 SECTION 8.4 Acknowledgment of Discharge by Trustee..................................................... 35
ii SECTION 8.5 Application of Trust Assets................................................................ 36 SECTION 8.6 Repayment to the Company; Unclaimed Money.................................................. 36 SECTION 8.7 Reinstatement.............................................................................. 36 ARTICLE 9 AMENDMENTS......................................................................................... 36 SECTION 9.1 Without Consent of Holders................................................................. 36 SECTION 9.2 With Consent of Holders.................................................................... 37 SECTION 9.3 Compliance with Trust Indenture Act........................................................ 38 SECTION 9.4 Revocation and Effect of Consents.......................................................... 38 SECTION 9.5 Notation on or Exchange of Notes........................................................... 39 SECTION 9.6 Trustee to Sign Amendments................................................................. 39 ARTICLE 10 [INTENTIONALLY OMITTED]........................................................................... 39 ARTICLE 11 SUBORDINATION..................................................................................... 39 SECTION 11.1 Ranking.................................................................................... 39 SECTION 11.2 Priority and Payment Over of Proceeds in Certain Events.................................... 39 SECTION 11.3 Payments May Be Made Prior to Notice....................................................... 41 SECTION 11.4 Rights of Holders of Senior Debt Not to Be Impaired........................................ 42 SECTION 11.5 Authorization to Trustee to Take Action to Effectuate Subordination........................ 42 SECTION 11.6 Subrogation................................................................................ 42 SECTION 11.7 Obligations of Company Unconditional....................................................... 42 SECTION 11.8 The Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice................ 43 SECTION 11.9 Right of Trustee to Hold Senior Debt....................................................... 43 SECTION 11.10 No Implied Covenants by or Obligations of the Trustee...................................... 43 ARTICLE 12 MEETINGS OF HOLDERS OF THE NOTES.................................................................. 43 SECTION 12.1 Purposes of the Meetings................................................................... 43 SECTION 12.2 Place of Meetings; Expenses................................................................ 44 SECTION 12.3 Call and Notice of Meetings................................................................ 44 SECTION 12.4 Voting at Meetings......................................................................... 44 SECTION 12.5 Voting Rights, Conduct and Adjournment..................................................... 44 SECTION 12.6 Revocation of Consent by Holders........................................................... 45 ARTICLE 13 MISCELLANEOUS..................................................................................... 45 SECTION 13.1 Trust Indenture Act Controls............................................................... 45 SECTION 13.2 Notices.................................................................................... 45 SECTION 13.3 Communication by Holders with Other Holders................................................ 46 SECTION 13.4 Certificate and Opinion as to Conditions Precedent......................................... 46 SECTION 13.5 Statements Required in Certificate or Opinion.............................................. 47 SECTION 13.6 Rules by Trustee and Agents................................................................ 47 SECTION 13.7 Legal Holidays............................................................................. 47 SECTION 13.8 No Recourse Against Others................................................................. 47 SECTION 13.9 Governing Law.............................................................................. 47 SECTION 13.10 No Adverse Interpretation of Other Agreements.............................................. 47 SECTION 13.11 Successors................................................................................. 47 SECTION 13.12 Severability............................................................................... 47 SECTION 13.13 Counterpart Originals...................................................................... 48 SECTION 13.14 Variable Provisions........................................................................ 48 SECTION 13.15 Qualification of Indenture................................................................. 48
iii SECTION 13.16 Table of Contents, Headings, Etc........................................................... 48 SECTION 13.17 Indenture Controls over Form of Note....................................................... 48
EXHIBIT A. Form of Note iv INDENTURE dated as of _______ __, 2001 between Danka Business Systems PLC, a public limited company organized under the laws of England and Wales (the "Company"), and HSBC Bank USA, a banking corporation and trust company organized under the laws of the State of New York, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders (as defined below) of the Company's 10% Subordinated Notes due April 1, 2008 (the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. The term "AFFILIATE" shall mean, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided, that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. The terms "controlling" and "controlled" have meaning correlative to the foregoing. The term "AGENT" shall mean any registrar or paying agent, custodian for the Notes, or authenticating agent or co-registrar. The term "BANKRUPTCY LAW" shall mean the United Kingdom Insolvency Act 1986, as supplemented or amended, together with all rules, regulations and instruments made thereunder and applicable United Kingdom law related to bankruptcy, insolvency, winding up, administration, receivership and other similar matters, the United States Bankruptcy Code or any similar federal, state or foreign law for the relief of creditors. The term "BOARD OF DIRECTORS," when used with reference to a Person shall mean the board of directors or equivalent governing body of the Person or any duly authorized committee of the board of directors or equivalent governing body of the Person. The term "BOARD RESOLUTION" shall mean a duly adopted resolution of a Board of Directors of a Person in full force and effect on the date of certification certified by any Director, Secretary or Assistant Secretary of such Person. The term "BOOK-ENTRY DEPOSITARY" shall mean the book-entry depositary or its nominee or the custodian of either, designated by the Company in the Depositary Agreement until a successor depositary shall have become such pursuant to the applicable provisions of the Depositary Agreement, and thereafter "Book-Entry Depositary" shall mean such successor book-entry depositary or its nominee or the custodian of either. The term "BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. The term "CAPITAL STOCK" shall mean, with respect to any Person, any and all shares, interest, participations, rights in or other equivalents (however designated) of corporate stock of such Person and all other equity interests in such Person. The term "CAPITALIZED LEASE OBLIGATION" shall mean as to any Person, the obligations of such Person under a lease of real or personal property of such Person that are required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with GAAP. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The term "CHANGE OF CONTROL" shall mean the occurrence of one or more of the following events: (a) any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to any Person or group of Persons (as those terms are used in Section 13(d) of the Exchange Act) (other than Permitted Holders), except to effect a Change of Domicile; (b) the approval by the holders of Capital Stock of the Company of a plan or proposal for the liquidation or dissolution of the Company, other than to effect a Change of Domicile; (c) a Person or group of Persons (as those terms are used in Section 13(d) of the Exchange Act (other than Permitted Holders) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) of a majority of the securities of the Company ordinarily having the right to vote in the election of directors of the Company; (d) the replacement of a majority of the Board of Directors over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, by persons who were not approved by a majority vote of the directors then still in office who were either directors at the beginning of such period or whose election as a director was previously so approved; or (e) the merger or consolidation of the Company with or into another corporation or the merger of another corporation into the Company with the effect that immediately after such transaction any Person or group of Persons (other than Permitted Holders) becomes the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors. The term "CHANGE OF DOMICILE" shall mean a transaction or a series of related transactions, including without limitation (i) a consolidation, amalgamation, or merger of the Company with or into any other Person; (ii) acquisition of all of the Capital Stock of the Company; or (iii) sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries) to another Person, of which the sole purpose is to reincorporate the Company in a jurisdiction other than England and Wales or incorporate or organize a Successor Entity to the Company in a jurisdiction other than England and Wales. For the purposes of this definition of Change of Domicile, a "Successor Entity" shall mean an entity whose Voting Stock following the Change of Domicile is owned or beneficially owned by the same Persons in the same proportions as owned or beneficially owned the Voting Stock of the Company immediately prior to the Change of Domicile. The term "CLEARSTREAM" shall mean Clearstream International. The term "CLOSING DATE" shall mean the date on which the Notes are originally issued under this Indenture. The term "COMMISSION" shall mean the Securities and Exchange Commission. The term "COMPANY" shall mean Danka Business Systems, PLC and, subject to the provisions of Article 5 hereof, shall also include its successors and assigns. The term "CORPORATE TRUST OFFICE" shall mean the principal corporate trust office of the Trustee at which, at any particular time, its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at c/o Issuer Services, 452 Fifth Avenue, New York, New York 10018. The term "CREDIT FACILITY" shall mean the Amended and Restated Credit Agreement dated as of June 29, 2001, by and among Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company, the several financial institutions from time to time a party and Bank of America, N.A., as agent, as the same may be amended, modified, supplemented, extended, renewed, restated, refunded, refinanced, restructured or replaced from time to time. The term "CUSTODIAN" shall mean any receiver, trustee, assignee, liquidator, custodian, or similar official under any Bankruptcy Law. The term "DEBT" shall mean, with respect to any Person (without duplication): (a) indebtedness of such Person, whether or not contingent, for borrowed money; (b) indebtedness of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all 2 indebtedness or other obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not in default or overdue by 90 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted); (e) all indebtedness for the reimbursement of any obligation on any letter of credit, banker's acceptance or similar credit transaction; (f) guarantees and other contingent obligations in respect of indebtedness referred to in (a) through (e) above and (h) and (i) below; (g) all indebtedness of any other Person of the type referred to in (a) through (f) that are secured by any Lien on any property or asset of the referent Person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured; (h) all indebtedness under currency agreements and interest swap agreements of such Person; (i) all obligations under the TROL; and (j) all Disqualified Capital Stock issued by such Person with the amount of indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. "Maximum fixed repurchase price" of any Disqualified Capital Stock that does not have a fixed repurchase price is calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which the indebtedness is required to be determined pursuant to this Indenture, and if such price is based upon or measured by the fair market value of such Disqualified Capital Stock, such fair market value will be determined reasonably and in good faith by the Board of Directors of the issuer of the Disqualified Capital Stock. The amount of any indebtedness (other than Disqualified Capital Stock) outstanding as of any date is: (a) the accreted value to the extent the indebtedness does not require current payments of interest; (b) the principal amount together with any interest that is more than 30 days past due in the case of any other indebtedness; (c) in the case of currency agreements and interest swap agreements, the amount that would appear on the consolidated balance sheet of the Person in accordance with GAAP; and (d) in the case of any guarantee or other contingent obligation in respect of indebtedness of any other Person, the maximum amount of such indebtedness, unless the liability is limited by the terms of the guarantee or contingent obligation, in which case the amount of such guarantee or other contingent obligation is deemed to equal the maximum amount of such liability. The term "DEFAULT" shall mean any event or condition the occurrence of which is, or with the lapse of time or the giving of notice (as provided in this Indenture), or both, would be an Event of Default. The term "DEPOSITARY" shall mean The Depository Trust Company, its nominees, and their respective successors, until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder. The term "DEPOSITARY AGREEMENT" shall mean the Note Depositary Agreement dated as of the date of this Indenture between the Company and the Book-Entry Depositary. The term "DESIGNATED SENIOR DEBT" shall mean (a) Debt under or in respect of the Credit Facility, and (b) any other Debt constituting Senior Debt, which at the time of determination has an aggregate principal amount of at least $50 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. The term "DISQUALIFIED CAPITAL STOCK" shall mean, with respect to any Person, any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Debt, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature, excluding the Senior Convertible Participating Shares. The term "DTC" shall mean the Depository Trust Company, a New York corporation. The term "EQUITY OFFERING" shall mean a public or private offering of Qualified Capital Stock of the Company. The term "EUROCLEAR" shall mean the Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. 3 The term "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. The term "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect on the date on which the Notes are first authenticated and delivered under this Indenture and from time to time in force. The term "HOLDER," "HOLDER OF NOTES" or other similar terms, shall mean (i) for so long as the Notes are represented by Global Notes, the bearer thereof, which initially shall be the Book-Entry Depositary and (ii) in the event Physical Notes are issued, the person in whose name a particular Note shall be registered on the books of the Company kept for that purpose in accordance with the terms hereof, and the word "majority," used in connection with the terms "Holder," "Holder of Notes," or other similar terms, shall mean the "majority in principal amount of Notes outstanding" whether or not so expressed. The term "INDENTURE" shall mean this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. The term "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time hereafter, or any successor federal income tax laws. The term "ISSUE DATE" shall mean _________________, 2001. The term "LIEN" shall mean any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind, including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest. The term "MATURITY" when used with respect to any Note, shall mean the date on which the principal of such Note or an installment of principal becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, call for redemption or otherwise. The term "MISCELLANEOUS NOTES PAYABLE" shall mean the miscellaneous notes payable of the Company totaling in the aggregate $2.6 million outstanding at March 31, 2001, which were comprised of the following: (a) $1.5 million of various bank overdraft accounts, (b) $0.9 million of outstanding notes payable related to two acquisitions completed in prior years, and (c) $0.2 million of outstanding capital leases. The term "NOTES" shall mean the 10% Subordinated Notes due April 1, 2008 that are issued under this Indenture. The term "NOTEHOLDER" shall mean a Holder of one or more Notes. The term "OBLIGATIONS" shall mean, collectively, all advances, debts, liabilities, obligations, covenants and duties arising under the Credit Facility (or any other document, agreement or instrument delivered to the agent or any lender under the Credit Facility in connection with the transactions contemplated by the Credit Facility) owing by any borrower under the Credit Facility to the agent, any lender or any person entitled to indemnification from any borrower under the Credit Facility, or arising under any Swap Contract or treasury services contract between any borrower under the Credit Facility and the agent or any lender under the Credit Facility, in any case, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. For the purposes of this definition, the term "SWAP CONTRACT" shall mean any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. The term "OFFICER" shall mean any of the Chairman of the Board of Directors of the Company, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer or the Secretary of the Company. The term "OFFICERS' CERTIFICATE" shall mean a certificate signed by two Officers of the Company complying with the applicable provisions of Sections 13.4 and 13.5 hereof. The term "OPINION OF COUNSEL" shall mean, with respect to any Person, an opinion in writing signed by legal counsel (who may be an employee of or counsel to such Person) who is reasonably acceptable to the Trustee and complying with the applicable provisions of Sections 13.4 and 13.5 hereof. The term "PERMITTED HOLDER" shall mean Cypress Associates II LLC and its Affiliates. 4 The term "PERSON" shall mean an individual, partnership, corporation, limited liability company, trust or unincorporated organization, trust or joint venture, a governmental agency or political subdivision thereof or any other entity. The term "PHYSICAL NOTES" shall mean any Notes transferred or issued pursuant to Section 2.8 in exchange for interests in the Global Notes. The Physical Notes shall be issued in the form of permanent certificated Notes in fully registered form without interest coupons in substantially the form set forth in Exhibit A. The term "QUALIFIED CAPITAL STOCK" shall mean any Capital Stock that is not Disqualified Capital Stock. The term "REDEMPTION DATE", when used with respect to any Note to be redeemed, shall mean the date fixed for such redemption or repurchase by or pursuant to this Indenture. The term "REDEMPTION PRICE" shall mean the amount payable for the redemption of any Note pursuant to this Indenture. The term "RESPONSIBLE OFFICER" shall mean any officer within the Issuer Services office of the Trustee (or any successor group of the Trustee), or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject, or any officer of the Trustee with direct responsibility for the administration of this Indenture. The term "RESTRICTED SUBSIDIARY" of a Person shall mean any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. The term "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. The term "SENIOR CONVERTIBLE PARTICIPATING SHARES" shall mean the 6.50% senior convertible participating shares of the Company with par value $1.00 each. The term "SENIOR DEBT" shall mean: (a) the principal of, interest on and all other Obligations relating to the Credit Facility, including all loans, letters of credit and other extensions of credit under the Credit Facility, and all expenses, fees, reimbursements, indemnities and other amounts owing pursuant to the Credit Facility; (b) amounts payable in respect of any interest swap obligations and currency agreements; (c) the Miscellaneous Notes Payable; (d) the Senior Subordinated Notes; and (e) all other Debt, except for any Debt which by its terms is made expressly equal to or behind the Notes in right of payment and except as otherwise provided below. Notwithstanding the foregoing, the term "Senior Debt" does not include: (a) any Debt of the Company to a Subsidiary of the Company; (b) Debt to or guaranteed on behalf of any shareholder, director, officer or employee of the Company or any Subsidiary of the Company, including amounts owed for compensation; (c) Debt to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (d) Debt represented by Disqualified Capital Stock; (e) any liability for federal, state, local or other taxes owed by the Company; (f) Debt that is without recourse to the Company; (g) the 6.75% Notes; and (h) any other Debt that by its express terms ranks in right of payment equal to or behind the Notes. The term "SENIOR REPRESENTATIVE" shall mean any trustee, agent or representative, if any, for the holders of any Designated Senior Debt. The term "SENIOR SUBORDINATED INDENTURE" shall mean the indenture for the Zero Coupon Senior Subordinated Notes to be executed on the Issue Date. The term "SENIOR SUBORDINATED NOTES" shall mean the Company's Zero Coupon Senior Subordinated Notes due April 1, 2004. 5 The term "SIGNIFICANT SUBSIDIARY" shall have the meaning given to it by Article 1.02(w) of Regulation S-X under the Securities Exchange Act of 1934, as amended. The term "6.75% NOTES" shall mean the Company's 6.75% Convertible Subordinated Notes due April 1, 2002. The term "STATED MATURITY" when used with respect to any security or Debt, or any installment of interest thereon, shall mean the date specified in such security or the instrument relating to such Debt as the fixed date on which the principal of such security or Debt or such installment of interest is due and payable. The term "SUBSIDIARY" of any Person shall mean: (a) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances is owned, directly or indirectly, by such Person; or (b) any other Person of which at least a majority of the voting interest under ordinary circumstances is owned, directly or indirectly, by such Person. The term "Subsidiary" does not include an Unrestricted Subsidiary for purposes of this Indenture. The term "TROL" shall mean the tax retention operating lease arrangements of the Company in effect on February 19, 2001. The term "TRUSTEE" shall mean HSBC Bank USA or any successor thereto. The term "UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent such Subsidiary: (a) has no Debt other than non-recourse Debt; (b) on the date of designation, is not a party to any agreement with the Company or a Restricted Subsidiary of the Company unless the terms of any such agreement are no less favorable to the Company or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates or the Company or the Restricted Subsidiary; (c) is a Person with respect to which neither the Company or any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Capital Stock or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Debt of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or its Restricted Subsidiaries. The term "U.S. GOVERNMENT OBLIGATIONS" shall mean securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality, of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligations or a specific payment of interest on or principal of any such U.S. Government Obligations held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of interest on or principal of the U.S. Government Obligations evidenced by such depository receipt. The term "VOTING STOCK" of any Person shall mean Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. SECTION 1.2 Other Definitions. Term Defined in Section ---- ------------------ "Acceleration Due to Blockage" 6.2 6 "Act" 1.5(a) "Additional Amounts" 4.9 "Agent Members" 2.8(b) "Blockage Period" 11.2 "Change of Control Offer" 4.17 "covenant defeasance" 8.1 "Default" 6.1 "Events of Default" 6.1 "Excluded Holder" 4.9 "Global Notes" 2.1 "legal defeasance" 8.1 "Paying Agent" 2.4 "Registrar" 2.4 "Repurchase Date" 4.17 "Required Filing Dates" 4.7 "Security Register" 2.7 "Senior Nonmonetary Default" 11.2 "Senior Payment Default" 11.2 "Surviving Entity" 5.1 "Taxes" 4.9(a) "TIA" 1.3 SECTION 1.3 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act of 1939 ("TIA"), the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITYHOLDER" means a Noteholder; 7 "INDENTURE TO BE QUALIFIED" means this Indenture; and "OBLIGOR" on the Notes means the Company, any other obligor upon the Notes or any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. SECTION 1.4 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) "including" means including without limitation; (e) words in the singular include the plural, and words in the plural include the singular; (f) provisions apply to successive events and transactions; and (g) references to sections of or rules under the Securities Act and Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time. SECTION 1.5 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Written actions so taken by the Holders or actions taken by the Holders at a meeting in accordance with Article 12 hereof, are herein collectively referred to as the "Act" of Holders of signing such instrument or instruments or taking such actions at a meeting of the Holders. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.1 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.5. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his or her authority. (c) Pursuant to Article 2, if Global Notes are transferred into registered Physical Notes, the ownership of those registered Notes shall be proved by the register maintained by the Registrar. (d) Subject to the provisions of Section 9.4, any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer therefor or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. However, any such Holder or subsequent Holder may revoke the request, demand, authorization, direction, notice, consent, waiver or other Act as to his or her Note or portion thereof if the Trustee receives written notice of revocation before the date such Act becomes effective. (e) The principal amount and serial numbers of Physical Notes held by any Person, and the date of holding the same, shall be proved by the Security Register. The principal amount and serial numbers of Global Notes held by any Person, and the date of holding the same, may be proved by the production of such Global Notes or by a certificate executed, as depositary, by any trust company, bank, banker or other depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depositary, or exhibited to it, the Global Notes therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Global Notes, if such certificate or affidavit is 8 deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Global Note continues until (i) another certificate or affidavit bearing a later date issued in respect of the same Global Note is produced, or (ii) such Global Note is produced to the Trustee by some other Person, or (iii) such Global Note is surrendered in exchange for a Physical Note, or (iv) such Global Note is no longer outstanding. The principal amount and serial numbers of Global Notes held by any Person, and the date of holding the same, may also be proved in any other manner which the Trustee deems sufficient. ARTICLE 2 THE NOTES SECTION 2.1 Form and Dating. (a) The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A. The Notes may have notations, legends --------- or endorsements required by law, stock exchange rule or usage, in addition to those set forth in Exhibit A. The Company shall approve the form of the Notes --------- and any notation, legend or endorsement on the Notes. Each Note shall be dated the date of its authentication. The Notes shall be issuable and initially represented by one or more global notes in bearer form without interest coupons in substantially the form set forth in Exhibit A (the "Global Notes"). --------- (b) The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (c) The aggregate principal amount of Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) The Physical Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. Physical Notes shall be issued in registered form only and in no event shall Physical Notes be issued in bearer form. SECTION 2.2 Denominations. The Notes shall initially be issued in denominations of $1,000 and integral multiples of $1,000. SECTION 2.3 Execution and Authentication. (a) Two Officers (each of whom shall have been duly authorized by all requisite corporate actions) shall sign the Notes for the Company by manual or facsimile signature. (b) If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note shall nevertheless be valid. (c) A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. (d) The Trustee shall authenticate Notes for original issue upon a written order of the Company executed by two Officers. The written order shall specify the amount and type of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and the legends, if any, to be placed on the Notes. 9 (e) The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. SECTION 2.4 Registrar and Paying Agent. (a) The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York where (i) Notes, if in registered form, may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (ii) Notes may be presented or surrendered for payment ("Paying Agent") and (iii) notices and demands in respect of the Notes and this Indenture may be served. The Company, or any Subsidiary or Affiliate of the Company may serve as the Agent referred to in clause (i), (ii) or (iii) above, except the Company, or such Subsidiary or Affiliate may not act as Paying Agent for purposes of the repurchase under Section 4.17. The Registrar shall keep a register of the Notes (in registered form) and of their transfer and exchange. The Company, upon written notice to and approval of the Trustee, may appoint one or more co-registrars and one or more additional paying agents. The Company may change any Registrar or Paying Agent without notice to any Noteholder. The term "Paying Agent" includes any additional paying agent reasonably acceptable to the Trustee. The term "Registrar" includes any appointed co-registrar. The Company initially appoints the Trustee as Registrar and Paying Agent and agent to receive notices and demands in respect of the Notes until such time as the Trustee has resigned or a successor has been appointed in accordance with the terms of this Indenture. For so long as the Notes are listed on the Luxembourg Stock Exchange, the Company shall maintain a Paying Agent in Luxembourg. The Company will appoint Banque Internationale a Luxembourg S.A. as its Paying Agent in Luxembourg until such time as Banque Internationale a Luxembourg has resigned or a successor has been appointed. (b) The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee in writing, in advance, of the name and address of any such Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.5 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, or interest on, the Notes (whether such money has been distributed to it by the Company or any other obligor on the Notes), and shall notify the Trustee in writing of any Default by the Company (or any other obligor upon the Notes) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate such money and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization procedures relating to the Company, the Trustee shall serve as Paying Agent for the Notes. While any such Default continues, the Trustee may require a Paying Agent to pay all such money held by it to the Trustee. The Company (or any other obligor upon the Notes) at any time may require a Paying Agent to pay all such money held by it to the Trustee and account for any funds disbursed. Upon such payment to the Trustee, the Paying Agent (if other than the Company, a Subsidiary or any other obligor upon the Notes) shall have no further liability for such money. SECTION 2.6 Noteholder Lists. In the event that Physical Notes are issued, the Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company (or any other obligor upon the Notes) shall furnish to the Trustee at least seven (7) Business Days before each interest payment date (and in all events at intervals of not more than six months) and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders, and the Company shall otherwise comply with TIA Section 312(a). 10 SECTION 2.7 Transfer and Exchange. (a) Physical Notes shall be transferable only upon the surrender of a Physical Note for registration of transfer. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 4.2 hereof being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Physical Notes and of transfers of Physical Notes. Where Notes in registered form or "Physical Notes" are presented to the Registrar or a co-registrar with a request to register the transfer of such Notes or exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange if its requirements for such transactions are met, provided that any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar or co-registrar and the Trustee, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate the Notes at the Registrar's or co-registrar's request. (b) The Registrar or co-registrar shall not be required to register the transfer of or exchange any Note in registered form (i) during a period beginning at the opening of business on a Business Day fifteen (15) days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article 3 hereof, except the unredeemed portion of any Note being redeemed in part. (c) No service charge shall be made for any registration of transfer or exchange; provided however, that the Company, Registrar or Trustee, as appropriate, may require payment of a sum sufficient to pay any taxes or similar governmental charges that may be imposed in connection with the transfer or exchange of Notes in registered form from the Noteholder requesting such transfer or exchange (other than any such transfer taxes or similar governmental charges arising under the laws of the United Kingdom or the United States or of any State thereof payable upon transfers or exchanges pursuant to Sections 2.10, 2.13, 3.6, 4.17 or 9.5 hereof). SECTION 2.8 Book-Entry Provisions for Global Notes. (a) The Global Notes initially shall (i) be in bearer form in accordance with Section 2.1(a) of this Indenture, and (ii) be delivered to the Trustee as custodian for such Depositary. (b) Rights of members of, or participants in DTC or the Depositary ("Agent Members") with respect to any Global Note held on their behalf, by the Trustee shall be limited in accordance with Section 2.16 hereof. (c) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depositary or, if applicable, those of Euroclear and Clearstream, and the provisions of this Article 2. (d) Physical Notes shall be transferred to all beneficial owners, as definitive registered Notes, in exchange for their beneficial interests in the Global Notes only if (i) the Depositary notifies the Company or the Trustee that it is unwilling or unable to continue as Depositary for the Global Notes, as the case may be, and a successor depositary is not appointed by the Company within 90 days of such notice; (ii) at any time, the Company determines that the Global Notes, in whole, but not in part, should be exchanged for definitive registered Notes, but only if such exchange is required by any applicable law, any event beyond the control, or payments on any Global Note, depositary interest or book- entry interest, or would become, subject to any deduction or withholding for taxes; (iii) the Trustee is at any time unwilling or unable to continue as book- entry depositary and the Company does not appoint a successor within 90 days; or (iv) an Event of Default has occurred and is continuing and the Trustee has received a request to the foregoing effect from the Holder. (e) In connection with any transfer of a portion of the beneficial interests in a Global Note to beneficial owners pursuant to paragraph (d) of this Section 2.8, the Registrar shall reflect on its books and records the date and 11 a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in such Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary or, if applicable, by Euroclear or Clearstream, in exchange for its beneficial interest in the Global Note an equal aggregate principal of Physical Notes of authorized denominations. (f) In connection with the transfer of the entire Global Note to beneficial owners pursuant to paragraph (b) of this Section, the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary or, if applicable, by Euroclear or Clearstream, in exchange for its beneficial interest in the Global Note an equal aggregate principal amount of Physical Notes of authorized denominations. (g) The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. (h) Beneficial owners of interests in a Global Note may receive Physical Notes in accordance with the procedures of the Depositary. In connection with the execution, authentication and delivery of such Physical Notes, the Registrar shall reflect on its books and records a decrease in the principal amount of the relevant Global Note (in registered form) equal to the principal amount of such Physical Notes and the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Notes having an equal aggregate principal amount. SECTION 2.9 Deposit of Monies. In accordance with Section 4.1 of this Indenture, one Business Day prior to the date of any Stated Maturity, whether an Interest Payment Date or Maturity Date, the Company shall have irrevocably deposited with the Trustee or Paying Agent in immediately available funds money sufficient to make cash payments for such principal, premium, if any, and interest, as the case may be, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. SECTION 2.10 Replacement Notes. If any mutilated Physical Note is surrendered to the Trustee or if any mutilated Global Note is surrendered to the Company or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, and the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company in the form of an Officers' Certificate, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond or other form of indemnification must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, or any Agent from any loss which any of them may suffer if a Note is replaced. The Company may charge the Holder for its reasonable out-of-pocket expenses in replacing a Note. The Company shall remain obligated under any replacement Note to the same extent as if it were the original Note surrendered. SECTION 2.11 Outstanding Notes. (a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled or those delivered to it for cancellation and those described in this Section 2.11 as not outstanding. (b) If a Note is replaced pursuant to Section 2.10 hereof (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.10 hereof. 12 (c) If an amount of money necessary to pay or redeem any Note shall be deposited in trust with the Trustee (and in the case of a Note which is to be redeemed prior to the Stated Maturity thereof, notice of such redemption shall be duly given or provision satisfactory to the Trustee shall be made for giving such notice), it ceases to be outstanding and interest on it ceases to accrue on and after the Redemption Date. (d) If a Note is cancelled by the Trustee or delivered to the Trustee for cancellation, it ceases to be outstanding and interest on it ceases to accrue. (e) A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note, except as otherwise provided in Section 2.12 hereof. SECTION 2.12 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any other obligor upon the Notes or an Affiliate of the Company or such other obligor shall be considered as though not outstanding, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to so act with respect to such Notes and that the pledgee is not the Company or any Affiliate of the Company. SECTION 2.13 Temporary Notes. Until Physical Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Physical Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Physical Notes to be authenticated and the date on which the temporary Physical Notes are to be authenticated. Temporary Physical Notes shall be substantially in the form of Physical Notes but may have variations that the Company considers appropriate for temporary Physical Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company pursuant to Section 2.3(d) hereof, shall authenticate Physical Notes in exchange for temporary Physical Notes. Until such exchange, temporary Physical Notes shall be entitled to the same rights, benefits and privileges as Physical Notes. SECTION 2.14 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee for cancellation any Physical Notes surrendered to them for registration of transfer, exchange, payment, repayment or redemption. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or a Subsidiary of the Company), and no one else, shall promptly cancel all Notes so delivered to the Trustee or surrendered for registration of transfer, exchange, payment, repayment, redemption, replacement or cancellation and shall destroy cancelled Notes in accordance with the usual procedures of the Trustee and a record of their destruction shall be maintained by the Trustee. