<PAGE> 1
Filed with the Securities and Exchange Commission on June 2, 1998
Registration No. 333-______________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
QUADRAMED CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 52-1992861
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
80 EAST SIR FRANCIS DRAKE BLVD., STE. 2A
LARKSPUR, CA 94939
(415) 461-7725
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------------
KEITH M. ROBERTS
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
QUADRAMED CORPORATION
80 EAST SIR FRANCIS DRAKE BLVD., STE. 2A
LARKSPUR, CA 94939
(415) 461-7725
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
----------------------
Copies to:
SCOTT D. LESTER
MICHAEL A. ZUERCHER
BROBECK, PHLEGER & HARRISON LLP
ONE MARKET
SPEAR STREET TOWER
SAN FRANCISCO, CA 94105
(415) 442-0900
----------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
TITLE OF EACH CLASS OF Amount Proposed Maximum Proposed Maximum Amount of
SECURITIES TO BE to be Offering Price Aggregate Offering Registration Fee
REGISTERED Registered Per Share(2) Price(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.25% Convertible Subordinated Debentures $115,000,000 100% $115,000,000 $33,925
Common Stock, par value $.01 per share 3,458,647 Shares(1) N/A N/A N/A(3)
===============================================================================================================================
</TABLE>
(1) Represents shares originally issuable upon conversion of the Debentures
being registered under this Registration Statement. An additional
indeterminable number of shares as may become issuable upon conversion
of the Debentures being registered hereunder by means of adjustment in
the conversion price thereof.
(2) Determined pursuant to Rule 457(i) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.
(3) Pursuant to Rule 457(i), there is no filing fee with respect to the
Shares of Common Stock being registered hereunder because no additional
consideration will be received in connection with the exercise of the
conversion privilege.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 1, 1998
PROSPECTUS
[LOGO]
QUADRAMED CORPORATION
$115,000,000
5.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
(INTEREST PAYABLE MAY 1 AND NOVEMBER 1)
AND
3,458,647 SHARES OF COMMON STOCK
------------------
This Prospectus relates to (i) $115,000,000 aggregate principal amount
of 5.25% Convertible Subordinated Debentures due 2005 (the "Debentures") of
QuadraMed Corporation, a Delaware corporation (sometimes referred to herein as
the "Company"), and (ii) 3,458,647 shares of the Common Stock, par value $.01
per share (the "Common Stock"), of the Company which are initially issuable upon
conversion of Debentures, plus such additional indeterminate number of shares of
Common Stock as may become issuable upon conversion of the Debentures as a
result of adjustments to the conversion price thereunder (collectively, the
"Shares"). The Debentures and such shares of Common Stock issued upon conversion
of the Debentures may be offered from time to time for the accounts of holders
of Debentures named herein (the "Selling Securityholders").
The Debentures are convertible into Common Stock of QuadraMed at any
time at or before maturity, unless previously redeemed, at a conversion price of
$33.25 per share, subject to adjustment in certain events. The Common Stock of
the Company is traded on The Nasdaq National Market ("Nasdaq") under the symbol
"QMDC." On May 29, 1998, the closing price of the Common Stock as reported by
Nasdaq was $24 1/16 per share.
The Debentures do not provide for a sinking fund. The Debentures are not
redeemable by the Company prior to May 4, 2001. Thereafter, the Debentures are
redeemable at the option of the Company, in whole or in part, at the redemption
prices set forth in this Prospectus, together with accrued interest. Upon a
Repurchase Event (as defined herein), each holder of Debentures shall have the
right, at the holder's option, to require the Company to repurchase such
holder's Debentures at a purchase price equal to 100% of the principal amount
thereof, plus accrued interest. See "Description of Debentures-Certain Rights to
Require Repurchase of Debentures."
