EXHIBIT 4.1
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SEQUUS PHARMACEUTICALS, INC.
CHEMICAL TRUST COMPANY OF CALIFORNIA
as Trustee
INDENTURE
Dated as of ___________________, 1997
___% Convertible Subordinated Debentures due 2007
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CROSS REFERENCE SHEET/*/
_____________________________________
Between
Provisions of Trust Indenture Act of 1939 and Indenture, dated as of _______,
1997, between Sequus Pharmaceuticals, Inc. and _________________________, as
Trustee, providing for __% Convertible Subordinated Debentures due 2007:
Section of the Act Section of Indenture
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310(a)(1) and (2)........ 8.9
310(a)(3) and (4)........ Inapplicable
310(b)................... 8.8 and 8.10(b) and (d)
310(c)................... Inapplicable
311(a)................... 8.13
311(b)................... 8.13
311(c)................... Inapplicable
312(a)................... 6.1 and 6.2(a)
312(b)................... 6.2(b)
312(c)................... 6.2(c)
313(a)................... 6.3(a)
313(b)(1)................ Inapplicable
313(b)(2)................ 6.3(a)
313(c)................... 6.3(a)
313(d)................... 6.3(b)
314(a)................... 6.4
314(b)................... Inapplicable
314(c)(1) and (2)........ 16.5
314(c)(3)................ Inapplicable
314(d)................... Inapplicable
314(e)................... 16.5
314(f)................... Inapplicable
315(a), (c) and (d)...... 8.1
315(b)................... 7.8
315(e)................... 7.9
316(a)(1)................ 7.7
316(a)(2)................ Not required
316(a) (last sentence)... 9.4
316(b)................... 11.2
317(a)................... 7.2
317(b)................... 5.4 and 13.2
318(a)................... 16.8
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/*/ This Cross Reference Sheet is not part of the Indenture.
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS........................................................... 1
Section 1.1 Definitions...................................... 1
ARTICLE II ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF
DEBENTURES.................................................................. 7
Section 2.1 Designation, Amount and Issue of Debentures...... 7
Section 2.2 Form of Debentures............................... 7
Section 2.3 Date and Denomination of Debentures; Payments of
Interest....................................... 8
Section 2.4 Execution of Debentures.......................... 10
Section 2.5 Exchange and Registration of Transfer of
Debentures....................................... 10
Section 2.6 Mutilated, Destroyed, Lost or Stolen Debentures.. 11
Section 2.7 Temporary Debentures............................. 12
Section 2.8 Cancellation of Debentures Paid, Etc............. 13
ARTICLE III REDEMPTION OF DEBENTURES............................................ 13
Section 3.1 Redemption Prices................................ 13
Section 3.2 Notice of Redemption; Selection of Debentures.... 13
Section 3.3 Payment of Debentures Called for Redemption...... 15
Section 3.4 Conversion Arrangement on Call for Redemption.... 15
ARTICLE IV SUBORDINATION OF DEBENTURES.......................................... 16
Section 4.1 Agreement of Subordination....................... 16
Section 4.2 Payments to Debentureholders..................... 17
Section 4.3 Subrogation of Debentures........................ 19
Section 4.4 Authorization by Debentureholders................ 20
Section 4.5 Notice to Trustee................................ 20
Section 4.6 Trustee's Relation to Senior Indebtedness........ 21
Section 4.7 No Impairment of Subordination................... 22
Section 4.8 Certain Conversions Deemed Payment............... 22
Section 4.9 Article Applicable to Paying Agents.............. 22
Section 4.10 Senior Indebtedness Entitled to Rely. 22
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY................................... 23
Section 5.1 Payment of Principal, Premium and Interest....... 23
Section 5.2 Maintenance of Office or Agency.................. 23
Section 5.3 Appointments to Fill Vacancies in Trustee's
Office......................................... 24
Section 5.4 Provisions as to Paying Agent.................... 24
Section 5.5 Existence........................................ 25
Section 5.6 Maintenance of Properties........................ 25
Section 5.8 Stay, Extension and Usury Laws................... 26
Section 5.9 Compliance Certificate........................... 26
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TABLE OF CONTENTS
(continued)
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Section 5.10 Further Instruments and Acts..................... 26
ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE... 27
Section 6.1 Debentureholders' Lists.......................... 27
Section 6.2 Preservation and Disclosure of Lists............. 27
Section 6.3 Reports by Trustee............................... 27
Section 6.4 Reports by Company............................... 28
ARTICLE VII DEFAULTS AND REMEDIES............................................... 28
Section 7.1 Events of Default................................ 28
Section 7.2 Payments of Debentures on Default; Suit Therefor. 30
Section 7.3 Application of Monies Collected by Trustee....... 32
Section 7.4 Proceedings by Debentureholder................... 33
Section 7.5 Proceedings by Trustee........................... 34
Section 7.6 Remedies Cumulative and Continuing............... 34
Section 7.7 Direction of Proceedings and Waiver of Defaults
by Majority of Debentureholders................ 34
Section 7.8 Notice of Defaults............................... 35
Section 7.9 Undertaking to Pay Costs......................... 35
Section 7.10 Delay or Omission Not Waiver..................... 35
ARTICLE VIII CONCERNING THE TRUSTEE............................................. 36
Section 8.1 Duties and Responsibilities of Trustee........... 36
Section 8.2 Reliance on Documents, Opinions, Etc............. 37
Section 8.3 No Responsibility for Recitals, Etc.............. 38
Section 8.4 Trustee, Paying Agents, Conversion Agents or
Registrar May Own Debentures................... 38
Section 8.5 Monies to Be Held in Trust....................... 38
Section 8.6 Compensation and Expenses of Trustee............. 38
Section 8.7 Officers' Certificate as Evidence................ 39
Section 8.8 Conflicting Interests of Trustee................. 39
Section 8.9 Eligibility of Trustee........................... 39
Section 8.10 Resignation or Removal of Trustee................ 40
Section 8.11 Acceptance by Successor Trustee.................. 41
Section 8.12 Succession by Merger, Etc........................ 42
Section 8.13 Limitation on Rights of Trustee as Creditor...... 42
ARTICLE IX CONCERNING THE DEBENTUREHOLDERS...................................... 42
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TABLE OF CONTENTS
(continued)
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Section 9.1 Action by Debentureholders....................... 42
Section 9.2 Proof of Execution by Debentureholders........... 43
Section 9.3 Who Are Deemed Absolute Owners................... 43
Section 9.4 Company-Owned Debentures Disregarded............. 43
Section 9.5 Revocation of Consents; Future Holders Bound..... 44
ARTICLE X DEBENTUREHOLDERS' MEETINGS............................................ 44
Section 10.1 Purpose of Meetings.............................. 44
Section 10.2 Call of Meetings by Trustee...................... 45
Section 10.3 Call of Meetings by Company or Debentureholders.. 45
Section 10.4 Qualifications for Voting........................ 45
Section 10.5 Regulations...................................... 45
Section 10.6 Voting........................................... 46
Section 10.7 No Delay of Rights by Meeting.................... 47
ARTICLE XI SUPPLEMENTAL INDENTURES.............................................. 47
Section 11.1 Supplemental Indentures Without Consent of
Debentureholders............................... 47
Section 11.2 Supplemental Indentures with Consent of
Debentureholders............................... 48
Section 11.3 Effect of Supplemental Indentures................ 49
Section 11.4 Notation on Debentures........................... 49
Section 11.5 Evidence of Compliance of Supplemental Indenture
to Be Furnished Trustee.......................... 49
ARTICLE XII MERGER, SALE OR CONSOLIDATION....................................... 50
Section 12.2 Successor Corporation to Be Substituted.......... 50
ARTICLE XIII SATISFACTION AND DISCHARGE OF INDENTURE............................ 51
Section 13.1 Discharge of Indenture........................... 51
Section 13.2 Deposited Monies to Be Held in Trust by Trustee.. 51
Section 13.3 Paying Agent to Repay Monies Held................ 52
Section 13.4 Return of Unclaimed Monies....................... 52
Section 13.5 Reinstatement 52
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS..... 52
Section 14.1 Indenture and Debentures Solely Corporate
Obligations.................................... 52
ARTICLE XV CONVERSION OF DEBENTURES............................................. 53
Section 15.1 Right to Convert................................. 53
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TABLE OF CONTENTS
(continued)
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Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends.......................... 53
Section 15.3 Cash Payments in Lieu of Fractional Shares....... 54
Section 15.4 Conversion Price................................. 55
Section 15.5 Adjustment of Conversion Price................... 55
Section 15.6 Reclassification, Consolidation, Merger or Sale.. 65
Section 15.7 Taxes on Shares Issued........................... 66
Section 15.8 Reservation of Shares; Shares to Be Fully Paid;
Listing of Common Stock........................ 67
Section 15.9 Responsibility of Trustee........................ 67
Section 15.10 Notice to Holders Prior to Certain Actions....... 68
Section 15.11 Adjustments to Conversion Price in the Event of
a Fundamental Change........................... 69
ARTICLE XVI MISCELLANEOUS PROVISIONS............................................ 71
Section 16.1 Provisions Binding on Company's Successors....... 71
Section 16.2 Official Acts by Successor Corporation........... 71
Section 16.3 Addresses for Notices, Etc....................... 72
Section 16.4 Governing Law.................................... 72
Section 16.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee............. 72
Section 16.6 Legal Holidays................................... 73
Section 16.7 No Security Interest Created..................... 73
Section 16.8 Trust Indenture Act.............................. 73
Section 16.9 Benefits of Indenture............................ 73
Section 16.10 Table of Contents, Headings, Etc. ............... 73
Section 16.11 Authenticating Agent............................. 73
Section 16.12 Execution in Counterparts........................ 74
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INDENTURE dated as of ___________, 1997 between
SEQUUS PHARMACEUTICALS, INC., a Delaware corporation (hereinafter sometimes
called the "Company", as more fully set forth in Section 1.1), and
CHEMICAL TRUST COMPANY OF CALIFORNIA, a ___________ organized under the laws of
California (hereinafter sometimes called the "Trustee", as more fully set forth
in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its ___% Convertible Subordinated Debentures due 2007 (hereinafter
sometimes called the "Debentures"), in an aggregate principal amount not to
exceed $57,500,000 and, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Debentures, the certificate of authentication to be borne by
the Debentures, a form of assignment, a form of conversion notice and a
certificate of transfer to be borne by the Debentures are to be substantially in
the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Debentures have in
all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Debentures
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Debentures by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the
Debentures (except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except as
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herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in
said Securities Act as in force at the date of the execution of this
Indenture. The words "herein," "hereof," "hereunder," and words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other Subdivision. The terms defined in this Article include the
plural as well as the singular.
Affiliate: The term "Affiliate" of any specified person shall mean any
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other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Applicable Price: The term "Applicable Price" shall have the meaning
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specified in Section 15.11(b).
Board of Directors: The term "Board of Directors" shall mean the Board of
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Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Board Resolution: The term "Board Resolution" means a copy of a resolution
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certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
Business Day: The term "Business Day" means each Monday, Tuesday,
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Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
Commission: The term "Commission" shall mean the Securities and Exchange
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Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class of
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the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Debentures shall include only shares of the class designated as
common stock of the Company at the date of this Indenture or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
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that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
2
Common Stock Fundamental Change: The term "Common Stock Fundamental
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Change" shall have the meaning specified in Section 15.11(b).
Company: The term "Company" shall mean Sequus Pharmaceuticals, Inc., a
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Delaware corporation, and subject to the provisions of Article XII, shall
include its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
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specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office," or other
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similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at
______________________.
Debenture or Debentures: The terms "Debenture" or "Debentures" shall mean
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any Debenture or Debentures, as the case may be, authenticated and delivered
under this Indenture.
Debentureholder; holder: The terms "Debentureholder" or "holder" as
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applied to any Debenture, or other similar terms (but excluding the term
"beneficial holder"), shall mean any person in whose name at the time a
particular Debenture is registered on the Debenture register.
Debenture register: The term "Debenture register" shall have the meaning
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specified in Section 2.5.
default: The term "default" shall mean any event that is, or after notice
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or passage of time, or both, would be, an Event of Default.
Designated Senior Indebtedness: The term "Designated Senior Indebtedness"
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means any particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Indebtedness shall be "Designated Senior Indebtedness" for purposes of the
Indenture (provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness).
Event of Default: The term "Event of Default" shall mean any event
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specified in Section 7.1(a), (b), (c), (d), (e), (f) or (g) continued for the
period of time, if any, and after the giving of notice, if any, therein
designated.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act of
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1934, as amended, and the rules and regulations promulgated thereunder.
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Exchange Date: The term "Exchange Date" shall mean the date on which the
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Debentures are issued in exchange for the outstanding shares of $____
Convertible Exchangeable Preferred Stock, par value $0.01 per share, of the
Company.
Fundamental Change: The term "Fundamental Change" shall have the meaning
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specified in Section 15.11(b).
Indebtedness: The term "Indebtedness" means, with respect to any person,
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all obligations, whether or not contingent, of such person (i) (a) for borrowed
money, (b) evidenced by a note, debenture, bond or other written instrument, (c)
under a lease required to be capitalized on the balance sheet of the lessee
under generally accepted accounting principles or under any lease or related
document (including a purchase agreement) that provides that the Company is
contractually obligated to purchase or cause a third party to purchase and
thereby guarantee a minimum residual value of the lease property to the lessor
and the obligations of the Company under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title in an encumbrance to which the property or
assets of such person are subject, whether or not the obligation secured thereby
shall have been assumed by or shall otherwise be such person's legal liability,
(f) in respect of the balance of deferred and unpaid purchase price of any
property or assets, (g) under interest rate or currency swap agreements, cap,
floor and collar agreements, spot and forward contracts and similar agreements
and arrangements; (ii) with respect to any obligation of others of the type
described in the preceding clause (i) or under clause (iii) below assumed by or
guaranteed in any manner by such person or in effect guaranteed by such person
through an agreement to purchase (including, without limitation, "take or pay"
and similar arrangements), contingent or otherwise (and the obligations of such
person under any such assumptions, guarantees or other such arrangements); and
(iii) any and all Indebtedness constituting deferrals, renewals, extensions,
refinancings and refundings of, or amendments, modifications or supplements to,
any of the foregoing.