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Debt represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.14. SECTION 2.15 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest plus, to the extent lawful, interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day, in each case at the rate provided in the Notes. The Company shall, with the consent of and by written notice to the Trustee, fix each such special record date and payment date. At least 15 days before the special record date, the Company shall pay the amount due to the Trustee, and the Company (or the Trustee, in the name of and at the expense of the Company) 13 shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.16 Persons Deemed Owners. (a) Members of, or participants in DTC, shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Trustee, and the Trustee may be treated by the Depositary, the Company and any agent of the Company as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, the Depository or any agent of such, from giving effect to any written certification proxy or other authorization furnished by the Trustee or the Depository regarding the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) The Holder may grant proxies and otherwise authorize any Person, including Agents and persons that may hold interests through Agents, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17 CUSIP, CINS and ISIN Numbers. The Company in issuing the Notes may use "CUSIP", "CINS", "ISIN" or other identification numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers, CINS numbers, ISIN numbers or other identification numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders, provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange and that reliance may be placed only to the other identification numbers printed on the Notes, provided further that failure to use "CUSIP", "CINS", "ISIN" or other identification numbers in any notice of redemption or exchange shall not effect the validity or sufficiency of such notice. SECTION 2.18 Issuance of Additional Notes. The Company may not issue additional Notes under this Indenture. ARTICLE 3 REDEMPTION SECTION 3.1 Notices to Trustee. (a) If the Company elects to redeem Notes pursuant to the optional redemption provisions of Sections 3.7, 3.9 or 3.10 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a Redemption Date, an Officers' Certificate setting forth the Section of this Indenture pursuant to which the redemption shall occur, the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price. If the Company elects to have the Trustee furnish notice of redemption (as described above) of the Notes to the Holders, the Company shall notify the Trustee in writing and provide all the information and documentation required by this paragraph, at least 45 days but not more than 60 days before a Redemption Date. (b) If the Registrar is not the Trustee, the Company shall, concurrently with each notice of redemption, cause the Registrar to deliver to the Trustee a certificate (upon which the Trustee may rely) setting forth the principal amounts of Notes held by each Holder. 14 SECTION 3.2 Selection of Notes to Be Redeemed. (a) If less than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange or if no such requirements exist, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that any Notes with a principal amount of $1,000 or less shall not be redeemed in part; and provided further, if partial redemption is made with the proceeds of an Equity Offering, the Trustee will select Notes for redemption only on a pro rata basis or as nearly a pro rata basis as practicable (subject to DTC procedures), unless that basis is not permitted. (b) The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of them selected shall be in amounts of $1,000 or integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes, held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.3 Notice of Redemption. (a) At least 30 days but not more than 60 days before a Redemption Date, the Company shall (i) if the Notes are represented by a Global Note, publish in a leading newspaper having general circulation in New York (which is expected to be the Wall Street Journal) (and, so long as the Notes are listed on the ------------------- Luxembourg Stock Exchange and the rules of such Exchange so require, shall be published in a daily newspaper which is expected to be the Luxemburger Wort), or ---------------- (ii) if the Notes are represented by Physical Notes, mail or cause to be mailed by first class mail a notice of redemption to each Holder of the Notes to be redeemed, at the last address for that holder shown on the registry books, with a copy to the Trustee and for so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange so require, publish in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). If the Company redeems any Note in part only, the notice ---------------- of redemption that relates to that Note will state the portion of the principal amount to be redeemed, which portion will not be less than $1,000. The Company will issue a new Note in principal amount equal to the unredeemed portion in the name of the Holder upon cancellation of the original Note (subject to DTC procedures). On and after the redemption or purchase date, interest will no longer accrue on the Notes or portions of the Notes called for redemption or purchase, whether or not such Notes are presented for payment at the office of the Paying Agent for the Notes in New York, so long as the Company has deposited funds in a sufficient amount to pay the redemption or purchase price. (b) The notice shall identify the Notes to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed (which portion shall not be less than $1,000) and that, after the Redemption Date, upon surrender of such Note, a new note or notes in principal amount equal to the unredeemed portion will be issued in the name of the holder upon cancellation of the original note (subject to DTC procedures); (iv) the name and address of the Paying Agent; (v) that Notes called for redemption must be surrendered to the Paying Agent at its address to collect the Redemption Price; (vi) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the 15 Holders of such Notes is to receive payment of the Redemption Price upon surrender to the Paying Agent of such Notes; (vii) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption; (viii) the paragraph of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (ix) the CUSIP, CINS or ISIN number of the Notes, as the case may be. (c) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense, provided that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in Section 3.3(b). SECTION 3.4 Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date at the Redemption Price. Upon surrender to any Paying Agent, such Notes shall be paid at the Redemption Price, on condition that sufficient funds to pay the Redemption Price of such Notes have been deposited with the Paying Agent; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, registered as such, at the close of business on the relevant record date for the payment of such installment of interest. SECTION 3.5 Deposit of Redemption Price. (a) At least one Business Day prior to the Redemption Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or if the Company is its own Paying Agent, shall, on or before the redemption date, segregate and hold in trust) money sufficient to pay the Redemption Price of all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. (b) If the Company complies with the preceding paragraph, unless the Company defaults in the payment of such Redemption Price, interest on the Notes to be redeemed will cease to accrue on the applicable Redemption Date, whether or not such Notes are presented for payment. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest will be paid on the unpaid principal, from the Redemption Date until such principal is paid, and on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.1 hereof. SECTION 3.6 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.7 Optional Redemption. (a) Except as set forth in this Section 3.7 and Section 3.9, the Notes shall not be redeemable at the option of the Company prior to April 1, 2005. Thereafter, the Notes may be redeemed, at the Company's option, in whole or in part, and from time to time on or after April 1, 2005 and prior to Maturity. [Any such redemption and notice may, in the Company's discretion, be subject to the satisfaction of one or more conditions precedent.] Any redemption pursuant to this Section 3.7 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof and the Notes. 16 (b) The Redemption Price for the Notes for a redemption under this Section 3.7 shall be equal to par plus a premium, declining ratably to par. The Company may redeem all or part of the Notes with at least 30 days but not more than 60 days' notice at the redemption prices expressed as percentages of principal amount, plus accrued interest, if any to the relevant Redemption Date, as follows:
Twelve Month Period Commencing Redemption Price ------------------------------ ---------------- April 1, 2005............................. 105.000% April 1, 2006............................. 102.500% April1, 2007 and thereafter............... 100.000%
(c) In connection with a redemption under this Section 3.7, the Company will pay accrued and unpaid interest on the Notes up to but not including the redemption date. The redemption prices set forth in clause (b) above shall apply to any optional redemption of notes by the Company during the 12-month period beginning on April 1 of the years indicated in clause (b) above. SECTION 3.8 [Intentionally Omitted] SECTION 3.9 Optional Tax Redemption. (a) The Notes may be redeemed at the option of the Company in whole but not in part at any time at a Redemption Price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, up to but not including the Redemption Date covered by (c) below if, (i) as a result of any change in or amendment to the laws or any regulations or rulings promulgated thereunder of the jurisdiction (or of any political subdivision or taxing authority thereof or therein) in which the Company is organized or through which payment is made to the Holders or any change in the official application or interpretation of such laws, regulations or rulings, or any change in the official application or interpretation of, or any execution of or amendment to, any treaty or treaties affecting taxation to which such jurisdiction (or such political subdivision or taxing authority) is a party, which change, execution or amendment becomes effective on or after the Issue Date, or (ii) as a result of any delivery or of any requirement to deliver registered securities, and in any case set forth in clause (i) or (ii) above the Company is or would be required on the next succeeding interest payment date to pay Additional Amounts in accordance with Section 4.9, and the payment of such Additional Amounts cannot be avoided by the use of any reasonable measures (including but not limited to relocation of any person through which payment is made to the Holder) available to the Company. Prior to the giving of notice of redemption of such Notes pursuant to this Section 3.9(a), the Company shall deliver to the Trustee an Officers' Certificate, stating that the Company is entitled to effect such redemption and setting forth in reasonable detail a statement of circumstances showing that the conditions precedent to the right of the Company to redeem the Notes pursuant to this Section 3.9(a) have been satisfied. (b) Further, if pursuant to Section 5.2, a Person formed by a consolidation of the Company or into which the Company is merged or to whom the Company has conveyed, transferred or leased its properties or assets substantially as an entirety has been or would be required to pay any Additional Amounts as therein provided, the Notes may be redeemed at the option of such Person in whole but not in part at any time, at a redemption price equal to the principal amount thereof and accrued but unpaid interest, if any, to the Redemption Date. Prior to the giving of notice of redemption of the Notes pursuant to this Section 3.9(b), the Person shall deliver to the Trustee an Officers' Certificate, stating that such Person is entitled to effect such redemption and setting forth in reasonable detail a statement of circumstances showing that the conditions precedent to the right of such Person to redeem such Notes pursuant to this Section 3.9 have been satisfied. (c) Any redemption pursuant to this Section 3.9 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof. 17 SECTION 3.10 Optional Redemption Following an Equity Offering. (a) In addition, at any time and from time to time prior to April 1, 2005, the Company at its option may redeem the Notes in an aggregate principal amount equal to up to 35% of the original aggregate principal amount of the Notes (including the principal amount of any Additional Notes), with funds in an aggregate amount not exceeding the aggregate proceeds of one or more Equity Offerings, at a Redemption Price (expressed as a percentage of principal amount thereof) of 110% plus accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that an -------- ------- aggregate principal amount of the Notes equal to at least 65% of the original aggregate principal amount of the Notes (including the principal amount of any Additional Notes) must remain outstanding after each such redemption. The Company may make such redemption upon notice in accordance with Section 3.3, but in no event more than 90 days after the completion of the related Equity Offering. Any such notice may be given prior to the completion of the related Equity Offering, and any such redemption or notice may, at the Company's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the completion of the related Equity Offering. (b) Any redemption pursuant to this Section 3.10 shall be made pursuant to the provisions of Sections 3.1 through 3.6 hereof. ARTICLE 4 COVENANTS Subject to the provisions of Section 8.1 hereof, so long as Notes are outstanding hereunder, the Company covenants for the benefit of the Holders that: SECTION 4.1 Payment of Principal and Interest. (a) The Company shall duly and punctually pay the principal, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. One Business Day prior to the date of any Stated Maturity, whether an Interest Payment Date or Maturity Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent money in immediately available funds sufficient to pay such principal, premium, if any, and interest. An installment of principal or interest (or a payment of premium, if applicable) shall be considered paid on the date due if the Trustee or the Paying Agent (other than the Company, a Subsidiary of the Company or an Affiliate of the Company) holds on that date money designated for and sufficient to pay the installment in full. If the Company or any Subsidiary of the Company or any Affiliate of either the Company or any Subsidiary, acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with Section 2.5. The Trustee or the Paying Agent shall return to the Company any money not required for that purpose. Such interest on the Notes shall be payable without presentation of such Notes only to, or upon the written order of, the Holders of such Notes. Payments of interest shall be made either, at the option of the Company, by check mailed to the address of the Person entitled thereto as such address shall appear on the register of Notes or at the office or agency of the Company maintained by the Trustee in accordance with Section 4.2 hereof. (b) The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate per annum borne by the Notes, to the extent lawful and provided for under this Indenture. (c) The Company shall pay interest on the Notes semi-annually in arrears on April 1 and October 1. The Company shall make each interest payment to the bearer of the Global Note, or in the case of any Physical Notes, to the Persons in whose names the Notes are registered at the close of business on the March 15 or September 15 immediately preceding the relevant Interest Payment Date. In the case of the first interest payment date on October 1, 2001, interest shall be paid as if it had accrued effective from April 1, 2001 through September 30, 2001. On each interest 18 payment date thereafter, interest shall accrue from the date interest was most recently paid. The Company shall compute interest on the basis of a 360-day year of twelve 30-day months. SECTION 4.2 Maintenance of Office or Agency for Notices and Demands. The Company shall maintain in New York, New York, an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where the Notes may be presented for payment, registration of transfer or exchange and an office or agency where notices and demands to or upon the Company in respect of such Notes or of this Indenture may be served. Until otherwise designated by the Company in a written notice to the Trustee, such office or agency in The City of New York shall be the Corporate Trust Office, which shall be, until further notice to the Company by the Trustee at c/o Issuer Services, 452 Fifth Avenue, New York, New York 10018. The Company may designate multiple offices for purposes of notices and demands. SECTION 4.3 Property and Insurance Matters. The Company shall maintain all material property, including equipment, in reasonable condition and order. The Company shall provide or cause to be provided for itself and each of its Subsidiaries insurance (including appropriate self-insurance) against loss or damage arising from the conduct of the business of the Company and its Subsidiaries with reputable insurers in such amounts, with such deductibles, and by such methods as will be either (a) consistent in all material respects with past practices of the Company or the applicable Subsidiary, or (b) customary in the industry, unless the failure to provide such insurance would not have a material adverse effect on the financial condition or results of operations taken as a whole or be a violation of applicable law or material agreement of the Company or its Subsidiaries. SECTION 4.4 Compliance Certificate and Opinion of Counsel; Notice of Default. (a) The Company shall deliver to the Trustee, within 90 days after the end of the Company's fiscal year, an Officers' Certificate, if given by one of the Company's Officers, or an Opinion of Counsel, if it is given by counsel, stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Person with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate or such counsel signing the opinion, that to the best of his or her knowledge the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and no Default or Event of Default occurred during such year or, if such signers do know of any Default or Event of Default, the certificate shall describe such Default or Event of Default and its status with reasonable particularity. (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five (5) Business Days after becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, a notice identifying in reasonable detail the circumstances relating to such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.5 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, material rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such material right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders of the Notes. SECTION 4.6 Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before any material penalty accrues thereon, the following: (a) all material taxes, assessments and governmental charges levied or imposed upon the 19 Company or any Subsidiary of the Company or upon the income, profits or property of the Company or any Subsidiary of the Company, and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 4.7 Reports. So long as any of the Notes are outstanding, whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall file with the Commission the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to such Sections 13(a) or 15(d) of the Exchange Act if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required to file such documents if the Company were so subject. The Company shall also in any event within 15 days after each Required Filing Date mail to the Trustee, copies of the annual reports, quarterly reports and other documents which the Company would have been required to file with the Commission pursuant to Sections 13(a) or 15(d) of the Exchange Act if the Company were subject so such Sections. Upon qualification of this Indenture under the TIA, the Company shall also comply with the other provisions of TIA Section 314(a). Notwithstanding anything to the contrary herein, the Trustee shall have no duty to review such documents for purposes of determining compliance with any provisions of this Indenture. SECTION 4.8 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on, the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.9 Payment of Additional Amounts. (a) All payments made by or on behalf of the Company under or with respect to the Notes shall be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of the United Kingdom or of any territory thereof, by any authority or agency therein or thereof having power to tax (hereinafter "Taxes"), unless the Company is required to withhold or deduct any amount for or on account of Taxes by law or by the interpretation or administration thereof by the relevant government authority or agency. If the Company is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, the Company shall pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount the Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts shall be payable with respect to payments made to a Holder (an "Excluded Holder") in respect of a beneficial owner (i) which is subject to such Taxes by reason of its being connected with the United Kingdom otherwise than by the mere holding of Notes or the receipt of payments thereunder; (ii) with respect to any Taxes that would not have been imposed, due or payable but for a failure by the Holder to comply with a request by the Company to satisfy any certification, identification or other reporting requirements, whether imposed by statute, regulation, treaty or administrative practice concerning nationality, residence or connection with the United Kingdom; (iii) with respect to any Taxes that would not have been imposed, due or payable but for the Holder's presentation of a Note for payment more than 30 days after the relevant payment is first made available to the Holder (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented on any day (including the last day) within such 30-day period); or (iv) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. The Company shall make any such 20 withholding or deduction as required and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law. The obligations of the Company to pay any Additional Amounts under this Section 4.9 shall be satisfied if the Company elects at its option to redeem the Notes in accordance with Section 3.9. (b) The Company shall furnish to the Holder, within 30 days after the date the payment of any Taxes referred to in Section 4.9(a) above is due pursuant to applicable law, evidence of such payment by the Company. (c) The foregoing obligations shall survive any termination, defeasance or discharge of the Indenture. SECTION 4.10 [Intentionally Omitted] SECTION 4.11 [Intentionally Omitted] SECTION 4.12 [Intentionally Omitted] SECTION 4.13 [Intentionally Omitted]. SECTION 4.14 Limitation on Transactions with Affiliates. (a) The Company may not, and may not permit any Restricted Subsidiary of the Company to, directly or indirectly, enter into any transaction or series of related transactions on or after the Issue Date with or for the benefit of any Affiliate of the Company or its Restricted Subsidiaries, unless: (i) such transaction or series of transactions are on terms no less favorable to the Company or such Restricted Subsidiary than those that could be obtained in a comparable arm's length transaction with a Person that is not an Affiliate of the Company or its Restricted Subsidiary; and (ii) with respect to such transaction or series of transactions, the following terms shall have been satisfied: (A) any transaction with an Affiliate or a series of related transactions with Affiliates that are similar or part of a common plan involving aggregate payments or other property with a fair market value in excess of $5 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, which approval shall be evidenced by a Board Resolution stating that the Board of Directors, including a majority of the disinterested directors, has determined that such transaction complies with the foregoing provisions; or (B) if the Company or any Restricted Subsidiary of the Company enters into a transaction with an Affiliate, or a series of related transactions with Affiliates have obtained a common plan involving aggregate payments or other property with a fair market value of more than $20 million, the Company or the relevant Restricted Subsidiary shall, before the consummation of the transaction or transactions, have obtained a favorable opinion as to the fairness of the transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an independent financial advisor and file the same with the Trustee. (b) Section 4.14(a) shall not apply to: (i) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, or employees of the Company or any Subsidiary of the Company as determined in good faith by the Board of Directors; (ii) any agreement in effect on the Issue Date and any modified or replacement agreement of an agreement in effect on the Issue Date that is not more disadvantageous to the Holders of the Notes in any material respect than the original agreement as in effect on the Issue Date; (iii) dividends and distributions approved by the Board of Directors; and (iv) transactions between or among the Company and any of its Restricted Subsidiaries or between or among Restricted Subsidiaries. SECTION 4.15 [Intentionally Omitted] SECTION 4.16 [Intentionally Omitted] 21 SECTION 4.17 Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of the Notes shall have the right to require that the Company repurchase such Holder's Notes, in whole or in part and if in part, equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, pursuant to the offer described in clause (b) below (the "Change of Control Offer"). (b) Notice of each Change of Control Offer shall be given to each Holder in accordance with Section 13.2, within 30 days following any Change of Control, with a copy to the Trustee. Such notice shall state: (i) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Notes, in whole or in part, and if in part equal to $1,000 or integral multiples of $1,000, at a repurchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any; (ii) the circumstances and relevant facts regarding such Change of Control (including, to the extent known to the Company, relevant information with respect to the transaction giving rise to such Change of Control, and if applicable, information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (iii) the repurchase date (which shall be not earlier than 30 days or later than 60 days from the date such notice is mailed) (the "Repurchase Date"); (iv) that any Note not tendered will continue to accrue interest; (v) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent (which may be the Company) at the address specified in the notice prior to the close of business on the Repurchase Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Repurchase Date, a telegram, telex, facsimile transmission or other written communication setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, and a statement that such Holder is withdrawing his or her election to have such Notes purchased; and (vii) that Holders which elect to have their Notes purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered. (c) If the Company is required to repurchase Notes pursuant to the provisions of this Section 4.17 hereof, it shall notify the Trustee in writing, at least 30 days before a Redemption Date, of the Section of this Indenture pursuant to which the repurchase shall occur, the Redemption Date, the principal amount of Notes to be repurchased and the Redemption Price and shall furnish to the Trustee an Officers' Certificate to the effect that the Company is required to make or has made a Change of Control Offer and the conditions set forth in Section 5.1 hereof have been satisfied, as the case may be. If the Company elects to have the Trustee furnish notice of repurchase (as described above) of the Notes to the Holders, the Company shall notify the Trustee in writing and provide all the information and documentation required by this paragraph, at least 45 days but not more than 60 days before a Redemption Date. (d) On the Repurchase Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Trustee or a Paying Agent (or segregate, if the Company is acting as its own Paying Agent) money in immediately available funds sufficient to pay the purchase price of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee Notes so accepted, together with an Officers' Certificate indicating the Notes or portions thereof which have been tendered to the Company. The Trustee or a Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price therefor and promptly authenticate and mail to such Holders a new Note in a principal amount equal to any unpurchased portion of the Note surrendered. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Repurchase Date. (e) In the event a Change of Control occurs and any repurchase pursuant to the foregoing constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act, the Company will comply with the requirements of Rule 14e-1 as then in effect, to the extent applicable, and any other applicable securities laws or regulations with respect to such repurchase. SECTION 4.18 Limitations on Payments for Consent. Neither the Company nor any of its Restricted Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Note for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes 22 unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.19 Limitation on Business Activities. The Company shall not and shall not permit any of its Restricted Subsidiaries to engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.20 [Intentionally Omitted] SECTION 4.21 [Intentionally Omitted] SECTION 4.22 Maintenance of All Registration, Regulations and Licenses. The Company shall maintain registrations, licenses, permits, privileges and franchises material to the conduct of its business and shall comply in all material respects with all laws, rules, regulations and orders of any government entity. SECTION 4.23 Internal Revenue Service Filing. The Company shall file a United States Internal Revenue Service Form 8281 Information Return for Publicly Offered Original Issue Discount Instruments, with the United States Internal Revenue Service within the time and in the manner required by law and shall mail a copy of such filing to the Trustee within 15 days after such filing with the Internal Revenue Service. ARTICLE 5 SUCCESSORS SECTION 5.1 Limitation on Mergers, Consolidations and Sales of All Assets. The Company shall not, in a single transaction or a series of related transactions, (i) consolidate with, amalgamate, or merge with or into any other Person or permit any other Person to consolidate with or merge into the Company or any Subsidiary of the Company (in a transaction in which such Subsidiary remains a Subsidiary of the Company); or (ii) sell, assign, transfer, lease, convey, or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries), unless, in the case of either clause (i) or clause (ii): (A) either: (1) the Company is the surviving or continuing corporation; or (2) the Person (if other than the Company) formed by the consolidation or amalgamation or into which the Company is merged or the Person that acquires the properties and assets of the Company and of the Company's Subsidiaries substantially as an entirety (the "Surviving Entity") (x) is a corporation organized and validly existing under the laws of England and Wales or the United States or any State thereof or the District of Columbia and (y) expressly assumes, by a supplemental indenture, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes and this Indenture on the part of the Company to be performed or observed; (B) immediately after giving effect to the transaction and the assumption contemplated by clause (A)(2)(y) above, no Default or Event of Default has occurred or is continuing; (3) the Company or the Surviving Entity agree to indemnify each Holder of the Notes against any tax, levy, assignment or governmental change payable by withholding or deduction which may be imposed on the Holder as a result of such an amalgamation, merger or consolidation; and (4) the Company or the Surviving Entity shall have delivered to the 23 Trustee, prior to the consummation of the proposed transaction, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, amalgamation, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture to this Indenture is required in connection with such transaction, such supplemental indenture shall comply with the applicable provision of this Indenture and all conditions precedent in this Indenture relating to such transaction shall have been satisfied; provided that clause (A)(2)(x) above shall not apply to a Change of Domicile. SECTION 5.2 Successor Corporation Substituted. Upon any consolidation, amalgamation, or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, in accordance with Section 5.1 hereof, in which the Company is not the continuing corporation or the successor Person formed or surviving any such consolidation, amalgamation, or merger, or to which a sale, lease, conveyance or other disposal of all or substantially all of the Company's assets is made, the Surviving Entity shall succeed to and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Entity has been named as the Company herein, and, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Notes and, except in the case of a lease, the Company shall be released. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.1 Events of Default. (a) A "DEFAULT" or "EVENT OF DEFAULT" shall occur if: (i) the Company fails to pay any interest on any of the Notes when the same becomes due and payable, and such failure continues for 30 days; (ii) the Company fails to pay principal of, or premium, if any, on any of the Notes when the same becomes due; (iii) the Company fails to pay the principal of, premium, if any, and interest on any Notes required to be purchased pursuant to a Change of Control Offer described under Section 4.17 hereof, when due and payable; (iv) the Company fails to perform any other covenant, warranty, term, condition, provision or agreement (other than the provisions of Article 5 hereof) of the Company contained in the Notes or this Indenture and such failure continues for 30 days after the notice specified below; (v) the Company fails to perform or comply with the provisions described under Article 5 herein; (vi) the occurrence of a default under any Debt of the Company or any Subsidiary of the Company if both (A) such default either results from failure to pay any such Debt at its Stated Maturity or relates to an obligation other than the obligation to pay such Debt at its Stated Maturity and results in the holders of such Debt causing such Debt to become due before its Stated Maturity, and (B) the principal amount of such Debt, together with, the principal amount of any other such Debt in default for failure to pay principal at the Stated Maturity of the maturity of which has been accelerated and aggregated at least $25 million or more at any one time outstanding; (vii) the rendering of a final judgment or judgments (not subject to appeal) by a court of competent jurisdiction against the Company or any of its Restricted Subsidiaries in an aggregate amount at any one 24 time in excess of $10 million and shall not have been vacated, discharged, satisfied or stayed within 60 consecutive days thereafter; (viii) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; (E) files a petition in bankruptcy or an answer or consent seeking reorganization or relief; or (F) consents to the filing of such petition in bankruptcy or the appointment of or taking possession by a Custodian; and (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary; and the order or decree remains unstayed and in effect for 60 days. The foregoing provisions in this Section 6.1(a) shall constitute Defaults or Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. (b) Subject to the provisions of this Indenture relating to the duties of the Trustee, set forth in Section 7 hereof, in case an Event of Default shall occur and be continuing, the Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee indemnity reasonably satisfactory to the Trustee, in accordance with Sections 6.6 and 7.1(e) hereof. Subject to Section 7.7 and in accordance with Section 6.5 hereof, the Holders of a majority in aggregate principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. (c) A Default under Section 6.1(a)(ii) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the outstanding Notes notify the Company and the Trustee, of the Default, and the Company or the applicable Subsidiary of the Company does not cure the Default within 60 days after receipt of such notice. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default" under this Section 6.1. Such notice shall be given by the 25 Trustee if so requested by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding. When a Default is cured or waived, it ceases. (d) The Company shall notify the Trustee in writing within five (5) Business Days of the occurrence of a Default or an Event of Default in accordance with Section 4.4(b) hereof. (e) For purposes of Section 6.1(a)(viii) and Section 6.1(a)(ix), it shall not be a Default or Event of Default if such proceedings are commenced under applicable United Kingdom laws or such orders or decrees are issued under applicable United Kingdom laws, in each case solely for the purpose of giving effect to a Change of Domicile. SECTION 6.2 Acceleration. (a) If an Event of Default (other than an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) hereof, with respect to the Company or any Significant Subsidiaries of the Company) occurs and is continuing either (i) the Trustee may, by written notice to the Company or (ii) the Holders of at least 25% in aggregate principal amount of the outstanding Notes may, by written notice to the Company and the Trustee, and upon such request of such Holders, the Trustee shall (by notice as provided in clause (i) above), declare the aggregate principal amount of the Notes outstanding, to be due and payable and, upon any such declaration the same shall become due and payable; provided however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of the outstanding Notes, may under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the non-payment of interest or accelerated principal, have been cured or waived as provided in this Indenture. If an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) hereof, with respect to the Company or any significant Subsidiary of the Company occurs, the aggregate principal amount of the Notes outstanding shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of the Notes. (b) After a declaration of acceleration has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of at least a majority in aggregate principal amount of Notes outstanding, by written notice to the Company and the Trustee, may annul such declaration if (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee, its agents and counsel under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7, (ii) all overdue interest on all Notes, (iii) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes, and (iv) principal due otherwise than by acceleration; and (b) all Events of Default, other than the nonpayment of principal of the Notes which have become due solely by such declaration of acceleration, have been cured or waived. Notwithstanding the foregoing, any acceleration of payment of the Notes from the failure of the Company to make an interest payment on the Notes during a Blockage Period (an "Acceleration Due to Blockage") automatically shall be rescinded if and when the following conditions are satisfied within five Business Days following the end of such Blockage Period: (i) the payment in respect of interest on the Notes, the failure of which gave rise to such Event of Default, is made; and (ii) no other Event of Default, other than an Event of Default which has occurred solely as a result of the acceleration of other Debt of the Company or any Subsidiary prior to its express maturity that was caused solely by an Acceleration Due to Blockage, shall have occurred and be continuing. SECTION 6.3 Other Remedies. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. 26 SECTION 6.4 Waiver of Past Defaults. Subject to Sections 6.7 and 9.2, the Holders of a majority in aggregate principal amount of the Notes outstanding may on behalf of the Holders of all the Notes waive any past defaults under this Indenture and its consequences, except a default in the payment of the principal of, premium, if any, or interest on any Note, or in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Note outstanding. SECTION 6.5 Control by Majority. The Holders of a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it including, without limitation, any remedies provided for in Section 6.3. Subject to Section 7.1, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, or that the Trustee determines may be unduly prejudicial to the rights of another Holder, or that may involve the Trustee in personal liability, provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.6 Limitation on Suits. (a) No Holder of any Note will have any right to institute any proceeding with respect to this Indenture for any remedy thereunder, unless: (i) such Holder previously has given to the Trustee written notice of a continuing Event of Default; (ii) the Holder or Holders of at least 25% in aggregate principal amount of the outstanding Notes will have made written request to the Trustee to institute such proceeding as trustee; (iii) such Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (iv) the Trustee fails to institute such proceeding within 60 days after receipt of such request and the offer of reasonable indemnity; and (v) during such 60-day period the Trustee has not received from Holders of a majority in aggregate principal amount of the outstanding Notes, a direction which, in the opinion of the Trustee, is inconsistent with the request. (b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. (c) This Section 6.6 does not apply to a suit instituted by a Holder of a Note for enforcement of payment of the principal of, premiums, if any, or interest on such Note or after the respective due dates expressed in such Note. SECTION 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium, if any, and interest on, a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. 