The Debentures are unsecured obligations of the Company and are
subordinate to all present and future Senior Indebtedness (as defined herein) of
the Company. As of May 31, 1998, the Company had no Senior Indebtedness. The
Indenture does not restrict the incurrence of any other indebtedness or
liabilities by the Company or its subsidiaries. See "Description of
Debentures-Subordination."
For a description of certain income tax consequences to holders of the
Debentures, see "Certain United States Federal Income Tax Consequences."
All of the Debentures were issued initially pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), provided by Section 4(2) thereof or Regulation D
thereunder and were transferred to the Selling Securityholders pursuant to Rule
144A and Rule 501(a)(1), (2), (3) or (7) under the Securities Act. There is no
existing public market for the Debentures and there can be no assurance as to
the liquidity of any markets that may develop for the Debentures, the ability of
the holders to sell their Debentures or at what price holders of the Debentures
will be able to sell their Debentures. The Initial Purchasers have informed the
Company that they are making and currently intend to continue making a market in
the Debentures. The Initial Purchasers, however, are not obligated to do so and
any such market making may be discontinued at any time without notice, in the
sole discretion of the Initial Purchasers. Prior to the resale of the Debentures
pursuant to this Prospectus, each of the Debentures was eligible for trading in
the Private Offerings, Resales and Trading through Automated Linkages Market
(the "PORTAL Market"). Debentures sold pursuant to this Prospectus will no
longer be eligible for trading in the PORTAL Market. The Company does not intend
to apply for listing of the Debentures on any securities exchange.
<PAGE> 3
The Debentures and the Shares are being registered to permit public
secondary trading of the Debentures and, upon conversion, the underlying Common
Stock, by the holders thereof from time to time after the date of this
Prospectus. The Company has agreed, among other things, to bear all expenses
(other than underwriting discounts, selling commissions and the fees and the
expenses of counsel and other advisors to the holders of the Debentures or the
underlying Common Stock) in connection with the registration and sale of the
Debentures and the Shares covered by this Prospectus.
The Selling Securityholders, acting as principals for their own account,
directly, through agents designated from time to time, or through brokers,
dealers, agents or underwriters also to be designated, may sell all or a portion
of the Debentures or the Shares which may be offered hereby by them from time to
time on terms to be determined at the time of sale. The aggregate proceeds to
the Selling Securityholders from the sale of the Debentures and the Shares which
may be offered hereby by the Selling Securityholders will be the purchase price
of such Debentures or Shares less commissions, if any. The Company will not
receive any proceeds from the sale of the Debentures or the Shares by the
Selling Securityholders. For information concerning indemnification arrangements
between the Company and the Selling Securityholders, see "Plan of Distribution."
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any commissions
received by such broker-dealers, agents or underwriters and any profit on the
resale of the Debentures or the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The Date of this Prospectus is _________________, 1998
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected without charge and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at its Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any
part thereof may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov. Reports and other information concerning the
Company also may be inspected at the offices of the Nasdaq National Market, 1735
K Street, N.W., Washington, D.C. 20006.
This Prospectus, which constitutes part of a registration statement
filed by the Company with the Commission under the Securities Act (the
"Registration Statement"), omits certain of the information contained in the
Registration Statement. Reference is made to the Registration Statement and to
the exhibits thereto for further information with respect to the Company and the
Shares offered hereby. Copies of such Registration Statement are available from
the Commission. Statements contained herein concerning the provisions of
documents filed herewith as exhibits are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission under Section 13(d) and 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
1. Proxy Statement on Schedule 14A filed January 16, 1998;
2. Proxy Statement on Schedule 14 filed April 27, 1998;
3. Annual Report on Form 10-K/A for the fiscal year ended December
31, 1997;
4. Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998;
5. Current Report on Form 8-K dated May 27, 1998 and filed May 29,
1998;
6. Current Report on Form 8-K dated May 1, 1998 and filed May 11,
1998;
7. Current Report on Form 8-K dated April 13, 1998 and filed April
29, 1998;
8. Current Report on Form 8-K dated April 24, 1997 and filed May 9,
1997, and amendments thereto filed July 8, 1997 and March 10,
1998, respectively;
9. Current Report on Form 8-K dated September 29, 1997 and filed
October 14, 1997, and amendment thereto filed March 10, 1998;
10. Current Report on Form 8-K dated December 29, 1997 and filed
January 13, 1998;
11. Current Report on Form 8-K dated February 4, 1998 and filed
February 18, 1998; and
12. The description of Company Common Stock set forth in the
Company's Registration Statement on Form 8-A filed pursuant to
Section 12 of the Exchange Act and any amendment or report filed
for the purpose of updating such description.