Indenture: The term "Indenture" shall mean this instrument as originally
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executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Instrument: The term "Instrument" shall have the meaning specified in
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Section 7.1(f).
Non-Stock Fundamental Change: The term "Non-Stock Fundamental Change"
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shall have the meaning specified in Section 15.11(b).
Officers' Certificate: The term "Officers' Certificate", when used with
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respect to the Company, shall mean a certificate signed by (a) one of the
President, the Chief Executive Officer, Executive or Senior Vice President or
any Vice President (whether or not designated by a number or numbers or word
added before or after the title "Vice President") and (b) by one of the
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Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or
Controller of the Company, which is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 16.5 if and
to the extent required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in
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writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
16.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to
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Debentures, shall, subject to the provisions of Section 9.4, mean, as of any
particular time, all Debentures authenticated and delivered by the Trustee under
this Indenture, except
(a) Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment, or redemption
of which monies in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company
shall act as its own paying agent); provided that if such Debentures are to
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be redeemed prior to the maturity thereof, notice of such redemption shall
have been given as provided in Section 3.2, or provision satisfactory to
the Trustee shall have been made for giving such notice;
(c) Debentures in lieu of which, or in substitution for which, other
Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof satisfactory to the Trustee is presented
that any such Debentures are held by bona fide holders in due course; and
(d) Debentures converted into Common Stock pursuant to Article XV and
Debentures deemed not outstanding pursuant to Section 3.2.
Payment Blockage Notice: The term "Payment Blockage Notice" has the
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meaning specified in Section 4.2.
person: The term "person" shall mean a corporation, an association, a
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partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
Predecessor Debenture: The term "Predecessor Debenture" of any particular
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Debenture shall mean every previous Debenture evidencing all or a portion of the
same debt as that evidenced by such particular Debenture; and, for the purposes
of this definition, any Debenture
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authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Debenture shall be deemed to evidence the same debt as the lost,
destroyed or stolen Debenture that it replaces.
Purchase Stock Price: The term "Purchase Stock Price" shall have the
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meaning specified in Section 15.11(b).
Reference Marked Price: The term "Reference Marked Price" shall have the
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meaning specified in Section 15.11(b).
"Representative" means the (a) indenture trustee or other trustee, agent or
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representative for any Senior Indebtedness or (b) with respect to any Senior
Indebtedness that does not have any such trustee, agent or other representative,
(i) in the case of such Senior Indebtedness issued pursuant to an agreement
providing for voting arrangements as among the holders or owners of such Senior
Indebtedness, any holder or owner of such Senior Indebtedness acting with the
consent of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness,
the holder or owner of such Senior Indebtedness.
Responsible Officer: The term "Responsible Officer", when used with
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respect to the Trustee, shall mean an officer of the Trustee assigned to the
Corporate Trust Office, and any officer of the Trustee to whom such matter is
referred to because of his knowledge of and familiarity with the particular
subject.
Securities Act: The term "Securities Act" means the Securities Act of
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1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
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of, premium, if any, and interest on, rent under, and any other amounts payable
on or in or in respect of any Indebtedness of the Company (including,
without limitation, any interest accruing after the filing of a petition by or
against the Company under any bankruptcy law, whether or not allowed as a claim
after such filing in any proceeding under such bankruptcy law), whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to the foregoing); provided, however, that Senior Indebtedness
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does not include (v) Indebtedness evidenced by the Debentures, (w) any liability
for federal, state local or other taxes owed or owing by the Company, (x)
Indebtedness of the Company to any subsidiary of the Company, (y) any trade
payables of the Company incurred in the ordinary course of business, and (z) any
indebtedness in which the instrument creating or evidencing the same or the
assumption or thereof (or related agreements or documents to which the Company
is a party) expressly provides that such Indebtedness shall not be senior in
right of payment to, or is pari passu with, or is subordinated or junior to, the
Debentures.
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Subsidiary: The term "Subsidiary" means a corporation more than 50% of the
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outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
Trading Day: The term "Trading Day" has the meaning specified in Section
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15.5(h)(5).
Trust Indenture Act: The term "Trust Indenture Act" shall mean the Trust
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Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; provided,
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however, that in the event the Trust Indenture Act of 1939 is amended after the
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date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean Chemical Trust Company of
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California and its successors and any corporation resulting from or surviving
any consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Article XV.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
Section 2.1 Designation, Amount and Issue of Debentures. The Debentures
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shall be designated as "___% Convertible Subordinated Debentures due 2007."
Debentures not to exceed the aggregate principal amount of $57,500,000 (except
pursuant to Sections 2.5, 2.6, 3.3 and 15.2) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures upon the written order of the Company,
signed by the Company's (a) President, Executive or Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) Treasurer or
Assistant Treasurer or its Secretary or any Assistant Secretary, without any
further action by the Company hereunder.
Section 2.2 Form of Debentures. The Debentures and the Trustee's
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certificate of authentication to be borne by such Debentures shall be
substantially in the form set forth in Exhibit A, which is incorporated in and
made a part of this Indenture.
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Any of the Debentures may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Debentures may be
listed or designated for issuance, or to conform to usage.
The terms and provisions contained in the form of Debenture attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Debentures; Payments of Interest.
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The Debentures shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Debenture shall be dated the date of its authentication and, except as
provided in this Section, shall bear interest, payable semiannually on March 1
and September 1, of each year, commencing on the first such date after the
Exchange Date, from the most recent date to which interest has been paid or
duly provided for, or if no interest has been paid or duly provided for on the
Debentures, from the Exchange Date, until payment of the principal sum has
been made or fully provided for. Notwithstanding the foregoing, when there is
no existing default in the payment of interest on the Debentures, all
Debentures authenticated by the Trustee after the close of business on the
record date (as defined in this Section 2.3) for any interest payment date
(March 1 or September 1, as the case may be) and prior to such interest
payment date shall be dated the date of authentication but shall bear interest
from such interest payment date, provided, however, that if and to the extent
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that the Company shall default in interest due on such interest payment date
then any such Debenture shall bear interest from the March 1 or the September
1, as the case may be, immediately preceding the date of such Debenture to
which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for on the Debentures, from the Exchange Date.
The person in whose name any Debenture (or its Predecessor Debenture) is
registered at the close of business on any record date with respect to any
interest payment date (including any Debenture that is converted after the
record date and on or before the interest payment date) shall be entitled to
receive the interest payable on such interest payment date notwithstanding the
cancellation of such Debenture upon any transfer, exchange or conversion
subsequent to the record date and on or prior to such interest payment date.
Interest may, at the option of the Company, be paid by check mailed to the
address of such person on the registry kept for such purposes; provided that,
--------
with respect to any holder of Debentures with an aggregate principal amount
equal to or in excess of $2,000,000, at the request of such holder in writing to
the Company, interest on such holder's Debentures shall be paid by wire transfer
in immediately available funds in accordance with the wire transfer instruction
supplied by such holder to the Trustee and paying agent (if different from
Trustee). The term "record date" with respect to any
8
interest payment date shall mean the February 15 or August 15 preceding said
March 1 or September 1.
Interest on the Debentures shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Any interest on any Debenture which is payable, but is not punctually paid
or duly provided for, on any said March 1 or September 1 (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Debentureholder
on the relevant record date by virtue of his having been such Debentureholder;
and such Defaulted Interest shall be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a
special record date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Debenture
and the date of the payment (which shall be not less than twenty-five (25)
days after the receipt by the Trustee of such notice, unless the Trustee
shall consent to an earlier date), and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall be not more than fifteen
(15) days and not less than ten (10) days prior to the date of the proposed
payment and not less than ten (10) days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such special record date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Debentureholder as of such special record date at
his address as it appears in the Debenture register, not less than ten (10)
days prior to such special record date. Notice of the proposed payment of
such Defaulted Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the persons in whose names
the Debentures (or their respective Predecessor Debentures) were registered
at the close of business on such special record date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Debentures
may be listed or designated for issuance, and upon such notice as may be
required by such exchange or automated quotation system, if, after notice
given by the Company to the Trustee of the proposed
9
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.4 Execution of Debentures. The Debentures shall be signed in
-----------------------
the name and on behalf of the Company by the facsimile signature of its
President, its Chief Executive Officer, any of its Executive or Senior Vice
Presidents, or any of its Vice Presidents (whether or not designated by a
number or numbers or word or words added before or after the title "Vice
President") and attested by the facsimile signature of its Secretary or any of
its Assistant Secretaries (which may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Debentures as shall
bear thereon a certificate of authentication substantially in the form set
forth on the form of Debenture attached as Exhibit A hereto, manually executed
by the Trustee (or an authenticating agent appointed by the Trustee as
provided by Section 16.11), shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate by the
Trustee (or such an authenticating agent) upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debentures shall cease to be such officer before the Debentures so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Debentures nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Debentures had not ceased to be
such officer of the Company; and any Debenture may be signed on behalf of the
Company by such persons as, at the actual date of the execution of such
Debenture, shall be the proper officers of the Company, although at the date of
the execution of this Indenture any such person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Debentures. The
----------------------------------------------------
Company shall cause to be kept at the Corporate Trust Office a register (the
register maintained in such office and in any other office or agency of the
Company designated pursuant to Section 5.2 being herein sometimes collectively
referred to as the "Debenture register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. Such register shall
be in written form or in any form capable of being converted into written form
within a reasonable period of time. The Trustee is hereby appointed "Debenture
registrar" for the purpose of registering Debentures and transfers of
Debentures as herein provided. The Company may appoint one or more co-
registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Debenture to the
Debenture registrar or any co-registrar, and satisfaction of the requirements
for such transfer set forth in this Section 2.5, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denominations and of a like aggregate principal amount.
10
Debentures may be exchanged for other Debentures of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Debentures to be exchanged at any such office or agency. Whenever any
Debentures are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Debentures which the Debentureholder
making the exchange is entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Debentures presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Debenture
registrar or any co-registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
duly executed, by the Debentureholder thereof or his attorney duly authorized in
writing.
No service charge shall be charged to the Debentureholder for any exchange
or registration of transfer of Debentures, but the Company may require payment
of a sum sufficient to cover any tax, assessments or other governmental charges
that may be imposed in connection therewith.
None of the Company, the Trustee, the Debenture registrar or any co-
registrar shall be required to exchange or register a transfer of (a) any
Debentures for a period of fifteen (15) days next preceding any selection of
Debentures to be redeemed or (b) any Debentures called for redemption or, if a
portion of any Debenture is selected or called for redemption, such portion
thereof selected or called for redemption or (c) any Debentures surrendered for
conversion or, if a portion of any Debenture is surrendered for conversion, such
portion thereof surrendered for conversion.
All Debentures issued upon any transfer or exchange of Debentures in
accordance with this Indenture shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this Indenture
as the Debentures surrendered upon such registration of transfer or exchange.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Debentures. In case any
-----------------------------------------------
Debenture shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute, and upon its request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and deliver, a
new Debenture, bearing a number not contemporaneously outstanding, in exchange
and substitution for the mutilated Debenture, or in lieu of and in substitution
for the Debenture so destroyed, lost or stolen. In every case the applicant for
a substituted Debenture shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company, to
the Trustee and, if applicable, to such authenticating agent evidence to their
satisfaction of the destruction, loss or theft of such Debenture and of the
ownership thereof.
11
The Trustee or such authenticating agent may authenticate any such
substituted Debenture and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Debenture, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debenture which has matured or is
about to mature or has been called for redemption or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or authorize the
payment of or convert or authorize the conversion of the same (without surrender
thereof except in the case of a mutilated Debenture), as the case may be, if the
applicant for such payment or conversion shall furnish to the Company, to the
Trustee and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless for any loss,
liability, cost or expense caused by or connected with such substitution, and,
in case of destruction, loss or theft, evidence satisfactory to the Company, the
Trustee and, if applicable, any paying agent or conversion agent of the
destruction, loss or theft of such Debenture and of the ownership thereof.
Every substitute Debenture issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Debenture is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Debenture shall be found at any
time, and shall be entitled to all the benefits of (but shall be subject to all
the limitations set forth in) this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. To the extent permitted by
law, all Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, destroyed, lost or stolen Debentures and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
or conversion of negotiable instruments or other securities without their
surrender.
Section 2.7 Temporary Debentures. Pending the preparation of definitive
--------------------
Debentures, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Debentures (printed or lithographed).
Temporary Debentures shall be issuable in any authorized denomination, and
substantially in the form of the definitive Debentures but with such omissions,
insertions and variations as may be appropriate for temporary Debentures, all as
may be determined by the Company. Every such temporary Debenture shall be
executed by the Company and authenticated by the Trustee or such authenticating
agent upon the same conditions and in substantially the same manner, and with
the same effect, as the definitive Debentures. Without unreasonable delay the
Company will execute and deliver to the Trustee or such authenticating agent
definitive Debentures and thereupon any or all temporary Debentures may be
surrendered in exchange therefor, at each office or agency maintained by the
Company pursuant to Section 5.2 and the Trustee or such authenticating agent
shall authenticate and deliver in exchange for such temporary Debentures an
equal aggregate principal amount of definitive Debentures. Such
12
exchange shall be made by the Company at its own expense and without any
charge therefor. Until so exchanged, the temporary Debentures shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as definitive Debentures authenticated and delivered
hereunder.
Section 2.8 Cancellation of Debentures Paid, Etc. All Debentures
-------------------------------------
surrendered for the purpose of payment, redemption, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Debenture registrar or any conversion agent, be surrendered to
the Trustee and promptly canceled by it, or, if surrendered to the Trustee,
shall be promptly canceled by it, and no Debentures shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Indenture. Upon written instructions of the Company, the Trustee shall destroy
canceled Debentures and, after such destruction, shall deliver a certificate
of such destruction to the Company. If the Company shall acquire any of the
Debentures, such acquisition shall not operate as a redemption or satisfaction
of the indebtedness represented by such Debentures unless and until the same
are delivered to the Trustee for cancellation.
ARTICLE III
REDEMPTION OF DEBENTURES
Section 3.1 Redemption Prices. The Company may, at its option, redeem
-----------------
all or from time to time any part of the Debentures on any date prior to
maturity, upon notice as set forth in Section 3.2, and at the optional
redemption prices set forth in the form of Debenture attached as Exhibit A
hereto, together with accrued interest, if any, to, but excluding, the date
fixed for redemption, provided, however, that no such redemption shall be
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effected before March 2, 2000.