27 SECTION 6.8 Collection Suit by Trustee. If an Event of Default in payment of principal, premium, if any, or interest specified in clause (i) or (ii) of Section 6.1 occurs and is continuing, or if any other Event of Default has occurred and the amounts due have been accelerated, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Notes, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.9 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Company or any other obligor upon the Notes, any of their respective creditors or any of their respective property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.7 hereof, including without limitation payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee, and the costs and expenses of collection; Second: to holders of Senior Debt to the extent required by Article 11 hereof; Third: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest respectively; Fourth: to holders of Debt which ranks pari passu with the Notes or senior to the 6.75% Notes for amounts due and unpaid on such Debt for principal, premium, if any, and interest ratably, without preference or priority of any kind, according to the amounts due and payable on such Debt for principal, premium, if any, and interest respectively; Fifth: to holders of the 6.75% Notes for amounts due and unpaid on the 6.75% Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the 6.75% Notes for principal, premium, if any, and interest respectively; and Sixth: to the Company. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. 28 SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 hereof, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the outstanding Notes. SECTION 6.12 Reports to the Trustee. In accordance with Section 4.4(a) of this Indenture, the Company shall furnish to the Trustee a statement annually of (a) the Company's performance of certain obligations under this Indenture and (b) any Default in such performance, including any Default identified in a notice made pursuant to Section 4.4(b) hereof. The Company shall provide written notice of Default or Event of Default in accordance with Section 6.1(d) hereof. ARTICLE 7 TRUSTEE SECTION 7.1 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee, subject to subparagraph (e) below, shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (i) The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) This paragraph does not limit the effect of paragraph (b) of this Section 7.1. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to the terms of this Indenture. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. 29 (e) No provision of this Indenture shall require the Trustee to (i) expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive indemnity reasonably satisfactory to the Trustee against such expense, risk or liability or (ii) take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it does not receive indemnity against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.2 Rights of Trustee. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Paying Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11 hereof. SECTION 7.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes, other than its certificate of authentication. 30 SECTION 7.5 Notice of Defaults. If a Default or an Event of Default known to the Trustee occurs and is continuing, the Trustee shall mail to each Noteholder a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default in payment on any Note (including the failure to make a mandatory redemption pursuant hereto), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. For purposes of Section 6.2, Section 7.1 and this Section 7.5, the Trustee shall not be deemed to have knowledge of a Default or an Event of Default unless a Responsible Officer has actual knowledge thereof or unless written notice of such Default or Event of Default is received by the Trustee and such notice refers to the Notes or this Indenture. SECTION 7.6 Reports by Trustee to Holders. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as the Notes remain outstanding, the Trustee shall mail to all Holders a brief report dated as of such reporting date that complies with TIA Section 313(a), if such a report is required pursuant to TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). (b) Commencing at the time this Indenture is qualified under the TIA, a copy of each such report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange, if any, on which the Notes are listed. The Company or any other obligor upon the Notes shall promptly notify the Trustee if the Notes become listed on any stock exchange or of any delisting thereof. SECTION 7.7 Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include reasonable compensation, disbursements and expenses of the Trustee's agents and counsel, except as set forth in Section 7.7(d). (b) The Company shall indemnify the Trustee and its officers, directors, employees and agents against any loss, liability or expense incurred by the Trustee or such person arising out of or in connection with the offer and sale of the Notes or the acceptance or administration of its duties under this Indenture (including but not limited to its services of Registrar and Paying Agent), including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.7) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except as set forth in Section 7.7(d). The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity, provided that failure to so notify the Company shall not affect the Company's indemnity obligations hereunder. (c) The obligations of the Company under this Section 7.7 to compensate and indemnify the Trustee and its agents and to reimburse the Trustee for its reasonable expenses shall survive the resignation or removal of the Trustee, the termination of the Company's obligations hereunder and the satisfaction and discharge of this Indenture. (d) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or willful misconduct. (e) The obligations of the Company under this Section shall be subordinated to the payment of Senior Debt pursuant to Article 11. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except that held in trust to pay principal, premium, if any, and interest on particular Notes. Such Lien shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. When the Trustee 31 incurs expenses or renders services after an Event of Default specified in Section 6.1(a)(viii) or Section 6.1(a)(ix) occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.8 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. (b) The Trustee may resign in writing at any time, in accordance with the requirements of the TIA, and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing at least 30 days prior to the date of proposed removal, provided that at such date no Event of Default shall have occurred and be continuing. The Company may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10 hereof; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a custodian or public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company and any other obligor upon the Notes shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least a majority in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to each Noteholder. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.9 Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee, provided that such successor is eligible and qualified under this Article 7. 32 SECTION 7.10 Eligibility; Disqualification. (a) There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee powers, shall be subject to supervision or examination by federal or state authority and shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. (b) This Indenture shall always have a Trustee which satisfies the requirements of TIA Sections 310(a)(1). The Trustee is subject to TIA Section 310(a)(5) concerning inability of a trustee to be a direct or indirect obligor of the Notes and is subject to TIA Section 310(b) regarding disqualification of a trustee upon acquiring any conflicting interest. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in this Article 7. Nothing contained herein shall prevent the Trustee from filing the application in TIA Section 310(b) regarding resignation. SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee, in its capacity as Trustee hereunder, is subject to TIA Section 311(a), subject to the creditor relationship provisions listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 7.12 Permitted Transactions. (a) The Trustee shall be limited, should it become a creditor of the Company, in its ability to obtain payment of claims or to realize on certain property received by it in respect of any such claim as security or otherwise. (b) The Trustee is permitted to engage in other transactions with the Company or any of its Affiliates; provided, however, that if it acquires any conflicting interest, as defined under the TIA, the Trustee must eliminate such conflict or resign. ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.1 Legal Defeasance and Covenant Defeasance of the Notes. (a) The Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Notes upon compliance with the conditions set forth in paragraph (d). (b) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (b), the Company shall be deemed to have been released and discharged from its obligations with respect to the outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of the Sections of and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned, except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due and (ii) obligations listed in Section 8.3. 33 (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company shall be released and discharged from its obligations under any covenant contained in Section 5.1 hereof and in Sections 4.3 through 4.23 hereof (subject to compliance with the Company's obligations under the TIA), with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent, declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1(a)(iii), nor shall any event referred to in Section 6.1(a)(viii) or Section 6.1(a)(ix) thereafter constitute a Default or an Event of Default thereunder but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. (d) The following shall be the conditions to application of either paragraph (b) or paragraph (c) above to the outstanding Notes: (i) The Company shall have irrevocably deposited in trust with the Trustee, pursuant to an irrevocable trust and security agreement in form and substance satisfactory to the Trustee, cash or U.S. Government Obligations maturing as to principal and interest at such times, or a combination thereof, in such amounts as are sufficient, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof (in form and substance reasonably satisfactory to the Trustee) delivered to the Trustee, to pay the principal of, premium, if any, and interest on the outstanding Notes on the dates on which any such payments are due and payable in accordance with the terms of this Indenture and of the Notes; (ii) (A) No Event of Default or Default shall have occurred and be continuing on the date of such deposit, and (B) no Default or Event of Default under Section 6.1(a)(v) or 6.1(a)(vi) shall occur on or before the 123rd day after the date of such deposit; (iii) Such deposit will not result in a Default under this Indenture or a breach or violation of, or constitute a default under, any other instrument or agreement to which the Company is a party or by which it or its property is bound; (iv) No default on any Senior Debt shall have occurred and be continuing; (v) In the case of a legal defeasance under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (B) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; and, in the case of a covenant defeasance under paragraph (c) above, the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (vi) The Holders shall have a perfected security interest under applicable law in the cash or U.S. Government Obligations deposited pursuant to Section 8.1(d)(i) above or such cash or U.S. Government Obligations shall be held in irrevocable trust for the benefit of all the Holders; 34 (vii) The Company shall have delivered to the Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, to the effect that (A) after the passage of 123 days following the deposit, the trust funds will not be subject to any applicable bankruptcy, insolvency, reorganization or similar law affecting creditors' rights generally, and (B) neither the Company, the Trustee nor the trust is an investment company under the Investment Company Act of 1940, or has been registered as an investment company; and (viii) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating, to the defeasance contemplated by this Section 8.1 have been complied with; provided, however, that no deposit under clause (i) above shall be effective to terminate the obligations of the Company under the Notes or this Indenture prior to 123 days following any such deposit. The Company shall use its best efforts to ensure that the deposit referred to in Section 8.1(d)(i) hereof does not result in the Company, the Trustee or the trust becoming or being deemed an investment company under the Investment Company Act of 1940. In the event that such deposit does result in the Company, the Trustee or the trust becoming, or being deemed an investment company, the Company shall bear all related expenses of registration and reporting under the Investment Company Act of 1940 for the duration of the trust. SECTION 8.2 Termination of Obligations Upon Cancellation of the Notes. In addition to the Company's rights under Section 8.1 hereof, the Company may terminate all of its obligations under this Indenture and this Indenture shall cease to be of further effect (subject to Sections 8.3 and 2.7 hereof) when: (a) either (i) all Notes theretofore authenticated and delivered (other than Notes which have been destroyed, lost or stolen and which have been replaced or paid and the Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) hereof have been delivered to the Trustee for cancellation; or (ii) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal of and premium, if any, on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder and under the Notes by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, stating that all conditions precedent specified in this Section 8 relating to the satisfaction and discharge of this Indenture have been complied with. SECTION 8.3 Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture and of the Notes referred to in Sections 8.1 or 8.2 hereof, the respective obligations of the Company and the Trustee, as applicable, under Sections 1.5, 2.3, 2.4, 2.5, 2.6, 2.7, 2.9, 2.10, 2.11, 2.14, 2.17, 4.1, 4.2, 4.9, 6.7, 7.7, 7.8, 8.5, 8.6, 8.7 and Article 13 hereof shall survive until the Notes are no longer outstanding, and thereafter the obligations of the Company and the Trustee under Sections 7.7, 8.5, 8.6 and 8.7 hereof shall survive. Nothing contained in this Article 8 shall abrogate any of the obligations or duties of the Trustee as set forth in this Indenture. SECTION 8.4 Acknowledgment of Discharge by Trustee. Subject to Section 8.7 hereof, after (i) the conditions of Sections 8.1 or 8.2 hereof have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all 35 conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon written request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.3 hereof. SECTION 8.5 Application of Trust Assets. The Trustee shall hold any cash or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.1 hereof. The Trustee shall apply the deposited cash or the U.S. Government Obligations, together with earnings thereon, through the Paying Agent, in accordance with this Indenture and the terms of the irrevocable trust agreement established pursuant to Section 8.1 hereof, to the payment of principal of, premium, if any, and interest on the Notes. The cash or U.S. Government Obligations so held in trust and deposited with the Trustee in compliance with Section 8.1 hereof, shall not be part of the trust estate under this Indenture, but shall constitute a separate trust fund for the benefit of all Holders entitled thereto. SECTION 8.6 Repayment to the Company; Unclaimed Money. Upon termination of the trust established pursuant to Section 8.1, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess cash or U.S. Government Obligations held by them. Additionally, the Trustee and the Paying Agent shall pay to the Company upon request, and, if applicable, in accordance with the irrevocable trust established pursuant to Section 8.1, any cash or U.S. Government Obligations held by them for the payment of principal of, premium, if any, or interest on the Notes that remain unclaimed for two years after the date on which such payment shall have become due unless otherwise required by law. After payment to the Company, all liability of the Trustee and such Paying Agent with respect to such cash or U.S. Government Obligations shall cease and Holders entitled to such payment must look to the Company for such payment as general creditors unless an applicable abandoned property law expressly provides otherwise. SECTION 8.7 Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or U.S. Government Obligations in accordance with Section 8.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply all such cash or U.S. Government Obligations in accordance with Section 8.1, provided that if the Company makes any payment of principal of, premium, if any, or interest on any Notes following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the cash or U.S. Government Obligations, and proceeds thereof, held by the Trustee or the Paying Agent. ARTICLE 9 AMENDMENTS SECTION 9.1 Without Consent of Holders. (a) The Company, when authorized by a Board Resolution, and the Trustee, together, may amend or supplement this Indenture or the Notes without the consent of any Noteholder: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 hereof; 36 (iii) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA as then in effect; (iv) to make any change that does not adversely affect the legal rights hereunder of any Noteholder under this Indenture or the Notes; (v) to evidence or to provide for a replacement Trustee under Section 7.8 hereof; or (vi) to add to the covenants and agreements of the Company for the benefit of the Holders and to surrender any right or power herein reserved to the Company, provided that, in each such case except in the case of clause (v) above where the Trustee has resigned, the Company has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.1. (b) Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of any amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture which affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.2 With Consent of Holders. (a) Subject to Section 9.2(e), the Company, when authorized by a Board Resolution, and the Trustee, together, may amend this Indenture or the Notes with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (such consent to be evidenced by an Act of such Holders in accordance with Section 1.5 hereof). The Holders of at least a majority in aggregate principal amount of the Notes then outstanding (by an Act of such Holders in accordance with Section 1.5 hereof), or the Trustee, with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (such consent to be evidenced by an Act of such Holders in accordance with Section 1.5 hereof) may, waive compliance in a particular instance by the Company, any past default under this Indenture or the Notes, except for as provided in Section 9.2(e)(vii). (b) Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders pursuant to Section 9.2(a), and upon receipt by the Trustee of the documents described in Section 9.6 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture but the Trustee shall not be obligated to enter into such amended or supplemental Indenture which affects its own rights, duties or immunities under this Indenture or otherwise. (c) It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement, or waiver, but it shall be sufficient if such consent approves the substance thereof. (d) After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to each Holder affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. (e) Notwithstanding Section 9.2(a), without the consent of each Holder affected, an amendment or waiver under this Section may not: (i) reduce the percentage stated in Section 9.2(a) of aggregate principal amount of outstanding Notes necessary to consent to an amendment, supplement or waiver of this Indenture; (ii) reduce the percentage of aggregate principal amount of outstanding Notes necessary to consent for waiver of certain defaults provided for in this Indenture; 37 (iii) reduce the principal amount of (or the premium, if any, of) or interest on any Note or change the Stated Maturity of the principal of, or any installment of interest on, Notes; (iv) change place or currency of payment of principal of, premium, if any, or interest (including defaulted interest) on, any Note; (v) change the stated maturity of the principal of, or any installment of interest on, any Note; (vi) impair the right to institute suit for the enforcement of any payment of principal of, premium, if any, or interest on, any Note; (vii) waive a continuing past Default or Event of Default in the payment of principal of, premium if any, or interest on, the Notes; (viii) modify or amend any of the provisions of this Indenture relating to the subordination of the Notes in a manner adverse to Holders; (ix) modify or amend any of the provisions of this Indenture relating to the modification and amendment of this Indenture or the waiver of past defaults or covenants; or (x) following the mailing of an offer with respect to a Change of Control Offer pursuant to Section 4.17, modify this Indenture with respect to such Change of Control Offer in a manner adverse to such Holders. SECTION 9.3 Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.4 Revocation and Effect of Consents. (a) Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his or her Note or portion of a Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. Any amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any Act of Holders, including any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last two sentences of Section 9.4(a), those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such Act of Holders, including an amendment, supplement or waiver, or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an Act of Holders, including an amendment, supplement or waiver becomes effective, it shall bind every Noteholder, unless it is an amendment, supplement or waiver that makes a change described in Section 9.2(e), in which case the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, provided, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. 38 SECTION 9.5 Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6 Trustee to Sign Amendments. The Trustee shall sign any amendment, waiver or supplemental indenture authorized pursuant to this Article 9 if the amendment, waiver, or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, waiver, or supplemental Indenture, the Trustee shall be entitled to receive and, subject to Section 7.1, shall be fully authorized and protected in relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment, waiver or supplemental Indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign any amendment or supplemental Indenture until the Board of Directors approves it. SECTION 9.7. Conformity with TIA. Every amendment or supplemental indenture executed pursuant to this Article 9 shall conform to the requirements of the TIA as then in effect. ARTICLE 10 [INTENTIONALLY OMITTED] ARTICLE 11 SUBORDINATION SECTION 11.1 Ranking. (a) Notwithstanding the provisions of Sections 6.2 and 6.3, the Company covenants and agrees, and the Trustee and each Holder of the Notes by his or her acceptance thereof likewise covenants and agrees, that all payments of the principal of, premium, if any, and interest on the Notes by the Company shall be subordinated in accordance with the provisions of this Article 11 to the prior payment in full of all amounts payable under existing and future Senior Debt of the Company and the Senior Subordinated Notes. (b) The Notes shall rank in right of payment junior to all of the Company's existing and future Senior Debt, including the Credit Facility, and all existing and future senior subordinated debt. The Notes will rank in right of payment senior to any 6.75% Notes. If the Company issues additional subordinated Debt in the future, the Notes will rank in right of payment pari passu or junior to such debt. (c) The Notes are unsecured obligations of the Company. SECTION 11.2 Priority and Payment Over of Proceeds in Certain Events. (a) Subordination on Dissolution, Liquidation or Reorganization of the Company. 39 In the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, or any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary, or any assignment for the benefit of creditors or other marshalling of assets or liabilities of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties substantially as an entirety, upon the terms and conditions described under Article 5 hereof), all Senior Debt due and owing (including, in the case of Designated Senior Debt and Senior Debt under the Credit Facility, interest accruing after the commencement of any such case or proceeding at the rate specified in the instrument evidencing such Senior Debt, whether or not a claim therefor is allowed in such proceeding, to the date of payment of such Senior Debt) and payment on the Senior Subordinated Notes must be paid in full before any payment or distribution of any assets of the Company of any kind or character is made on account of principal of, premium, if any, or interest on, the Notes, including repurchase, purchase, redemption or other acquisition of the Notes. Before any payment may be made by the Company of the principal of, premium, if any, or interest on the Notes, and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee on their behalf would be entitled, except for the provisions of this Article 11, shall be made by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, directly to the holders of the Senior Debt of the Company or any Senior Representative thereof to the extent necessary to pay all such Senior Debt in full after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. (b) Subordination on Default in Senior Debt and/or the Senior Subordinated Notes. (i) During the continuance of any default in the payment when due of principal of, reimbursement obligation under, premium, if any, or interest on, any Senior Debt and/or the Senior Subordinated Notes, including without limitation any default in the payment when due of any Obligations or commitment or facility fees, letter of credit fees or agency fees under the Credit Facility, or any default in payment when due of any reimbursement obligation of the Company with respect to any letter of credit issued under the Credit Facility (a "Senior Payment Default"), no direct or indirect payment or distribution of any assets of the Company of any kind or character may be made on account of the principal of, premium, if any, interest on, or other amounts payable in respect of, the Notes or on account of the purchase, redemption or other acquisition of or in respect of the Notes unless and until such Senior Payment Default has been cured, waived or has ceased to exist or such Senior Debt shall have been discharged or paid in full or when the right under this Indenture to prevent any such payment is waived by or on behalf of the holders of such Senior Debt. (ii) During the continuance of any default (other than a Senior Payment Default) with respect to the Credit Facility or any Designated Senior Debt, the occurrence of which entitles, or with the giving of notice or lapse of time (or both) would entitle, one or more Persons to accelerate the maturity thereof (a "Senior Nonmonetary Default") pursuant to which the Trustee and the Company have received from the agent bank for the Credit Facility or from any authorized person on behalf of any Designated Senior Debt a written notice of such Senior Nonmonetary Default, no direct or indirect payment or distribution of any assets of the Company of any kind or character may be made on account of the principal of, premium, if any, or interest on, or other amounts payable in respect of, the Notes or on account of the purchase, redemption or other acquisition of, or in respect of, the Notes for the period specified below (the "Blockage Period"). (iii) The Blockage Period shall commence upon the receipt of notice of a Senior Nonmonetary Default by the Trustee and the Company and shall end (subject to any blockage of payment that may be in effect in respect of a Senior Payment Default or insolvency) on the earlier of (A) 179 days after the receipt of such notice, provided such Senior Debt shall not theretofore have been accelerated and no Senior Payment Default shall be in effect; (B) the date on which such Senior Nonmonetary Default is cured, waived or ceases to exist or such Senior Debt is discharged or paid in full. In no event will a Blockage Period extend beyond 179 days from the date of the receipt by the Trustee and the Company of the notice initiating such Blockage Period. Any number of notices of a Senior Nonmonetary Default may be given during a Blockage Period, provided, that no such notice shall extend such Blockage Period, only one Blockage Period may be commenced within any 360-day period and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Blockage Period is in effect. No Senior Nonmonetary Default with respect to Senior Debt that existed or was continuing on the date of the 40 commencement of any Blockage Period and that was known to the holders of or the Senior Representative for such Senior Debt will be, or can be, made the basis for the commencement of a subsequent Blockage Period, whether or not within a period of 360 consecutive days, unless such Senior Nonmonetary Default has been cured or waived for a period of not less than 90 consecutive days. The Company shall deliver an Officers' Certificate to the Trustee promptly after the date on which any Senior Nonmonetary Default is cured or waived or ceases to exist or on which the Senior Debt related thereto is discharged or paid in full. (c) Rights and Obligations of Holders of Notes and Trustee. (i) In the event that, notwithstanding the foregoing provisions prohibiting such payment or distribution, the Trustee or any Holder shall have received any payment on account of the principal of, premium, if any, or interest on the Notes at a time when such payment is prohibited by this Section 11.2 and before the principal of, premium, if any, and interest on Senior Debt is paid in full, then and in such event (subject to the provisions of Section 11.8) such payment or distribution shall be received and held in trust for the holders of Senior Debt and shall be paid over or delivered (A) to the trustee in bankruptcy, liquidating trustee, receiver, Custodian, assignee, agent or other person making any such payment or distribution of assets of the Company, or (B) in the event that no such trustee or other person under clause (A) has been appointed, then to the holders of the Senior Debt (or to their Senior Representatives in the case of Designated Senior Debt) remaining unpaid promptly at the written direction of such holders of Senior Debt or their designees to the extent necessary for application to the payment in full of the principal of, premium, if any, and interest on such Senior Debt in accordance with its terms after giving effect to any concurrent payment or distribution to the holders of such Senior Debt. (ii) Nothing contained in this Article 11 will limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.2 hereof or to pursue any rights or remedies hereunder against the Company, provided, that, to the extent provided in this Article 11, all Senior Debt of the Company then or thereafter due or declared to be due shall first be paid in full before the Holders or the Trustee are entitled to receive any payment from the Company of principal of, premium, if any, or interest on the Notes. (iii) Upon any payment or distribution of assets or Notes referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and upon any certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making any such payment or distribution delivered to the Trustee, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Debt and other Debt of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. In the absence of such order, decree or certificate, the Trustee and the Holders shall be entitled to request and rely upon an Officers' Certificate from the Company. The Company shall provide to the Trustee, in the form of an Officers' Certificate, the names and addresses of the holders of such Senior Debt, the amount of the Senior Debt outstanding to each such holder of Senior Debt and any necessary information to calculate the daily increase in indebtedness to such holders of Senior Debt. The Trustee shall be entitled to rely conclusively on any such order, decree or certificate (including any such Officers' Certificate) in making any disbursements to the holders of Senior Debt, without making any independent verification of the information contained therein. (d) The subordination provisions of this Section 11.2 shall cease to apply to the Notes upon any defeasance or covenant defeasance of the Notes pursuant to Article 8 hereof. SECTION 11.3 Payments May Be Made Prior to Notice. Nothing contained in this Article 11 or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Section 11.2 hereof, from making payments at any time of principal of, premium, if any, and interest on, the Notes, or from depositing with the Trustee any monies for such payments or (ii) the application by the Trustee of any monies deposited with it for the purpose of making such payments of principal of, premium, if any, and interest on, the Notes, to the Holders entitled thereto, unless by noon Eastern time one Business Day prior to the date upon which such payment would otherwise (except for the prohibitions contained in Section 11.2 hereof) become due and payable, the Trustee shall have received the written notice provided for in 41 Section 11.2(b) hereof (or there shall have been an acceleration of the Notes prior to such application), subject to Section 11.8 hereof. SECTION 11.4 Rights of Holders of Senior Debt Not to Be Impaired. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act in good faith by any such holder, or by any noncompliance by the Company with the terms and provisions and covenants herein, regardless of any knowledge thereof any such holder may have or otherwise be charged with. (b) The provisions of this Article 11 are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt. SECTION 11.5 Authorization to Trustee to Take Action to Effectuate Subordination. Each Holder of Notes by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination as provided in this Article 11 and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 11.6 Subrogation. (a) Subject to the payment in full of all amounts payable under or in respect of Senior Debt, the Holders shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of assets of the Company made on such Senior Debt until the Notes shall be paid in full in cash; and for the purposes of such subrogation, no payments or distributions to holders of such Senior Debt of any cash, property or securities to which Holders of the Notes would be entitled except for the provisions of this Article 11, and no payment pursuant to the provisions of this Article 11 to holders of such Senior Debt by the Holders, shall, as between the Company, its creditors other than holders of such Senior Debt and the Holders, be deemed to be a payment by the Company to or on account of such Senior Debt, it being understood that the provisions of this Article 11 are solely for the purpose of defining the relative rights of the holders of such Senior Debt, on the one hand, and the Holders, on the other hand. (b) If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article 11 shall have been applied, pursuant to the provisions of this Article 11, to the payment of all amounts payable under the Senior Debt, then and in such case, the Holders shall be entitled to receive from the holders of such Senior Debt at the time outstanding any payments or distributions received by such holders of Senior Debt in excess of the amount sufficient to pay all amounts payable under or in respect of such Senior Debt in full. SECTION 11.7 Obligations of Company Unconditional. (a) Nothing contained in this Article 11 or elsewhere in this Indenture or in any Note is intended to or shall impair, as between the Company and the Holders, the obligations of the Company, which are absolute and unconditional to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article 11 of the holders of such Senior Debt in respect of cash, property or Notes of the Company received upon the exercise of any such remedy. (b) The failure to make a payment on account of principal of, premium, if any, or interest on, the Notes by reason of any provision of this Article 11 shall not be construed as preventing the occurrence of an Event of Default under Section 6.1. 42 SECTION 11.8 The Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Trustee or Paying Agent shall not at any time be charged with the knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee or Paying Agent, unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company or one or more holders of Senior Debt or from any trustee or agent therefor, including Senior Representatives and/or the trustee for the Senior Subordinated Notes; and, prior to the receipt of any such written notice, the Trustee or Paying Agent shall be entitled to assume conclusively that no such facts exist. Unless by noon Eastern time one Business Day prior to the date on which by the terms of this Indenture any monies are to be deposited by the Company with the Trustee or any Paying Agent (whether or not in trust) for any purpose (including, without limitation, the payment of the principal of, premium, if any, or the interest on, any Note), the Trustee or Paying Agent shall have received with respect to such monies the notice provided for in the preceding sentence, the Trustee or Paying Agent shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such date, except for an acceleration of the Notes prior to such application. The foregoing shall not apply to the Paying Agent if the Company is acting as Paying Agent. Nothing contained in this Section 11.8 shall limit the right of the holders of Senior Debt to recover payments as contemplated by Section 11.2 hereof. The Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself or itself to be a holder of such Senior Debt (or a trustee on behalf of, or other representative of, such holder, including Senior Representatives) to establish that such notice has been given by a holder of such Senior Debt or a trustee on behalf of any such holder. Nothing in this Article 11 shall apply to amounts due the Trustee pursuant to Section 7.7 hereof. SECTION 11.9 Right of Trustee to Hold Senior Debt. The Trustee and any agent (including Senior Representatives) for the holders of Senior Debt shall be entitled to all of the rights set forth in this Article 11 in respect of any Senior Debt at any time held by it to the same extent as any other holder of such Senior Debt, and nothing in this Indenture shall be construed to deprive the Trustee or any agent for the holders of Senior Debt of any of its rights as such holder. SECTION 11.10 No Implied Covenants by or Obligations of the Trustee. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Article 11 against the Trustee. The Trustee shall not be deemed to have any fiduciary duty to the holders of the Senior Debt. ARTICLE 12 MEETINGS OF HOLDERS OF THE NOTES SECTION 12.1 Purposes of the Meetings. A meeting of the Holders may be called at any time from time to time pursuant to this Article 12 for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to Article 9 hereof; (b) to remove the Trustee and appoint a successor trustee pursuant to Article 7 hereof; or (c) to consent to the execution of an indenture supplemental hereto pursuant to Article 9 hereof. 43 SECTION 12.2 Place of Meetings; Expenses. Meetings of Holders may be held at such place or places in the Borough of Manhattan, The City of New York, as the Trustee or, in case of its failure to act, the Company or the Holders calling the meeting, in accordance with Section 12.3(b) hereof, shall from time to time determine. Except for a meeting requested by the Company pursuant to a Board Resolution or by the Trustee, all expenses (other than the expenses of the Company and the Trustee) of any meetings called or held pursuant to this Article 12 shall be borne by the Holders who call such meeting and the Company and the Trustee shall be entitled to indemnification from such Holders in respect of the costs thereof. SECTION 12.3 Call and Notice of Meetings. (a) The Trustee may at any time (upon not less than 20 days' notice) call a meeting of Holders to be held at such time and at such place in the location determined by the Trustee pursuant to Section 12.2 hereof. Notice of every meeting of Holders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given to the Company and each Holder, in accordance with Section 13.2 hereof. (b) In case at any time the Company pursuant to a Board Resolution, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, shall have requested the Trustee to call a meeting of the Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first giving of the notice of such meeting within 20 days after receipt of such request, then the Company or the Holders in the amount above specified may determine the time (not less than 20 days after notice is given) and the place in the location determined by the Company or the Holders pursuant to Section 12.2 hereof for such meeting and may call such meeting to take any action authorized in Section 12.1 hereof by giving notice thereof as provided in Section 12.3(a) hereof. SECTION 12.4 Voting at Meetings. To be entitled to vote at any meeting of Holders, a Person shall be (i) a Holder or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons so entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 12.5 Voting Rights, Conduct and Adjournment. (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding of Notes and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Notes shall be proved in the manner specified in Section 1.5 hereof and the appointment of any proxy shall be proved in such manner as is deemed appropriate by the Trustee or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company customarily authorized to certify to the holding of a security such as a Global Note. (b) At any meeting of Holders, the presence of Persons holding or representing Notes in an aggregate principal amount sufficient under the appropriate provision of this Indenture to take action upon the business for the transaction of which such meeting was called shall constitute a quorum. Any meetings of Holders duly called pursuant to Section 12.3 hereof may be adjourned from time to time by vote of the Holders (or proxies for the Holders) of a majority of the Notes represented at the meeting and entitled to vote, whether or not a quorum shall be present; and the meeting may be held as so adjourned without further notice. No action at a meeting of Holders shall be effective unless approved by Persons holding or representing Notes in the aggregate principal amount required by the provision of this Indenture pursuant to which such action is being taken. 