All reports and definitive proxy or information statements filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus shall be deemed to be incorporated by
reference into this Prospectus from the date of filing of such documents. Any
statement contained in a document
1.
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incorporated or deemed to be incorporated herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. There will be provided without charge to
each person, including any beneficial owner of Debentures or Common Stock, to
whom a Prospectus is delivered, upon oral or written request of any such person,
a copy of any or all documents incorporated by reference herein (excluding
exhibits unless such exhibits are specifically incorporated by reference
herein). Requests should be directed to Keith M. Roberts, Quadramed Corporation,
80 E. Sir Francis Drake Blvd., Suite 2A, Larkspur, California, 94939 (Tel.
415/461-7725).
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Except for the historical financial information contained herein, the
matters discussed in this Prospectus may be considered "forward-looking"
statements within the meaning of Section 27A of the Securities Act, and Section
21E of the Exchange Act. Such statements include declarations regarding the
intent, belief or current expectations of the Company and its management.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve a number of risks and
uncertainties, including those discussed herein under "Risk Factors." Actual
results could differ materially from those indicated by such forward-looking
statements. Among the important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements are:
(i) that the information is of a preliminary nature and may be subject to
further adjustment, (ii) variability in quarterly operating results, (iii)
identification, consummation and assimilation of acquisitions, (iv) dependence
on hospitals and demand for the Company's products and services in the
healthcare information systems and services markets, (v) legislative or
market-driven reforms in the healthcare industry, (vi) the Company's ability to
develop and introduce new products, (vii) management of the Company's changing
operations, (viii) dependence on key personnel, (ix) development by competitors
of new or superior products or entry into the market of new competitors, (x)
risks related to product defects, (xi) risks associated with pending litigation,
(xii) volatility in the Company's stock price, (xiii) the success or failure of
strategic alliances, (xiv) risk of interruption in data processing, (xv) risks
associated with certain investments in early stage companies, and (xvi) other
risks identified from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K/A for the year ended December 31, 1997.
2.
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with the detailed information and financial statements,
including the notes thereto, appearing elsewhere or incorporated by reference in
this Prospectus. Unless the context otherwise requires, references herein to the
"Company" and "QuadraMed" refer to QuadraMed Corporation, a Delaware
corporation, its wholly owned subsidiaries and QuadraMed Corporation, its
California predecessor.
THE COMPANY
QuadraMed develops, markets and sells software products and services
designed to enable health care providers and payors to increase operational
efficiency, improve cash flow, measure the cost of care and effectively
administer managed care contracts. The Company's suite of products is an
integrated offering of electronic data interchange ("EDI"), financial management
and decision support and compliance solutions for both providers and payors. In
addition, the Company provides compliance, consulting and business office
outsourcing services.
Electronic Data Interchange. These products enable the editing and
formatting of all claims submitted to payors to help ensure accuracy and
completeness, which results in more efficient reimbursement of third party
claims. The Company collects and utilizes detailed clinical and financial
information from customers who license its EDI products. This data, which is
supplemented with similar, publicly-available information, forms the basis of
the Company's proprietary databases for its decision support products.