Section 3.2 Notice of Redemption; Selection of Debentures. In case the
---------------------------------------------
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Debentures pursuant to Section 3.1, it shall fix a date for
redemption, and it, or at its request (which must be received by the Trustee at
least ten (10) Business Days prior to the date the Trustee is requested to give
notice as described below unless a shorter period is agreed to by the Trustee),
the Trustee in the name of and at the expense of the Company, shall mail or
cause to be mailed a notice of such redemption at least twenty (20) and not more
than sixty (60) days prior to the date fixed for redemption to the holders of
Debentures so to be redeemed as a whole or in part at their last addresses as
the same appear on the Debenture register (provided that if the Company shall
--------
give such notice, it shall also give such notice, and notice of the Debentures
to be redeemed, to the Trustee). Such mailing shall be by first class mail.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Debenture designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Debenture.
13
Each such notice of redemption shall specify the aggregate principal amount
of Debentures to be redeemed, the date fixed for redemption, the redemption
price at which Debentures are to be redeemed, the place or places of payment,
that payment will be made upon presentation and surrender of such Debentures,
that interest accrued to, but excluding, the date fixed for redemption will be
paid as specified in said notice, and that on and after said date interest
thereon or on the portion thereof to be redeemed will cease to accrue. Such
notice shall also state the current Conversion Price and the date on which the
right to convert such Debentures or portions thereof into Common Stock will
expire. If fewer than all the Debentures are to be redeemed, the notice of
redemption shall identify the Debentures to be redeemed. In case any Debenture
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Debenture, a new Debenture
or Debentures in principal amount equal to the unredeemed portion thereof will
be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 3.2, the Company will deposit with the Trustee
or with one or more paying agents (or, if the Company is acting as its own
paying agent, set aside, segregate and hold in trust as provided in Section 5.4)
an amount of money sufficient to redeem on the redemption date all the
Debentures (or portions thereof) so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued interest to, but excluding, the date
fixed for redemption; provided that if such payment is made on the redemption
--------
date it must be received by the Trustee or paying agent, as the case may be, by
10:00 a.m. New York City time, on such date. If any Debenture called for
redemption is converted pursuant hereto, any money deposited with the Trustee or
any paying agent or so segregated and held in trust for the redemption of such
Debenture shall be paid to the Company upon its request, or, if then held by the
Company shall be discharged from such trust. If fewer than all the Debentures
are to be redeemed, the Company will give the Trustee written notice in the form
of an Officers' Certificate not fewer than thirty-five (35) days (or such
shorter period of time as may be acceptable to the Trustee) prior to the
redemption date as to the aggregate principal amount of Debentures to be
redeemed.
If fewer than all the Debentures are to be redeemed, the Trustee shall
select the Debentures or portions thereof to be redeemed (in principal amounts
of $1,000 or integral multiples thereof), by lot or, in its sole discretion, on
a pro rata basis. If any Debenture selected for partial redemption is converted
in part after such selection, the converted portion of such Debenture shall be
deemed (so far as may be) to be the portion to be selected for redemption. The
Debentures (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such Debenture is
converted as a whole or in part before the mailing of the notice of redemption.
Upon any redemption of less than all Debentures, the Company and the
Trustee may (but need not) treat as outstanding any Debentures surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not)
14
treat as not outstanding any Debenture authenticated and delivered during such
period in exchange for the unconverted portion of any Debenture converted in
part during such period.
Section 3.3 Payment of Debentures Called for Redemption. If notice of
-------------------------------------------
redemption has been given as above provided, the Debentures or portion of
Debentures with respect to which such notice has been given shall, unless
converted into Common Stock pursuant to the terms hereof, become due and payable
on the date and at the place or places stated in such notice at the applicable
redemption price, together with interest accrued to, but excluding, the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Debentures at the redemption price, together with
interest accrued to, but excluding, said date) interest on the Debentures or
portion of Debentures so called for redemption shall cease to accrue and such
Debentures shall cease after the close of business on the Business Day next
preceding the date fixed for redemption to be convertible into Common Stock and,
except as provided in Sections 8.5 and 13.4, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Debentures except the right to receive the redemption price
thereof and unpaid interest to, but excluding, the date fixed for redemption.
On presentation and surrender of such Debentures at a place of payment in said
notice specified, the said Debentures or the specified portions thereof to be
redeemed shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to, but excluding, the date fixed
for redemption; provided that, if the applicable redemption date is an interest
--------
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holders of such Debentures registered as such on the
relevant record date subject to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Debenture redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Debenture or Debentures, of authorized
denominations, in principal amount equal to the unredeemed portion of the
Debentures so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Debentures
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Debentures or of any Event of Default of
which, in the case of any Event of Default other than under Section 7.1(a) or
(b), a Responsible Officer of the Trustee has knowledge. If any Debenture
called for redemption shall not be so paid upon surrender thereof for
redemption, the principal and premium, if any, shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Debenture and such Debenture shall remain convertible into Common Stock
until the principal and premium, if any, shall have been paid or duly provided
for.
Section 3.4 Conversion Arrangement on Call for Redemption. In connection
---------------------------------------------
with any redemption of Debentures, the Company may arrange for the purchase and
conversion of any Debentures by an agreement with one or more investment bankers
or other purchasers to purchase such Debentures by paying to the Trustee in
trust for the Debentureholders, on or before
15
the date fixed for redemption, an amount not less than the applicable redemption
price, together with interest accrued to the date fixed for redemption, of such
Debentures. Notwithstanding anything to the contrary contained in this Article
III, the obligation of the Company to pay the redemption price of such
Debentures, together with interest accrued to, but excluding, the date fixed for
redemption, shall be deemed to be satisfied and discharged to the extent such
amount is so paid by such purchasers. If such an agreement is entered into, a
copy of which will be filed with the Trustee prior to the date fixed for
redemption, any Debentures not duly surrendered for conversion by the holders
thereof may, at the option of the Company, be deemed, to the fullest extent
permitted by law, acquired by such purchasers from such holders and
(notwithstanding anything to the contrary contained in Article XV) surrendered
by such purchasers for conversion, all as of immediately prior to the close of
business on the date fixed for redemption (and the right to convert any such
Debentures shall be deemed to have been extended through such time), subject to
payment of the above amount as aforesaid. At the direction of the Company, the
Trustee shall hold and dispose of any such amount paid to it in the same manner
as it would monies deposited with it by the Company for the redemption of
Debentures. Without the Trustee's prior written consent, no arrangement between
the Company and such purchasers for the purchase and conversion of any
Debentures shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture,
and the Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in connection with any
such arrangement for the purchase and conversion of any Debentures between the
Company and such purchasers to which the Trustee has not consented in writing,
including the costs and expenses incurred by the Trustee in the defense of any
claim or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or obligations under
this Indenture.
ARTICLE IV
SUBORDINATION OF DEBENTURES
Section 4.1 Agreement of Subordination. The Company covenants and agrees,
--------------------------
and each holder of Debentures issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued subject to
the provisions of this Article IV; and each person holding any Debenture,
whether upon original issue or upon transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Debentures (including, but not limited to, the redemption price with respect to
the Debentures to be redeemed, as provided in this Indenture) issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full of all Senior
Indebtedness.
16
No provision of this Article IV shall prevent the occurrence of any default
or Event of Default hereunder.
Section 4.2 Payments to Debentureholders. No payment shall be made with
----------------------------
respect to the principal of, or premium, if any, or interest on the Debentures
(including, but not limited to, the redemption price with respect to the
Debentures to be redeemed, as provided in this Indenture), except payments and
distributions made by the Trustee as permitted by the first or second paragraph
of Section 4.5, if:
(a) a default in the payment of principal, premium, interest, rent
or other obligations due on any Senior Indebtedness occurs and is
continuing (or, in the case of Senior Indebtedness for which there is a
period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing
such Senior Indebtedness), unless and until such default shall have been
cured or waived or shall have ceased to exist; or
(b) a default, other than a payment default, on a Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from the
Company or holder or Representative of Designated Senior Indebtedness.
If the Trustee receives any Payment Blockage Notice pursuant to clause (b)
above, no subsequent Payment Blockage Notice shall be effective for purposes of
this Section unless and until (A) at least 365 days shall have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice, and (B) all
scheduled payments of principal, premium, if any, and interest on the Debentures
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Company may and shall resume payments on and distributions in respect
of the Debentures upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in clause (ii) above, the earlier
of (x) the date such default is cured or waived and (y) 179 days pass after
notice is received if the maturity of such Designated Senior Indebtedness has
not been accelerated, unless this Article IV otherwise prohibits the payment
or distribution at the time of such payment or distribution.
17
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made on account of the principal (and premium, if any) or interest on the
Debentures (except payments made pursuant to Article XIII from monies deposited
with the Trustee pursuant thereto prior to the happening of such dissolution,
winding-up, liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings); and upon any such dissolution or
winding-up or liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Debentures or the Trustee
under this Indenture would be entitled, except for the provision of this Article
IV, shall (except as aforesaid) be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the holders of the Debentures or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders or as otherwise required by
law or a court order) or their respective Representative or Representatives, as
their respective interests may appear, to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment or
distribution is made to the holders of the Debentures or to the Trustee under
this Indenture.
In the event of the acceleration of the Debentures because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Debentures in respect of the principal of, premium, if any, or interest on
the Debentures (including, but not limited to, the redemption price with respect
to the Debentures called for redemption in accordance with Section 3.2), except
payments and distributions made by the Trustee as permitted by the first or
second paragraph of Section 4.5, until all Senior Indebtedness has been paid in
full in cash or other payment satisfactory to the holders of Senior Indebtedness
or such acceleration is rescinded in accordance with the terms of this
Indenture. If payment of the Debentures is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
such acceleration.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Debentures before all Senior
Indebtedness is paid in full, or provision is made for such payment in
accordance with its terms, such payment or distribution shall be held by the
recipient or recipients in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective
Representative or Representatives, or to the trustee or trustees under any
indenture pursuant to which any
18
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, as calculated by the Company, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution (or provision
therefor) to or for the holders of such Senior Indebtedness.
For purposes of this Article IV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated (at least to the extent provided in this Article IV with respect to
the Debentures) to the payment of all Senior Indebtedness which may at the time
be outstanding; provided that (i) the Senior Indebtedness is assumed by the new
--------
corporation, if any, resulting from such reorganization or adjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or by the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 4.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3 Subrogation of Debentures. Subject to the payment in full
-------------------------
of all Senior Indebtedness, the rights of the holders of the Debentures shall
be subrogated to the extent of the payments or distributions made to the
holders of such Senior Indebtedness pursuant to the provisions of this Article
IV (equally and ratably with the holders of all indebtedness of the Company
which by its express terms is subordinated to other indebtedness of the
Company to substantially the same extent as the Debentures are subordinated
and is entitled to like rights of subrogation) to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Debentures shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article IV, and no payment over
pursuant to the provisions of this Article IV, to or for the benefit of the
holders of Senior Indebtedness by holders of the Debentures or the Trustee,
shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the holders of the Debentures, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of the
19
Debentures pursuant to the subrogation provisions of this Article IV, which
would otherwise have been paid to the holders of Senior Indebtedness shall be
deemed to be a payment by the Company to or for the account of the Debentures.
It is understood that the provisions of this Article IV are and are intended
solely for the purposes of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Debentures is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the holders of the
Debentures, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Debentures the principal of (and premium, if any)
and interest on the Debentures 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 of the Debentures and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article IV of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Debentures shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 Authorization by Debentureholders. Each holder of a
---------------------------------
Debenture by his acceptance thereof authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate
the subordination provided in this Article IV and appoints the Trustee his
attorney-in-fact for any and all such purposes.
Section 4.5 Notice to Trustee. The Company shall give prompt written
-----------------
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any
paying agent in respect of the Debentures pursuant to the provisions of this
Article IV. Notwithstanding the provisions of this Article IV or any other
provision of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any Senior Indebtedness or of any default or event of
default with respect to any Senior Indebtedness or of any other facts which
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article IV,
unless and until a
20
Responsible Officer of the Trustee shall have received written notice thereof
at the Corporate Trust Office from the Company (in the form of an Officers'
Certificate) or a holder or holders or Representative of Senior Indebtedness
who shall have been certified by the Company or otherwise established to the
reasonable satisfaction of the Trustee to be such holder or Representative;
and before the receipt of any such written notice, the Trustee, subject to the
provisions of Section 8.1, shall be entitled in all respects to assume that no
such facts exist; provided that if on a date at least two (2) Business Days
--------
prior to the date upon which by the terms hereof any such monies may become
payable for any purpose (including, without limitation, the payment of the
principal of, or premium, if any, or interest on any Debenture), the Trustee
shall not have received with respect to such monies the notice provided for in
this Section 4.5, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such monies and to apply the same to the purpose for which they were received,
and shall not be affected by any notice to the contrary which may be received
by it on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent (a) any payment by the Company or the Trustee to the
Debentureholders of amounts in connection with a redemption of Debentures if (i)
notice of such redemption has been given pursuant to Article III prior to the
receipt by the Trustee of written notice as aforesaid, and (ii) such notice of
redemption is given not earlier than sixty (60) days before the redemption date,
or (b) any payment by the Trustee to the Debentureholders of monies deposited
with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be entitled to
rely on the delivery to it of a written notice by a person representing himself
to be a holder of Senior Indebtedness (or a Representative on behalf of such
holder) to establish that such notice has been given by a holder of Senior
Indebtedness or a Representative on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article IV, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article IV, and if such evidence is not furnished the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee and
-----------------------------------------
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any
Senior Indebtedness at any time held by it, to the same extent as any other
holder of Senior Indebtedness, and nothing in Section 8.13 or elsewhere in
this Indenture shall deprive the Trustee or any such agent of any of its
rights as such holder. Nothing in this Article IV shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6.
21
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other person money or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article IV or
otherwise.
Section 4.7 No Impairment of Subordination. No right of any present or
------------------------------
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Deemed Payment. For the purposes of this
----------------------------------
Article only, (1) the issuance and delivery of junior securities upon conversion
of Debentures in accordance with Article XV shall not be deemed to constitute a
payment or distribution on account of the principal of (or premium, if any) or
interest on Debentures or on account of the purchase or other acquisition of
Debentures, and (2) the payment, issuance or delivery of cash (except in
satisfaction of fractional shares pursuant to Section 15.3), property or
securities (other than junior securities) upon conversion of a Debenture shall
be deemed to constitute payment on account of the principal of such Debenture.