44 (c) At any meeting of Holders, each Holder or proxy shall be entitled to one vote for each $1,000 principal amount at maturity of outstanding Notes held or represented. (d) Any resolution duly passed or decision or action duly taken at any meeting of the Holders duly held in accordance with this Article 12 shall be binding on all Holders whether or not present or represented at the meeting; provided, however, that the requisite number of Holders necessary to approve such resolution, decision or action as required by Article 9 shall have voted in favor of such resolution, decision or action at such meeting. The Company shall furnish to the Trustee a written copy of any resolution passed or decision or action taken at any meeting of the Holders. SECTION 12.6 Revocation of Consent by Holders. Any revocation of consent by Holders shall be made pursuant to Section 9.4 of this Indenture. ARTICLE 13 MISCELLANEOUS SECTION 13.1 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required or deemed to be included in this Indenture by the TIA, the provision so required or deemed shall control; and if any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 13.2 Notices. Any notice or communication by the Company, the Trustee or any Senior Representative to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telex, facsimile or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company: Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, Florida 33716 Telephone: (727) 579-2801 Facsimile: (727) 579-2880 Attn: Keith J. Nelsen, Esquire With a copy to: Altheimer & Gray 10 South Wacker Drive, Suite 4000 Chicago, Illinois 60606 Telephone: (312) 715-4000 Facsimile: (312) 715-4800 Attn: Jonathan Baird, Esquire If to the Trustee: HSBC Bank USA Issuer Services 452 Fifth Avenue New York, New York 10018 Attention: Frank J. Godino 45 If to any Senior Representative, to such address as such Senior Representative may by notice to the others designate. The Company, any other obligor upon the Notes or the Trustee or any Senior Representative by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Noteholders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Noteholder shall be made (i) if the Notes are represented by Global Notes, by publishing such in a leading newspaper having a general circulation in New York (which is expected to be the Wall ---- Street Journal) (and, so long as the Notes are listed on the Luxembourg Stock - -------------- Exchange and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)), and (ii) if the Notes are represented by Physical Notes, by - ---------------- mailing such notice or other communication by first-class mail to his or her address shown on the register kept by the Registrar and, with respect to a notice of redemption or repurchase under this Indenture, for so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange so require, publishing in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). Copies of any notice ---------------- or communication by the Company, or any other obligor upon the Notes, shall also be mailed to the Trustee and each Agent at the same time. Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed and published in the manner provided in this Section 13.2, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 13.3 Communication by Holders with Other Holders. Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and other applicable Persons shall have the protection of TIA Section 312(c). SECTION 13.4 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company (or any other obligor upon the Notes) to the Trustee to take any action under this Indenture, the Company (or such other obligor) shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.5) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.5) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with. 46 SECTION 13.5 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 13.6 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Noteholders. Any Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.7 Legal Holidays. If any specified date for making payment is not a Business Day, subject to Section 4.1 hereof, the action may be taken on the next succeeding Business Day without penalty of any kind (including the accrual of interest). SECTION 13.8 No Recourse Against Others. A director, officer, employee or stockholder of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or this Indenture, or for any claim based on, in respect of or by reason of such obligations or their creation. Each Noteholder, by accepting a Note, waives and releases all such liability. SECTION 13.9 Governing Law. The laws of the State of New York shall govern and be used to construe this Indenture and the Notes. SECTION 13.10 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.11 Successors. All agreements of the Company in this Indenture and in the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 47 SECTION 13.13 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.14 Variable Provisions. The Company initially appoints the Trustee as Paying Agent and Registrar. SECTION 13.15 Qualification of Indenture. The Company shall qualify this Indenture under the TIA and shall pay all reasonable costs and expenses (including attorneys' fees for the Company and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of the Indenture and the Notes and printing this Indenture and the Notes. The Trustee shall be entitled to receive from the Company any such Officers' Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the TIA and the registration and exchange of the Notes. SECTION 13.16 Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only and are not intended to describe, interpret, define, limit or modify any of the terms or provisions of this Indenture. SECTION 13.17 Indenture Controls over Form of Note. If any provision of a Note conflicts with the terms of this Indenture, the terms of this Indenture shall control. [SIGNATURE PAGES FOLLOW] 48 IN WITNESS WHEREOF, the Company and the Trustee have caused this Indenture to be duly executed and delivered as of the date first written above. DANKA BUSINESS SYSTEMS PLC By: ____________________________________ Name: ____________________________________ Title: ____________________________________ HSBC Bank USA, Trustee By: ____________________________________ Name: ____________________________________ Title: ____________________________________ EXHIBIT A FORM OF NOTE [FRONT SIDE] 10% SUBORDINATED NOTES [CUSIP NO.] [CINS NO.] [ISIN NO.] DUE APRIL 1, 2008 DANKA BUSINESS SYSTEMS, PLC, a public limited company organized under the laws of England and Wales (the "Company," which term includes any successor corporation under the indenture hereinafter referred to), for value received promises to pay to [If Physical Note: ______________, or registered assigns], [If Global Note: the bearer upon surrender hereof], the principal sum [If Physical Note: of __________ dollars ($________)], [If Global Note: of the amount indicated on Schedule A hereof]. Interest payments accrue at 10% per annum, payable semi-annually. Interest Payment Dates: April 1 and October 1 with interest accruing effective from April 1, 2001 through September 30, 2001 in the case of the first interest payment on October 1, 2001, and therefrom interest shall accrue from the date to which the interest was most recently paid. The first payment date is October 1, 2001. [If Global Note: to the bearer hereof], [If Physical Note: to the Persons in whose names the Notes are registered at the close of business on the March 15 or September 15 immediately preceding the relevant Interest Payment Date.] Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted herein. Dated: DANKA BUSINESS SYSTEMS PLC By: __________________________ Name: Title: Attest: - ----------------------------- DANKA BUSINESS SYSTEMS PLC By: __________________________ Name: Title: Attest: - ----------------------------- CERTIFICATE OF AUTHENTICATION This is one of the 10% Subordinated Notes due 2008 referred to in the within- mentioned Indenture. HSBC BANK USA, as Trustee By: _______________________ Authorized Officer A-1 [REVERSE SIDE] 10% SUBORDINATED NOTES DUE 2008 1. Principal and Interest. The Company will pay the principal of this Note on April 1, 2008 ("Maturity"). The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above. The Company will pay interest semi-annually [If Global Note: to the bearer hereof] [If Physical Note: to the Persons in whose names the Notes are registered at the close of business on the March 15 or September 15 immediately preceding the relevant Interest Payment Date] on each April 1 and October 1 of each year. Interest on the Notes will accrue effective from April 1, 2001, provided that the first interest payment date shall be in cash on October 1, 2001 and thereafter from the most recent date to which interest has been paid. Interest on the Notes will continue to accrue at the rate of 10% per annum in the event of overdue principal, premium or interest, if any. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. One Business Day prior to the date of the Stated Maturity, the Company shall irrevocably deposit with the Trustee or the Paying Agent money in immediately available funds sufficient to pay such principal, premium, if any, and/or interest. The Paying Agent shall pay from such monies interest on the Notes (except defaulted interest) to [If Global Note: the bearer hereof], [If Physical Note: the Persons in whose names the Notes are registered at the close of business on the March 15 or September 15 immediately preceding the relevant Interest Payment Date] in each case, even if such Notes are cancelled, redeemed or repurchased after such record date and on or before such interest payment date; provided that, with respect to the payment of principal, the Company shall make payment to the Holder that surrenders this Note to a Paying Agent on or after April 1, 2008. Subject to the foregoing, each Note delivered under the Indenture upon registration of, transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. The Holder must surrender this Note to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. [If Global Note: Payments in respect of Notes represented by global notes (including principal, premium, interest and defaulted interest, if any) shall be made by wire transfer of immediately available funds to the accounts specified by the bearer hereof.] [If Physical Note: With respect to Physical Notes, the Company will make all payments of principal, premium, interest and defaulted interest, if any by wire transfer of immediately available funds to the U.S. dollar accounts maintained by the Holders with banks in the United States, or, if no such account is designated by any Holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such Holder.] If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. The Company, at its option, may pay principal, premium, if any, and interest by check payable in such money mailed to a Holder's registered address or at the office or agency of the Company maintained for such purpose in the City of New York. 3. Paying Agent and Registrar. Initially, the Trustee will act as authenticating agent, Paying Agent and Registrar. The Company may change any authenticating agent, Paying Agent or Registrar without notice. Banque Internationale a Luxembourg S.A. will also be appointed as a Paying Agent in Luxembourg. The Company, any Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar, except for purposes of redemption under Section 4.17 of the Indenture, neither the Company nor any Subsidiary nor any Affiliate of the Company may act as Paying Agent. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Noteholder. 4. Indenture. The Company issued the Notes under an Indenture dated as of __________, 2001 (as it may be amended from time to time in accordance with the terms thereof, the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (Title 15, United States Code, Sections 77aaa, 77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are unsecured general obligations of the Company. The Company may not issue additional Notes under the Indenture. A-2 5. Optional Redemption. The Company may redeem the Notes in full or in part beginning on April 1, 2005, upon not less than 30 days nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple thereof at the Redemption Prices (expressed as a percentage of the principal amount) set forth below, if redeemed during the 12-month period beginning April 1 of the years indicated below: 12 Month Period Commencing Redemption Price -------------------------- ---------------- April 1, 2005 105.00% April 1, 2006 102.50% April 1, 2007 and thereafter 100.00% in each case together with accrued and unpaid interest to the Redemption Date (subject to the right of [If a Physical Note: Holders of record on the relevant Regular Record Date] [If Global Note: the bearer hereof] to receive interest due on an Interest Date that is on or prior to the Redemption Date) if redeemed during the 12-month period commencing April 1 of the applicable year set forth above. 6. Mandatory Redemption. Except in the event of a Change of Control, there is no sinking fund with respect to the Notes. 7. Notice of Redemption. Notice of redemption shall be given at least 30 days but not more than 60 days before the Redemption Date, (i) if the Notes are represented by a Global Note, by publishing in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street ----------- Journal) (and, so long as the Notes are listed on the Luxembourg Stock Exchange - ------- and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger ----------- Wort), or (ii) if the Notes are represented by Physical Notes, by mailing notice - ---- by first-class mail to each Holder of Notes to be redeemed at such Holder's last address as shown on the registry books, with a copy to the Trustee (and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require, published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)). ---------------- Notes may be redeemed in whole or in part, and if in part in amounts equal to $1,000 or integral multiples of $1,000. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption. 8. Redemption of Notes at the Option of the Holder. (a) Subject to the terms and conditions of the Indenture, if any Change of Control (as defined in the Indenture) occurs on or prior to maturity, the Company will be required, subject to its prior compliance with certain covenants in respect of Senior Debt, to offer to purchase each Holder's Notes as provided in the Indenture for a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the purchase date. Subject to the terms of the Indenture, if additional payments are required because of changes in United Kingdom tax withholding laws, the Company may redeem the Notes in whole (but not in part) at any time, at a Redemption Price equal to 100.00% of the principal amount, plus accrued but unpaid interest up to but not including the redemption date. (b) In accordance with Section 13.2 of the Indenture, a notice of such Change of Control shall be given within 30 days after any Change of Control occurs, (i) if the Notes are represented by a Global Note, by publishing in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) (and, so long as the Notes are listed on the ------------------- Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort) and (ii) if the Notes are represented by Physical Notes, ---------------- by mailing notice by first-class mail to each Holder of Notes to be redeemed at such Holder's registered address (and, so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such stock exchange shall so require, published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)). ---------------- 9. Redemptions of the Notes at the Option of the Company. (a) Subject to the terms and conditions of the Indenture, the Company may redeem Notes, in whole (but not in part), at any time, if there is a payment in accordance with the provisions of Section 4.6 of the Indenture, upon not less than 30 days nor more than 60 days' A-3 notice if the Company is required to pay the additional amounts as set forth in Section 4.6 of the Indenture. The Redemption Price is 100.00% of principal, plus accrued but unpaid interest up to but not including the redemption date. (b) Subject to terms and conditions of the Indenture, on or before April 1, 2005, the Company may redeem up to 35% of the aggregate principal amount of the Notes originally issued using the net cash proceeds of one or more Equity Offerings, if at least 65% of the aggregate principal amount of the Notes originally issued remain outstanding immediately after the redemption. The redemption price is 110% of the principal amount of the Notes. The Company will pay accrued and unpaid interest on the Notes up to but not including the redemption date. The Company must make the redemption with net cash proceeds from a public Equity Offering not more than 90 days after the consummation of the public Equity Offering plus accrued and unpaid interest, if any to the Redemption Date (subject to the right [If a Physical Note: Holders of record on the relevant Regular Record Date that is on or prior to the Redemption Date] [If Global Note: the bearer hereof] to receive interest due on an Interest Payment Date. 10. Subordination. The Notes are subordinated to Senior Debt (as defined in the Indenture) which includes (with certain exceptions) the principal of, and premium, if any, and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding) on, any Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred or assumed, unless, in the case of any particular Debt, the instrument creating or evidencing, or the agreement governing, such Debt or pursuant to which such Debt is outstanding expressly provides that such Debt shall not be senior in right of payment to the Notes. To the extent provided in the Indenture, such Debt must be paid before the Notes may be paid. The Notes are also subordinated to the Senior Subordinated Notes. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 11. Denominations, Transfer, Exchange. The Notes are in bearer form without coupons which shall be issuable in registered form of Physical Notes, only in the limited circumstances set forth in the Indenture. [If Physical Note: A Holder may register the transfer or exchange of Physical Notes in accordance with the Indenture. The Registrar may require a Holder of a Physical Note, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Physical Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before a selection of Notes to be redeemed is made.] The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements, certificates, opinions and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the next succeeding interest payment date. 12. Persons Deemed Owners. [If Physical Note: A Holder] [If Global Note: the bearer of this Note:] shall be treated as the absolute owner of the Note for all purposes. 13. Amendments and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented, or compliance by the Company with any provision of the Indenture or the Notes may be waived, with the Act of the Holders, in accordance with Section 1.5 of the Indenture, of a majority in aggregate principal amount of the Notes then outstanding; provided, however, that without the consent of each Holder affected thereby, the Company may not (1) reduce the percentage stated in the Indenture of aggregate principal amount of outstanding Notes necessary to consent to an amendment, supplement or waiver of the Indenture; (2) reduce the percentage of aggregate principal amount of outstanding Notes necessary to consent for waiver of certain defaults as defined in the Indenture; (3) reduce the principal amount of (or the premium of, if any) or interest on any Note or change the stated maturity of the principal of the Notes; (4) change place or currency of payment of principal of, premium, if any, or interest (including defaulted interest) on, any Note; (5) change the stated maturity of the principal of or any installment of interest on any Note; (6) impair the right to institute suit for the enforcement of any payment of principal of, premium, if any, or interest on, any Note; (7) modify or amend any of the provisions of the Indenture relating to the subordination of the Notes in a manner adverse to the Holders; (8) waive a continuing past Default or Event of Default in the payment of principal of, premium, if any, or interest on, any Note; (9) modify or amend any of the provisions of the Indenture relating to the modification and amendment of the Indenture or the A-4 waiver of past defaults or covenants; or (10) following the mailing of an offer with respect to a Change of Control Offer pursuant to Section 4.17 of the Indenture, modify the Indenture with respect to such Change of Control Offer or offer to purchase in a manner adverse to such Holders. Notwithstanding the foregoing, without the consent of any Holder of Notes and subject to certain requirements set forth in Section 9.1 of the Indenture, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, omission, defect or inconsistency, to comply with Article 5 of the Indenture, to make any change that does not adversely affect the legal rights under the Indenture of any of such Holder under the Indenture or the Notes, to evidence or to provide for a replacement Trustee, to comply with requirements of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act as then in effect, or to add to the covenants and agreements of the Company for the benefit of the Holders and to surrender any right or power reserved in the Indenture to the Company. 14. Defaults and Remedies. An Event of Default shall occur if: (1) the Company fails to pay any interest on any of the Notes when the same becomes due and payable, and such failure continues for 30 days; (2) the Company fails to pay principal of, or premium, if any, on any of the Notes when the same becomes due and payable, at maturity, upon acceleration, redemption or otherwise; (3) the Company fails to pay the principal of, premium, if any, and interest on any Notes required to be purchased pursuant to a Change of Control Offer pursuant to Section 4.17 of the Indenture or an offer to repurchase Notes pursuant to Section 4.15 of the Indenture, as provided in such Section; (4) the Company fails to perform any other covenant, warranty, term, condition, provision or agreement (other than the provisions of Article 5 of the Indenture) of the Company contained in the Notes or the Indenture and such failure continues for 30 days after the notice specified below; (5) the Company fails to perform or comply with the provisions described under Article 5 or Section 4.15 of the Indenture; (6) the occurrence of a default under any Debt of the Company or any Subsidiary of the Company if both (A) the default either results from failure to pay any such Debt at its Stated Maturity and (B) the principal amount of such Debt, together with, the principal amount of any other such Debt in default for failure to pay principal at the Stated Maturity of the maturity of which has been accelerated and aggregated at least $25 million or more at any one time outstanding; (7) the rendering of a final judgment or judgments (not subject to appeal) by a court of competent jurisdiction against the Company or any of its Restricted Subsidiaries in an aggregate amount at any one time in excess of $10 million and shall not have been vacated, discharged, satisfied or stayed within 60 consecutive days thereafter; and (8) certain events of bankruptcy, insolvency or reorganization affecting the Company or any significant Subsidiary of the Company. If an Event of Default shall occur and be continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable as provided in the Indenture, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes become due and payable immediately without further action or notice. The Trustee may require indemnity reasonably satisfactory to the Trustee before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Company must furnish an annual compliance certificate to the Trustee. The Company must also furnish a notice of any Default (as provided in the Indenture) to the Trustee within five business days after such occurrence. 15. Trustee Dealings with Company. Subject to certain limitations, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. 16. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 17. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with A-5 right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money over to the Company, unless otherwise required by law. After that, Holders entitled to money must look to the Company for payment, unless otherwise required by law. 20. Discharge Prior to Maturity. If the Company irrevocably deposits with the Trustee or Paying Agent in trust cash or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to maturity and satisfies certain conditions specified in the Indenture, the Company will be discharged from the Indenture except for certain Sections thereof. 21. Successor. When a successor to the Company assumes all the obligations of its predecessor under the Notes and the Indenture, such predecessor shall be released from those obligations. 22. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. 23. Information. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Danka Business Systems, PLC Attention: Keith J. Nelsen, Esquire 11201 Danka Circle North St. Petersburg, Florida 33716 A-6 [SCHEDULE A - TO BE ATTACHED TO GLOBAL NOTES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE THE INITIAL PRINCIPAL AMOUNT AT MATURITY OF THIS GLOBAL NOTE IS AS SHOWN BY THE LATEST ENTRY MADE OR ON BEHALF OF THE COMPANY IN THE FOURTH COLUMN BELOW. REDUCTIONS IN THE PRINCIPAL AMOUNT OF THIS GLOBAL NOTE FOLLOWING EXCHANGE OF THIS GLOBAL NOTE FOR REGISTERED NOTES OR PURCHASE AND CANCELLATION OF NOTES, AND INCREASES IN THE PRINCIPAL AMOUNT OF THIS GLOBAL NOTE, ARE ENTERED IN THE SECOND AND THIRD COLUMNS BELOW.
Initial principal amount and Reason for outstanding reduction/ principal amount increase in the of this global principal note amount of this Amount of such following such Notation made global reduction/ reduction/ by or on behalf Date security increases increases of the issuer ---------- ------------ ------------- ------------- ----------------- , 2001 Not applicable Not applicable [ ] Not applicable __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
*STATE (A) WHETHER REDUCTION FOLLOWING (I) EXCHANGE FOR NOTES IN A DIFFERENT FORM; OR (II) CONVERSION OF NOTES; OR (III) PURCHASE AND CANCELLATION OF NOTES; OR (B) CIRCUMSTANCES RELATING TO INCREASE. A-7 ASSIGNMENT FORM FOR PHYSICAL NOTES AND GLOBAL NOTES TO ASSIGN THIS NOTE, FILL IN THE FORM BELOW: (I) OR (WE) ASSIGN AND TRANSFER THIS NOTE TO (Insert assignee's soc. sec. or tax I.D. no.) (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her. Date: _______________ Your Signature: __________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: _____________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15) Date: _______________ Your Signature: __________________________ NOTICE: To be executed by an executive officer Signature Guarantee: ____________________ (Signature must be guaranteed by an eligible guarantor institution A-8 (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15) A-9 Option of Holder to Elect Purchase: If you wish to elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.17 ("Change of Control Offer") of the Indenture, check the applicable boxes: [ ] Change of Control Offer: in whole [ ] in part [ ] Amount to be purchased: $ Date: ____________ Your Signature: ______________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ______________________ (Signature must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan with membership in an pursuant to Securities associations and credit unions) approved guarantee and Exchange Commission medallion program Rule 17Ad-15) Social Security Number or Taxpayer Identification Number: ______________ A-10 EX-8.1 4 dex81.txt OPINION OF ALTHEIMER & GRAY EXHIBIT 8.1 ALTHEIMER & GRAY SUITE 4000 10 SOUTH WACKER DRIVE CHICAGO, ILLINOIS 60606-7482 (312) 715-4000 June 27, 2001 Danka Business Systems PLC 11201 Danka Circle North St. Petersburg, FL 33716 Re: Material Federal Income Tax Consequences of the Exchange of Old Notes for Cash, New senior subordinated Notes, New 10% Notes, or any Combination thereof Ladies and Gentlemen: 1. We have acted as United States tax counsel to Danka Business Systems PLC (the "Company") in connection with the registration by the Company under the United States Securities Act of 1933, as amended (the "Securities Act") of up to $100,000,000 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 (the "new senior subordinated notes") and up to $200,000,000 in principal amount of new 10% subordinated notes due April 1, 2008 (the "new 10% notes") to be issued by the Company in connection with an offer by the Company (the "Exchange Offer") to exchange the new senior subordinated notes and the new 10% notes for up to $200,000,000 in principal amount of the Company's 6.75% convertible subordinated notes due April 1, 2002 (the "old notes"). You have requested our opinion as to material federal income tax consequences of the exchange of old notes of the Company for cash, new senior subordinated notes, or new 10% notes, or any combination of cash, new senior subordinated notes and new 10% notes. While our opinion discusses the material anticipated United States federal income tax consequences, it does not purport to discuss all United States tax consequences and is limited to those United States tax consequences specifically discussed in the Registration Statement under the caption "Material United States Federal Income Tax Consequences." 2. Capitalized terms used herein and not otherwise defined herein have the respective meanings assigned to them in the Registration Statement. 3. We have examined and relied on copies of such corporate records of the Company and other documents, including the Registration Statement on Form S-4 filed by the Company, and reviewed such matters of law as we have deemed necessary or appropriate for the purpose of this opinion. We have not made any independent investigation in rendering these opinions other than as described herein. 4. Our opinion is based upon existing United States federal income tax laws, regulations, United States Internal Revenue Service administrative pronouncements and judicial decisions. All such authorities are subject to change, either prospectively or retroactively. No assurance can be provided as to the effect of any such change upon our opinion. 5. We have not sought and will not seek any rulings from the United States Internal Revenue Service with respect to any consequences discussed in our opinion. Our opinion has no binding effect on the United States Internal Revenue Service or the courts of the United States. There can be no assurance that the United States Internal Revenue Service or a United States court would agree with our opinion if the matter were contested. 6. We have advised the Company in connection with the material United States federal income tax consequences to holders of old notes of participating in the Exchange Offer and of acquiring, owning and disposing of the new notes. We confirm that the statements of law and legal conclusions contained in the Registration Statement under the caption "Material United States Federal Income Tax Consequences" are our opinion. While our opinion discusses the material anticipated United States federal income tax consequences, it does not purport to discuss all United States tax consequences and is limited to those United States tax consequences specifically discussed therein. 7. In giving our opinion, we express no opinion other than as to the federal income tax law of the United States of America. 8. This opinion is expressed as of the date hereof and we assume no responsibility to update this opinion. 9. We are furnishing this letter in our capacity as United States tax counsel to the Company. This letter is not to be used, circulated, quoted or otherwise referred to for any other purposes, except as set forth in the Registration Statement. 10. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus that is a part of the Registration Statement. In giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, /s/ Altheimer & Gray Altheimer & Gray EX-8.2 5 dex82.txt OPINION OF CLIFFORD CHANCE EXHIBIT 8.2 CLIFFORD CHANCE 200 Aldersgate Street London EC1A 4JJ 27 June 2001 The Board of Directors Danka Business Systems Plc 11201 Danka Circle North St. Petersburg, Florida 33716 United States Dear Sirs Danka Business Systems Plc We are acting as United Kingdom counsel to Danka Business Systems Plc (the "Company") in connection with Registration Statement on Form S-4 (the "Registration Statement"), filed with the Securities and Exchange Commission for the purposes of registering under the Securities Act of 1933, as amended, up to $100,000,000 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 and up to $200,000,000 in principal amount of new 10% subordinated notes due April 1, 2008 (collectively "the new notes") to be issued by the Company in connection with an offer by the Company to exchange the new notes for up to $200,000,000 in principal amount of the Company's 6.75% convertible subordinated notes, due April 1, 2002. We hereby confirm that the statements covering United Kingdom tax laws as set forth in the Prospectus included in the Registration Statement (the "Prospectus") under the caption "Material United Kingdom Tax Consequences" subject to the reservations and qualifications set forth in that section of the Prospectus is our opinion on the matters so captioned. We hereby consent to the use of our name in the Prospectus under the caption "Legal Matters" and to the filing of this letter as an exhibit to the Registration Statement. In giving such consent we do not admit that we come within the category of persons whose consent is required under section 7 of the Act. Yours faithfully /s/ Clifford Chance Clifford Chance LLP EX-23 6 dex23.txt CONSENT OF CHARTERED ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- To the Members of Danka Business Systems PLC We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. Our report dated June 7, 2001, contains an explanatory paragraph that states that the Company has a substantial amount of indebtedness maturing on March 31, 2002 and April 1, 2002. The Company's need to restructure its indebtedness in order to meet its obligations and repay such indebtedness when it matures raises substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of that uncertainty. KPMG Audit Plc Chartered Accountants Registered Auditor London, England June 27, 2001 EX-99.1 7 dex991.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 A registration statement has been filed with the Securities and Exchange Commission in connection with the Exchange Offer. The completion of the exchange offer is dependent upon the registration statement becoming effective. Danka Business Systems PLC Letter of Transmittal Exchange offer for the outstanding 6.75% Convertible Subordinated Notes due April 1, 2002 of Danka Business Systems PLC The exchange offer will expire at 8:00 a.m., New York City time, on June 29, 2001 unless the exchange offer is extended. Tenders may be withdrawn prior to 8:00 a.m., New York City time, on the expiration date. The exchange agent for the exchange offer is: HSBC Bank USA One Hanson Place Lower Level Brooklyn, New York 11243 By facsimile (for eligible institutions only): (718) 488-4488 For information or confirmation by telephone: (718) 488-4475 Delivery of this letter of transmittal to an address other than as set forth above, or transmission of instructions via a fax number other than as set forth above, will not constitute a valid delivery. The instructions contained herein and in the prospectus dated as of June 27, 2001 should be read carefully before this letter of transmittal is completed. The exchange offer by Danka Business Systems PLC is conditioned on the satisfaction of certain conditions, more fully described in the prospectus under the caption "The Exchange Offer--Conditions to this Exchange Offer," including the valid tender of at least 92% in aggregate principal amount of the outstanding 6.75% convertible subordinated debentures due April 1, 2002. The prospectus contains a more complete description of the exchange offer and the conditions thereof. Use this letter of transmittal only to tender old notes pursuant to the exchange offer. This letter of transmittal and the instructions hereto are to be used by the holders of old notes. This letter of transmittal is to be used by such holders of old notes if tender of old notes is to be made by book-entry transfer to the exchange agent's account at DTC, Euroclear or Clearstream pursuant to the procedures set forth under the caption "This Exchange Offer--Procedures for Exchanging Notes" in the prospectus and instructions are not being transmitted through the DTC Automated Tender Offer Program. Holders of old notes who are tendering by book-entry transfer to the exchange agent's account at DTC can execute the tender through DTC Automated Tender Offer Program. DTC, Euroclear and Clearstream participants that are accepting the exchange offer must transmit their acceptance to DTC, Euroclear or Clearstream, which will edit and verify the acceptance and execute a book- entry delivery to the exchange agent's account. DTC, Euroclear and Clearstream will send an agent's message to the exchange agent for its acceptance. Delivery of the agent's message will satisfy the terms of the exchange offer as to the tender of old notes. The exchange offer is not being made to, nor will tenders of old notes be accepted from or on behalf of, holders in any jurisdiction in which the making or acceptance of the exchange Offer would not be in compliance with the laws of such jurisdiction. Delivery of instructions or documents to DTC, Euroclear or Clearstream does not constitute delivery to the exchange agent. Only holders of old notes may validly tender old notes. The undersigned should complete, execute and deliver this letter of transmittal to indicate the action the undersigned desires to take with respect to the exchange offer. The instructions included with this letter of transmittal must be followed. Questions and requests for assistance or for additional copies of the prospectus and this letter of transmittal may be directed to HSBC Bank USA in its capacity as exchange agent. See Instruction 10 below. TENDER OF OLD NOTES Complete the following for all tendered old notes being delivered by book- entry transfer made to the account maintained by the exchange agent with DTC, Euroclear or Clearstream: Name of Tendering Institution: -------------------------------------------------------- Account Number: ---------------------------------------------------------------- Transaction Code Number: ---------------------------------------------------------- Upon the terms and subject to the conditions of the exchange offer set forth in this letter of transmittal and the accompanying prospectus, Danka is offering to exchange cash and new debt securities for your 6.75% convertible subordinated notes due 2002 that are validly tendered, not withdrawn, and accepted, in this exchange offer. You can select the form of consideration that you will receive for your old notes from the following three options: .Limited Cash Option $400 in cash for every $1,000 in principal amount of old notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of old notes. If more than $60 million in principal amount of old notes are tendered under this option, Danka will exchange $800 in principal amount of new zero coupon senior subordinated senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of old notes tendered. Danka will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions as everyone else who tenders old notes under this option. Danka may issue new senior subordinated notes in denominations of less than $1,000. Danka will not determine whether the limited cash option is over-subscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes once we make this determination even though it may affect the type of exchange consideration that you will receive in this exchange offer. .Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. We may issue new senior subordinated notes in denominations of less than $1,000. .10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all the old notes that you tender. You do not have to tender all of your old notes to participate in this exchange offer. However, this exchange offer is conditioned on Danka receiving valid tenders of at least 92% in aggregate principal amount of the old notes. You may withdraw your tender of old notes or change your choice of consideration options at any time before the expiration of this exchange offer. List below the old notes to which this letter of transmittal relates. If the space provided is inadequate, list the principal amounts and your account number on a separately executed schedule and affix the schedule to this letter of transmittal. DESCRIPTION OF OLD NOTES Item 1. Name of DTC, Euroclear or Clearstream participant and DTC, Euroclear or Clearstream participant's account number in which old notes are held. Please fill in the blank.