Financial Management Products. These products utilize the enhanced data
stream created by the Company's EDI products to allow providers to track payor
contract terms and review medical billing information to ensure that bills are
properly coded and include all services rendered. These capabilities facilitate
a provider's ability to obtain timely and accurate reimbursement and to
administer and measure the profitability of managed care contracts. Further, the
Company offers a product that is designed to improve the ability of health care
providers to prevent Medicare and Medicaid fraud and abuse by identifying
potentially fraudulent coding in their medical bills. In addition, the Company's
electronic document imaging products allow its customers to improve work flow
and move toward a paperless office environment.
Decision Support Products. These products include database analysis
software and national and regional benchmark data that enable customers to
perform clinical, financial and marketing analyses. These products utilize the
enhanced data stream created by the Company's EDI and financial management
products to build proprietary databases that enable providers to measure more
accurately the resources consumed in the provision of care and to compare
clinical outcomes against the associated costs.
Business Office Outsourcing and Cash Flow Management Services. These
services are offered to health care providers, many of which are recognizing the
value of outsourcing their business office operations to reduce costs, increase
cash flow and improve operating efficiencies. The Company believes that it
possesses a significant advantage in the provision of outsourcing services due
to its ability to use its own QuanTIM(R) suite of software products and its
centralized cash flow management operations.
Compliance and Consulting Products and Services. These services are
offered (i) to improve the ability of healthcare providers to prevent Medicare
and Medicaid fraud and abuse by identifying potentially fraudulent coding in a
medical bill, and (ii) to assist clients in increasing the efficiency of the
business office. QuadraMed offers a comprehensive compliance program, including
compliance assessment, auditing and education expertise through a team of over
100 credentialed healthcare attorneys, medical records professionals, registered
nurses and physicians. These services are augmented by the implementation of
QuadraMed's integrated compliance software products. In addition, QuadraMed
offers consulting and education services in the areas of managed care contract
performance and negotiation, clinically oriented, patient-focused data analysis
and financial management.
The Company is incorporated under the laws of the State of Delaware. The
Company's executive offices are located at 80 East Sir Francis Drake Blvd.,
Suite 2A, Larkspur, California 94939 and its telephone number is (415) 461-7725.
3.
<PAGE> 7
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained or incorporated by reference in this Prospectus
before purchasing the Debentures offered hereby.
HISTORY OF OPERATING LOSSES; UNCERTAIN PROFITABILITY
The Company incurred net losses of $18.8 million, $958,000 and $25.6
million for the years ended December 31, 1995, 1996 and 1997, respectively, and
a net loss of $9.4 million for the fiscal quarter ended March 31, 1998. As of
March 31, 1998, the Company had an accumulated deficit of $61.8 million. These
results include write-offs for acquired in-process research and development in
the years ended December 31, 1995 and 1997 and the three months ended March 31,
1998 of $14.8 million, $21.9 million and $12.8 million, respectively. In
conjunction with the acquisition of the remaining 43.3% interest in Medicus
Systems Corporation ("Medicus"), the Company expects to record a write-off in
the second quarter of 1998 for acquired in-process research and development of
approximately $16.7 million. In connection with its acquisitions, the Company
has and will incur significant non-recurring charges and will be required to
amortize significant expenses related to goodwill and other intangible assets in
future periods. There can be no assurance that the Company will be able to
achieve or sustain revenue growth or profitability on a quarterly or annual
basis.
POTENTIAL VARIABILITY IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have varied significantly in
the past and are likely to vary substantially from quarter to quarter in the
future. Quarterly revenues and operating results may fluctuate as a result of a
variety of factors, including: integration of acquired businesses, variability
in demand for the Company's products and services; the number, timing and
significance of announcements and releases of product enhancements and new
products by the Company and its competitors; the timing and significance of
announcements concerning the Company's present or prospective strategic
alliances; the termination of, or a reduction in, offerings of the Company's
products and services; the loss of customers due to consolidation in the health
care industry; delays in product delivery requested by customers; the length of
the sales cycle or the timing of sales; the amount of new potential contracts at
the beginning of any particular quarter; customer budgeting cycles and changes
in customer budgets; investments by the Company in marketing, sales, research
and development, and administrative personnel necessary to support the Company's
anticipated operations; marketing and sales promotional activities; software
defects and other quality factors; and general economic conditions.