For the purposes of this Section, the term "junior securities" means (a) shares
of any stock of any class of the Company and (b) securities of the Company which
are subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders of the Debentures, the right, which is absolute and
unconditional, of the holder of any Debenture to convert such Debenture in
accordance with Article XV.
Section 4.9 Article Applicable to Paying Agents. If at any time any
-----------------------------------
paying agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article in addition to or
in place of the Trustee; provided, however, that the first paragraph of
-------- -------
Section 4.5 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as paying agent.
Section 4.10 Senior Indebtedness Entitled to Rely. The holders of Senior
------------------------------------
Indebtedness (including, without limitation, Designated Senior Indebtedness)
shall have the right to rely upon
22
this Article IV, and no amendment or modification of the provisions contained
herein shall diminish the rights of such holders unless such holders shall
have agreed in writing thereto.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Debentures at
the places, at the respective times and in the manner provided herein and in the
Debentures. Each installment of interest on the Debentures due on any semi-
annual interest payment date may be paid by mailing checks for the interest
payable to or upon the written order of the holders of Debentures entitled
thereto as they shall appear on the registry books of the Company, provided
--------
that, with respect to any holder of Debentures with an aggregate principal
amount equal to or in excess of $2,000,000, at the request of such holder in
writing to the Company, interest on such holder's Debentures shall be paid by
wire transfer in immediately available funds in accordance with the wire
transfer instructions supplied by such holder to the Trustee and paying agent
(if different from Trustee).
Section 5.2 Maintenance of Office or Agency. The Company will maintain in
-------------------------------
the Borough of Manhattan, The City of New York, an office or agency where the
Debentures may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Debentures and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office [or the office or
agency of the Trustee in the Borough of Manhattan, The City of New York.]
The Company may also from time to time designate one or more other offices
or agencies where the Debentures may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided that
--------
no such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Debenture registrar, Custodian and conversion agent and the Corporate Trust
Office and the office or agency of the Trustee in the Borough of Manhattan, The
City of New York (which shall initially be
23
____________________________) shall be considered as one such office or agency
of the Company for each of the aforesaid purposes.
So long as the Trustee is the Debenture registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 8.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee or if the Trustee shall appoint such a paying agent, it will cause
such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on the
Debentures (whether such sums have been paid to it by the Company or by
any other obligor on the Debentures) in trust for the benefit of the
holders of the Debentures;
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Debentures) to make any
payment of the principal of and premium, if any, or interest on the
Debentures when the same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Debentures, deposit with the paying
agent a sum sufficient to pay such principal, premium, if any, or interest,
and (unless such paying agent is the Trustee) the Company will promptly
notify the Trustee of any failure to take such action, provided that if
such deposit is made on the due date, such deposit must be received by the
paying agent by 10:00 a.m., New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of, premium, if any, or
interest on the Debentures, set aside, segregate and hold in trust for
the benefit of the holders of the Debentures a sum sufficient to pay such
principal, premium, if any, or interest so becoming due and will notify
the Trustee of any failure to take such action and of any failure by the
Company (or any other
24
obligor under the Debentures) to make any payment of the principal of,
premium, if any, or interest on the Debentures when the same shall become
due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for any
other reason, pay or cause to be paid to the Trustee all sums held in
trust by the Company or any paying agent hereunder as required by this
Section 5.4, such sums to be held by the Trustee upon the trusts herein
contained and upon such payment by the Company or any paying agent to the
Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5 Existence. Subject to Article XII, the Company will do or
---------
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
--------
however, that the Company shall not be required to preserve any such right or
-------
franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the holders.
Section 5.6 Maintenance of Properties. The Company will cause all
-------------------------
properties used or useful in the conduct of its business or the business of
any Subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
-------- -------
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the holders.
Section 5.7 Payment of Taxes and Other Claims. The Company will pay or
---------------------------------
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, (ii) all claims for
labor, materials and supplies which, if unpaid, might by law become a lien or
charge upon the property of the Company or any Subsidiary, and (iii) all stamps
and other duties, if any, which may be imposed by the United States or any
political subdivision thereof or therein in connection with the issuance,
transfer, exchange or conversion of any Debentures or with respect to this
Indenture; provided, however, that, in the case of clauses (i) and (ii), the
-------- -------
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim (A) if the failure to do so
will not, in the aggregate, have a material adverse impact on the Company,
25
or (B) if the amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Section 5.8 Stay, Extension and Usury Laws. The Company covenants (to the
------------------------------
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Debentures as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 5.9 Compliance Certificate. The Company shall deliver to the
----------------------
Trustee, within 120 days after the end of each fiscal year of the Company ending
(beginning with the fiscal year in which the Exchange Date falls), an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware of
any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or any Event of Default, an Officers'
Certificate specifying with particularity such default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto.
Any notice required to be given under this Section 5.9 shall be delivered
to the Trustee at its Corporate Trust Office.
Section 5.10 Further Instruments and Acts. Upon request of the Trustee,
----------------------------
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
26
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
Section 6.1 Debentureholders' Lists. The Company covenants and
-----------------------
agrees that it will furnish or cause to be furnished to the Trustee, semi-
annually, not more than fifteen (15) days after each February 15 and August 15
in each year beginning with the immediately succeeding February 15 or August
15 after the Exchange Date, and at such other times as the Trustee may request
in writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses
of the holders of Debentures as of a date not more than fifteen (15) days (or
such other date as the Trustee may reasonably request in order to so provide
any such notices) prior to the time such information is furnished, except that
no such list need be furnished so long as the Trustee is acting as Debenture
registrar.
Section 6.2 Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debentures contained in the most recent list furnished to it as
provided in Section 6.1 or maintained by the Trustee in its capacity as
Debenture registrar, if so acting. The Trustee may destroy any list furnished
to it as provided in Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Debentureholders to communicate with
other holders of Debentures with respect to their rights under this Indenture
or under the Debentures and the corresponding rights and duties of the
Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Debentureholder, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of holders of
Debentures made pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
------------------
(a) Within 60 days after [May 15] of each year commencing
with the year in which the Exchange Date falls, the Trustee shall transmit to
holders of Debentures such reports dated as of [May 15] of the year in which
such reports are made concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
27
(b) A copy of such report shall, at the time of such
transmission to holders of Debentures, be filed by the Trustee with each stock
exchange or automated quotation system upon which the Debentures are listed,
with the Commission and with the Company. The Company will notify the Trustee
when the Debentures are listed on any stock exchange or automated quotation
system and when any such listing is discontinued.
Section 6.4 Reports by Company. The Company shall file with the
------------------
Trustee and the Commission, and transmit to holders of Debentures, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such information, documents
--------
or reports required to be filed with the Commission pursuant to Section 13 or
15(d) of the Exchange Act shall be filed with the Trustee within 15 days after
the same is so required to be filed with the Commission.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. In case one or more of the following
-----------------
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of the principal of and premium,
if any, on any of the Debentures as and when the same shall become due
and payable either at maturity or in connection with any redemption, by
declaration or otherwise, whether or not such payment is prohibited by
the provisions of Article IV; or
(b) default in the payment of any installment of interest,
if any, upon any of the Debentures as and when the same shall become due
and payable, and continuance of such default for a period of thirty (30)
days, whether or not such payment is prohibited by the provisions of
Article IV; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Debentures or in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with) continued for a period of forty-
five (45) days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the
Company by the Trustee, or to the Company and a Responsible Officer of
the Trustee by the holders of at least 25% in
28
aggregate principal amount of the outstanding Debentures at the time
outstanding determined in accordance with Section 9.4; or
(d) failure by the Company to make any payment at maturity,
including any applicable grace period, in respect of Indebtedness, in an
amount in excess of $5,000,000 or the equivalent thereof in any other
currency or composite currency and such failure shall have continued for
thirty (30) days after written notice thereof shall have been given to
the Company by the Trustee or to the Company and a Responsible Officer of
the Trustee or to the Company and a Responsible Officer of the Trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding Debentures at the time outstanding determined in accordance
with Section 9.4; or
(e) a default by the Company with respect to any
Indebtedness which default results in the acceleration of Indebtedness in
an amount in excess of $5,000,000 or the equivalent thereof in any other
currency or composite currency without such Indebtedness having been
discharged or such acceleration having been cured, waived, rescinded or
annulled for a period of thirty (30) days after written notice thereof
shall have been given to the Company by the Trustee by the holders of at
least 25% in aggregate principal amount of the outstanding Debentures at
the time outstanding determined in accordance with Section 9.4; or
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be
commenced against the Company liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of
ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(f) or (g)), unless the principal of all of the Debentures shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the
29
Debentures then outstanding hereunder determined in accordance with Section
9.4, by notice in writing to the Company (and to the Trustee if given by
Debentureholders), may declare the principal of and premium, if any, on all
the Debentures and the interest accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Debentures
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(f) or (g) occurs and is continuing, the principal of all the
Debentures and the interest accrued thereon shall be immediately due and
payable. This provision, however, is subject to the conditions that if, at any
time after the principal of the Debentures shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all Debentures and the principal of and premium,
if any, on any and all Debentures which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest (to the
extent that payment of such interest is enforceable under applicable law) and
on such principal and premium, if any, at the rate borne by the Debentures, to
the date of such payment or deposit) and amounts due to the Trustee pursuant
to Section 8.6, and if any and all defaults under this Indenture, other than
the nonpayment of principal of and premium, if any, and accrued interest on
Debentures which shall have become due by acceleration, shall have been cured
or waived pursuant to Section 7.7, then and in every such case the holders of
a majority in aggregate principal amount of the Debentures then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults or
Events of Default and rescind and annul such declaration and its consequences;
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or Event of Default, or shall impair any right
consequent thereon. The Company shall notify the Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the holders of Debentures, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Debentures, and the Trustee
shall continue as though no such proceeding had been instituted.
Section 7.2 Payments of Debentures on Default; Suit Therefor. The Company
------------------------------------------------
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Debentures as and when the same
shall become due and payable, and such default shall have continued for a period
of thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Debentures as and when the same
shall have become due and payable, whether at maturity of the Debentures or in
connection with any redemption, by declaration under this Indenture or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Debentures, the whole amount that
then shall have become due and payable on all such
30
Debentures for principal and premium, if any, or interest, or both, as the
case may be, with interest upon the overdue principal and premium, if any, and
(to the extent that payment of such interest is enforceable under applicable
law) upon the overdue installments of interest at the rate borne by the
Debentures; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any
expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Debentures to
the registered holders, whether or not the Debentures are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on the Debentures wherever situated the monies
adjudged or decreed to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Debentures, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Debentures, and, in case of
any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Debentureholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Debentures, its or their
creditors, or its or their property, and to collect and receive any monies or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of any amounts due the Trustee under Section 8.6; and
any receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
custodian or similar official is hereby authorized by each of the
Debentureholders 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
Debentureholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason,
31
payment of the same shall be secured by a lien on, and shall be paid out of,
any and all distributions, dividends, monies, securities and other property
which the holders of the Debentures may be entitled to receive in such
proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Debentureholder any plan of
reorganization or arrangement affecting the Debentures or the rights of any
Debentureholder, or to authorize the Trustee to vote in respect of the claim of
any Debentureholder in any such proceeding; provided, however, that the Trustee
-------- -------
may, on behalf of the Debentureholders, vote for the election of a trustee in
bankruptcy or similar official and may be a member of the creditor's committee
established with respect to such bankruptcy.
All rights of action and of asserting claims under this Indenture, or under
any of the Debentures, may be enforced by the Trustee without the possession of
any of the Debentures, or the production thereof on any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Debentures.
In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party) the Trustee shall be held to represent all the holders of the
Debentures, and it shall not be necessary to make any holders of the Debentures
parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
------------------------------------------
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the
distribution of such monies, upon presentation of the several Debentures, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Debentures shall not have become due and be
unpaid, to the payment of interest on the Debentures in default in the
order of the maturity of the installments of such interest, with interest
(to the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by the Debentures,
such payments to be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the principal
of the outstanding Debentures shall have become due, by declaration or
otherwise, and be
32
unpaid, to the payment of the whole amount then owing and unpaid upon the
Debentures for principal and premium, if any, and interest, with interest
on the overdue principal and premium, if any, and (to the extent that
such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Debentures; and in case
such monies shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Debentures, then to the payment of such principal and
premium, if any, and interest without preference or priority of principal
and premium, if any, over interest, or of interest over principal and
premium, if any, or of any installment of interest over any other
installment of interest, or of any Debenture over any other Debenture,
ratably to the aggregate of such principal and premium, if any, and
accrued and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company or any other person lawfully entitled
thereto.
Section 7.4 Proceedings by Debentureholder. No holder of any Debenture
------------------------------
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof,
as hereinbefore provided, and unless also the holders of not less than 25% in
aggregate principal amount of the Debentures then outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to the Trustee
such reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to
the Trustee pursuant to Section 7.7; it being understood and intended, and
being expressly covenanted by the taker and holder of every Debenture with
every other taker and holder and the Trustee, that no one or more holders of
Debentures shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice
the rights of any other holder of Debentures, or to obtain or seek to obtain
priority over or preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Debentures (except as otherwise
provided herein). For the protection and enforcement of this Section 7.4, each
and every Debentureholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Debenture, the right of any holder of any Debenture to receive payment of
the principal of and premium, if any, and interest on such Debenture, on or
after the respective due dates expressed in such Debenture, or to institute suit
for the enforcement of any such payment on or after such respective dates
against the Company shall not be impaired or affected without the consent of
such holder.
33
Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of Default the
----------------------
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except as provided in
----------------------------------
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Debentures to exercise any right
or power accruing upon any default or Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by this Article VII or
by law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of
--------------------------------------------------------------
Debentureholders. The holders of a majority in aggregate principal amount of
----------------
the Debentures at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
-------- -------
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Debentures at the time outstanding determined in
accordance with Section 9.4 may on behalf of the holders of all of the
Debentures waive any past default or Event of Default hereunder and its
consequences except (i) a default in the payment of interest or premium, if any,
on, or the principal of, the Debentures, (ii) a failure by the Company to
convert any Debentures into Common Stock or (iii) a default in respect of a
covenant or provisions hereof which under Article XI cannot be modified or
amended without the consent of the holders of all Debentures then outstanding.