Principal Amount Tendered (1) Account Number (2) ---------------- ------------------ Total principal amount of old notes ten- dered.................................... $
- ------- (1) A tendering holder of old notes may tender all or some of the old notes held by such holder. (2) DTC, Euroclear or Clearstream account number. ELECTION AS TO FORM OF EXCHANGE OFFER CONSIDERATION Item 2. Special Issuance/Special Delivery Instructions. [_]Mark this box if, in the event that your old notes are not accepted for exchange, they should be returned to an account other than the account for which they were tendered. (Complete Box A--"Special Issuance/Delivery Instructions" below.) [_]Mark this box if you want to provide special delivery instructions for the exchange consideration to which you may be entitled. (Complete Box B--"Special Issuance/Delivery Instructions" below.) Item 3. Election as to Form of Consideration. If you are accepting the exchange offer, you may elect to receive either (a) $400 in cash for every $1,000 in principal amount of old notes that you tender, subject to an aggregate maximum of $24 million cash for $60 million in principal amount of old notes, (b) $800 in principal amount of zero coupon senior subordinated notes due April 1, 2004 of Danka Business Systems PLC, for each $1,000 in aggregate principal amount of old notes that you tender, or (c) $1,000 in principal amount of 10% subordinated notes due April 1, 2008. We may issue new senior subordinated notes in denominations of less than $1,000. The new senior subordinated notes and the new 10% notes are referred to collectively as the "new notes." If you hold more than $1,000 in aggregate principal amount of old notes, you need not make the same election for each $1,000 principal amount of old notes. For example, if you hold $100,000 aggregate principal amount of old notes and you choose to tender in the Exchange Offer, you may elect to receive cash for $65,000 of your old notes and new 10% notes for the remaining $35,000 of your old notes. A. [_] Check this box if you want to tender all of your old notes in exchange for $400 in cash for each $1,000 in principal amount of old notes tendered by you. B. [_] Check this box if you want to tender all of your old notes in exchange for $800 in principal amount of new senior subordinated notes for each $1,000 in principal amount of old notes tendered by you. C. [_] Check this box if you want to tender all of your old notes in exchange for $1,000 in principal amount of new 10% notes for each $1,000 in principal amount of old notes tendered by you. D. [_] Check this box, and complete the remainder of this Item, if you hold more than $1,000 in aggregate principal amount of old notes and you wish to make a mixed election as to form of consideration. (1) Indicate the principal amount of your old notes being tendered for which you elect to receive cash. (2) Indicate the principal amount of your old notes being tendered for which you elect to receive only new senior subordinated notes. (3) Indicate the principal amount of your old notes being tendered for which you elect to receive only new 10% notes. (4) Total principal amount for which you are making this mixed election. (This amount is the total of Items 3D(1), 3D(2) and 3(D)(3) above and must be equal to the total principal of your old notes being tendered as indicated in Item 1 above.) The names and addresses of the holders of old notes should be printed, if not already printed above, exactly as they appear in your DTC, Euroclear or Clearstream account. The old notes and the principal amount of old notes that the undersigned wishes to tender should be indicated in the appropriate boxes. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: By execution hereof, the undersigned hereby acknowledges receipt of the prospectus dated June 27, 2001 of Danka Business Systems PLC and this letter of transmittal and Instructions hereto. Upon the terms and subject to the conditions of this exchange offer, the undersigned hereby tenders to Danka the aggregate principal amount of the old notes indicated above. Subject to, and effective upon, the acceptance for exchange of the principal amount of the old notes tendered hereby, the undersigned hereby assigns and transfers to, or upon the order of, Danka, all right, title and interest in and to such old notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the exchange agent the true and lawful agent and attorney-in-fact of the undersigned with respect to such tendered old notes, with full powers of substitution, among other things, to cause the old notes being tendered to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the old notes being tendered, and to acquire the cash, the new senior subordinated notes and the new 10% notes, as the case may be, issuable upon the exchange of such tendered old notes, and that, when the same are accepted for exchange, Danka will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by Danka. The undersigned will, upon request, execute and deliver any additional documents deemed by Danka to be necessary or desirable to complete the sale, assignment and transfer of the old notes tendered hereby. All authority conferred or agreed to be conferred in this letter of transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive the death or incapacity of the undersigned. You may withdraw the tender of your old notes at any time prior to the expiration of the exchange offer, but the exchange consideration shall not be payable in respect of old notes that are withdrawn. Any permitted withdrawal of old notes may not be rescinded, and any old notes properly withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offer. Withdrawn notes may, however, be re-tendered by again following one of the appropriate procedures described in the prospectus at any time prior to the expiration of the exchange offer. The undersigned understands that tenders of old notes pursuant to any of the procedures described in the prospectus and in the Instructions hereto and acceptance of such old notes by Danka will constitute a binding agreement between the undersigned and Danka upon the terms and subject to the conditions of the exchange offer. For purposes of the exchange offer, the undersigned understands that validly tendered old notes (or defectively tendered old notes with respect to which Danka has, or has caused to be, waived such defect) will be deemed to have been accepted by Danka if, as and when Danka gives oral or written notice thereof to the exchange agent. The undersigned hereby represents and warrants that the undersigned is relying on the information contained in the accompanying Prospectus in making its investment decision with respect to the exchange offer. The undersigned further acknowledges that neither Danka nor any person representing Danka has made any representation to it with respect to Danka, the exchange offer or the issuance of the exchange considerations, other than the information contained in the accompanying Prospectus. The undersigned understands that the delivery and surrender of any old notes are not effective, and the risk of loss of the old notes does not pass to the exchange agent, until receipt by the exchange agent of this letter of transmittal (or a copy thereof), properly completed and duly executed, together with all accompanying evidences of authority and any other required documents in form satisfactory to Danka. All questions as to the form of all documents and the validity (including time of receipt) and acceptance of tenders of old notes will be determined by Danka, which determination shall be final and binding. Unless otherwise indicated herein under "A. Special Issuance/Delivery Instructions," the undersigned hereby request(s) that any old notes representing principal amounts that are not accepted for exchange be returned by book-entry transfer by credit to the account of DTC, Euroclear or Clearstream for which such old notes were tendered. Unless otherwise indicated herein under "B. Special Issuance/Delivery Instructions," the undersigned hereby request(s) that the exchange consideration in respect of tendered old notes accepted for exchange be tendered by book-entry transfer by credit to the account of DTC, Euroclear or Clearstream for which such old notes were tendered. In the event that the "A. Special Issuance/Delivery Instructions" box is completed, the undersigned hereby request(s) that any old notes representing principal amounts not accepted for exchange be issued in the name(s) of, and be delivered by book-entry transfer by credit to the account of DTC, Euroclear or Clearstream therein indicated. The undersigned recognizes that Danka has no obligation pursuant to the "A. Special Issuance/Delivery Instructions" box to transfer any old notes from the names of the tendering holder(s) of old notes thereof if Danka does not accept for exchange any of the principal amount of such old notes so tendered. In the event that the "B. Special Issuance/Delivery Instructions" box is completed, the undersigned hereby request(s) that the exchange consideration issued in exchange for tendered old notes accepted for exchange be issued in the name(s) of, and be delivered by book-entry transfer by credit to the account of DTC, Euroclear or Clearstream therein indicated. A. SPECIAL ISSUANCE DELIVERY B. SPECIAL ISSUANCE DELIVERY INSTRUCTIONS INSTRUCTIONS (See Instructions) (See Instructions) To be completed ONLY if the ex- To be completed ONLY if old change consideration for old notes not accepted for exchange notes accepted for exchange is to are to be issued by credit to an be issued by credit to an account account maintained at DTC, maintained at DTC, Euroclear or Euroclear or Clearstream other Clearstream other than the ac- than the account for which the count for which the tender was tender was made. made. Name _____________________________ Name _____________________________ (Please Print) (Please Print) Credit unexchanged old notes by Credit exchange consideration by book-entry transfer to the book-entry transfer to the account set forth below: account set forth below: DTC Account No.: _________________ DTC Account No.: _________________ Euroclear Account No.: ___________ Euroclear Account No.: ___________ Clearstream Account No.: _________ Clearstream Account No.: _________ __________________________________ __________________________________ (Tax Identification or Social (Tax Identification or Social Security Number) Security Number) (See Form W-9 herein) (See Form W-9 herein) PLEASE SIGN HERE (To be completed by all tendering and consenting holders of old notes) By completing, executing and delivering this letter of transmittal, the undersigned hereby tenders the principal amount of the old notes listed in the box above labeled "Description of Old Notes" under the column heading "Principal Amount Tendered." This letter of transmittal must be signed by the holder(s) of old notes exactly as such participant's name appears on a security position listing as the owner of old notes with DTC, Euroclear or Clearstream. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Signature(s) of Holder(s) of Old Notes or Authorized Signatory (See guarantee requirement below) Dated.................................................. Name(s)................................................ Firm................................................... (Please Print) Capacity............................................... Address(es)............................................ (Including Zip Code) Area Code and Telephone Number......................... Area Code and Fax Number............................... Tax Identification or Social Security Number .......... (COMPLETE ACCOMPANYING FORM W-9 OR FORM W-8) Medallion Signature Guarantee (If Required--See Instructions 1 and 4) Authorized Signature................................... Name of Firm........................................... INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Signature Guarantees. Signatures on this letter of transmittal must be guaranteed by a Medallion Signature Guarantor, unless the old notes are tendered by a participant in DTC, Euroclear or Clearstream whose name appears on a securities position listing as the owner of such old notes that has not completed any of the boxes entitled "Special Issuance/Delivery Instructions" on this letter of transmittal. If the old notes are registered in the name of a person other than the signer of this letter of transmittal, the signatures on this Letter of Transmittal accompanying the tendered old notes must be guaranteed by a Medallion Signature Guarantor as described above. See Instruction 5. 2. Delivery of Letter of Transmittal and Old Notes. This letter of transmittal is to be completed by holders of old notes if tender of old notes is to be made by book-entry transfer to the exchange agent's account at DTC, Euroclear or Clearstream pursuant to the procedures set forth under the caption "The Exchange Offer--Procedures for Exchanging Notes" in the prospectus and instructions are not being transmitted through ATOP. Holders of old notes must deliver a confirmation of a book-entry transfer into the exchange agent's account at DTC, Euroclear or Clearstream of all old notes delivered electronically, as well as a properly completed and duly executed letter of transmittal (or a copy thereof) and any other documents required by this Letter of Transmittal, must be received by the exchange agent at its address set forth herein on or prior to the expiration date. Delivery of documents to DTC, Euroclear or Clearstream does not constitute delivery to the exchange agent. The method of delivery of this letter of transmittal, the old notes and all other required documents, including delivery through DTC, Euroclear or Clearstream and any acceptance of the agent's message delivered through ATOP, is at the option and risk of the tendering holder of old notes. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed for such documents to reach the exchange agent. No alternative, conditional or contingent tenders will be accepted. All tendering holders of old notes, by execution of this letter of transmittal (or a copy thereof), waive any right to receive any notice of the acceptance of their old notes for payment. 3. Withdrawal of Tenders. Tenders of old notes may be withdrawn at any time before 8:00 a.m., New York City time, on the expiration date. For a withdrawal of a tender of old notes to be effective, a written notice of withdrawal of a tender of old notes to be effective, a written notice of withdrawal must be received by the exchange agent on or prior to the expiration date (or such later date as may be permitted by the preceding paragraph) at its address set forth on the back cover of the prospectus. 4. Inadequate Space. If the space provided herein is inadequate, the principal amount represented by old notes should be listed on a separate signed schedule attached hereto. 5. Signature on Letter of Transmittal, Instruments of Transfer and Endorsements. If this letter of transmittal is signed by a participant in DTC, Euroclear or Clearstream whose name is shown as the owner of the old notes tendered hereby, the signature must correspond with the name shown on the security position listing as the owner of the old notes. If any old notes tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate letters of transmittal, and any necessary accompanying documents as there are different registrations of such old notes. If this letter of transmittal or any old note or instrument of transfer is signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Danka of such person's authority to so act, must be submitted. When this letter of transmittal is signed by the registered holders of the old notes listed and transmitted hereby, no endorsements of the old notes or separate instruments of transfer are required unless the old notes tendered and not accepted for exchange are to be issued to a person other than the registered holder of the old notes, in which case signatures on such old notes or instruments of transfer must be guaranteed by a Medallion Signature Guarantor. If this letter of transmittal is signed other than by the registered holder of the old notes listed, the old notes must be endorsed or accompanied by appropriate instruments of transfer signed exactly as the name or names of the registered holder(s) appear on the old notes, and signatures on such old notes or instruments of transfer must be guaranteed by a Medallion Signature Guarantor, unless the signature is that of an "eligible institution." 6. Special Issuance and Delivery Instructions. If old notes are to be returned to someone other than the signer of this letter of transmittal, the appropriate "A. Special Issuance/Delivery Instructions" box on this letter of transmittal should be completed. Furthermore, if the exchange consideration exchanged for old notes is to be issued in the name of a person other than the signer of this letter of transmittal and/or are to be sent to someone other than the signer of this letter of transmittal, the appropriate "B. Special Issuance/Delivery Instructions" boxes on this letter of transmittal should be completed. Otherwise, all old notes tendered by book-entry transfer and not accepted for exchange will be returned, and all exchange consideration delivered, by crediting the account at DTC, Euroclear or Clearstream designated above as the account for which such old notes were delivered. 7. Transfer Taxes. Except as set forth in this Instruction 7, owners who tender their old notes for exchange will not be obligated to pay any transfer taxes. If, however, new notes are to be delivered to, or issued in the name of, any person other than the registered owner of the old notes; or old notes are registered in the name of any person other than the person signing the letter of transmittal; or a transfer tax is imposed for any reason other than the exchange of new notes or old notes in connection with the exchange offer; then the amount of any transfer taxes, whether imposed on the registered owner or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from them is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder. 8. Waiver of Conditions. The conditions of the exchange offer may be amended or waived by Danka, in whole or in part, at any time and from time to time, in the case of any old notes tendered. 9. Form W-9. Unless an exemption from backup withholding tax and information reporting requirements is otherwise established with the exchange agent, each tendering United States holder of old notes (or other payee) must provide the exchange agent with a completed Form W-9. The information required on a Form W-9 includes a United States taxpayer identification number ("TIN"), generally the holder's United States Social Security or federal employer identification number. For a description of other information that must be included on Form W-9, see "Important Tax Information" below. If a holder fails to provide a completed and valid Form W-9, that holder (or other payee) may be subject to a $50 penalty imposed by the United States Internal Revenue Service and 31% backup withholding tax. If the tendering holder (or other payee) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future, such tendering holder should write "Applied For" in Part I of the Form W-9. If "Applied For" is written in Part I, and the Exchange Agent is not provided with a TIN, the Exchange Agent will withhold any amounts required to be withheld. See the enclosed Form W-9 specific instructions for additional instructions. Any non-United States holder should not complete a Form W-9, but must instead complete either a Form W-8BEN, W-8ECI or W-8INY, as discussed in "Important Tax Information" below. 10. Requests for Assistance or Additional Copies. Any questions or requests for assistance or additional copies of the prospectus or this letter of transmittal may be directed to the exchange agent at its telephone number and location listed below. A holder of old notes may also contact Banc of America Securities LLC, at its telephone number and location listed below, or such holder's broker, dealer, commercial bank or trust company or nominee for assistance concerning the exchange offer. 11. Conflicts. In the event of any conflict between the terms of the prospectus and the terms of the letter of transmittal, the terms of the prospectus will control. IMPORTANT TAX INFORMATION Every holder of the old notes whose tendered old notes are accepted for exchange must complete either a Form W-9 or one of the Forms W-8 described below, even if such holder elects the limited cash option under the exchange offer. Under United States federal income tax law, a holder of old notes whose tendered old notes are accepted for exchange generally is required to provide the exchange agent with such holder's current TIN on Form W-9 below. If such holder of old notes is an individual, the TIN is generally his or her Social Security number. If the Exchange Agent is not provided with the correct TIN, the holder of old notes or other payee may be subject to a $50 penalty imposed by the United States Internal Revenue Service. In addition, such holder of old notes or other payee with respect to old notes exchanged pursuant to the exchange offer may be subject to 31% backup withholding tax. Backup withholding tax is not an additional tax. Rather, the United States federal income tax liability of persons subject to backup withholding tax will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the United States Internal Revenue Service. Certain holders of old notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding tax and reporting requirements. If you can establish your status as a non-United States holder, any interest paid to you will not be subject to withholding tax and reporting requirements. You can do so by submitting to the exchange agent a properly completed Form W-8 signed under penalties of perjury and attesting to your exempt status as a non-United States holder. The following three versions of Form W-8 are described below. You should complete the Form W-8 which is appropriate to your circumstances. Form W-8BEN-to be completed by any nonresident alien (an individual who is not a United States citizen and does not qualify as a resident alien (someone who lives in the United States for more than 183 days)) or by a foreign corporation (a corporation which is incorporated under other than United States federal or state law) or by a foreign complex trust, unless they are required to complete a Form W-8ECI. Form W-8ECI-to be completed by any nonresident alien, foreign corporation or foreign trust whose income is effectively connected with a United States trade or business. "Effectively connected income" is defined very broadly and includes income generated by a United States trade or business and income from items held for working capital. Form W-8IMY-to be completed by a foreign partnership or foreign simple trust or foreign grantor trust or any other entity not governed by United States law which is a flow-through entity unless the entity is required to complete a Form W-8ECI. If such an entity completes a Form W-8IMY, it must also attach completed W-8BENs for all of its partners or beneficiaries. Purpose of Substitute Form W-9 To prevent backup withholding tax, the holder of old notes is required to notify the exchange agent of the holder's current TIN (or the TIN of any other payee) by completing the form below, certifying that the TIN provided on Form W-9 is correct (or that such holder of old notes is awaiting a TIN), and that (1) the holder of old notes has not been notified by the United States Internal Revenue Service that the holder of old notes is subject to backup withholding tax as a result of failure to report all interest or dividends, or (2) the United States Internal Revenue Service has notified the holder of old notes that the holder of old notes is no longer subject to backup withholding tax. What Number to Give the Exchange Agent The holder of old notes is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the old notes. If the old notes are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Form W-9" for additional guidance on which number to report. The exchange agent for the exchange offer is: HSBC Bank USA One Hanson Place Lower Level Brooklyn, New York 11243 By facsimile (for eligible institutions only): (718) 488-4488 For information or confirmation by Telephone: (718) 488-4475 Any questions or requests for assistance or for additional copies of the prospectus or the letter of transmittal may be directed to the exchange agent except that Nebraska residents should contact Banc of America Securities LLC for any questions or requests for assistance or additional copies. A holder of old notes may also contact D.F. King & Co., Inc. or Banc of America Securities LLC at their respective telephone numbers set forth below, or such holder's broker, dealer, commercial bank, trust company or other nominee, for assistance concerning the exchange offer. The information agent for the exchange offer is: D.F. King & Co., Inc. 77 Water Street New York, New York 10005 Banks and brokers, call collect: (212) 269-5500 All others, call toll-free: (800) 769-4414 The exclusive dealer manager for the exchange offer is: Banc of America Securities LLC 100 North Tryon St., 7th Floor Charlotte, North Carolina 28255 Attention: High Yield Special Products: (704) 388-1457 (collect) (888) 292-0070 (toll free) Form W-9 (Rev. December 2000) Department of the Treasury Internal Revenue Service Request for Taxpayer Identification Number and Certification Give form to the requester. Do not send to the IRS. - -------------------------------------------------------------------------------- Please print or type - -------------------------------------------------------------------------------- Name (See Specific Instructions on page 2.) - -------------------------------------------------------------------------------- Business name, if different from above. (See Specific Instructions on page 2.) - -------------------------------------------------------------------------------- Check appropriate box: [_] Individual/Sole proprietor [_] Corporation [_] Partnership [_] Other --------------- - -------------------------------------------------------------------------------- Address (number, street, and apt. or suite no.) - -------------------------------------------------------------------------------- City, state, and ZIP code - -------------------------------------------------------------------------------- Requester's name and address (optional) - -------------------------------------------------------------------------------- Part I Taxpayer Identification Number (TIN) - -------------------------------------------------------------------------------- Enter your TIN in the appropriate box. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 2. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 2. Note: If the account is in more than one name, see the chart on page 2 for guidelines on whose number to enter. Social security number - - --- --- ---- or Employer identification number - - --- --- ---- - -------------------------------------------------------------------------------- List account number(s) here (optional) - -------------------------------------------------------------------------------- Part II For U.S. Payees Backup Withholding (See the instructions on page 2.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Part III Certification - -------------------------------------------------------------------------------- Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and 3. I am a U.S. person (including a U.S. resident alien). Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page 2.) - -------------------------------------------------------------------------------- Sign Signature of Here U.S. person Date - -------------------------------------------------------------------------------- Purpose of Form A person who is required to file an information return with the IRS must get your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. Use Form W-9 only if you are a U.S. person (including a resident alien), to give your correct TIN to the person requesting it (the requester) and, when applicable, to: 1. Certify the TIN you are giving is correct (or you are waiting for a number to be issued), 2. Certify you are not subject to backup withholding, or 3. Claim exemption from backup withholding if you are a U.S. exempt payee. If you are a foreign person, use the appropriate Form W-8. See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations. Note: If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester's form if it is substantially similar to this Form W-9. What is backup withholding? Persons making certain payments to you must withhold and pay to the IRS 31% of such payments under certain conditions. This is called "backup withholding." Payments that may be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding. If you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return, payments you receive will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. You do not certify your TIN when required (see the Part III instructions on page 2 for details), or 3. The IRS tells the requester that you furnished an incorrect TIN, or 4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or 5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only). Certain payees and payments are exempt from backup withholding. See the Part II instructions and the separate Instructions for the Requester of Form W-9. Penalties Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. Misuse of TINs. If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. - -------------------------------------------------------------------------------- Cat. No. 10231X Form W-9 (Rev. 12-2000) Form W-9 (Rev. 12-2000) Specific Instructions Name. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name. If the account is in joint names, list first and then circle the name of the person or entity whose number you enter in Part I of the form. Sole proprietor. Enter your individual name as shown on your social security card on the "Name" line. You may enter your business, trade, or "doing business as (DBA)" name on the "Business name" line. Limited liability company (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, enter the owner's name on the "Name" line. Enter the LLC's name on the "Business name" line. Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8. Other entities. Enter your business name as shown on required Federal tax documents on the "Name" line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the "Business name" line. Part I--Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below. If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN. If you are an LLC that is disregarded as an entity separate from its owner (see Limited liability company (LLC) above), and are owned by an individual, enter your SSN (or "pre-LLC" EIN, if desired). If the owner of a disregarded LLC is a corporation, partnership, etc., enter the owner's EIN. Note: See the chart on this page for further clarification of name and TIN combinations. How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office. Get Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS's Internet Web Site at www.irs.gov. If you do not have a TIN, write "Applied For" in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester. Note: Writing "Applied For" means that you have already applied for a TIN or that you intend to apply for one soon. Part II--For U.S. Payees Exempt From Backup Withholding Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. For more information on exempt payees, see the separate Instructions for the Requester of Form W-9. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in Part II, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8. Part III--Certification To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 3, and 5 below indicate otherwise. For a joint account, only the person whose TIN is shown in Part I should sign (when required). 1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification. 2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification. 4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. "Other payments" include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations). 5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified state tuition program payments, IRA or MSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification. Privacy Act Notice Section 6109 of the Internal Revenue Code requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA or MSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply. What Name and Number to Give the Requester
- -------------------------------------------------------------------------------- For this type of account: Give name and SSN of: - -------------------------------------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, the first individual on the account /1/ 3. Custodian account of The minor /2/ a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor-trustee /1/ revocable savings trust (grantor is also trustee) b. So-called trust The actual owner /1/ account that is not a legal or valid trust under state law 5. Sole proprietorship The owner /3/ - -------------------------------------------------------------------------------- For this type of account: Give name and EIN of: - -------------------------------------------------------------------------------- 6. Sole proprietorship The owner /3/ 7. A valid trust, estate, or Legal entity /4/ pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------------------------------------
/1/ List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person's number must be furnished. /2/ Circle the minor's name and furnish the minor's SSN. /3/ You must show your individual name, but you may also enter your business or "DBA" name. You may use either your SSN or EIN (if you have one). /4/ List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. Instructions for the [LOGO OF INTERNAL REVENUE SERVICE] Requester of Form W-9 Department of the Treasury (Rev. December 2000) Internal Revenue Service Request for Taxpayer Identification Number and Certification Section references are to the Internal Revenue Code unless otherwise noted. - -------------------------------------------------------------------------------- These instructions are for the requester of Form W-9 and supplement the instructions on the Form W-9. How Do I Know When To Use Form W-9? Use Form W-9 to request the taxpayer identification number (TIN) of a U.S. person (including a resident alien) and to request certain certifications and claims for exemption. (See Purpose of Form on the Form W-9.) Withholding agents may require signed Forms W-9 from U.S. exempt recipients to overcome any presumptions of foreign status. Note: Beginning in 2001, use Form W-9 instead of Form 1078, Certificate of Alien Claiming Residence in the United States, for alien resident individuals from whom you are requesting a TIN, certifications, and claims for exemption. Any Forms 1078 you have on file expire after December 31, 2000. Advise foreign persons to use the appropriate Form W-8. See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations, for more information and a list of the W-8 forms. Also, a nonresident alien individual may, under certain circumstances, claim treaty benefits on scholarships and fellowship grant income. See Pub. 515 or Pub. 519, U.S. Tax Guide for Aliens, for more information. Electronic Submission of Forms W-9 Requesters may establish a system for payees to submit Forms W-9 electronically, including by fax. A requester is anyone required to file an information return. A payee is anyone required to provide a taxpayer identification number (TIN) to the requester. Electronic system. Generally, the electronic system must: . Ensure the information received is the information sent, and document all occasions of user access that result in the submission. . Make it reasonably certain the person accessing the system and submitting the form is the person identified on Form W-9. . Provide the same information as the paper Form W-9. . Be able to supply a hard copy of the electronic Form W-9 if the Internal Revenue Service requests it. . Require as the final entry in the submission an electronic signature by the payee whose name is on Form W-9 that authenticates and verifies the submission. The electronic signature must be under penalties of perjury and the perjury statement must contain the language of the paper Form W-9. TIP For Forms W-9 that are not required to be signed, the electronic system need not provide for an electronic signature or a perjury statement. Also, see Announcement 98-27, 1998-1 C.B. 865. Individual Taxpayer Identification Number (ITIN) Form W-9 (or an acceptable substitute) is used by persons required to file information returns with the IRS to get the payee's (or other person's) correct TIN. For individuals, the TIN is generally a social security number (SSN). However, in some cases, individuals who become U.S. resident aliens for tax purposes are not eligible to obtain an SSN. This includes certain resident aliens who must receive information returns but who cannot obtain an SSN. These individuals must apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification Number, unless they have an application pending for an SSN. Individuals who have an ITIN must provide it on Form W-9. Substitute Form W-9 You may develop and use your own Form W-9 (a substitute Form W-9) if its content is substantially similar to the official IRS Form W-9 and it satisfies certain certification requirements. You may incorporate a substitute Form W-9 into other business forms you customarily use, such as account signature cards. However, the certifications on the substitute Form W-9 must clearly set forth (as shown on the official Form W-9) that: 1. The payee's TIN is correct; 2. The payee is not subject to backup withholding due to failure to report interest and dividend income; and 3. The payee is a U.S. person. You may not: 1. Use a substitute Form W-9 that requires the payee, by signing, to agree to provisions unrelated to the required certifications or 2. Imply that a payee may be subject to backup withholding unless the payee agrees to provisions on the substitute form that are unrelated to the required certifications. Cat. No. 20479P A substitute Form W-9 that contains a separate signature line just for the certifications satisfies the requirement that the certifications be clearly set forth. If a single signature line is used for the required certifications and other provisions, the certifications must be highlighted, boxed, printed in bold-face type, or presented in some other manner that causes the language to stand out from all other information contained on the substitute form. Additionally, the following statement must be presented to stand out in the same manner as as described above and must appear immediately above the single signature line: "The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding." If you use a substitute form, you are encouraged (but not required) to provide Form W-9 instructions to the payee. The payee only needs to be instructed orally or in writing to strike out the language of the certification (Part III, item 2 (Form W-9)) that relates to payee underreporting, if the payee is subject to backup withholding due to notified payee underreporting. TIN Applied For For interest and dividend payments and certain payments with respect to readily tradable instruments, the payee may return a properly completed, signed Form W-9 to you with "Applied For" written in Part I. This is an "awaiting- TIN" certificate. The payee has 60 calendar days, from the date you receive this certificate, to provide a TIN. If you do not receive the payee's TIN at that time, you must begin backup withholding on payments. Reserve rule. You must backup withhold on any reportable payments made during the 60-day period if a payee withdraws more than $500 at one time, unless the payee reserves 31 percent of all reportable payments made to the account during the period. Alternative rule. You may also elect to backup withhold during this 60-day period, after a 7-day grace period, under one of the two alternative rules discussed below. Option 1. Backup withhold on any reportable payments if the payee makes a withdrawal from the account after the close of 7 business days after you receive the awaiting-TIN certificate. Treat as reportable payments all cash withdrawals in an amount up to the reportable payments made from the day after you receive the awaiting-TIN certificate to the day of withdrawal. Option 2. Backup withhold on any reportable payments made to the payee's account, regardless of whether the payee makes any withdrawals, beginning no later than 7 business days after you receive the awaiting-TIN certificate. CAUTION The 60-day exemption from backup withholding does not apply to any payment other than interest, dividends, and certain payments relating to readily tradable instruments. Any other reportable payment, such as nonemployee compensation, is subject to backup withholding immediately, even if the payee has applied for and is awaiting a TIN. Even if the payee gives you an awaiting-TIN certificate, you must backup withhold on reportable interest and dividend payments if the payee does not certify, under penalties of perjury, that the payee is not subject to backup withholding. Payees Exempt From Backup Withholding Even if the payee does not provide a TIN in the manner required, you are not required to backup withhold on any payments you make if the payee is: 1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2). 2. The United States or any of its agencies or instrumentalities. 3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. 4. A foreign government or any of its political subdivisions, agencies, or instrumentalities. 5. An international organization or any of its agencies or instrumentalities. Other payees that may be exempt from backup withholding include: 6. A corporation. 7. A foreign central bank of issue. 8. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. 9. A futures commission merchant registered with the Commodity Futures Trading Commission. 10. A real estate investment trust. 11. An entity registered at all times during the tax year under the Investment Company Act of 1940. 12. A common trust fund operated by a bank under section 584(a). 13. A financial institution. 14. A middleman known in the investment community as a nominee or custodian. 15. A trust exempt from tax under section 664 or described in section 4947. The following types of payments are exempt from backup withholding as indicated for items 1 through 15 above. Interest and dividend payments. All listed payees are exempt except the payee in item 9. Broker transactions. All payees listed in items 1 through 13 are exempt. A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker is also exempt. Barter exchange transactions and patronage dividends. Only payees listed in items 1 through 5 are exempt. Payments reportable under sections 6041 and 6041A. Only payees listed in items 1 through 7 are generally exempt. However, the following payments made to a corporation (including gross proceeds paid to an attorney under Page 2 section 6045(f), even if the attorney is a corporation) and reportable on Form 1099-Misc, Miscellaneous Income, are not exempt from backup withholding: . Medical and health care payments. . Attorneys' fees. . Payments for services paid by a Federal executive agency. Payments Exempt From Backup Withholding Payments that are not subject to information reporting also are not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. The following payments are generally exempt from backup withholding. Dividends and patronage dividends. . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. . Payments of patronage dividends not paid in money. . Payments made by certain foreign organizations. . Section 404(k) distributions made by an ESOP. Interest payments. . Payments of interest on obligations issued by individuals. However, if you pay $600 or more of interest in the course of your trade or business to a payee, you must report the payment. Backup withholding applies to the reportable payment if the payee has not provided a TIN or has provided an incorrect TIN. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Mortgage or student loan interest paid to you. Other types of payments. . Wages. . Distributions from a pension, annuity, profit-sharing or stock bonus plan, any IRA, or an owner-employee plan. . Certain surrenders of life insurance contracts. . Gambling winnings if withholding is required under section 3402(q). However, if withholding is not required under section 3402(q), backup withholding applies if the payee fails to furnish a TIN. . Real estate transactions reportable under section 6045(e). . Cancelled debts reportable under section 6050P. . Distributions from a medical savings account and long-term care benefits. . Fish purchases for cash reportable under section 6050R. Joint Foreign Payees If the first payee listed on an account gives you a Form W-8 or a similar statement signed under penalties of perjury, backup withholding applies unless: 1. Every joint payee provides the statement regarding foreign status or 2. Any one of the joint payees who has not established foreign status gives you a TIN. If any one of the joint payees who has not established foreign status gives you a TIN, use that number for purposes of backup withholding and information reporting. For more information, see the Instructions for the Requester of Forms W-8BEN, W-8EIC, W-8EXP, and W-8IMY. Names and TINs To Use for Information Reporting Show the full name and address as provided on Form W-9 on the information return filed with the IRS and on the copy furnished to the payee. If you made payments to more than one payee or the account is in more than one name, enter on the first name line only the name of the payee whose TIN is shown on the information return. You may show the names of any other individual payees in the area below the first name line. Sole proprietor. Enter the individual's name on the first name line. On the second name line, enter the business name or "doing business as (DBA)" if provided. You may not enter only the business name. For the TIN, you may enter either the individual's SSN or the employer identification number (EIN) of the business. However, the IRS prefers that you show the SSN. LLC. For an LLC that is disregarded as an entity separate from its owner, you must show the owner's name on the first name line. On the second name line, you may enter the LLC's name. Use the owner's TIN. Additional Information For more information on backup withholding, see . Pub. 1679, A Guide to Backup Withholding, or . Pub. 1281, Backup Withholding on Missing and Incorrect Name/TINs. Notices From the IRS The IRS will send you a notice if the payee's name and TIN on the information return you filed do not match the IRS's records. You may have to send a "B" notice to the payee to solicit another TIN. See Pubs. 1679 and 1281 for copies of the two types of "B" notices. Page 3 Form W-8BEN (Rev. December 2000) Department of the Treasury Internal Revenue Service Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding . Section references are to the Internal Revenue Code. . See separate instructions. . Give this form to the withholding agent or payer. Do not send to the IRS. OMB No. 1545-1621 - --------------------------------------------------------------------------------
Do not use this form for: Instead, use Form: . A U.S. citizen or other U.S. person, including a resident alien individual ............................................... W-9 . A person claiming an exemption from U.S. withholding on income effectively connected with the conduct of a trade or business in the United States ......................................................................... W-8ECI . A foreign partnership, a foreign simple trust, or a foreign grantor trust (see instructions for exceptions) .. W-8ECI or W-8IMY . A foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession that received effectively connected income or that is claiming the applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b) (see instructions) .. W-8ECI or W-8EXP Note: These entities should use Form W-8BEN if they are claiming treaty benefits or are providing the form only to claim they are a foreign person exempt from backup withholding. . A person acting as an intermediary .................................................................................... W-8IMY Note: See instructions for additional exceptions.