The timing of customer purchases is difficult to predict given the
complex procurement decision process associated with most health care providers
and payors. As a result, the Company typically experiences sales cycles that
extend over several quarters. Moreover, the Company's operating expense levels,
which will increase with the addition of acquired businesses are relatively
fixed. If revenues are below expectations, net income is likely to be
disproportionately adversely affected. Further, it is likely that in some future
quarter the Company's revenues or operating results will be below the
expectations of securities analysts and investors. In such event, the trading
price of the Company's Common Stock would likely be materially adversely
affected.
INTEGRATION OF ACQUIRED COMPANIES INTO THE COMPANY
The Company expects to realize significant benefits from its recent
acquisitions, including the acquisition of Medicus Systems Corporation
("Medicus") and the acquisition of Rothenberg Health Systems Inc. and related
entities ("Rothenberg"). Realizing these benefits will depend in significant
part upon the successful integration of the businesses, including their products
and employees, with the Company, and there can be no assurance that such
integration will not entail substantial costs, delays or other problems or that
such integration will be successfully completed. The effort to integrate the
businesses will divert the attention of management from other matters and will
result in significant operational and administrative expense. Any difficulties
encountered in the integration process could have a material adverse effect on
the revenues and operating results of the Company. In addition, the process of
integrating the businesses could cause the interruption of, or a disruption in,
the business of the Company, which could have a material adverse effect on the
operations and financial performance of the Company. Even if these businesses
are successfully integrated into the Company, the acquired operations may not
achieve sales, productivity and profitability commensurate with the Company's
historical or projected operating results. Failure to achieve such projected
results would have a material adverse effect on the Company's financial
performance, and in turn, on the market value of the Company's Common Stock.
There can be no assurance that the Company will realize any of the anticipated
benefits of its recent acquisitions, including the acquisition of Medicus and
the acquisition of Rothenberg, or that such acquisitions will enhance the
Company's business or financial performance.
4.
<PAGE> 8
DEPENDENCE ON ACQUISITION STRATEGY
The Company intends to continue to expand in substantial part through
acquisitions of products, technologies and businesses. The Company's ability to
expand successfully through acquisitions depends on many factors, including the
successful identification and acquisition of products, technologies or
businesses and management's ability to effectively negotiate and consummate
acquisitions and integrate and operate the new products, technologies or
businesses. There is significant competition for acquisition opportunities in
the Company's industry, which may intensify due to increasing consolidation in
the health care industry, thereby increasing the costs of capitalizing on
acquisition opportunities. The Company competes for acquisition opportunities
with other companies that have significantly greater financial and management
resources than the Company. The inability to successfully identify appropriate
acquisition opportunities, consummate acquisitions or successfully integrate
acquired products, technologies, operations, personnel or businesses could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, acquisitions may divert management's
attention from other business concerns, expose the Company to the risks of
entering markets in which it has no direct prior experience or to risks
associated with the market acceptance of acquired products and technologies, or
result in the loss of key employees of the Company or the acquired company.
Moreover, acquisitions by the Company may result in potentially dilutive
issuances of equity securities, the incurrence of additional debt and the
recognition of amortization expenses related to goodwill and other intangible
assets, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH ACQUISITIONS; NEED TO MANAGE CHANGING OPERATIONS
Acquisitions involve a number of special risks including, without
limitation, managing geographically dispersed operations, failure of the
acquired business to achieve expected results, failure to retain key personnel
of the acquired business, inability to integrate the new business into existing
operations and risks associated with unanticipated events or liabilities,
potential increases in stock compensation expense and increased compensation
expense resulting from newly hired employees, the assumption of unknown
liabilities and potential disputes with the sellers of one or more acquired
entities, all of which could have a material adverse effect on the Company's
business, results of operations and financial condition. Additionally, customer
dissatisfaction or performance problems at a single acquired company could have
an adverse effect on the Company's reputation and its sales and marketing
initiatives. With the addition of acquired businesses, the Company's anticipated
future operations may place a strain on its management systems and resources.