Upon any such waiver the Company, the Trustee and the holders of the Debentures
shall be restored to their former positions and rights hereunder; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon. Whenever any default or Event of
Default hereunder
34
shall have been waived as permitted by this Section 7.7, said default or Event
of Default shall for all purposes of the Debentures and this Indenture be
deemed to have been cured and to be not continuing; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90)
------------------
days after the occurrence of a default, mail to all Debentureholders, as the
names and addresses of such holders appear upon the Debenture register, notice
of all defaults known to a Responsible Officer, unless such defaults shall
have been cured or waived before the giving of such notice; and provided that,
--------
except in the case of default in the payment of the principal of, or
premium, if any, or interest on any of the Debentures, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interests of the
Debentureholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the
costs of such suit and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this
--------
Section 7.9 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Debentureholder, or group of Debentureholders, holding in
the aggregate more than 10% in principal amount of the Debentures at the time
outstanding determined in accordance with Section 9.4, or to any suit
instituted by any Debentureholder for the enforcement of the payment of the
principal of or premium, if any, or interest on any Debenture (including, but
not limited to, the redemption price with respect to the Debentures being
redeemed, as provided in this Indenture) on or after the due date expressed in
such Debenture or to any suit for the enforcement of the right to convert any
Debenture in accordance with the provisions of Article XV.
Section 7.10 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any holder of any Debenture to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or any acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
holders of Debentures may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the holders of Debentures, as the case
may be.
35
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. The Trustee,
--------------------------------------
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture. In case
an Event of Default has occurred (which has not been cured or waived) the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the
Trust Indenture Act, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth
in this Indenture and no implied covenants or obligations shall be read
into this Indenture and the Trust Indenture Act against the Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; but, in the case of any such
certificates or opinions which by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be provided that the Trustee was negligent in ascertaining the
pertinent facts;
(c) the Trustee shall not be liable to any Debentureholder with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of not less than a majority in
principal amount of the Debentures at the time outstanding determined as
provided in Section 9.4 relating to the time, method and place
36
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of
this Section.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise
-------------------------------------
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Debentureholders pursuant to the provisions of
this Indenture, unless such Debentureholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or
37
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; provided,
--------
however, that if the payment within a reasonable time to the Trustee of the
-------
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable indemnity from the
Debentureholders against such expenses or liability as a condition to so
proceeding; the reasonable expenses of every such examination shall be paid
by the Company or, if paid by the Trustee or any predecessor Trustee, shall
be repaid by the Company upon demand; and
(f) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed by it with
due care hereunder.
In no event shall the Trustee be liable for any consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action other than through the Trustee's willful misconduct or
gross negligence.
Section 8.3 No Responsibility for Recitals, Etc. The recitals contained
------------------------------------
herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any Debentures or the proceeds of any Debentures authenticated
and delivered by the Trustee in conformity with the provisions of this
Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own
--------------------------------------------------------------
Debentures. The Trustee, any paying agent, any conversion agent or Debenture
----------
registrar, in its individual or any other capacity, may become the owner or
pledgee of Debentures with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Debenture registrar.
Section 8.5 Monies to Be Held in Trust. Subject to the provisions of
--------------------------
Section 13.4, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as may be agreed from time to time by the Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The Company covenants
------------------------------------
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited
38
by any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances reasonably incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or willful misconduct.
The Company also covenants to indemnify the Trustee in any capacity under this
Indenture and its agents and any authenticating agent for, and to hold them
harmless against, any loss, liability or expense incurred without negligence or
willful misconduct on the part of the Trustee or such agent or authenticating
agent, as the case may be, and arising out of or in connection with the
acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section
8.6 to compensate or indemnify the Trustee and to pay or reimburse the Trustee
for expenses, disbursements and advances shall be secured by a lien prior to
that of the Debentures upon all property and funds held or collected by the
Trustee as such, except, subject to the effect of Sections 4.3 and 7.6, funds
held in trust herewith for the benefit of the holders of particular Debentures
prior to the date of the accrual of such unpaid compensation or indemnifiable
claim. The obligation of the Company under this Section shall survive the
satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(f) or (g)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy, insolvency or
similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or omitting any action hereunder,
such matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to
the Trustee, and such Officers' Certificate, in the absence of negligence,
willful misconduct, recklessness and bad faith on the part of the Trustee,
shall be full warrant to the Trustee for any action taken or omitted by it
under the provisions of this Indenture upon the faith thereof.
Section 8.8 Conflicting Interests of Trustee. If the Trustee has or shall
--------------------------------
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Trustee shall either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the Trust Indenture
Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times be a Trustee
----------------------
hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a
39
combined capital and surplus of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign by giving written notice
of such resignation to the Company and by mailing notice thereof to the
holders of Debentures at their addresses as they shall appear on the
Debenture register. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one copy of
which instrument shall be delivered to the resigning Trustee and one copy
to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment sixty (60) days after the mailing
of such notice of resignation to the Debentureholders, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months
may, subject to the provisions of Section 7.9, on behalf of himself and
all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Debentureholder who has
been a bona fide holder of a Debenture or Debentures for at least six
months, or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, the
Company may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of Directors, one
copy of which instrument shall be delivered to the Trustee so removed and
one copy
40
to the successor trustee, or, subject to the provisions of Section 7.9, any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so
removed or any Debentureholder, upon the terms and conditions and otherwise
as in Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 8.10 shall execute, acknowledge and deliver
to the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect
as if originally named as trustee herein; but, nevertheless, on the written
request of the Company or of the successor trustee, the trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the provisions of
Section 8.6, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming
to such successor trustee all such rights and powers. Any trustee ceasing to
act shall, nevertheless, retain a lien upon all property and funds held or
collected by such trustee as such, except for funds held in trust for the
benefit of holders of particular Debentures, to secure any amounts then due it
pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, each of the Company and the former trustee shall mail or cause
to be mailed notice of the succession of such trustee hereunder to the holders
of Debentures at their addresses as they shall appear on the Debenture
register. If the Company fails to mail such notice within ten (10) days
41
after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Company.
Section 8.12 Succession by Merger, Etc. Any corporation or other entity
-------------------------
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
other entity succeeding to all or substantially all of the trust business of
the Trustee, shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the trust business of the Trustee such corporation
shall be qualified under the provisions of Section 8.8 and eligible under the
provisions of Section 8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee or authenticating agent
appointed by such predecessor trustee, and deliver such Debentures so
authenticated; and in case at that time any of the Debentures shall not have
been authenticated, any successor to the Trustee or an authenticating agent
appointed by such successor trustee may authenticate such Debentures either in
the name of any predecessor trustee hereunder or in the name of the successor
trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Debentures or in this Indenture provided that the
certificate of the Trustee shall have; provided, however, that the right to
-------- -------
adopt the certificate of authentication of any predecessor Trustee or to
authenticate Debentures in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 8.13 Limitation on Rights of Trustee as Creditor. If and when the
-------------------------------------------
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Debentures), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE DEBENTUREHOLDERS
Section 9.1 Action by Debentureholders. Whenever in this Indenture it is
--------------------------
provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b)
by the record of the holders of Debentures voting in favor
42
thereof at any meeting of Debentureholders duly called and held in accordance
with the provisions of Article X, or (c) by a combination of such instrument
or instruments and any such record of such a meeting of Debentureholders.
Whenever the Company or the Trustee solicits the taking of any action by the
holders of the Debentures, the Company or the Trustee may fix in advance of
such solicitation, a date as the record date for determining holders entitled
to take such action. The record date shall be not more than fifteen (15) days
prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Debentureholders. Subject to the
--------------------------------------
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Debentureholder or his agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Debentures shall be proved by the Debenture register or
by a certificate of the Debenture registrar. The record of any
Debentureholders' meeting shall be proved in the manner provided in Section
10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee, any
------------------------------
paying agent, any conversion agent and any Debenture registrar may deem the
person in whose name such Debenture shall be registered upon the Debenture
register to be, and may treat him as, the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding any notation
of ownership or other writing thereon) for the purpose of receiving payment of
or on account of the principal of, premium, if any, and interest on such
Debenture, for conversion of such Debenture and for all other purposes; and
neither the Company nor the Trustee nor any paying agent nor any conversion
agent nor any Debenture registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.
Section 9.4 Company-Owned Debentures Disregarded. In determining
------------------------------------
whether the holders of the requisite aggregate principal amount of Debentures
have concurred in any direction, consent, waiver or other action under this
Indenture, Debentures which are owned by the Company or any other obligor on
the Debentures or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any other obligor on the Debentures shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
--------
purposes of determining whether the Trustee shall be protected in
relying on any such direction, consent, waiver or other action only Debentures
which a Responsible Officer knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 9.4 if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right to vote such
Debentures and that the pledgee is not the Company, any other obligor on the
Debentures or a person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any such other
obligor. In the case of a dispute as to such right, any decision by the
Trustee taken upon the advice of counsel shall be full protection
43
to the Trustee. Upon request of the Trustee, the Company shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Debentures, if any, known by the Company to be owned or held by or for the
account of any of the above described persons; and, subject to Section 8.1,
the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Debentures not listed therein are outstanding for the purpose of any such
determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any time
--------------------------------------------
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Debentures specified in this Indenture in connection
with such action, any holder of a Debenture which is shown by the evidence to
be included in the Debentures the holders of which have consented to such
action may, by filing written notice with the Trustee at its Corporate Trust
Office and upon proof of holding as provided in Section 9.2, revoke such
action so far as concerns such Debenture. Except as aforesaid, any such action
taken by the holder of any Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of such Debenture and of any
Debentures issued in exchange or substitution therefor, irrespective of
whether any notation in regard thereto is made upon such Debenture or any
Debenture issued in exchange or substitution therefor.
ARTICLE X
DEBENTUREHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Debentureholders may be
-------------------
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and
its consequences, or to take any other action authorized to be taken by
Debentureholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
44
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Debentures under any other provision of this Indenture or under
applicable law; or
(5) to take any other action authorized by this Indenture or
under applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any time
---------------------------
call a meeting of Debentureholders to take any action specified in Section
10.1, to be held at such time and at such place in the Borough of Manhattan,
The City of New York, as the Trustee shall determine. Notice of every meeting
of the Debentureholders, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting and the
establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Debentures at their addresses as they shall appear on the Debenture
register. Such notice shall also be mailed to the Company. Such notices shall
be mailed not less than twenty (20) nor more than ninety (90) days prior to
the date fixed for the meeting.
Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Debentureholders. In case
-----------------------------------------------
at any time the Company, pursuant to a resolution of its Board of Directors,
or the holders of at least 10% in aggregate principal amount of the Debentures
then outstanding, shall have requested the Trustee to call a meeting of
Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of
such request, then the Company or such Debentureholders may determine the time
and the place for such meeting and may call such meeting to take any action
authorized in Section 10.1, by mailing notice thereof as provided in Section
10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote at any
-------------------------
meeting of Debentureholders a person shall (a) be a holder of one or more
Debentures on the record date pertaining to such meeting or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more
Debentures. The only persons who shall be entitled to be present or to speak
at any meeting of Debentureholders shall be the persons entitled to vote at
such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of this
-----------
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of
45
Debentureholders, in regard to proof of the holding of Debentures 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 think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 10.3, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.
Subject to the provisions of Section 9.4, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Debentures held or represented by him; provided, however,
-------- -------
that no vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debentures held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Debentureholders. Any
meeting of Debentureholders duly called pursuant to the provisions of Section
10.2 or 10.3 may be adjourned from time to time by the holders of a majority of
the aggregate principal amount of Debentures represented at the meeting, whether
or not constituting a quorum, and the meeting may be held as so adjourned
without further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any
------
meeting of Debentureholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Debentures or of their
representatives by proxy and the principal amount of the Debentures held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of
Debentureholders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more
persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section
10.2. The record shall show the principal amount of the Debentures voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto
the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
46
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X
-----------------------------
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Debentureholders.
-----------------------------------------------------------
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of
the holders of Debentures pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign, mortgage
or pledge to the Trustee as security for the Debentures, any property or
assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and the
Trustee shall consider to be for the benefit of the holders of Debentures,
and to make the occurrence, or the occurrence and continuance, of a default
in any such additional covenants, restrictions or conditions a default or
an Event of Default permitting the enforcement of all or any of the several
remedies provided in this Indenture as herein set forth; provided, however,
-------- -------
that in respect of any such additional covenant, restriction or condition
such supplemental indenture may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement
upon such default or may limit the remedies available to the Trustee upon
such default;
(e) to provide for the issuance under this Indenture of
Debentures in coupon form (including Debentures registrable as to principal
only) and to provide for exchangeability of such Debentures with the
Debentures issued hereunder in fully registered form and to make all
appropriate changes for such purpose;
47
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or in
any supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
materially adversely affect the interests of the holders of the Debentures;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualifications
of this Indenture under the Trust Indenture Act, or under any similar
federal statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 11.2.
Section 11.2 Supplemental Indentures with Consent of Debentureholders.
--------------------------------------------------------
With the consent (evidenced as provided in Article IX) of the holders of not
less than a majority in aggregate principal amount of the Debentures at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debentures; provided, however, that no such supplemental indenture shall
-------- -------
(i) extend the fixed maturity of any Debenture, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on redemption thereof, or
impair or adversely affect the right of any Debentureholder to institute suit
for the payment thereof, or make the principal thereof or interest or premium,
if any, thereon payable in any coin or currency other than that provided in the
Debentures, or change or impair the right to convert the Debentures into Common
Stock subject to the terms set forth herein, including Section 15.6, or modify
the provisions of this Indenture with respect to the subordination of the
Debentures in a manner adverse to the Debentureholders, without the consent of
the holder of each Debenture so affected, or (ii) reduce the aforesaid
percentage of Debentures, the holders of which are required to consent
48
to any such supplemental indenture, without the consent of the holders of all
Debentures then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Debentureholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in is discretion, but shall not be obligated to, enter into
such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders under
this Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any supplemental
---------------------------------
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 11.4 Notation on Debentures. Debentures authenticated and
----------------------
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article XI may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debentures so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may,
at the Company's expense, be prepared and executed by the Company, authenticated
by the Trustee (or an authenticating agent duly appointed by the Trustee
pursuant to Section 16.11) and delivered in exchange for the Debentures then
outstanding, upon surrender of such Debentures then outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
-----------------
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
49
ARTICLE XII
MERGER, SALE OR CONSOLIDATION
Section 12.1 Limitation on Merger, Sale or Consolidation. The
-------------------------------------------
Company shall not, directly or indirectly, consolidate with or merge with or
into another person or sell, lease, convey or transfer all or substantially all
of its assets (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another person or group of
affiliated persons, unless (i) either (A) in the case of a merger or
consolidation, the Company is the surviving entity or (B) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Debentures and the Indenture; (ii) no default or Event of
Default shall exist or shall occur immediately before or after giving effect on
a pro forma basis to such transaction; and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, lease, conveyance or transfer and, if a
supplemental indenture is required, such supplemental indenture comply with the
Indenture and that all conditions precedent relating to such transactions have
been satisfied.