- -------------------------------------------------------------------------------- Part I Identification of Beneficial Owner (See instructions.) - -------------------------------------------------------------------------------- 1 Name of individual or organization that is the beneficial owner 2 Country of incorporation or organization - ------------------------------------------------------------------------------------------------------------------------------------ 3 Type of beneficial owner: [_] Individual [_] Corporation [_] Disregarded entity [_] Partnership [_] Simple trust [_] Grantor trust [_] Complex trust [_] Estate [_] Government [_] International organization [_] Central bank of issue [_] Tax-exempt [_] Private foundation organization - ------------------------------------------------------------------------------------------------------------------------------------ 4 Permanent residence address (street, apt. or suite no., or rural route). Do not use a P.O. box or in-care-of address. - ------------------------------------------------------------------------------------------------------------------------------------ City or town, state or province. Include postal code where appropriate. Country (do not abbreviate) - ------------------------------------------------------------------------------------------------------------------------------------ 5 Mailing address (if different from above) - ------------------------------------------------------------------------------------------------------------------------------------ City or town, state or province. Include postal code where appropriate. Country (do not abbreviate) - ------------------------------------------------------------------------------------------------------------------------------------ 6 U.S. taxpayer identification number, if required (see instructions) 7 Foreign tax identifying number, if any (optional) [_] SSN or ITIN [_] EIN - ------------------------------------------------------------------------------------------------------------------------------------ 8 Reference number(s) (see instructions) - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Part II Claim of Tax Treaty Benefits (if applicable) - -------------------------------------------------------------------------------- 9 I certify that (check all that apply): a [_] The beneficial owner is a resident of __________ within the meaning of the income tax treaty between the United States and that country. b [_] If required, the U.S. taxpayer identification number is stated on line 6 (see instructions). c [_] The beneficial owner is not an individual, derives the item (or items) of income for which the treaty benefits are claimed, and, if applicable, meets the requirements of the treaty provision dealing with limitation on benefits (see instructions). d [_] The beneficial owner is not an individual, is claiming treaty benefits for dividends received from a foreign corporation or interest from a U.S. trade or business of a foreign corporation, and meets qualified resident status (see instructions). e [_] The beneficial owner is related to the person obligated to pay the income within the meaning of section 267(b) or 707(b), and will file Form 8833 if the amount subject to withholding received during a calendar year exceeds, in the aggregate, $500,000. 10 Special rates and conditions (if applicable--see instructions): The beneficial owner is claiming the provisions of Article ______ of the treaty identified on line 9a above to claim a ________ % rate of withholding on (specify type of income): _________. Explain the reasons the beneficial owner meets the terms of the treaty article: ______________________________ ___________________________________________________________________________ - -------------------------------------------------------------------------------- Part III Notional Principal Contracts - -------------------------------------------------------------------------------- 11 [_] I have provided or will provide a statement that identifies those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States. I agree to update this statement as required. - -------------------------------------------------------------------------------- Part IV Certification - -------------------------------------------------------------------------------- Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete. I further certify under penalties of perjury that: . I am the beneficial owner (or am authorized to sign for the beneficial owner) of all the income to which this form relates, . The beneficial owner is not a U.S. person, . The income to which this form relates is not effectively connected with the conduct of a trade or business in the United States or is effectively connected but is not subject to tax under an income tax treaty, and . For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner. Sign Here - -------------------------------------------------------------------------------- Signature of beneficial owner (or individual authorized to sign for beneficial owner) - ----------------- Date (MM-DD-YYYY) - ------------------------ Capacity in which acting - -------------------------------------------------------------------------------- For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 25047Z Form W-8BEN (Rev. 12-2000) Instructions for Form [LOGO OF INTERNAL REVENUE SERVICE] W-8BEN Department of the Treasury (Rev. December 2000) Internal Revenue Service Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding Section references are to the Internal Revenue Code unless otherwise noted. - -------------------------------------------------------------------------------- General Instructions Note: For definitions of terms used throughout these instructions, see Definitions on pages 2 and 3. Purpose of Form. Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of: . Interest (including certain original issue discount (OID)); . Dividends; . Rents; . Royalties; . Premiums; . Annuities; . Compensation for, or in expectation of, services performed; . Substitute payments in a securities lending transaction; or . Other fixed or determinable annual or periodical gains, profits, or income. This tax is imposed on the gross amount paid and is generally collected by withholding on that amount. A payment is considered to have been made whether it is made directly to the beneficial owner or to another person, such as an intermediary, agent, or partnership, for the benefit of the beneficial owner. If you receive certain types of income, you must provide Form W-8BEN to: . Establish that you are a foreign person; . Claim that you are the beneficial owner of the income for which Form W-8BEN is being provided; and . If applicable, claim a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty. You may also be required to submit Form W-8BEN to claim an exception from domestic information reporting and backup withholding at a 31% rate, including for certain types of income that are not subject to foreign-person withholding. Such income includes: . Broker proceeds. . Short-term (183 days or less) original issue discount (OID). . Bank deposit interest. . Foreign source interest, dividends, rents, or royalties. . Proceeds from a wager placed by a nonresident alien individual in the games of blackjack, baccarat, craps, roulette, or "big 6" wheel. You may also use Form W-8BEN to certify that income from a notional principal contract is not effectively connected with the conduct of a trade or business in the United States. A withholding agent or payer of the income may rely on a properly completed Form W-8BEN to treat a payment associated with the Form W-8BEN as a payment to a foreign person who beneficially owns the amounts paid. If applicable, the withholding agent may rely on the Form W-8BEN to apply a reduced rate of withholding at source. Provide Form W-8BEN to the withholding agent or payer before income is paid or credited to you. Failure to provide a Form W-8BEN when requested may lead to withholding of a 30% or 31% amount from the payment. Note: For additional information and instructions for the withholding agent, see the Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY. Who must file. You must give Form W-8BEN to the withholding agent or payer if you are a foreign person and you are the beneficial owner of an amount subject to withholding. Submit Form W-8BEN when requested by the withholding agent or payer whether or not you are claiming a reduced rate of, or exemption from, withholding. Do not use Form W-8BEN if: . You are a U.S. citizen (even if you reside outside the United States) or other U.S. person (including a resident alien individual). Instead, use Form W-9, Request for Taxpayer Identification Number and Certification. . You are a disregarded entity with a single owner that is a U.S. person and you are not a hybrid entity claiming treaty benefits. Instead, provide Form W-9. . You are a nonresident alien individual who claims exemption from withholding on compensation for independent or dependent personal services performed in the United States. Instead, provide Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, or Form W-4, Employee's Withholding Allowance Certificate. . You are receiving income that is effectively connected with the conduct of a trade or business in the United States. Instead, provide Form W-8ECI, Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States. If any of the income for which you have provided a Form W-8BEN becomes effectively connected, this is a change in Cat. No. 25576H circumstances and Form W-8BEN is no longer valid. You must file Form W-8ECI. See Change in circumstances below. . You are filing for a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession claiming the applicability of section 115(2), 501(c), 892, 895, or 1443(b). Instead, provide Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. However, you should use Form W-8BEN if you are claiming treaty benefits or are providing the form only to claim you are a foreign person exempt from backup withholding. You should use Form W-8ECI if you received effectively connected income (e.g., income from commercial activities). . You are a foreign flow-through entity, other than a hybrid entity, claiming treaty benefits. Instead, provide Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding. However, if you are a partner, beneficiary, or owner of a flow-through entity and you are not yourself a flow-through entity, you may be required to furnish a Form W-8BEN to the flow-through entity. . You are a reverse hybrid entity transmitting beneficial owner documentation provided by your interest holders to claim treaty benefits on their behalf. Instead, provide Form W-8IMY. . You are a withholding foreign partnership or a withholding foreign trust. A withholding foreign partnership or a withholding foreign trust is a foreign partnership or trust that has entered into a withholding agreement with the IRS under which it agrees to assume primary withholding responsibility for each partner's, beneficary's, or owner's distributive share of income subject to withholding that is paid to the partnership or trust. Instead, provide Form W-8IMY. . You are acting as an intermediary (i.e., acting not for your own account, but for the account of others as an agent, nominee, or custodian). Instead, provide Form W-8IMY. Giving Form W-8BEN to the withholding agent. Do not send Form W-8BEN to the IRS. Instead, give it to the person who is requesting it from you. Generally, this will be the person from whom you receive the payment or who credits your account. Give Form W-8BEN to the person requesting it before the payment is made to you or credited to your account. If you do not provide this form, the withholding agent may have to withhold at a 30% (foreign-person withholding) or 31% (backup withholding) rate. If you receive more than one type of income from a single withholding agent for which you claim different benefits, the withholding agent may, at its option, require you to submit a Form W-8BEN for each different type of income. Generally, a separate Form W-8BEN must be given to each withholding agent. Note: If you own the income or account jointly with one or more other persons, the income or account will be treated by the withholding agent as owned by a foreign person if Forms W-8BEN are provided by all of the owners. If the withholding agent receives a Form W-9 from any of the joint owners, the payment must be treated as made to a U.S. person. Change in circumstances. If a change in circumstances makes any information on the Form W-8BEN you have submitted incorrect, you must notify the withholding agent or payer within 30 days of the change in circumstances and you must file a new Form W-8BEN or other appropriate form. If you use Form W-8BEN to certify that you are a foreign person, a change of address to an address in the United States is a change in circumstances. Generally, a change of address within the same foreign country or to another foreign country is not a change in circumstances. However, if you use Form W-8BEN to claim treaty benefits, a move to the United States or outside the country where you have been claiming treaty benefits is a change in circumstances. In that case, you must notify the withholding agent or payer within 30 days of the move. If you become a U.S. citizen or resident after you submit Form W-8BEN, you are no longer subject to the 30% foreign-person withholding rate. You must notify the withholding agent or payer within 30 days of becoming a U.S. citizen or resident. You may be required to provide a Form W-9. For more information, see Form W-9 and instructions. Expiration of Form W-8BEN. Generally, a Form W-8BEN provided without a U.S. taxpayer identification number (TIN) will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2001, remains valid through December 31, 2004. A Form W-8BEN furnished with a U.S. TIN will remain in effect until a change in circumstances makes any information on the form incorrect, provided that the withholding agent reports on Form 1042-S at least one payment annually to the beneficial owner who provided the Form W-8BEN. See Line 6 on page 4 for circumstances under which you must provide a U.S. TIN. Definitions Beneficial owner. For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is generally the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income. Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee or other agent. The beneficial owners of income paid to a foreign simple trust (i.e., a foreign trust that is described in section 651(a)) are generally the Page 2 beneficiaries of the trust, if the beneficiary is not a foreign partnership, foreign simple or grantor trust, nominee or other agent. The beneficiaries of a foreign grantor trust (i.e., a foreign trust to the extent that all or a portion of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) are the persons treated as the owners of the trust. The beneficial owners of income paid to a foreign complex trust (i.e., a foreign trust that is not a foreign simple trust or foreign grantor trust) is the trust itself. The beneficial owner of income paid to a foreign estate is the estate itself. Note: A payment to a U.S. partnership, U.S. trust, or U.S. estate is treated as a payment to a U.S. payee that is not subject to 30% foreign-person withholding. A U.S. partnership, trust, or estate should provide the withholding agent with a Form W-9. Foreign person. A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch or office of a U.S. financial institution or U.S. clearing organization if the foreign branch is a qualified intermediary. Generally, a payment to a U.S. branch of a foreign person is a payment to a foreign person. Nonresident alien individual. Any individual who is not a citizen or resident of the United States is a nonresident alien individual. An alien individual meeting either the "green card test" or the "substantial presence test" for the calendar year is a resident alien. Any person not meeting either test is a nonresident alien individual. Additionally, an alien individual who is a resident of a foreign country under the residence article of an income tax treaty, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa is a nonresident alien individual. See Pub. 519, U.S. Tax Guide for Aliens, for more information on resident and nonresident alien status. Note: Even though a nonresident alien individual married to a U.S. citizen or resident alien may choose to be treated as a resident alien for certain purposes (e.g., filing a joint income tax return), such individual is still treated as a nonresident alien for withholding tax purposes on all income except wages. Flow-through entity. A flow-through entity is a foreign partnership (other than a withholding foreign partnership), a foreign simple or foreign grantor trust (other than a withholding foreign trust), or, for payments for which a reduced rate of withholding is claimed under an income tax treaty, any entity to the extent the entity is considered to be fiscally transparent (see below) with respect to the payment by an interest holder's jurisdiction. Hybrid entity. A hybrid entity is any person (other than an individual) that is treated as fiscally transparent (see below) in the United States but is not treated as fiscally transparent by a country with which the United States has an income tax treaty. Hybrid entity status is relevant for claiming treaty benefits. See Line 9c on page 4. Reverse hybrid entity. A reverse hybrid entity is any person (other than an individual) that is not fiscally transparent under U.S. tax law principles but that is fiscally transparent under the laws of a jurisdiction with which the United States has an income tax treaty. See Line 9c on page 4. Fiscally transparent entity. An entity is treated as fiscally transparent with respect to an item of income for which treaty benefits are claimed to the extent that the interest holders in the entity must, on a current basis, take into account separately their shares of an item of income paid to the entity, whether or not distributed, and must determine the character of the items of income as if they were realized directly from the sources from which realized by the entity. For example, partnerships, common trust funds, and simple trusts or grantor trusts are generally considered to be fiscally transparent with respect to items of income received by them. Disregarded entity. A business entity that has a single owner and is not a corporation under Regulations section 301.7701-2(b) is disregarded as an entity separate from its owner. Amounts subject to withholding. Generally, an amount subject to withholding is an amount from sources within the United States that is fixed or determinable annual or periodical (FDAP) income. FDAP income is all income included in gross income, including interest (as well as OID), dividends, rents, royalties, and compensation. FDAP income does not include most gains from the sale of property (including market discount and option premiums). Withholding agent. Any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or who can disburse or make payments of an amount subject to withholding is a withholding agent. The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including (but not limited to) any foreign intermediary, foreign partnership, and U.S. branches of certain foreign banks and insurance companies. Generally, the person who pays (or causes to be paid) the amount subject to withholding to the foreign person (or to its agent) must withhold. - -------------------------------------------------------------------------------- Specific Instructions Note: A hybrid entity should give Form W-8BEN to a withholding agent only for income for which it is claiming a reduced rate of withholding under an income tax treaty. A reverse hybrid entity should give Form W-8BEN to a withholding agent only for income for which no treaty benefit is being claimed. Part I Line 1. Enter your name. If you are a disregarded entity with a single owner who is a foreign person and you are not claiming treaty benefits as a hybrid entity, this form should be completed and signed by your foreign single owner. If the account to which a payment is made or credited is in the name of the disregarded entity, the foreign single owner should inform the withholding agent of this fact. This may be done by including the name and account number of the disregarded entity on line 8 (reference number) of Part I of the form. However, if you are a disregarded entity that is claiming treaty benefits as Page 3 a hybrid entity, this form should be completed and signed by you. Line 2. If you are a corporation, enter the country of incorporation. If you are another type of entity, enter the country under whose laws you are created, organized, or governed. If you are an individual, enter N/A (for "not applicable"). Line 3. Check the one box that applies. By checking a box, you are representing that you qualify for this classification. You must check the box that represents your classification (e.g., corporation, partnership, trust, estate, etc.) under U.S. tax principles. Do not check the box that describes your status under the law of the treaty country. If you are a partnership or disregarded entity receiving a payment for which treaty benefits are being claimed, you must check the "Partnership" or "Disregarded entity" box. If you are a sole proprietor, check the "Individual" box, not the "Disregarded entity" box. Caution: Only entities that are tax-exempt under section 501 should check the "Tax-exempt organizations" box. Such organizations should use Form W-8BEN only if they are claiming a reduced rate of withholding under an income tax treaty or some code exception other than section 501. Use Form W-8EXP if you are claiming an exemption from withholding under section 501. Line 4. Your permanent residence address is the address in the country where you claim to be a resident for purposes of that country's income tax. If you are giving Form W-8BEN to claim a reduced rate of withholding under an income tax treaty, you must determine your residency in the manner required by the treaty. Do not show the address of a financial institution, a post office box, or an address used solely for mailing purposes. If you are an individual who does not have a tax residence in any country, your permanent residence is where you normally reside. If you are not an individual and you do not have a tax residence in any country, the permanent residence address is where you maintain your principal office. Line 5. Enter your mailing address only if it is different from the address you show on line 4. Line 6. If you are an individual, you are generally required to enter your social security number (SSN). To apply for an SSN, get Form SS-5 from a Social Security Administration (SSA) office. Fill in Form SS-5 and return it to the SSA. If you do not have an SSN and are not eligible to get one, you must get an individual taxpayer identification number (ITIN). To apply for an ITIN, file Form W-7 with the IRS. It usually takes about 30 days to get an ITIN. If you are not an individual (e.g., a foreign estate or trust), or you are an individual who is an employer or who is engaged in a U.S. trade or business as a sole proprietor, use Form SS-4, Application for Employer Identification Number, to obtain an EIN. If you are a disregarded entity claiming treaty benefits as a hybrid entity, enter your EIN. You must provide a U.S. taxpayer identification number (TIN) if you are: 1. Claiming an exemption from withholding under section 871(f) for certain annuities received under qualified plans, or 2. A foreign grantor trust with 5 or fewer grantors, or 3. Claiming benefits under an income tax treaty. However, a U.S. TIN is not required to be shown in order to claim treaty benefits on the following items of income: . Dividends and interest from stocks and debt obligations that are actively traded; . Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund); . Dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were upon issuance) publicly offered and are registered with the SEC under the Securities Act of 1933; and . Income related to loans of any of the above securities. Note: You may want to obtain and provide a U.S. TIN on Form W-8BEN even though it is not required. A Form W-8BEN containing a U.S. TIN remains valid for as long as your status and the information relevant to the certifications you make on the form remain unchanged provided at least one payment is reported to you annually on Form 1042-S. Line 7. If your country of residence for tax purposes has issued you a tax identifying number, enter it here. For example, if you are a resident of Canada, enter your Social Insurance Number. Line 8. This line may be used by the filer of Form W-8BEN or by the withholding agent to whom it is provided to include any referencing information that is useful to the withholding agent in carrying out its obligations. For example, withholding agents who are required to associate the Form W-8BEN with a particular Form W-8IMY may want to use line 8 for a referencing number or code that will make the association clear. A beneficial owner may use line 8 to include the number of the account for which he or she is providing the form. Part II Line 9a. Enter the country where you claim to be a resident for income tax treaty purposes. For treaty purposes, a person is a resident of a treaty country if the person is a resident of that country under the terms of the treaty. Line 9b. If you are claiming benefits under an income tax treaty, you must have a U.S. TIN unless one of the exceptions listed under Line 6 above applies. Line 9c. An entity (but not an individual) that is claiming a reduced rate of withholding under an income tax treaty must represent that it (1) derives the item of income for which the treaty benefit is claimed and (2) meets the limitation on benefits provisions contained in the treaty, if any. An item of income may be derived by either the entity receiving the item of income or by the interest holders in the entity or, in certain circumstances, both. An item of income paid to an entity is considered to be derived by the entity only if the entity is not fiscally transparent under the laws of the entity's jurisdiction with respect to the item of Page 4 income. An item of income paid to an entity shall be considered to be derived by the interest holder in the entity only if (1) the interest holder is not fiscally transparent in its jurisdiction with respect to the item of income and (2) the entity is considered to be fiscally transparent under the laws of the interest holder's jurisdiction with respect to the item of income. An item of income paid directly to a type of entity specifically identified in a treaty as a resident of a treaty jurisdiction is treated as derived by a resident of that treaty jurisdiction. If an entity is claiming treaty benefits on its own behalf, it should complete Form W-8BEN. If an interest holder in an entity that is considered fiscally transparent in the interest holder's jurisdiction is claiming a treaty benefit, the interest holder should complete Form W-8BEN on its own behalf and the fiscally transparent entity should associate the interest holder's Form W-8BEN with a Form W-8IMY completed by the entity. Note: An income tax treaty may not apply to reduce the amount of any tax on an item of income received by an entity that is treated as a domestic corporation for U.S. tax purposes. Therefore, neither the domestic corporation nor its shareholders are entitled to the benefits of a reduction of U.S. income tax on an item of income received from U.S. sources by the corporation. To determine whether an entity meets the limitation on benefits provisions of a treaty, you must consult the specific provisions or articles under the treaties. Income tax treaties are available on the IRS Web Site at www.irs.gov/ind_info/treaties.html. Note: If you are an entity that derives the income as a resident of a treaty country, you may check this box if the applicable income tax treaty does not contain a "limitation on benefits" provision. Line 9d. Caution: If you are claiming treaty benefits under an income tax treaty entered into force after December 31, 1986, do not check box 9d. Instead, check box 9c. If you are a foreign corporation claiming treaty benefits under an income tax treaty that entered into force before January 1, 1987 (and has not been renegotiated) on (a) U.S. source dividends paid to you by another foreign corporation, or (b) U.S. source interest paid to you by a U.S. trade or business of another foreign corporation, you must generally be a "qualified resident" of a treaty country. See section 884 for the definition of interest paid by a U.S. trade or business of a foreign corporation ("branch interest") and other applicable rules. In general, a foreign corporation is a qualified resident of a country if one or more of the following applies: . It meets a 50% ownership and base erosion test. . It is primarily and regularly traded on an established securities market in its country of residence or the United States. . It carries on an active trade or business in its country of residence. . It gets a ruling from the IRS that it is a qualified resident. See Regulations section 1.884-5 for the requirements that must be met to satisfy each of these tests. Line 9e. Check this box if you are related to the withholding agent within the meaning of section 267(b) or 707(b) and the aggregate amount subject to withholding received during the calendar year exceeds $500,000. Additionally, you must file Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b). Line 10. Line 10 must be used only if you are claiming treaty benefits that require that you meet conditions not covered by the representations you make in lines 9a through 9e. However, this line should always be completed by foreign students and researchers claiming treaty benefits. See Scholarship and Fellowship Grants below for more information. Additional examples of persons who should complete this line are: 1. Exempt organizations claiming treaty benefits under the exempt organization articles of the treaties with Canada, Mexico, Germany, and the Netherlands. 2. Persons claiming an exemption under a personal services article that contains a monetary threshold. 3. Foreign corporations that are claiming a preferential rate applicable to dividends based on ownership of a specific percentage of stock. 4. Persons claiming treaty benefits on royalties if the treaty contains different withholding rates for different types of royalties. This line is generally not applicable to claiming treaty benefits under an interest or dividends (other than dividends subject to a preferential rate based on ownership) article of a treaty. Scholarship and Fellowship Grants. A nonresident alien student (including a trainee or business apprentice) or researcher who receives scholarship or fellowship grant income may use Form W-8BEN to claim benefits under a tax treaty that apply to reduce or eliminate U.S. tax on such income. No Form W-8BEN is required unless a treaty benefit is being claimed. A nonresident alien student or researcher who receives compensation for personal services should use Form 8233 to claim any benefits of a tax treaty that apply to such compensation if the compensation is included in, or is in addition to, the individual's scholarship or fellowship grant income. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on income from a scholarship or fellowship grant. However, most tax treaties contain a provision known as a "saving clause." Exceptions specified in the saving clause may permit an exemption from tax to continue for scholarship or fellowship grant income even after the recipient has otherwise become a U.S. resident alien for tax purposes. Thus, a student or researcher may continue to use Form W-8BEN to claim a tax treaty benefit if the withholding agent has otherwise indicated an intention to withhold on a scholarship or fellowship grant. Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty Page 5 (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. Completing lines 4 and 9a. Most tax treaties that contain an article exempting scholarship or fellowship grant income from taxation require that the recipient be a resident of the other treaty country at the time of, or immediately prior to, entry into the United States. Thus, a student or researcher may claim the exemption even if he or she no longer has a permanent address in the other treaty country after entry into the United States. If this is the case, you may provide a U.S. address on line 4 and still be eligible for the exemption if all other conditions required by the tax treaty are met. You must also identify on line 9a the tax treaty country of which you were a resident at the time of, or immediately prior to, your entry into the United States. Completing line 10. You must complete line 10 if you are a student or researcher claiming an exemption from taxation on your scholarship or fellowship grant income under a tax treaty. You must identify the applicable treaty article. Additionally, if you are a U.S. resident alien and are relying on an exception contained in the saving clause of a tax treaty to claim exemption from taxation on your scholarship or fellowship income, you must specify the article number (or location) in the tax treaty that contains the saving clause and its exceptions. Part III If you check this box, you must provide the withholding agent with the required statement for income from a notional principal contract that is to be treated as income not effectively connected with the conduct of a trade or business in the United States. You should update this statement as often as necessary. A new Form W-8BEN is not required for each update provided the form otherwise remains valid. Part IV Form W-8BEN must be signed and dated by the beneficial owner of the income, or, if the beneficial owner is not an individual, by an authorized representative or officer of the beneficial owner. If Form W-8BEN is completed by an agent acting under a duly authorized power of attorney, the form must be accompanied by the power of attorney in proper form or a copy thereof specifically authorizing the agent to represent the principal in making, executing, and presenting the form. Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. The agent, as well as the beneficial owner, may incur liability for the penalties provided for an erroneous, false, or fraudulent form. Broker transactions or barter exchanges. Income from transactions with a broker, or barter exchanges, is subject to reporting rules and backup withholding unless Form W-8BEN or a substitute form is filed to notify the broker or barter exchange that you are an exempt foreign person. You are an exempt foreign person for a calendar year in which: (1) you are a nonresident alien individual or a foreign corporation, partnership, estate, or trust; (2) you are an individual who has not been, and does not plan to be, present in the United States for a total of 183 days or more during the calendar year; and (3) you are neither engaged, nor plan to be engaged during the year, in a U.S. trade or business that has effectively connected gains from transactions with a broker or barter exchange. - -------------------------------------------------------------------------------- Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to provide the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 5 hr., 58 min.; Learning about the law or the form, 3 hr., 46 min.; Preparing and sending the form to IRS, 4 hr., 2 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send Form W-8BEN to this office. Instead, give it to your withholding agent. Page 6 Form W-8ECI (Rev. December 2000) Department of the Treasury Internal Revenue Service Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States . Section references are to the Internal Revenue Code. . See separate instructions. . Give this form to the withholding agent or payer. Do not send to the IRS. OMB No. 1545-1621 - -------------------------------------------------------------------------------- Note: Persons submitting this form must file an annual U.S. income tax return to report income claimed to be effectively connected with a U.S. trade or business (see instructions). - --------------------------------------------------------------------------------
Do not use this form for: Instead, use Form: . A beneficial owner solely claiming foreign status or treaty benefits ....... W-8BEN . A foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession claiming the applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b) ....................................... W-8EXP Note: These entities should use Form W-8ECI if they received effectively connected income (e.g., income from commercial activities). . A foreign partnership or a foreign trust (unless claiming an exemption from U.S. withholding on income effectively connected with the conduct of a trade or business in the United States) .................................... W-8BEN or W-8IMY . A person acting as an intermediary ......................................... W-8IMY Note: See instructions for additional exceptions.