Section 12.2 Successor Corporation to Be Substituted. In case of any
---------------------------------------
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Debentures and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Sequus Pharmaceuticals, Inc. any or all of the
Debentures issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver, or cause to be authenticated and delivered, any Debentures which
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication, and any Debentures which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Debentures so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debentures theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Debentures had been issued at the date of the execution hereof. In the
event of any such consolidation, merger, sale or conveyance (but not in the
event of such lease), the person named as the "Company" in the first paragraph
of this Indenture, or any successor which shall thereafter have become such in
the manner prescribed in this Article XII and which shall have transferred its
rights and obligations hereunder to another successor in the manner prescribed
in this Article XII, may be dissolved, wound up and liquidated at any time
50
thereafter and such person shall be released from its liabilities as obligor and
maker of the Debentures and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall
----------------------
deliver to the Trustee for cancellation all Debentures theretofore authenticated
(other than any Debentures which have been destroyed, lost or stolen and in lieu
of or in substitution for which other Debentures shall have been authenticated
and delivered) and not theretofore canceled, or (b) all the Debentures not
theretofore canceled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, funds sufficient to pay at
maturity or upon redemption of all of the Debentures (other than any Debentures
which shall have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Debentures shall have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest due or to
become due to such date of maturity or redemption date, as the case may be, and
if in either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of transfer,
substitution and exchange and conversion of Debentures, (ii) rights hereunder of
Debentureholders to receive payments of principal of and premium, if any, and
interest on, the Debentures and the other rights, duties and obligations of
Debentureholders, as beneficiaries hereof with respect to the amounts, if any,
so deposited with the Trustee and (iii) the rights, obligations and immunities
of the Trustee hereunder), and the Trustee, on demand of the Company accompanied
by an Officers' Certificate and an Opinion of Counsel as required by Section
16.5 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Debentures.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee.
-----------------------------------------------
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1 shall be held in trust and applied by it to the payment,
notwithstanding the provisions of Article IV, either directly or through any
paying agent (including the Company if acting as its own paying agent), to the
holders of the particular Debentures for the payment or redemption of which such
monies have
51
been deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the
---------------------------------
satisfaction and discharge of this Indenture, all monies then held by any paying
agent of the Debentures (other than the Trustee) shall, upon demand of the
Company, be repaid to it or paid to the Trustee, and thereupon such paying agent
shall be released from all further liability with respect to such monies.
Section 13.4 Return of Unclaimed Monies. Subject to the requirements
--------------------------
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Debentures and not applied
but remaining unclaimed by the holders of Debentures for two years after the
date upon which the principal of, premium, if any, or interest on such
Debentures, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on demand and all liability of the Trustee
shall thereupon cease with respect to such monies; and the holder of any of the
Debentures shall thereafter look only to the Company for any payment which such
holder may be entitled to collect unless an applicable abandoned property law
designates another person.
Section 13.5 Reinstatement. If (i) the Trustee or the paying agent
-------------
is unable to apply any money in accordance with Section 13.2 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Debentures so request by
written notice to the Trustee, the Company's obligations under this Indenture
and the Debentures shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest on or
-------- -------
principal of any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Debentures to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Debentures Solely Corporate Obligations.
-----------------------------------------------------
No recourse for the payment of the principal of or premium, if any, or interest
on any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, agent, officer or
director or subsidiary, as such,
52
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Debentures.
ARTICLE XV
CONVERSION OF DEBENTURES
Section 15.1 Right to Convert. Subject to and upon compliance with
----------------
the provisions of this Indenture, the holder of any Debenture shall have the
right, at his option, at any time (except that, with respect to any Debenture or
portion of a Debenture which shall be called for redemption, such right shall
terminate, except as provided in the fourth paragraph of Section 15.2, at the
close of business on the next Business Day preceding the date fixed for
redemption of such Debenture or portion of a Debenture unless the Company shall
default in payment due upon redemption thereof) to convert the principal amount
of any such Debenture, or any portion of such principal amount which is $1,000
or an integral multiple thereof, into that number of fully paid and non-
assessable shares of Common Stock (as such shares shall then be constituted)
obtained by dividing the principal amount of the Debenture or portion thereof
surrendered for conversion by the Conversion Price in effect at such time, by
surrender of the Debenture so to be converted in whole or in part in the manner
provided in Section 15.2. A holder of Debentures is not entitled to any rights
of a holder of Common Stock until such holder has converted his Debentures to
Common Stock, and only to the extent such Debentures are deemed to have been
converted to Common Stock under this Article XV.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common
----------------------------------------------------
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
------------------------------------------------------------
exercise the conversion privilege with respect to any Debenture, the holder of
any such Debenture to be converted in whole or in part shall surrender such
Debenture, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the last
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Debentures (or such other notice which is acceptable to
the Company) to the office or agency that the holder elects to convert such
Debenture or such portion thereof specified in said notice. Such notice shall
also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 15.7. Each such Debenture surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the same name as the registration of such Debenture, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or his duly authorized attorney.
53
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, if shares issuable on conversion are to be issued in
a name other than that of the Debentureholder (as if such transfer were a
transfer of the Debenture or Debentures (or portion thereof) so converted), the
Company shall issue and shall deliver to such holder at the office or agency
maintained by the Company for such purpose pursuant to Section 5.2, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Debenture or portion thereof in accordance
with the provisions of this Article and a check or cash in respect of any
fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 15.3 (which payment, if any, shall be paid no
later than five Business Days after satisfaction of the requirements for
conversion set forth above). In case any Debenture of a denomination greater
than $1,000 shall be surrendered for partial conversion, and subject to Section
2.3, the Company shall execute and the Trustee shall authenticate and deliver to
the holder of the Debenture so surrendered, without charge to him, a new
Debenture or Debentures in authorized denominations in an aggregate principal
amount equal to the unconverted portion of the surrendered Debenture.
Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 15.2 have been satisfied as to such Debenture (or portion
thereof), and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
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books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Debenture shall be surrendered.
Any Debenture or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Business Day next preceding such
interest payment date shall (unless such Debenture or portion thereof being
converted shall have been called for redemption and a notice of redemption has
been sent to the holders of the Debentures pursuant to Section 3.2) be
accompanied by payment, in New York Clearing House funds or other funds
acceptable to the Company, of an amount equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; provided,
--------
however, that no such payment need be made if there shall exist at the time of
-------
conversion a default in the payment of interest on the Debentures. Except as
provided above in this Section 15.2, no adjustment shall be made for interest
accrued on any Debenture converted or for dividends on any shares issued upon
the conversion of such Debenture as provided in this Article.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No
------------------------------------------
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Debentures. If more than one Debenture shall be
surrendered for conversion at one time by the
54
same holder, the number of full shares which shall be issuable upon conversion
shall be computed on the basis of the aggregate principal amount of the
Debentures (or specified portions thereof to the extent permitted hereby) so
surrendered for conversion. If any fractional share of stock otherwise would be
issuable upon the conversion of any Debenture or Debentures, the Company shall
make an adjustment therefor in cash at the current market value thereof to the
holder of Debentures. The current market value of a share of Common Stock shall
be the Closing Price on the first Trading Day immediately preceding the day on
which the Debentures (or specified portions thereof) are deemed to have been
converted and such Closing Price shall be determined as provided in Section
15.5(h).
Section 15.4 Conversion Price. The conversion price shall be as
----------------
specified in the form of Debenture (herein called the "Conversion Price")
attached as Exhibit A hereto, subject to adjustment as provided in this Article
XV.
Section 15.5 Adjustment of Conversion Price. The Conversion Price
------------------------------
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or
make a distribution to all holders of the outstanding Common Stock in
shares of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined in Section 15.5(h)) fixed
for such determination and the denominator shall be the sum of such number
of shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after
the opening of business on the day following the Record Date. If any
dividend or distribution of the type described in this Section 15.5(a) is
declared but not so paid or made, the Conversion Price shall again be
adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to
all holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 15.5(h)) on the
Record Date fixed for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Current Market Price, and of which
the denominator shall
55
be the number of shares of Common Stock outstanding on the close of
business on the Record Date plus the total number of additional shares of
Common Stock so offered for subscription or purchase. Such adjustment
shall become effective immediately after the opening of business on the day
following the Record Date fixed for determination of stockholders entitled
to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered pursuant to such rights or warrants, upon the
expiration or termination of such rights or warrants the Conversion Price
shall be readjusted to the Conversion Price which would then be in effect
had the adjustments made upon the issuance of such rights or warrants been
made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so
issued, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or warrants
had not been fixed. In determining whether any rights or warrants entitle
the holders to subscribe for or purchase shares of Common Stock at less
than such Current Market Price, and in determining the aggregate offering
price of such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to
which Section 15.5(a) applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding (1) any rights or
warrants referred to in Section 15.5(b) or (2) dividends and distributions
paid exclusively in cash (the foregoing hereinafter in this Section 15.5(d)
called the "Securities")), then, in each such case, the Conversion Price
shall be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to the close
of business on the Record Date (as defined in Section 15.5(h)) with respect
to such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in Section 15.5(h)) on such
date less the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the Securities so
56
distributed applicable to one share of Common Stock and the denominator
shall be such Current Market Price, such reduction to become effective
immediately prior to the opening of business on the day following the
Record Date; provided, however, that in the event the then fair market
-------- -------
value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Debentureholder
shall have the right to receive upon conversion of a Debenture (or any
portion thereof) the amount of Securities such holder would have received
had such holder converted such Debenture (or portion thereof) immediately
prior to such Record Date. In the event that such dividend or distribution
is not so paid or made, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines
the fair market value of any distribution for purposes of this Section
15.5(d) by reference to the actual or when issued trading market for any
securities comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period (the "Reference
Period") used in computing the Current Market Price pursuant to Section
15.5(h) to the extent possible, unless the Board of Directors in a board
resolution determines in good faith that determining the fair market value
during the Reference Period would not be in the best interest of the
Debentureholder.
In the event that the Company implements a new stockholders' rights
plan (a "Rights Plan"), such Rights Plan shall provide that upon conversion
of the Debentures the holders will receive, in addition to the Common Stock
issuable upon such conversion, the rights, whether or not such rights have
separated from Common Stock at the time of the conversion.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 15.5(d)
(and no adjustment to the Conversion Price under this Section 15.5(d) will
be required) until the occurrence of the earliest Trigger Event. If such
right or warrant is subject to subsequent events, upon the occurrence of
which such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitle the holder
to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of
each such event shall be deemed to be the date of issuance and record date
with respect to a new right or warrant (and a termination or expiration of
the existing right or warrant without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of
rights or warrants, or
57
any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto, that resulted in an adjustment to the
Conversion Price under this Section 15.5(d), (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price
received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made
to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants all of which
shall have expired or been terminated without exercise, the Conversion
Price shall be readjusted as if such rights and warrants had never been
issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that
also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 15.5(b) applies (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock or rights or warrants to
which Section 15.5(b) applies (and any Conversion Price reduction required
by this Section 15.5(d) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or distribution of
such shares of Common Stock or such rights or warrants (and any further
Conversion Price reduction required by Sections 15.5(a) and (b) with
respect to such dividend or distribution shall then be made, except (A) the
Record Date of such dividend or distribution shall be substituted as "the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination"
and "Record Date" within the meaning of Section 15.5(a) and as "the date
fixed for the determination of stockholders entitled to receive such rights
or warrants", "the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Record
Date" within the meaning of Section 15.5(b) and (B) any shares of Common
Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that
is distributed upon a merger or consolidation to which Section 15.6 applies
or as part of a distribution referred to in Section 15.5(d)), in an
aggregate amount that, combined together with (1) the aggregate amount of
any other such distributions to all holders of its Common Stock made
exclusively in cash within the twelve (12) months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to this Section 15.5(e) has been made, and (2) the aggregate of
any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
58
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common
Stock concluded within the twelve (12) months preceding the date of payment
of such distribution, and in respect of which no adjustment pursuant to
Section 15.5(f) has been made, exceeds 10.0% of the product of the Current
Market Price (determined as provided in Section 15.5(h)) on the Record Date
with respect to such distribution times the number of shares of Common
Stock outstanding on such date, then, and in each such case, immediately
after the close of business on such date, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business
on such Record Date by a fraction (i) the numerator of which shall be equal
to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10.0% and (y)
the number of shares of Common Stock outstanding on the Record Date and
(ii) the denominator of which shall be equal to the Current Market Price on
such date, provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Debentureholder shall have the right to receive upon conversion of a
Debenture (or any portion thereof) the amount of cash such holder would
have received had such holder converted such Debenture (or portion thereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. Any cash distribution to
all holders of Common Stock as to which the Company makes the election
permitted by Section 15.5(n) and as to which the Company has complied with
the requirements of such Section shall be treated as not having been made
for all purposes of this Section 15.5(e).
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution), as of the expiration of such tender
offer, of consideration payable in respect of any other tender offers, by
the Company or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to this
Section 15.5(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to
Section 15.5(e) has been made, exceeds
59
10.0% of the product of the Current Market Price (determined as provided in
Section 15.5(h)) as of the last time (the "Expiration Time") tenders could
have been made pursuant to such tender offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time, then, and in each such case, immediately
prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration
Time multiplied by the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on the Expiration Time and
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this Section 15.5(f) to any tender
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such tender offer under this Section 15.5(f). Any cash
distribution to all holders of Common Stock as to which the Company has
made the election permitted by Section 15.5(n) and as to which the Company
has complied with the requirements of such Section shall be treated as not
having been made for all purposes of this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person other
than the Company or any Subsidiary for an amount which increases the
offeror's ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such person of consideration
per share of Common Stock having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive, and described
in a resolution of the Board of Directors at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended)) that exceeds the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration
Time, and in which, as of the Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration Time by a
60
fraction of which the numerator shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time multiplied by the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender or exchange offer)
of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) on
the Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day following
the Expiration Time. In the event that such person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such person is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding the foregoing,
the adjustment described in this Section 15.5(g) shall not be made if, as
of the Expiration Time, the offering documents with respect to such offer
disclose a plan or intention to cause the Company to engage in any
transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms shall
have the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case no
such sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in each case on the Nasdaq National Market
or New York Stock Exchange, as applicable, or, if such security is not
listed or admitted to trading on such National Market or Exchange, on the
principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported
by the National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors for that purpose, or a price determined in
good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days
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immediately prior to the date in question; provided, however,
-------- -------
that (1) if the "ex" date (as hereinafter defined) for any event (other
than the issuance or distribution or Fundamental Change requiring such
computation) that requires an adjustment to the Conversion Price pursuant
to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs during such ten
(10) consecutive Trading Days, the Closing Price for each Trading Day prior
to the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the same fraction by which the Conversion Price is so
required to be adjusted as a result of such other event, (2) if the "ex"
date for any event (other than the issuance or distribution or Fundamental
Change requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or
(g) occurs on or after the "ex" date for the issuance or distribution or
Fundamental Change requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the Conversion Price is so required
to be adjusted as a result of such other event, and (3) if the "ex" date
for the issuance, distribution or Fundamental Change requiring such
computation is prior to the day in question, after taking into account any
adjustment required pursuant to clause (1) or (2) of this proviso, the
Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value
(as determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 15.5(d), (f) or (g),
whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For purposes of any
computation under Sections 15.5(f) or (g), the Current Market Price of the
Common Stock on any date shall be deemed to be the average of the daily
Closing Prices per share of Common Stock for such day and the next two
succeeding Trading Days; provided, however, that if the "ex" date for any
-------- -------
event (other than the tender offer requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) and (g) occurs on or after the Expiration Time for
the tender or exchange offer requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event. For
purposes of this paragraph, the term "ex" date, (1) when used with respect
to any issuance or distribution or Fundamental Change, means the first date
on which the Common Stock trades regular way on the relevant exchange or in
the relevant market from which the Closing Price was obtained without the
right to receive such issuance or distribution, (2) when used with respect
to any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades
62
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (3) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such exchange or in such market after
the Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to
this Section 15.5, such adjustments shall be made to the Current Market
Price as may be necessary or appropriate to effectuate the intent of this
Section 15.5 and to avoid unjust or inequitable results as determined in
good faith by the Board of Directors.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive such
cash, securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange or
another national security exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable security is not so
listed, admitted for trading or quoted, any day other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) and
(g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best
63
interests of the Company, which determination shall be conclusive and
described in a Board Resolution. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Company shall mail to the holder of
each Debenture at his last address appearing on the Debenture register
provided for in Section 2.5 a notice of the reduction at least fifteen (15)
days prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period during which
it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
-------- -------
Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be made to the
nearest cent or to the nearest one hundredth of a share, as the case may
be. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any conversion agent
other than the Trustee an Officers' Certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Price to the holder of each Debenture at
his last address appearing on the Debenture register provided for in
Section 2.5, within twenty (20) days of the effective date of such
adjustment. Failure to deliver such notice shall not effect the legality or
validity of any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event (i) issuing
to the holder of any Debenture converted after such Record Date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fraction pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
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(n) In lieu of making any adjustment to the Conversion Price
pursuant to Section 15.5(e), the Company may elect to reserve an amount of
cash for distribution to the holders of the Debentures upon the conversion
of the Debentures so that any such holder converting Debentures will
receive upon such conversion, in addition to the shares of Common Stock and
other items to which such holder is entitled, the full amount of cash which
such holder would have received if such holder had, immediately prior to
the Record Date for such distribution of cash, converted its Debentures
into Common Stock, together with any interest accrued with respect to such
amount, in accordance with this Section 15.5(n). The Company may make such
election by providing an Officers' Certificate to the Trustee to such
effect on or prior to the payment date for any such distribution and
depositing with the Trustee on or prior to such date an amount of cash
equal to the aggregate amount the holders of the Debentures would have
received if such holders had, immediately prior to the Record Date for such
distribution, converted all of the Debentures into Common Stock. Any such
funds so deposited by the Company with the Trustee shall be invested by the
Trustee in marketable obligations issued or fully guaranteed by the United
States government with a maturity not more than three (3) months from the
date of issuance. Upon conversion of Debentures by a holder, the holder
will be entitled to receive, in addition to the Common Stock issuable upon
conversion, an amount of cash equal to the amount such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution, converted its Debenture into Common Stock, along with such
holder's pro rata share of any accrued interest earned as a consequence of
the investment of such funds. Promptly after making an election pursuant to
this Section 15.5(n), the Company shall give or shall cause to be given
notice to all Debentureholders of such election, which notice shall state
the amount of cash per $1,000 principal amount of Debentures such holders
shall be entitled to receive (excluding interest) upon conversion of the
Debentures as a consequence of the Company having made such election.
Section 15.6 Reclassification, Consolidation, Merger or Sale. If any
-----------------------------------------------
transaction shall occur (including, without limitation (a) any recapitalization
or reclassification of shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of Common Stock), (b) any consolidation
of the Company with, or merger of the Company into, any other person, or any
merger of another person into the Company (other than a merger that does not
result in a reclassification, conversion, exchange or cancellation of Common
Stock), (c) any sale, transfer or lease of all or substantially all of the
assets of the Company or (d) any compulsory share exchange) pursuant to which
either shares of Common Stock shall be converted into the right to
receive other securities, cash or other property, or, in the case of a sale or
transfer of all or substantially all of the assets of the Company, the holders
of Common Stock shall be entitled to receive other securities, cash or other
property, then the Company, or such successor or purchasing corporation, as the
case may be, shall, as a condition precedent to such recapitalizaion,
reclassification, change, consolidation, merger, sale, transfer or share
exchange, execute and deliver to the Trustee a supplemental indenture providing
that the holder of each Debenture then
65
outstanding shall have the right thereafter, to convert such Debenture only
into: (x) in the case of any such transaction that does not constitute a Common
Stock Fundamental Change (as defined in Section 15.11(b)) and subject to funds
being legally available for such purpose under applicable law at the time of
such conversion, the kind and amount of the securities, cash or other property
that would have been receivable upon such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock issuable upon conversion of such Debentures
immediately prior to such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange, after giving effect, in the case of
any Non-Stock Fundamental Change (as defined in Section 15.11(b)), to any
adjustment in the Conversion Price in accordance with Section 15.11(a)(i) and
(y) in the case of any such transaction that constitutes a Common Stock
Fundamental Change, common stock of the kind received by holders of Common Stock
as a result of such Common Stock Fundamental Change in an amount determined in
accordance with Section 15.11(a)(ii). Such supplemental indenture shall provide
for adjustments that, for events subsequent to the effective date of such
supplemental indenture shall be as nearly equivalent as may be practicable to
the relevant adjustments provided for in this Article XV. If, in the case of any
such consolidation, merger, transfer or lease, the capital stock and other
securities and assets (including cash) receivable thereupon by a holder of
Common stock includes shares of capital stock or other securities or assets of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, transfer or lease, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders as the Board
of Directors shall reasonably consider necessary by reason of the foregoing.
The above provisions of this Section shall similarly apply to successive
recapitalizations, consolidations, mergers, sales, transfers or share exchanges.
In the event the Company shall execute a supplemental indenture pursuant to
this Section 15.6, the Company shall promptly file with the Trustee an Officers'
Certificate briefly stating the reasons therefor, the kind or amount of shares
of capital stock or securities or assets (including cash) receivable by holders
upon the conversion of their Debentures after any such recapitalization,
reclassification, change, consolidation, merger, sale, transfer or share
exchange and any adjustment to be made with respect thereto.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
----------------------
conversions of Debentures shall be made without charge to the converting
Debentureholder for any tax in respect of the issue thereof. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Debenture converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
66
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
----------------------------------------------------------
Common Stock. The Company shall provide, free from preemptive rights, out of its
------------
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Debentures from time to time as such
Debentures are presented for conversion, and no Debenture shall be issued unless
such sufficient number of shares has been reserved and are available for
issuance upon conversion of Debentures under this Article XV.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Debentures, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Debentures will be fully paid and non-assessable by the Company
and free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Debentures hereunder require registration with or
approval of any governmental authority under any Federal or State law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the Nasdaq National Market or any other national securities exchange
or automated quotation system the Company will, if permitted by the rules of
such exchange or automated quotation system, list and keep listed, so long as
the Common Stock shall be so listed on such exchange or automated quotation
system, all Common Stock issuable upon conversion of the Debentures.
Section 15.9 Responsibility of Trustee. The Trustee and any other
-------------------------
conversion agent shall not at any time be under any duty or responsibility to
any holder of Debentures to determine whether any facts exist which may require
any adjustment of the Conversion Price, or with respect to the nature or extent
or calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Debenture; and the Trustee and
any other conversion agent make no representations with respect thereto. Subject
to the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither
67
the Trustee nor any conversion agent shall be under any responsibility to
determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Debentureholders upon the conversion of their Debentures after any event
referred to in such Section 15.6 or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 8.1, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case:
------------------------------------------
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (that would require an adjustment in the
Conversion Price pursuant to Section 15.5); or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Debentures at his address appearing on the Debenture register,
provided for in Section 2.5 of this Indenture, as promptly as possible but in
any event at least fifteen days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such
68
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
Section 15.11 Adjustments to Conversion Price in the Event of a
-------------------------------------------------
Fundamental Change.
------------------
(a) Notwithstanding any other provision in this Article XV to
the contrary, if any Fundamental Change (as defined below) occurs, then the
Conversion Price in effect will be adjusted immediately following such
Fundamental Change as described below. In addition, in the event of a Common
Stock Fundamental Change, each Debenture shall be convertible solely into common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section 15.11 in the event of a Fundamental Change, immediately following such
Fundamental Change (and for such purposes a Fundamental Change shall be deemed
to occur on the earlier of (a) the occurrence of such Fundamental Change, and
(b) the date, if any, fixed for determination of stockholders entitled to
receive the cash, securities, property or other assets distributable in such
Fundamental Change to holders of the Common Stock):
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price of the Debentures immediately following such Non-Stock
Fundamental Change shall be the lower of (A) the Conversion Price in effect
immediately prior to such Non-Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to this Article XV
and (B) the product of (1) the greater of the Applicable Price (as defined
in Section 15.11(b)) and the then applicable Reference Market Price (as
defined in Section 15.11(b)) and (2) a fraction, the numerator of which is
$1000 and the denominator of which is (x) the amount of the redemption
price for one Debenture if the redemption date were the date of such Non-
Stock Fundamental Change (or the date of the period commencing on the first
date of original issuance of the Debentures and to March 1, 1998 or the
twelve-month periods commencing March 1, 1998 and March 1, 1999, the
product of __%, __% and __%, respectively, times $1000) plus (y) any
accrued interest and unpaid interest thereon to, but excluding, the date of
such Non-Stock Fundamental Change; and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price of the Debentures immediately following such Common Stock
Fundamental Change shall be the Conversion Price in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect to
any other prior adjustments effected pursuant to Section 15.5 multiplied by
a fraction, the numerator of which is the Purchaser Stock Price (as defined
in Section 15.11(b)) and the denominator of which is the Applicable Price;
provided, however, that in the event of a Common Stock Fundamental Change
in which (A) 100% of the value of the consideration received by a holder of
Common Stock is common stock of the successor, acquiror or other third
party
69
(and cash, if any, paid with respect to any fractional interests in such
common stock resulting from such Common Stock Fundamental Change) and (B)
all of the Common Stock shall have been exchanged for, converted into or
acquired for, common stock of the successor, acquiror or other third party
(and any cash with respect to fractional interests), the Conversion Price
immediately following such Common Stock Fundamental Change shall be the
Conversion Price in effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the numerator of which is one
(1) and the denominator of which is the number of shares of common stock of
the successor, acquiror or other third party received by a holder of one
share of Company Common Stock as a result of such Common Stock Fundamental
Change.
(b) For purposes of this Section 15.11, the following terms shall
have the meaning indicated:
(i) "Applicable Price" means (i) in the event of a Non-
Stock Fundamental Change in which the holders of Common Stock receive only
cash, the amount of cash received by a holder of one share of Common Stock
and (ii) in the event of any other Fundamental Change, the average of the
daily Closing Price (determined as provided in Section 15.5(h)(1)) for one
share of Common Stock during the 10 Trading Days (determined as provided in
Section 15.5(h)(5)) immediately prior to the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental
Change or, if there is no such record date, prior to the date upon which
the holders of Common Stock shall have the right to receive such cash,
securities, property or other assets. The Closing Price on any Trading Day
may be subject to adjustment as provided in Section 15.5(h)(1).
(ii) "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by
the Board of Directors) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately
prior to such Fundamental Change, has been admitted for listing or admitted
for listing subject to notice of issuance on a national securities exchange
or quoted on Nasdaq National Market, provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change
and the outstanding Debentures continues to exist as outstanding Debentures
or (ii) not later than the occurrence of such Fundamental Change, the
outstanding Debentures are converted into or exchanged for debentures have
terms substantially similar to those of the Debentures.
(iii) "Fundamental Change" means the occurrence of any
transaction or event or series of transactions or events pursuant to which
all or substantially all of the Common Stock shall be exchanged for,
converted into, acquired for or shall constitute solely the right to
receive cash, securities, property or other assets (whether by means of
70
an exchange offer, liquidation, tender, offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise); provided,
--------
however, in the case of any such series of transactions or events, for
-------
purposes of adjustment of the Conversion Price, such Fundamental Change
shall be deemed to have occurred when substantially all of the Common Stock
shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or
other assets, but the adjustment shall be based upon the consideration that
the holders of the Common Stock received in the transaction or event as a
result of which more than 50% of the Common Stock shall have been exchanged
for, converted into or acquired for, or shall constitute solely the right
to receive, such cash, securities, property or other assets.