- -------------------------------------------------------------------------------- Part I Identification of Beneficial Owner (See instructions.) - -------------------------------------------------------------------------------- 1 Name of individual or organization that is the beneficial owner - -------------------------------------------------------------------------------- 2 Country of incorporation or organization - -------------------------------------------------------------------------------- 3 Type of entity (check the appropriate box): [ ] Individual [ ] Corporation [ ] Disregarded entity [ ] Partnership [ ] Simple trust or grantor trust [ ] Complex trust [ ] Estate [ ] Government [ ] International organization [ ] Central bank of issue [ ] Tax-exempt organization [ ] Private foundation - -------------------------------------------------------------------------------- 4 Permanent residence address (street, apt. or suite no., or rural route). Do not use a P.O. box. - -------------------------------------------------------------------------------- City or town, state or province. Include postal code where appropriate. Country (do not abbreviate) - -------------------------------------------------------------------------------- 5 Business address in the United States (street, apt. or suite no., or rural route). Do not use a P.O. box. - -------------------------------------------------------------------------------- City or town, state, and ZIP code - -------------------------------------------------------------------------------- 6 U.S. taxpayer identification number (required--see instructions) [ ] SSN or ITIN [ ] EIN - -------------------------------------------------------------------------------- 7 Foreign tax identifying number, if any (optional) - -------------------------------------------------------------------------------- 8 Reference number(s) (see instructions) - -------------------------------------------------------------------------------- 9 Specify each item of income that is, or is expected to be, received from the payer that is effectively connected with the conduct of a trade or business in the United States - -------------------------------------------------------------------------------- Part II Certification - -------------------------------------------------------------------------------- Sign Here Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete. I further certify under penalties of perjury that: . I am the beneficial owner (or I am authorized to sign for the beneficial owner) of all the income to which this form relates, . The amounts for which this certification is provided are effectively connected with the conduct of a trade or business in the United States and are includible in my gross income (or the beneficial owner's gross income) for the taxable year, and . The beneficial owner is not a U.S. person. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner. - -------------------------------------------------------------------------------- Signature of beneficial owner (or individual authorized to sign for the beneficial owner) - ----------------- Date (MM-DD-YYYY) - ------------------------ Capacity in which acting - -------------------------------------------------------------------------------- For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 25045D Form W-8ECI (Rev. 12-2000) Instructions for Form [LOGO OF INTERNAL REVENUE SERVICE] W-8ECI Department of the Treasury (Rev. December 2000) Internal Revenue Service Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States Section references are to the Internal Revenue Code unless otherwise noted. - -------------------------------------------------------------------------------- General Instructions Note: For definitions of terms used throughout these instructions, see Definitions on pages 2 and 3. Purpose of form. Foreign persons are generally subject to U.S. tax at a 30% rate on income they receive from U.S. sources. However, no withholding is required on income (other than personal services income and income subject to withholding under section 1445 (dispositions of U.S. real property interests) or section 1446 (foreign partner's share of effectively connected income)) that is, or is deemed to be, effectively connected with the conduct of a trade or business within the United States and is includible in the beneficial owner's gross income for the tax year. If you receive effectively connected income from sources within the United States, you must provide Form W-8ECI to: . Establish that you are not a U.S. person, . Claim that you are the beneficial owner of the income for which Form W-8ECI is being provided, and . Claim that the income is effectively connected with the conduct of a trade or business within the United States. If you expect to receive both income that is effectively connected and income that is not effectively connected from a withholding agent, you must provide Form W-8ECI for the effectively connected income and Form W-8BEN (or Form W-8EXP or Form W-8IMY) for income that is not effectively connected. If you are a foreign partnership, a foreign simple trust, or a foreign grantor trust with effectively connected income, you may submit Form W-8ECI without attaching Forms W-8BEN or other documentation for your foreign partners, beneficiaries, or owners. A withholding agent or payer of the income may rely on a properly completed Form W-8ECI to treat the payment associated with the Form W-8ECI as a payment to a foreign person who beneficially owns the amounts paid and is entitled to an exemption from withholding because the income is effectively connected with the conduct of a trade or business within the United States. Provide Form W-8ECI to the withholding agent or payer before income is paid or credited to you. Failure by a beneficial owner to provide a Form W-8ECI when requested may lead to withholding of a 30% or 31% amount from the payment. Note: For additional information and instructions for the withholding agent, see the Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY. Who must file. You must give Form W-8ECI to the withholding agent or payer if you are a foreign person and you are the beneficial owner of U.S. source income that is (or is deemed to be) effectively connected with the conduct of a trade or business within the United States. Do not use Form W-8ECI if: . You are a nonresident alien individual who claims exemption from withholding on compensation for independent or certain dependent personal services performed in the United States. Instead, provide Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien, or Form W-4, Employee's Withholding Allowance Certificate. . You are claiming an exemption from withholding for a reason other than a claim that the income is effectively connected with the conduct of a trade or business within the United States. For example, if you are a foreign person and the beneficial owner of U.S. source income that is not effectively connected with a U.S. trade or business and are claiming a reduced rate of withholding as a resident of a foreign country with which the United States has an income tax treaty in effect, do not use this form. Instead, provide Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. . You are a foreign person receiving proceeds from the disposition of a U.S. real property interest. Instead, see Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests. . You are filing for a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession claiming the applicability of section 115(2), 501(c), 892, 895, or 1443(b). Instead, provide Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. However, these entities should use Form W-8BEN if they are claiming treaty benefits or are providing the form only to claim exempt recipient status for backup withholding purposes. They should use Form Cat. No. 25902V W-8ECI if they received effectively connected income (e.g., income from commercial activities). . You are acting as an intermediary (i.e., acting not for your own account or for that of your partners, but for the account of others as an agent, nominee, or custodian). Instead, provide Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding. . You are a withholding foreign partnership or a withholding foreign trust. A withholding foreign partnership is, generally, a foreign partnership that has entered into a withholding agreement with the IRS under which it agrees to assume primary withholding responsibility for each partner's distributive share of income subject to withholding that is paid to the partnership. A withholding foreign trust is, generally, a foreign simple trust or a foreign grantor trust that has entered into a withholding agreement with the IRS under which it agrees to assume primary withholding responsibility for each beneficiary's or owner's distributive share of income subject to withholding that is paid to the trust. Instead, provide Form W-8IMY. . You are a foreign corporation that is a personal holding company receiving compensation described in section 543(a)(7). Such compensation is not exempt from withholding as effectively connected income, but may be exempt from withholding on another basis. . You are a foreign partner in a domestic partnership and the income you receive from the partnership is effectively connected with the conduct of a trade or business within the United States. See section 1446. A Form W-8BEN, Form W-8IMY, or Form W-8EXP is required, however, for income that is not effectively connected. See Rev. Proc. 89-31, 1989-1 C.B. 895. Giving Form W-8ECI to the withholding agent. Do not send Form W-8ECI to the IRS. Instead, give it to the person who is requesting it from you. Generally, this will be the person from whom you receive the payment or who credits your account. Give Form W-8ECI to the person requesting it before the payment is made to you or credited to your account. If you do not provide this form, the withholding agent may have to withhold at a 30% or 31% rate. A separate Form W-8ECI must be given to each withholding agent. Change in circumstances. If a change in circumstances makes any information on the Form W-8ECI you have submitted incorrect, you must notify the withholding agent or payer within 30 days of the change in circumstances and you must file a new Form W-8ECI or other appropriate form. For example, if during the taxable year any part or all of the income is no longer effectively connected with the conduct of a trade or business within the United States, your Form W-8ECI is no longer valid. You must notify the withholding agent and provide Form W-8BEN, W-8EXP, or Form W-8IMY. If you become a citizen or a resident of the United States after you submit Form W-8ECI, you are no longer subject to the 30% foreign-person withholding rules. You must notify the withholding agent or payer within 30 days of becoming a U.S. citizen or resident. For more information, see the Instructions for the Requestor of Form W-9. Expiration of Form W-8ECI. Generally, a Form W-8ECI will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8ECI signed on September 30, 2001, remains valid through December 31, 2004. Upon the expiration of the 3-year period, you must provide a new Form W-8ECI. Definitions Beneficial owner. For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is generally the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income. Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee or other agent. The beneficial owners of income paid to a foreign simple trust (i.e., a foreign trust that is described in section 651(a)) are generally the beneficiaries of the trust, if the beneficiary is not a foreign partnership, foreign simple or grantor trust, nominee or other agent. The beneficiaries of a foreign grantor trust (i.e., a foreign trust to the extent that all or a portion of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) are the persons treated as the owners of the trust. The beneficial owners of income paid to a foreign complex trust (i.e., a foreign trust that is not a foreign simple trust or foreign grantor trust) is the trust itself. The beneficial owner of income paid to a foreign estate is the estate itself. Note: A payment to a U.S. partnership, U.S. trust, or U.S. estate is treated as a payment to a U.S. payee that is not subject to 30% foreign-person withholding. A U.S. partnership, trust, or estate should provide the withholding agent with a Form W-9. Effectively connected income. Generally, when a foreign person engages in a trade or business within the United States, all income from sources within the United States other than fixed or determinable annual or periodical (FDAP) income (e.g., interest, dividends, rents, and certain similar amounts) is considered income effectively connected with a U.S. trade or business. FDAP income may or may not be effectively connected with a U.S. business. Factors to be considered to determine whether FDAP income and similar amounts from U.S. sources are effectively connected with a U.S. trade or business include whether: Page 2 . The income is from assets used in, or held for use in, the conduct of that trade or business or . The activities of that trade or business were a material factor in the realization of the income. There are special rules for determining whether income from securities is effectively connected with the active conduct of a U.S. banking, financing, or similar business. See section 864(c)(4)(B)(ii) and Regulations section 1.864-4(c)(5)(ii) for more information. Effectively connected income, after allowable deductions, is taxed at graduated rates applicable to U.S. citizens and residents, rather than at a 30% withholding rate. You must report this income on an annual tax or information return as follows: . Individuals--Use Form 1040NR, U.S. Nonresident Alien Income Tax Return. . Corporations--Use Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. . Partnerships--Use Form 1065, U.S. Return of Partnership Income. . Trusts or estates--Use Form 1041, U.S. Income Tax Return for Estates and Trusts. Foreign person. A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person. Nonresident alien individual. Any individual who is not a citizen or resident of the United States is a nonresident alien individual. An alien individual meeting either the "green card test" or the "substantial presence test" for the calendar year is a resident alien. Any person not meeting either test is a nonresident alien individual. Additionally, an alien individual who is a resident of a foreign country under the residence article of an income tax treaty, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa is a nonresident alien individual. Note: Even though a nonresident alien individual married to a U.S. citizen or resident alien may choose to be treated as a resident alien for certain purposes (e.g., filing a joint income tax return), such individual is still treated as a nonresident alien for withholding tax purposes on all income except wages. See Pub. 519, U.S. Tax Guide for Aliens, for more information on resident and nonresident alien status. Disregarded entity. A business entity that has a single owner and is not a corporation under Regulations section 301.7701-2(b) is disregarded as an entity separate from its owner. Withholding agent. Any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or who can disburse or make payments of an amount subject to withholding is a withholding agent. The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity including (but not limited to) any foreign intermediary, foreign partnership, and U.S. branches of certain foreign banks and insurance companies. Generally, the person who pays (or causes to be paid) an amount subject to withholding to the foreign person (or to its agent) must withhold. - -------------------------------------------------------------------------------- Specific Instructions Part I Line 1. Enter your name. If you are filing for a disregarded entity with a single owner who is a foreign person, this form should be completed and signed by the foreign single owner. If the account to which a payment is made or credited is in the name of the disregarded entity, the foreign single owner should inform the withholding agent of this fact. This may be done by including the name and account number of the disregarded entity on line 8 (reference number) of Part I of the form. Note: If you own the income or account jointly with one or more other persons, the income or account will be treated by the withholding agent as owned by a foreign person if Forms W-8ECI are provided by all of the owners. If the withholding agent receives a Form W-9, Request for Taxpayer Identification Number and Certification, from any of the joint owners, the payment must be treated as made to a U.S. person. Line 2. If you are filing for a corporation, enter the country of incorporation. If you are filing for another type of entity, enter the country under whose laws the entity is created, organized, or governed. If you are an individual, write "N/A" (for "not applicable"). Line 3. Check the box that applies. By checking a box, you are representing that you qualify for this classification. You must check the one box that represents your classification (e.g., corporation, partnership, etc.) under U.S. tax principles. If you are filing for a disregarded entity, you must check the "Disregarded entity" box (not the box that describes the status of your single owner). Line 4. Your permanent residence address is the address in the country where you claim to be a resident for that country's income tax. Do not show the address of a financial institution, a post office box, or an address used solely for mailing purposes. If you are an individual who does not have a tax residence in any country, your permanent residence is where you normally reside. If you are not an individual and you do not have a tax residence in any country, the permanent residence address is where you maintain your principal office. Line 5. Enter your business address in the United States. Do not show a post office box. Line 6. You must provide a U.S. taxpayer identification number (TIN) for this form to be valid. A U.S. TIN is a social security number (SSN), employer identification number (EIN), or IRS individual taxpayer identification number (ITIN). Check the appropriate box for the type of U.S. TIN you are providing. If you are an individual, you are generally required to enter your SSN. To apply for an SSN, get Form SS-5 from a Social Security Administration (SSA) office. Fill in Form SS-5 and return it to the SSA. If you do not have an SSN and are not eligible to get one, you must get an ITIN. To apply for an ITIN, file Form W-7 with the IRS. It usually takes about 30 days to get an ITIN. If you are not an individual (e.g., a foreign estate or trust), or you are an individual who is an employer or who Page 3 is engaged in a U.S. trade or business as a sole proprietor, use Form SS-4, Application for Employer Identification Number, to obtain an EIN. If you are a foreign wholly-owned entity, enter the U.S. TIN of your foreign single owner. Line 7. If your country of residence for tax purposes has issued you a tax identifying number, enter it here. For example, if you are a resident of Canada, enter your Social Insurance Number. Line 8. This line may be used by the filer of Form W-8ECI or by the withholding agent to whom it is provided to include any referencing information that is useful to the withholding agent in carrying out its obligations. A beneficial owner may use line 8 to include the name and number of the account for which he or she is providing the form. Line 9. You must specify the items of income that are effectively connected with the conduct of a trade or business within the United States. You will generally have to provide Form W-8BEN, Form W-8EXP, or Form W-8IMY for those items from sources within the United States that are not effectively connected with the conduct of a trade or business within the United States. See Form W-8BEN, W-8EXP, or W-8IMY, and its instructions, for more details. Part II Signature. Form W-8ECI must be signed and dated by the beneficial owner of the income, or, if the beneficial owner is not an individual, by an authorized representative or officer of the beneficial owner. If Form W-8ECI is completed by an agent acting under a duly authorized power of attorney, the form must be accompanied by the power of attorney in proper form or a copy thereof specifically authorizing the agent to represent the principal in making, executing, and presenting the form. Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. The agent, as well as the beneficial owner, may incur liability for the penalties provided for an erroneous, false, or fraudulent form. - -------------------------------------------------------------------------------- Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. If you want to receive exemption from withholding on income effectively connected with the conduct of a trade or business in the United States, you are required to provide the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 3 hr., 35 min.; Learning about the law or the form, 3 hr., 22 min.; Preparing and sending the form to IRS, 3 hr., 35 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send Form W-8ECI to this office. Instead, give it to your withholding agent. Page 4 Form W-8IMY (Rev. December 2000) Department of the Treasury Internal Revenue Service Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding . Section references are to the Internal Revenue Code. . See separate instructions. . Give this form to the withholding agent or payer. Do not send to the IRS. OMB No. 1545-1621 - -------------------------------------------------------------------------------- Do not use this form for: Instead, use Form: . A beneficial owner solely claiming foreign status or treaty benefits ............. W-8BEN . A hybrid entity claiming treaty benefits on its own behalf ....................... W-8BEN . A person claiming an exemption from U.S. withholding on income effectively connected with the conduct of a trade or business in the United States ........... W-8ECI . A disregarded entity. Instead, the single foreign owner should use ............... W-8BEN or W-8ECI . A foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession claiming the applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b) ............................................................. W-8EXP
- -------------------------------------------------------------------------------- Part I Identification of Entity - -------------------------------------------------------------------------------- 1 Name of individual or organization that is acting as intermediary - -------------------------------------------------------------------------------- 2 Country of incorporation or organization - -------------------------------------------------------------------------------- 3 Type of entity--check the appropriate box: [ ] Qualified intermediary. Complete Part II. [ ] Nonqualified intermediary. Complete Part III. [ ] U.S. branch. Complete Part IV. [ ] Withholding foreign partnership. Complete Part V. [ ] Withholding foreign trust. Complete Part V. [ ] Nonwithholding foreign partnership. Complete Part VI. [ ] Nonwithholding foreign simple trust. Complete Part VI. [ ] Nonwithholding foreign grantor trust. Complete Part VI. - -------------------------------------------------------------------------------- 4 Permanent residence address (street, apt. or suite no., or rural route). Do not use P.O. box. - -------------------------------------------------------------------------------- City or town, state or province. Include postal code where appropriate. - -------------------------------------------------------------------------------- Country (do not abbreviate) - -------------------------------------------------------------------------------- 5 Mailing address (if different from above) - -------------------------------------------------------------------------------- City or town, state or province. Include postal code where appropriate. - -------------------------------------------------------------------------------- Country (do not abbreviate) - -------------------------------------------------------------------------------- 6 U.S. taxpayer identification number (if required, see instructions) [ ] SSN or ITIN [ ] EIN [ ] QI-EIN - -------------------------------------------------------------------------------- 7 Foreign tax identifying number, if any (optional) - -------------------------------------------------------------------------------- 8 Reference number(s) (see instructions) - -------------------------------------------------------------------------------- Part II Qualified Intermediary - -------------------------------------------------------------------------------- 9a [ ] (All qualified intermediaries check here) I certify that the entity identified in Part I: . Is a qualified intermediary and is not acting for its own account with respect to the account(s) identified on line 8 or in a withholding statement associated with this form and . Has provided or will provide a withholding statement, as required. b [ ] (If applicable) I certify that the entity identified in Part I has assumed primary withholding responsibility under Chapter 3 of the Code with respect to the account(s) identified on this line 9b or in a withholding statement associated with this form ------------------------------------- - -------------------------------------------------------------------------------- c [ ] (If applicable) I certify that the entity identified in Part I has assumed primary Form 1099 reporting and backup withholding responsibility as authorized in its withholding agreement with the IRS with respect to the account(s) identified on this line 9c or in a withholding statement associated with this form > ----------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Part III Nonqualified Intermediary - -------------------------------------------------------------------------------- 10a [ ] (All nonqualified intermediaries check here) I certify that the entity identified in Part I is not a qualified intermediary and is not acting for its own account. b [ ] (If applicable) I certify that the entity identified in Part I is using this form to transmit withholding certificates and/or other documentary evidence and has provided or will provide a withholding statement, as required. - -------------------------------------------------------------------------------- For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 25402Q Form W-8IMY (Rev. 12-2000) Form W-8IMY (Rev. 12-2000) Page 2 - -------------------------------------------------------------------------------- Part IV Certain United States Branches - -------------------------------------------------------------------------------- Note: You may use this Part if the entity identified in Part I is a U.S. branch of a foreign bank or insurance company and is subject to certain regulatory requirements (see instructions). 11 [ ] I certify that the entity identified in Part I is a U.S. branch and that the payments are not effectively connected with the conduct of a trade or business in the United States. Check box 12 or box 13, whichever applies: 12 [ ] I certify that the entity identified in Part I is using this form as evidence of its agreement with the withholding agent to be treated as a U.S. person with respect to any payments associated with this certificate. 13 [ ] I certify that the entity identified in Part I: . Is using this form to transmit withholding certificates or other documentary evidence for the persons for whom the branch receives a payment and . Has provided or will provide a withholding statement, as required. - -------------------------------------------------------------------------------- Part V Withholding Foreign Partnership or Withholding Foreign Trust - -------------------------------------------------------------------------------- 14. [ ] I certify that the entity identified in Part I: . Is a withholding foreign partnership or a withhholding foreign trust and . Has provided or will provide the withholding statement, as required. - -------------------------------------------------------------------------------- Part VI Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust - -------------------------------------------------------------------------------- 15 [ ] I certify that the entity identified in Part I: . Is a nonwithholding foreign partnership, a nonwithholding foreign simple trust, or a nonwithholding foreign grantor trust and that the payments to which this certificate relates are not effectively connected, or are not treated as effectively connected, with the conduct of a trade or business in the United States and . Has provided or will provide a withholding statement, as required. - -------------------------------------------------------------------------------- Part VII Certification - -------------------------------------------------------------------------------- Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income for which I am providing this form or any withholding agent that can disburse or make payments of the income for which I am providing this form. Sign Here ----------------------------------------------- ----------------- Signature of authorized official Date (MM-DD-YYYY) Instructions for Form [LOGO OF INTERNAL REVENUE SERVICE] W-8IMY Department of the Treasury (Rev. December 2000) Internal Revenue Service Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding Section references are to the Internal Revenue Code unless otherwise noted. - -------------------------------------------------------------------------------- General Instructions Note: For definitions of terms used throughout these instructions, see Definitions on pages 2 and 3. Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of interest (including certain original issue discount (OID)), dividends, rent, premiums, annuities, compensation for, or in expectation of, services performed, or other fixed or determinable annual or periodical (FDAP) gains, profits, or income. This tax is imposed on the gross amount paid and is generally collected by withholding on that amount. A payment is considered to have been made whether it is made directly to the beneficial owner or to another person, such as an intermediary, agent, trustee, executor, or partnership, for the benefit of the beneficial owner. Note: For additional information and instructions for the withholding agent, see the Instructions for the Requester of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY. Who must file. Form W-8IMY must be provided by: . A foreign person, or a foreign branch of a U.S. person, to establish that it is a qualified intermediary that is not acting for its own account, to represent that it has provided or will provide a withholding statement, as required, and, if applicable, to represent that it has assumed primary withholding responsibility under Chapter 3 of the Code and/or primary Form 1099 reporting and backup withholding responsibility. . A foreign person to establish that it is a nonqualified intermediary that is not acting for its own account, and, if applicable, that it is using the form to transmit withholding certificates and/or other documentary evidence and has provided, or will provide, a withholding statement as required. A U.S. person cannot be a nonqualified intermediary. . A U.S. branch of certain foreign banks or foreign insurance companies to represent that the income it receives is not effectively connected with the conduct of a trade or business within the United States and either (a) that it is using the form as evidence of its agreement with the withholding agent to be treated as a U.S. person with respect to any payments associated with the Form W-8IMY or (b) that it is using the certificate to transmit the documentation of the persons for whom it receives a payment and has provided, or will provide, a withholding statement, as required. . A flow-through entity to represent that it is (a) a withholding foreign partnership or withholding foreign trust and will provide a withholding statement, as required or (b) a nonwithholding foreign partnership or nonwithholding foreign simple or grantor trust, the income which it receives is not effectively connected with a U.S. trade or business, and it has provided a withholding statement as required. Note: Solely for purposes of providing this form, a reverse hybrid entity that is providing documentation on behalf of its interest holders to claim a reduced rate of withholding under a treaty is considered to be a nonqualified intermediary unless it has entered into a qualified intermediary agreement with the IRS. Provide Form W-8IMY to the withholding agent or payer before income is paid or credited to you on behalf of the beneficial owner. Failure to provide a Form W-8IMY or failure to provide necessary documentation and withholding statements to be associated with the form may lead to withholding of a 30% or 31% amount from the payment. Do not use Form W-8IMY if: . You are the beneficial owner of U.S. source income (other than income that is effectively connected with the conduct of a trade or business within the United States) and you need to establish that you are not a U.S. person. Instead, submit Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. . You are the beneficial owner of U.S. source income (other than income that is effectively connected with the conduct of a trade or business within the United States) and are claiming a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty. Instead, provide Form W-8BEN. . You are filing for a hybrid entity claiming treaty benefits on its own behalf, or you are filing for a reverse hybrid entity and are not claiming treaty benefits on behalf of its interest holders. Instead, provide Form W-8BEN. . You are the beneficial owner of income that is effectively connected with the conduct of a trade or business within the United States. Instead, provide Form W-8ECI, Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States. . You are a nonresident alien individual who claims exemption from withholding on compensation for independent or certain dependent personal services performed in the United States. Instead, provide Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, or Form W-4, Employee's Withholding Allowance Certificate. Cat. No. 25904R . You are filing for a disregarded entity (i.e., a business entity that has a single owner and is not a corporation under Regulations section 301.7701-2(b) is disregarded as an entity separate from its owner). Instead, provide Form W-8BEN or W-8ECI. . You are filing for a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession claiming the applicability of section 115(2), 501(c), 892, 895, or 1443(b). Instead, provide Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. However, these entities should use Form W-8BEN if they are claiming treaty benefits or are providing the form only to claim exempt recipient status for backup withholding purposes. Giving Form W-8IMY to the withholding agent. Do not send Form W-8IMY to the IRS. Instead, give it to the person who is requesting it. Generally, this person will be the one from whom you receive the payment or who credits your account. Give Form W-8IMY to the person requesting it before income is paid to you or credited to your account. If you do not provide this form, the withholding agent may have to withhold at a 30% rate (foreign-person withholding) or 31% (backup withholding) rate. Generally, a separate Form W-8IMY must be submitted to each withholding agent. Change in circumstances. If a change in circumstances makes any information on the Form W-8IMY (or any documentation or a withholding statement associated with the Form W-8IMY) you have submitted incorrect, you must notify the withholding agent or payer within 30 days of the changes in circumstances and you must file a new Form W-8IMY or provide new documentation or a new withholding statement. You must update the information associated with Form W-8IMY as often as is necessary to enable the withholding agent to withhold at the appropriate rate on each payment and to report such income. Expiration of Form W-8IMY. Generally, a Form W-8IMY remains valid until the status of the person whose name is on the certificate is changed in a way relevant to the certificate or circumstances change that make the information on the certificate no longer correct. The indefinite validity period does not extend, however, to any withholding certificates, documentary evidence, or withholding statements associated with the certificate. Definitions Foreign person. A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch or office of a U.S. financial institution or U.S. clearing organization if the foreign branch is a qualified intermediary. Generally, a payment to a U.S. branch of a foreign person is a payment to a foreign person. Intermediary. An intermediary is any person that acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary. Qualified intermediary. A qualified intermediary is a person that is a party to a withholding agreement with the IRS and is: . A foreign financial institution or a foreign clearing organization (other than a U.S. branch or U.S. office of the institution or organization), . A foreign branch or office of a U.S. financial institution or a foreign branch or office of a U.S. clearing organization, . A foreign corporation for purposes of presenting claims of benefits under an income tax treaty on behalf of its shareholders, or . Any other person the IRS accepts as a qualified intermediary and who enters into a withholding agreement with the IRS. See Rev. Proc. 2000-12, 2000-4 I.R.B. 387, for procedures to apply to be a qualified intermediary. Nonqualified intermediary. A nonqualified intermediary is any intermediary that is not a U.S. person and that is not a qualified intermediary. Beneficial owner. For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is generally the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income. Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee or other agent. The beneficial owners of income paid to a foreign simple trust (i.e., a foreign trust that is described in section 651(a)) are generally the beneficiaries of the trust, if the beneficiary is not itself a foreign partnership, foreign simple or grantor trust, nominee or other agent. The beneficiaries of a foreign grantor trust (i.e., a foreign trust to the extent that all or a portion of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) are the persons treated as the owners of the trust. The beneficial owner of income paid to a foreign complex trust (i.e., a foreign trust that is not a foreign simple trust or foreign grantor trust) is the trust itself. The beneficial owner of income paid to a foreign estate is the estate itself. Flow-through entity. A flow-through entity is a foreign partnership (other than a withholding foreign partnership), a foreign simple or foreign grantor trust (other than a withholding foreign trust), or, for payments for which a reduced rate of withholding is claimed under an income tax treaty, any entity to the extent the entity is considered to be fiscally transparent (see page 3) with respect to the payment by an interest holder's jurisdiction. Withholding foreign partnership or withholding foreign trust. A withholding foreign partnership or withholding foreign trust is a foreign partnership or a foreign simple or grantor trust that has entered into a withholding agreement with the IRS in which it agrees to assume primary withholding responsibility for all payments that are made to it for its partners, beneficiaries, or owners. Page 2 Nonwithholding foreign partnership, simple trust, or grantor trust. A nonwithholding foreign partnership is any foreign partnership other than a withholding foreign partnership. A nonwithholding foreign simple trust is any foreign simple trust that is not a withholding foreign trust. A nonwithholding foreign grantor trust is any foreign grantor trust that is not a withholding foreign trust. Hybrid entity. A hybrid entity is any person (other than an individual) that is treated as fiscally transparent (see below) in the United States but is not treated as fiscally transparent by a country with which the United States has an income tax treaty. Hybrid status is relevant for claiming treaty benefits. Reverse hybrid entity. A reverse hybrid entity is any person (other than an individual) that is not fiscally transparent under U.S. tax law principles but that is fiscally transparent under the laws of a jurisdiction with which the United States has an income tax treaty. Fiscally transparent entity. An entity is treated as fiscally transparent with respect to an item of income to the extent that the interest holders in the entity must, on a current basis, take into account separately their shares of an item of income paid to the entity, whether or not distributed, and must determine the character of the items of income as if they were realized directly from the sources from which realized by the entity. Amounts subject to withholding. Generally, an amount subject to withholding is an amount from sources within the United States that is FDAP income. FDAP income is all income included in gross income, including interest (and original issue discount), dividends, rents, royalties, and compensation. FDAP income does not include most gains from the sale of property (including market discount and option premiums). FDAP income also does not include items of U.S. source income that are excluded from gross income without regard to the U.S. or foreign status of the holder, such as interest under section 103(a). Reportable amount. Solely for purposes of the statements required to be attached to Form W-8IMY, a reportable amount is an amount subject to withholding, U.S. source deposit interest (including original issue discount), and U.S. source interest or original issue discount on the redemption of short-term obligations. It does not include payments on deposits with banks and other financial institutions that remain on deposit for 2 weeks or less or amounts received from the sale or exchange (other than a redemption) of a short-term obligation that is effected outside the United States. It also does not include amounts of original issue discount arising from a sale and repurchase transaction completed within a period of 2 weeks or less, or amounts described in Regulations section 1.6049-5(b)(7), (10), or (11) (relating to certain obligations issued in bearer form). See the instructions for Forms 1042-S and 1099 to determine whether these amounts are also subject to information reporting. Withholding agent. A withholding agent is any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or who can disburse or make payments of an amount subject to withholding. The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including (but not limited to) any foreign intermediary, foreign partnership, and U.S. branches of certain foreign banks and insurance companies. Generally, the person who pays (or causes to be paid) the amount subject to withholding to the foreign person (or to its agent) must withhold. - -------------------------------------------------------------------------------- Specific Instructions Part I Line 1. Enter your name. By doing so, you are representing to the payer or withholding agent that you are not the beneficial owner of the amounts that will be paid to you. Line 2. If you are a corporation, enter the country of incorporation. If you are another type of entity, enter the country under whose laws you are created, organized, or governed. If you are an individual, enter "N/A" (for "not applicable"). Line 3. Check the one box that applies. If you are a foreign partnership receiving the payment on behalf of your partners, check the "Withholding foreign partnership" box or the "Nonwithholding foreign partnership" box, whichever is appropriate. If you are a foreign simple trust or foreign grantor trust receiving the payment on behalf of your beneficiaries or owners, check the "Withholding foreign trust" box, the "Nonwithholding foreign simple trust" box, or the "Nonwithholding foreign grantor trust" box, whichever is appropriate. If you are a foreign partnership (or a foreign trust) receiving a payment on behalf of persons other than your partners (or beneficiaries or owners), check the "Qualified intermediary" box or the "Nonqualified intermediary" box, whichever is appropriate. A reverse hybrid entity that is providing documentation from its interest holders to claim a reduced rate of withholding under a treaty should check the "Nonqualified intermediary" box unless it has entered into a qualified intermediary agreement with the IRS. See Parts II Through VI on page 4 if you are acting in more than one capacity. Line 4. Your permanent residence address is the address in the country where you claim to be a resident. Do not show the address of a financial institution, a post office box, or an address used solely for mailing purposes. If you do not have a tax residence in any country, the permanent residence address is where you maintain your principal office or, if you are an individual, where you normally reside. Line 5. Enter your mailing address only if it is different from the address you show on line 4. Line 6. You must provide an employer identification number (EIN) if you are a U.S. branch of a foreign bank or insurance company. If you are acting as a qualified intermediary or a withholding foreign partnership or a withholding foreign trust, you must use the EIN that was issued to you in such capacity (your "QI-EIN"). If you also act as a nonqualified intermediary with respect to other amounts subject to withholding, you must complete a separate Form W-8IMY for those amounts and use the EIN, if any, that is not your QI-EIN. A nonqualified intermediary, a nonwithholding foreign partnership, or a nonwithholding foreign simple or grantor trust is generally not required to provide a U.S. TIN. However, a nonwithholding foreign grantor trust with five or fewer grantors is required to provide an EIN. Page 3 Line 7. If your country of residence for tax purposes has issued you a tax identifying number, enter it here. Line 8. This line may be used by the filer of Form W-8IMY or by the withholding agent to whom it is provided to include any referencing information that is useful to the withholding agent in carrying out its obligations. For example, a withholding agent who is required to associate a particular Form W-8BEN with this Form W-8IMY may want to use line 8 for a referencing number or code that will make the association clear. Parts II Through VI You should complete only one part. If you are acting in multiple capacities, you must provide separate Forms W-8IMY for each capacity. For example, if you are acting as a qualified intermediary for one account, but a nonqualified intermediary for another account, you must provide one Form W-8IMY in your capacity as a qualified intermediary, and a separate Form W-8IMY in your capacity as a nonqualified intermediary. Part II -- Qualified Intermediary Check box 9a if you are a qualified intermediary (QI) (whether or not you assume primary withholding responsibility) for the income for which you are providing this form. By checking the box, you are certifying to all of the statements contained on line 9a. Check box 9b only if you have assumed primary withholding responsibility under Chapter 3 of the Code (nonresident alien withholding) with respect to the accounts identified on this line or in a withholding statement associated with this form. Check box 9c only if you have assumed primary Form 1099 reporting and backup withholding responsibility as authorized in a withholding agreement with the IRS with respect to the accounts identified on this line or in a withholding statement associated with this form. Although a QI obtains withholding certificates or appropriate documentation from beneficial owners, payees, and, if applicable, shareholders, as specified in your withholding agreement with the IRS, a QI does not need to attach the certificates or documentation to this form. However, to the extent you have not assumed primary Form 1099 reporting or backup withholding responsibility, you must disclose the names of those U.S. persons for whom you receive reportable amounts and that are not exempt recipients (as defined in Regulations section 1.6049-4(c)(1)(ii) or under section 6041, 6042, 6045, or 6050N). You should make this disclosure by attaching to Form W-8IMY the Forms W-9 (or substitute forms) of persons that are not exempt recipients. If you do not have a Form W-9 for a non-exempt U.S. payee, you must attach to Form W-8IMY any information you do have regarding that person's name, address, and TIN. Withholding statement of a QI. As a QI, you must provide a withholding statement to each withholding agent from which you receive reportable amounts. The withholding statement becomes an integral part of the Form W-8IMY and, therefore, the certification statement that you sign in Part VII of the form applies to the withholding statement as well as to the form. The withholding statement must: 1. Designate those accounts for which you act as a QI. 2. Designate those accounts for which you assumed primary withholding responsibility under Chapter 3 of the Code and/or primary Form 1099 reporting and backup withholding responsibility. 3. Provide information regarding withholding rate pools. A withholding rate pool is a payment of a single type of income, based on the categories of income reported on Form 1042-S or Form 1099 (e.g., interest, dividends), that is subject to a single rate of withholding. The withholding rate pool may be established by any reasonable method agreed upon by you and the withholding agent. For example, you may agree to establish a separate account for a single withholding rate pool or you may agree to divide a payment made to a single account into portions allocable to each withholding rate pool. You must provide the withholding rate pool information that is required for the withholding agent to meet its withholding and reporting obligations. A withholding agent may request any information reasonably necessary to withhold and report payments correctly. If you do not assume primary Form 1099 reporting and backup withholding responsibility, you must establish a separate withholding rate pool for each U.S. non-exempt recipient account holder disclosed to the withholding agent unless the alternative procedure is used (see below). The withholding rate pools are based on valid documentation that you obtain under your withholding agreement with the IRS or, if a payment cannot be reliably associated with valid documentation, under the applicable presumption rules. Alternative procedure for U.S. non-exempt recipients. If permitted by the QI withholding agreement with the IRS and if approved by the withholding agent, you may establish: . A single withholding rate pool (not subject to backup withholding) for all U.S. non-exempt recipient account holders for whom you have provided Forms W-9 prior to the withholding agent making any payments. Alternatively, you may include such U.S. non-exempt recipients in a zero rate withholding pool that includes U.S. exempt recipients and foreign persons exempt from non-resident alien withholding provided all the conditions of the alternative procedure are met and . A separate withholding rate pool (subject to 31% backup withholding) for all U.S. non-exempt recipient account holders for whom you have not provided Forms W-9 prior to the withholding agent making any payments. If you elect the alternative procedure, you must provide the information required by your QI withholding agreement to the withholding agent not later than January 15 of the year following the year in which the payments are paid. Failure to provide this information may result in penalties under sections 6721 and 6722 and termination of your withholding agreement with the IRS. Updating the statement. The statement by which you identify the relevant withholding rate pools must be updated as often as is necessary to allow the withholding agent to withhold at the appropriate rate on each payment and to correctly report the income to the IRS. The updated information becomes an integral part of Form W-8IMY. Part III -- Nonqualified Intermediary If you are providing Form W-8IMY as a nonqualified intermediary (NQI), you must check box 10a. By checking Page 4 this box, you are certifying to all of the statements on line 10a. Check box 10b if you are using this form to transmit withholding certificates or other documentation. If you are acting on behalf of another NQI or on behalf of a foreign partnership or foreign trust that is not a withholding foreign partnership or a withholding foreign trust, you must attach to your Form W-8IMY the Form W-8IMY of the other NQI or the foreign partnership or the foreign trust together with the withholding certificates and other documentation attached to that Form W-8IMY. Withholding statement of an NQI. An NQI must provide a withholding statement to obtain reduced rates of withholding for its customers and to avoid certain reporting responsibilities. The withholding statement must be provided prior to a payment and becomes an integral part of the Form W-8IMY and, therefore, the certification statement that you sign in Part VII of the form applies to the withholding statement as well as to the form. The withholding statement must: 1. Contain the name, address, U.S. TIN (if any), and the type of documentation (documentary evidence, Form W-9, or type of Form W-8) for every person for whom documentation has been received and must state whether that person is a U.S. exempt recipient, a U.S. non-exempt recipient, or a foreign person. The statement must indicate whether a foreign person is a beneficial owner or an intermediary, flow-through entity, or U.S. branch and the type of recipient, based on the recipient codes reported on Form 1042-S. 2. Allocate each payment by income type to every payee for whom documentation has been provided. The type of income is based on the income codes reported on Form 1042-S (or, if applicable, the income categories for Form 1099). If a payee receives income through another NQI, flow-through entity, or U.S. branch, your withholding certificate must also state the name, address, and U.S. TIN, if known, of the other NQI or U.S. branch from which the payee directly receives the payment or the flow-through entity in which the payee has a direct ownership interest. If another NQI, flow-through entity, or U.S. branch fails to allocate a payment, you must provide, for that payment, the name of the NQI, flow-through entity, or U.S. branch that failed to allocate the payment. 3. If a payee is identified as a foreign person, you must specify the rate of withholding to which the payee is subject, the payee's country of residence and, if a reduced rate of withholding is claimed, the basis for that reduced rate (e.g., treaty benefit, portfolio interest, exempt under section 501(c)(3), 892, or 895). The statement must also include the U.S. TIN (if required) and, if the beneficial owner is not an individual and is claiming treaty benefits, state whether the limitation on benefits and section 894 statements have been provided by the beneficial owner. You must inform the withholding agent as to which payments those statements relate. 4. Contain any other information the withholding agent requests in order to fulfill its withholding and reporting obligations under Chapter 3 of the Code and/or Form 1099 reporting and backup withholding responsibility. Alternative procedures for NQIs. Under this procedure, you may provide information allocating a payment of a reportable amount to each payee (including U.S.-exempt recipients) after a payment is made. To use the alternative procedure you must inform the withholding agent on your withholding statement that you are using the procedure and the withholding agent must agree to the procedure. [GRAPHIC OF CAUTION] This alternative procedure cannot be used for payments that are allocable to U.S. non-exempt recipients. Under this procedure, you must provide a withholding agent with all the information required on the withholding statement (see above) and all payee documentation, except the specific allocation information for each payee, prior to the payment of a reportable amount. In addition, you must provide the withholding agent with withholding rate pool information. The withholding statement must assign each payee to a withholding rate pool prior to the payment of a reportable amount. A withholding rate pool is a payment of a single type of income, based on the income codes reported on Form 1042-S (e.g., interest, dividends), that is subject to a single rate of withholding. The withholding rate pool may be established by any reasonable method agreed upon by you and the withholding agent. For example, you may agree to establish a separate account for a single withholding rate pool, or you may agree to divide a payment made to a single account into portions allocable to each withholding rate pool. You must determine withholding rate pools based on valid documentation or, to the extent a payment cannot be reliably associated with valid documentation, the applicable presumption rules. You must provide the withholding agent with sufficient information to allocate the income in each withholding rate pool to each payee (including U.S. exempt recipients) within the pool no later than January 31 of the year following the year of payment. If you fail to provide allocation information, if required, by January 31 for any withholding rate pool, you may not use this procedure for any payment made after that date for all withholding rate pools. You may remedy your failure to provide allocation information by providing the information to the withholding agent no later than February 14. See Regulations section 1.1441-1. Part IV -- Certain United States Branches Line 11 Check the box to certify that you are either: . A U.S. branch of a foreign bank subject to regulatory supervision by the Federal Reserve Board or . A U.S. branch of a foreign insurance company required to file an annual statement on a form approved by the National Association of Insurance Commissioners with the insurance department of a state, a territory, or the District of Columbia. By checking the box you are also certifying that the income you are receiving is not effectively connected with the conduct of your trade or business in the United States. You must provide your EIN on line 6 of Part I. Line 12 or 13 If you are one of the types of U.S. branches specified in the instructions for line 11 above, then you may choose to be treated in one of two ways: 1. Check box 12 if you have an agreement with the withholding agent to which you are providing this form to be treated as a U.S. person. In this case, you will be treated as a U.S. person. Therefore, you will receive the payment free of Chapter 3 withholding but you will yourself Page 5 be responsible for Chapter 3 withholding and backup withholding for any payments you make or credit to the account of persons for whom you are receiving the payment. 2. Check box 13 if you do not have an agreement with the withholding agent to be treated as a U.S. person. Withholding statement of a U.S. branch not treated as a U.S. person. If you checked box 13, you must provide the withholding agent with a written withholding statement. The withholding statement becomes an integral part of the Form W-8IMY. The withholding statement must provide the same information outlined under Withholding statement of an NQI on page 5. Part V -- Withholding Foreign Partnership or Withholding Foreign Trust Check box 14 if you are a withholding foreign partnership or a withholding foreign trust for the accounts for which you are providing this form and you are receiving the income from those accounts on behalf of your partners, beneficiaries, or owners. If you are not receiving the income on behalf of your partners, beneficiaries, or owners, do not complete Part V. Instead, complete Part II or Part III, whichever is appropriate. If you are acting as a withholding foreign partnership or as a withholding foreign trust, you must assume primary withholding responsibility for all payments that are made to you for your partners, beneficiaries, or owners. Therefore, you are not required to provide information to the withholding agent regarding each partner's, beneficiary's, or owner's distributive share of the payment. If you are also receiving payments from the same withholding agent for persons other than your partners, beneficiaries, or owners, you must provide a separate Form W-8IMY for those payments. Part VI -- Nonwithholding Foreign Partnership, Simple Trust, or Grantor Trust Check box 15 if you are a foreign partnership or a foreign simple or grantor trust that is not a withholding foreign partnership or a withholding foreign trust. By checking this box, you are certifying to both of the statements on line 15. If you are receiving income that is effectively connected with the conduct of a trade or business in the United States, provide Form W-8ECI. If you are not receiving the income on behalf of your partners, beneficiaries, or owners, do not complete Part VI. Instead, complete Part II or Part III, whichever is appropriate. If you are acting on behalf of an NQI or another foreign partnership or foreign trust that is not a withholding foreign partnership or a withholding foreign trust, you must associate with your Form W-8IMY the Form W-8IMY of the other foreign partnership or foreign trust together with the withholding certificates and other documentation attached to that other form. Withholding statement of nonwithholding foreign partnership or nonwithholding foreign trust. You must provide the withholding agent with a written withholding statement to obtain reduced rates of withholding and relief from certain reporting obligations. The withholding statement becomes an integral part of the Form W-8IMY. The withholding statement must provide the same information outlined under Withholding statement of an NQI on page 5. Part VII -- Certification Form W-8IMY must be signed and dated by a person authorized to sign a declaration under penalties of perjury on behalf of the person whose name is on the form. - -------------------------------------------------------------------------------- Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. If you are acting in any capacity described in these instructions, you are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Recordkeeping, 5 hr., 58 min.; Learning about the law or the form, 4 hr., 38 min.; Preparing and sending the form to IRS, 6 hr., 8 min. If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send Form W-8IMY to this office. Instead, give it to your withholding agent. Page 6 EX-99.2 8 dex992.txt FORM OF LTR TO BROKERS, DEALERS, COMMERCIAL BANKS EXHIBIT 99.2 A registration statement has been filed with the Securities and Exchange Commission in connection with the exchange offer. The completion of the exchange offer is dependent upon the registration statement becoming effective. Danka Business Systems PLC Notice of Exchange Offer CUSIP Numbers G2652NAA7, 236277AA7 AND 236277AB5 Dated June 26, 2001 Exchange offer for the outstanding 6.75% Convertible Subordinated Notes due April 1, 2002 of Danka Business Systems PLC The exchange offer will expire at 8:00 a.m., New York City time, on June 29, 2001 unless the exchange offer is extended. Tenders may be withdrawn prior to 8:00 a.m., New York City time, on the expiration date. To: Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. Enclosed for your consideration are a prospectus dated June 27, 2001 and other materials relating to an offer by Danka Business Systems PLC to exchange cash and new debt securities for its 6.75% convertible subordinated notes due 2002 that are validly tendered, not withdrawn, and accepted, in the exchange offer. Holders can select the form of consideration that they will receive for their notes from the following three options: .Limited Cash Option $400 in cash for every $1,000 in principal amount of notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of notes. If more than $60 million in principal amount of notes are tendered under this option, Danka will exchange $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of old notes tendered. Danka will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions as everyone else who tenders old notes under this option. Danka may issue new senior subordinated notes in denominations of less than $1,000. We will not determine whether the limited cash option is over-subscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes once we make this determination even though it may affect the type of exchange consideration that you will receive in this exchange offer. .Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. We may issue new senior subordinated notes in denominations of less than $1,000. .10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all the old notes that you tender. You do not have to tender all of your old notes to participate in this exchange offer. However, this exchange offer is conditioned on Danka receiving valid tenders of at least 92% in aggregate principal amount of the old notes. You may withdraw your tender of old notes or change your choice of consideration options at any time before the expiration date of this exchange offer. Danka will pay in cash accrued and unpaid interest on all old notes accepted in the exchange offer through, but not including, the date of acceptance. The tender of old notes may be withdrawn at any time prior to 8:00 a.m., New York City time, on the expiration date. The exchange consideration shall not be payable in respect of old notes so withdrawn. Any permitted withdrawal of old notes may not be rescinded, and any old notes properly withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offer. Withdrawn old notes may, however, be re-tendered by again following one of the appropriate procedures described in the prospectus at any time prior to the expiration date. We are asking you to contact your clients for whom you hold old notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold old notes registered in their own names. Danka will pay all transfer taxes, if any, applicable to the tender of old notes, except as otherwise provided in the prospectus and letter of transmittal. For your information and for forwarding to your clients as described above, we are enclosing the following documents: 1. Prospectus dated June 27, 2001; 2. The letter of transmittal for your use and for the information of your clients, together with Guidelines for Certification of Taxpayer Identification Number on Form W-9 providing information relating to backup United States federal income tax withholding and Forms W-8 for non-U.S. holders of old notes; 3. A printed form of letter, including a letter of instructions, which may be sent to your clients for whose account you hold old notes registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the exchange offer; and 4. A return envelope addressed to the exchange agent. DTC participants will be able to execute tenders through the DTC Automated Tender Offer Program. We urge you to contact your clients as promptly as possible in order to obtain their instructions. Please note that the exchange offer will expire at 8:00 a.m., New York City time, on June 29, 2001, unless extended. Any inquiries you may have with respect to the exchange offer should be addressed, or requests for additional copies of the enclosed materials, should be directed to HSBC Bank USA, the Exchange Agent for the exchange offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, Danka Business Systems PLC Nothing contained herein or in the enclosed documents shall constitute you or any person as agent of Danka Business Systems PLC or Banc of America Securities LLC, the dealer manager, or D.F. King & Co., Inc., the information agent, or the exchange agent, or authorize you or any other person to use any document or make any statements on behalf of any of them in connection with the exchange offer other than the documents enclosed herewith and the statements contained therein. Important: The letter of transmittal (or a facsimile thereof), together with the old notes and all other required documents must be received by the exchange agent on or prior to the expiration date in order for holders to receive the exchange consideration. 2 EX-99.3 9 dex993.txt FORM OF LETTER TO CLIENTS EXHIBIT 99.3 A registration statement has been filed with the Securities and Exchange Commission in connection with the Exchange Offer. The completion of the Exchange Offer is dependent upon the registration statement becoming effective. Danka Business Systems PLC Exchange offer for the outstanding 6.75% Convertible Subordinated Notes due April 1, 2002 of Danka Business Systems PLC The exchange offer will expire at 8:00 a.m., New York City time, on June 29, 2001 unless the exchange offer is extended. Tenders may be withdrawn prior to 8:00 a.m., New York City time, on the expiration date. June 27, 2001 To Our Clients: Enclosed for your consideration are the prospectus and a form of letter of transmittal relating to the offer by Danka Business Systems PLC to exchange cash and new debt securities for your 6.75% convertible subordinated notes due 2002 that are validly tendered, not withdrawn, and accepted, in this exchange offer. Holders can select the form of consideration that they will receive for their old notes from the following three options: .Limited Cash Option $400 in cash for every $1,000 in principal amount of notes tendered under this option, up to an aggregate maximum of $24 million in cash for $60 million in principal amount of old notes. If more than $60 million in principal amount of old notes are tendered under this option, Danka will exchange $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every additional $1,000 in principal amount of old notes tendered. Danka will distribute the $24 million in cash so that everyone who tenders old notes under this option will receive cash and new senior subordinated notes in the same proportions as everyone else who tenders old notes under this option. Danka may issue new senior subordinated notes in denominations of less than $1,000. Danka will not determine whether the limited cash option is over-subscribed until after this exchange offer closes. You will not be able to withdraw your tender of old notes once we make this determination even though it may affect the type of exchange consideration that you will receive in this exchange offer. .Zero Coupon Note Option $800 in principal amount of new zero coupon senior subordinated notes due April 1, 2004 for every $1,000 in principal amount of old notes tendered under this option. We may issue new senior subordinated notes in denominations of less than $1,000. .10% Note Option $1,000 in principal amount of new 10% subordinated notes due April 1, 2008 for every $1,000 in principal amount of old notes tendered under this option. You do not have to choose the same option for all the old notes you tender. You do not have to tender all of your old notes to participate in this exchange offer. However, this exchange offer is conditioned on Danka receiving valid tenders of at least 92% in aggregate principal amount of the old notes. You may withdraw your tender of old notes or change your choice of consideration options at any time before the expiration of this exchange offer. This material is being forwarded to you as the beneficial owner of old notes held by us for your account but not registered in your name. The accompanying letter of transmittal is furnished to you for informational purposes only and may not be used by you to tender old notes with respect to old notes held by us for your account. A tender of such old notes may be made only by us as the holder and only pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender the old notes held by us for your account. We urge you to read carefully the prospectus and the letter of transmittal and consent before instructing us to tender your old notes. If you wish to have us tender your old notes pursuant to the exchange offer, please so instruct us by completing, executing and returning to us the instruction form that appears on the final page of this letter. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender your old notes in accordance with the provisions of the exchange offer. Your attention is directed to the following: 1. The exchange offer is for all old notes that are outstanding. 2. If you desire to tender any old notes pursuant to the exchange offer and receive the exchange offer consideration, we must receive your instructions in ample time to permit us to effect a tender of old notes on your behalf prior to 8:00 a.m., New York City time, on the expiration date. Unless otherwise specified in your instructions, tenders of all your old notes will be made on your behalf. 3. The exchange offer is conditioned upon, among other things, at least 92% in aggregate principal amount of the old notes being validly tendered and not properly withdrawn pursuant to the exchange offer. 4. You do not have to choose the same consideration option for all the old notes that you tender. 5. Any transfer taxes incident to the transfer of old notes from the tendering holder to Danka will be paid by Danka, except as provided in the prospectus and the letter of transmittal. 2 INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the exchange offer and consent solicitation by Danka Business Systems PLC with respect to its 6.75% subordinated convertible notes due April 1, 2002. This will instruct you to tender old notes held by you for the account of the undersigned pursuant to the terms and conditions set forth in the prospectus and the letter of transmittal. A. [_] Tender all of my old notes for the limited cash option. B. [_] Tender all of my old notes for the senior subordinated note option. C. [_] Tender all of my old notes for the 10% note option. D. [_] I hold more than $1,000 in aggregate-principal amount of old notes and I wish to make a mixed election as to form of consideration. (1) : The principal amount of old notes being tendered for the limited cash option. (2) : The principal amount of old notes being tendered for the senior subordinated note option. (3) : The principal amount of old notes being tendered for the 10% note option. (4) : Total principal amount of old notes being tendered for this mixed election. (This amount is the total of items D(1), D(2) and D(3) above and must be equal to the total principal of old notes being tendered.) Note: Tendering noteholders should check the appropriate box above to indicate which consideration option they have chosen under the exchange offer. Check one box only. Tendering noteholders who check box (A), (B) or (C) will be deemed to be tendering all of their old notes for the chosen consideration option. Tendering noteholders who check box (D) should insert the appropriate principal amount of old notes which they have chosen to tender for each consideration option in the space next to the appropriate consideration option. __________________________________ __________________________________ Date Signature(s) __________________________________ __________________________________ Please Print Name(s) Zip Code __________________________________ __________________________________ Area Code and Telephone No. __________________________________ Address __________________________________ Tax Identification or Social __________________________________ Security No. __________________________________ __________________________________ My Account Number with You __________________________________ 3 -----END PRIVACY-ENHANCED MESSAGE-----