(iv) "Non-Stock Fundamental Change" means any Fundamental
Change other than a Common Stock Fundamental Change.
(v) "Purchase Stock Price" means, with respect to any
Common Stock Fundamental Change, the average of the daily Closing Price for
one share of the common stock received by holders of the Common Stock in
such Common Stock Fundamental Change during the 10 Trading Days immediately
prior to the date fixed for the determination of the holders of the Common
Stock entitled to receive such common stock or, if there is no such date,
prior to the date upon which the holders of the Common Stock shall have the
right to receive such common stock.
(vi) "Reference Market Price" shall initially mean $_____
(which is an amount equal to 66 2/3% of the reported last sale price for
Company Common Stock on the Nasdaq National Market on ________) and, in
the event of any adjustment to the Conversion Price other than as a
result of a Fundamental Change, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the
Conversion Price after giving effect to any such adjustment shall always
be the same as the ratio of the initial Reference Market Price to the
initial Conversion Price of $ ____ per share.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 16.2 Official Acts by Successor Corporation. Any act or proceeding
--------------------------------------
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and
71
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
Section 16.3 Addresses for Notices, Etc. Any notice or demand which by any
--------------------------
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Debentures on the Company shall be deemed to
have been sufficiently given or made, for all purposes if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Sequus Pharmaceuticals, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer. Any notice, direction,
request or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at ______________________________.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Debentureholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Debenture register and shall be sufficiently given to him if so mailed within
the time prescribed.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 16.4 Governing Law. This Indenture and each Debenture shall be
-------------
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York.
Section 16.5 Evidence of Compliance with Conditions Precedent;
------------------------------------------------
Certificates to Trustee. Upon any application or demand by the Company to the
-----------------------
Trustee to take any action under any of the provisions of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for by or on behalf of the Company in
this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such
72
certificate or opinion is based; (3) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 16.6 Legal Holidays. In any case where the date of maturity of
--------------
interest on or principal of the Debentures or the date fixed for redemption of
any Debenture will not be a Business Day, then payment of such interest on or
principal of the Debentures need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 16.7 No Security Interest Created. Nothing in this Indenture or
----------------------------
in the Debentures, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction.
Section 16.8 Trust Indenture Act. If and to the extent that any
-------------------
provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act,
such required provision shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
Section 16.9 Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Debentures, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Debenture
registrar and their successors hereunder, the holders of Debentures and the
holders of Senior Indebtedness, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 16.10 Table of Contents, Headings, Etc. The table of contents and
--------------------------------
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 16.11 Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully
to all intents and purposes as though the authenticating agent had been
expressly authorized by this Indenture and those Sections to authenticate and
deliver Debentures. For all purposes of this Indenture, the authentication and
delivery of Debentures by the authenticating agent shall be deemed to be
authentication and delivery of such Debentures "by the Trustee" and a
certificate of
73
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Debentures for
the Trustee's certificate of authentication. Such authenticating agent shall at
all times be a person eligible to serve as trustee hereunder pursuant to Section
8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall mail notice of such appointment to all holders of Debentures as the names
and addresses of such holders appear on the Debenture register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 16.11 shall
be applicable to any authenticating agent.
Section 16.12 Execution in Counterparts. This Indenture may be executed
-------------------------
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
____________________________ hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
74
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
SEQUUS PHARMACEUTICALS, INC.
By:
-------------------------------------
Title:
Attest:
---------------------------------
[seal]
________________________, as Trustee
By:
-------------------------------------
Title:
Attest:
---------------------------------
[seal]
EXHIBIT A - FORM OF DEBENTURE
[FORM OF FACE OF DEBENTURE]
No. ____________ $_______________
SEQUUS PHARMACEUTICALS, INC.
___% Convertible Subordinated Debenture due 2007
SEQUUS PHARMACEUTICALS, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor corporation under the Indenture referred to on
the reverse hereof), for value received hereby promises to pay to
____________________, or registered assigns, the principal sum of ______
____________________________________ Dollars on March 1, 2007, and to pay
interest on said principal sum semi-annually on March 1 and September 1 of each
year, commencing on the first such date after the Exchange Date (as defined in
the Indenture), at the rate per annum specified in the title of this Debenture,
accrued from the March 1 or September 1, as the case may be, next preceding the
date of this Debenture to which interest has been paid or duly provided for,
unless the date of this Debenture is a date to which interest has been paid or
duly provided for, in which case interest shall accrue from the date of this
Debenture, or unless no interest has been paid or duly provided for on this
Debenture, in which case interest shall accrue from the Exchange Date, until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any February 15 or
August 15, as the case may be, and before the following March 1 or September 1,
this Debenture shall bear interest from such March 1 or September 1,
respectively; provided, however, that if the Company shall default in the
-------- -------
payment of interest due on such March 1 or September 1, then this Debenture
shall bear interest from the next preceding March 1 or September 1 to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on this Debenture, from the Exchange Date. The interest so
payable on any March 1 or September 1 will be paid to the person in whose name
this Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the record date, which shall be the February 15 or August
15 (whether or not a Business Day) next preceding such March 1 or September 1,
respectively, as provided in the Indenture; provided that any such interest not
-------- ----
punctually paid or duly provided for shall be payable as provided in the
Indenture. Payment of the principal of and interest accrued on this Debenture
shall be made at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, The City of New York, or, at the option of the
holder of this Debenture, at the Corporate Trust Office, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts; provided, however,
-------- -------
that at the option of the Company, payment of interest may be made by check
mailed to the registered address of the person entitled thereto.
Reference is made to the further provisions of this Debenture set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if
any, and interest on this Debenture to the prior payment in full of all Senior
Indebtedness as defined in the Indenture and provisions giving the holder of
this Debenture the right to convert this Debenture into Common Stock of the
Company on the terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Debenture shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said State.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
-2-
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal.
SEQUUS PHARMACEUTICALS, INC.
Dated: By:
________________________ _____________________________________
Title:
Attest:
___________________________________________
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-named Indenture.
__________________________________________
___, as Trustee
By:
_______________________________________
Authorized Signatory
-3-
[FORM OF REVERSE OF DEBENTURE]
SEQUUS PHARMACEUTICALS, INC.
__% Convertible Subordinated Debenture due 2007
This Debenture is one of a duly authorized issue of Debentures of the Company,
designated as its ___% Convertible Subordinated Debentures due 2007 (herein
called the "Debentures"), limited to the aggregate principal amount of
$57,500,000 all issued or to be issued under and pursuant to an Indenture, dated
as of __________, 1996 (herein called the "Indenture"), between the Company and
___________________________ (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Debentures.
In case an Event of Default, as defined in the Indenture, shall have occurred
and be continuing, the principal of and accrued interest on all Debentures may
be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority of the aggregate
principal amount of the Debentures at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Debentures; provided, however, that no such supplemental
-------- -------
indenture shall (i) extend the fixed maturity of any Debenture, or reduce the
rate or extend the time of payment of interest thereon, or reduce the principal
amount thereof or premium, if any, thereon, or reduce any amount payable on
redemption thereof, or impair or adversely affect the right of any
Debentureholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Debentures, or modify the provisions of the
Indenture with respect to the subordination of the Debentures in a manner
adverse to the Debentureholders, or impair, or change in any respect adverse to
the holders of the Debentures, the right to convert the Debentures into Common
Stock subject to the terms set forth in the Indenture, including Section 15.6
thereof, without the consent of the holder of each Debenture so affected or (ii)
reduce the aforesaid percentage of Debentures, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of all Debentures then outstanding. It is also provided in the
Indenture that, prior to any declaration accelerating the maturity of the
Debentures, the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive any past default or Event of Default under the Indenture and
its consequences except a default in the payment of interest or any premium on
or the principal of or any redemption price of any of the Debentures or a
failure by the Company to convert any Debentures into Common Stock of the
Company. Any such consent or waiver by the holder of this Debenture (unless
revoked as provided in the Indenture) shall be conclusive and binding upon
such holder and upon all future holders and owners of this Debenture and any
Debentures which may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Debenture or such other Debentures.
The indebtedness evidenced by the Debentures is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Debenture is issued subject to the provisions of
the Indenture with respect to such subordination. Each holder of this
Debenture, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Debenture at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
Interest on the Debentures shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Debentures, Debentures may be exchanged for a like
aggregate principal amount of Debentures of other authorized denominations.
The Debentures will not be redeemable at the option of the Company prior to
March 2, 2000. On or after such date and prior to maturity the Debentures may
be redeemed at the option of the Company as a whole, or from time to time in
part, upon mailing a notice of such redemption not less than 20 nor more than 60
days before the date fixed for redemption to the holders of Debentures at their
last registered addresses, all as provided in the Indenture, at the following
optional redemption prices (expressed as percentages of the principal amount),
together in each case with accrued interest to, but excluding, the date fixed
for redemption.
If redeemed during the 12-month period beginning March 1 (beginning March 2,
2000 and ending on February 28, 2001, in the case of the first such period):
Year Percentage
------------------ -------------
2000.............. %
2001..............
2002..............
-2-
Year Percentage
------------------ -------------
2003..............
2004..............
2005..............
and 100% at March 1, 2007; provided, that if the date fixed for redemption is a
-------- ----
March 1 or September 1, then the interest payable on such date shall be paid to
the holder of record on the next preceding February 15 or August 15.
The Debentures are not subject to redemption through the operation of any
sinking fund.
Subject to the provisions of the Indenture, the holder hereof has the right,
at its option, at any time, or, as to all or any portion hereof called for
redemption, prior to the close of business on the next Business Day preceding
the date fixed for redemption (unless the Company shall default in payment due
upon redemption), to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof, into that number of
fully paid and non-assessable shares of Company's Common Stock, as said shares
shall be constituted at the date of conversion, obtained by dividing the
principal amount of this Debenture or portion thereof to be converted by the
conversion price of $____ or such conversion price as adjusted from time to time
as provided in the Indenture, upon surrender of this Debenture, together with a
conversion notice as provided in the Indenture and this Debenture, to the
Company at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, or at the option of such holder,
the Corporate Trust Office, and, unless the shares issuable on conversion are to
be issued in the same name as this Debenture, duly endorsed by, or accompanied
by instruments of transfer in form satisfactory to the Company duly executed by,
the holder or by his duly authorized attorney. In addition, the conversion
price of the Debenture is subject to adjustment as provided in the Indenture in
the event of a Non-Stock Fundamental Change or a Common Stock Fundamental
Change. No adjustment in respect of interest or dividends will be made upon any
conversion; provided, however, that if this Debenture shall be surrendered for
-------- -------
conversion during the period from the close of business on any record date for
the payment of interest through the close of business on the Business Day next
preceding the following interest payment date, this Debenture (unless it or the
portion being converted shall have been called for redemption and a notice of
redemption has been mailed to the holders of the Debentures pursuant to Section
3.2 of the Indenture) must be accompanied by an amount, in funds acceptable to
the Company, equal to the interest otherwise payable on such interest payment
date on the principal amount being converted. No fractional shares of Common
Stock will be issued upon any conversion, but an adjustment in cash will be paid
to the holder, as provided in the Indenture, in respect of any fraction of a
share which would otherwise be issuable upon the surrender of any Debenture or
Debentures for conversion.
Any Debentures called for redemption, unless surrendered for conversion on or
before the close of business on the date fixed for redemption, may be deemed to
be purchased from the holder of such Debentures at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who
-3-
may agree with the Company to purchase such Debentures from the holders thereof
and convert them into Common Stock of the Company and to make payment for such
Debentures as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Debenture at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Debenture, at the Corporate Trust
Office, a new Debenture or Debentures of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange thereof,
subject to the limitations provided in the Indenture, without charge except for
any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Debenture registrar may deem and treat the registered
holder hereof as the absolute owner of this Debenture (whether or not this
Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon made by anyone other than the Company or any Debenture
registrar), for the purpose of receiving payment hereof, or on account hereof,
for the conversion hereof and for all other purposes, and neither the Company
nor the Trustee nor any other authenticating agent nor any paying agent nor any
other conversion agent nor any Debenture registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Debenture.
No recourse for the payment of the principal of or any premium or interest on
this Debenture, or for any claim based hereon or otherwise in respect hereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in the Indenture or any indenture supplemental thereto or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, agent, officer,
director or subsidiary, as such, past, present or future, of the Company or of
any successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
Terms used in this Debenture and defined in the Indenture are used herein as
therein defined.
-4-
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of this
Debenture, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian ________
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with Act ___________________________________________
right of survivorship (State)
and not as tenants in
common
Additional abbreviations may also be used
though not in the above list.
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Sequus Pharmaceuticals, Inc.
The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Debenture, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for fractional shares and
any Debentures representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Debenture not converted are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required
to be paid to the undersigned on account of interest accompanies this Debenture.
Dated: ________________________
________________________________
________________________________
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, Stock brokers, savings and
loan associations and credit unions)
with membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common Stock
are to be issued, or Debentures to be
delivered, other than to and in the name
of the registered holder.
_______________________________
Signature Guarantee
Fill in for registration of
shares if to be issued, and
Debentures if to be delivered,
other than to and in the name
of the registered holder:
_______________________________
(Name)
_______________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
_______________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less
than all): $______,000
________________________________
Social Security or Other Taxpayer
Identification Number
[FORM OF ASSIGNMENT]
For value received ____________________________ hereby sell(s), assign(s) and
transfer(s) unto _________________________________________________ (Please
insert social security or Taxpayer Identification Number of assignee) the within
Debenture, and hereby irrevocably constitutes and appoints
___________________________________________________________ attorney to transfer
the said Debenture on the books of the Company, with full power of substitution
in the premises.
Dated: _______________________
_______________________________
_______________________________
Signature(s)
Signature(s) must be guaranteed by an eligible
Guarantor Institution (banks, stock brokers,
savings and loan associations and credit unions)
with membership in an approved signature
guarantee medallion program pursuant to Securities
Securities and Exchange Commission Rule 17Ad-15
if shares of Common Stock are to be issued, or
Debentures to be delivered, other than to and in the
name of the required holder.
_______________________________
Signature Guarantee
NOTICE: The signature on the conversion notice or the assignment must
correspond with the name as written upon the face of the Debenture in every
particular without alteration or enlargement or any change whatever.