The Company expects that it will be required to continue to improve its
financial and management controls, reporting systems and procedures, and will
need to expand, train and manage its work force. There can be no assurance that
the Company will be able to effectively manage these tasks, and the failure to
do so could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's performance depends in significant part upon the continued
service of its executive officers, its product managers and other key sales,
marketing and development personnel. The loss of the services of any of its
executive officers or the failure to hire or retain other key employees could
have a material adverse effect on the Company's business, financial condition
and results of operations. Additions of new, and departures of existing,
personnel can be disruptive and could have a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS RELATED TO HOSPITAL AND MANAGED CARE MARKETS; UNCERTAINTY IN THE HEALTH
CARE INDUSTRY
A substantial portion of the Company's revenues have been and are
expected to be derived from the sale of software products and services to
hospitals. Consolidation in the health care industry, particularly in the
hospital and managed care markets, could cause a decrease in the number of
existing or potential purchasers of the Company's products and services, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the decision to purchase the
Company's products often involves the approval of several members of management
of a hospital or health care provider. Consequently, it is difficult for the
Company to predict the timing or outcome of the buying decisions of customers or
potential customers.
The health care industry in the United States is subject to changing
political, economic and regulatory influences that may affect the procurement
practices and operations of health care organizations. The Company
5.
<PAGE> 9
believes that the commercial value and appeal of its products may be adversely
affected if the current health care financing and reimbursement system were to
reverse its current evolution to a managed care model back to a fee-for-service
model. In addition, many of the Company's customers are providing services under
capitated service agreements, and a reduction in the use of capitation
arrangements as a result of regulatory or market changes could have a material
adverse effect on the Company's business, financial condition and results of
operations. During the past several years, the health care industry has been
subject to increasing levels of governmental regulation of, among other things,
reimbursement rates and certain capital expenditures. Certain proposals to
reform the health care system have been and are being considered by Congress.
These proposals, if enacted, could change the operating environment for the
Company's clients in ways that cannot be predicted. Health care organizations
may react to these proposals by curtailing or deferring investments, including
those for the Company's products and services.
Changes in current health care financing and reimbursement systems could
result in the need for unplanned product enhancements, in delays or
cancellations of product orders or shipments or in the revocation of endorsement
of the Company's products by hospital associations or other customers. Any of
these occurrences could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, many
health care providers are consolidating to create integrated health care
delivery systems with greater regional market power. As a result, these emerging
systems could have greater bargaining power, which may lead to price erosion of
the Company's products. The failure of the Company to maintain adequate price
levels would have a material adverse effect on the Company's business, financial
condition and results of operations. Other market-driven reforms could also have
adverse effects on the Company's business, financial condition and results of
operations.
HIGHLY COMPETITIVE MARKET
Competition in the market for the Company's products and services is
intense and is expected to increase. Increased competition could result in price
reductions, reduced gross margins and loss of market share, any of which could
materially adversely affect the Company's business, financial condition and
results of operations. The Company's competitors include other providers of
health care information software and services, as well as health care consulting
firms. The combined company's principal competitors include: (i) CIS
Technologies, Inc., a division of National Data Corporation, Inc., and
Sophisticated Software, Inc. in the market for its EDI products; (ii) Envoy
Corp. and MedE AMERICA in the market for its claims processing service; (iii)
Healthcare Cost Consultants, Inc., a division of CIS Technologies, Inc., and
Trego Systems, Inc. in the market for its contract management products; (iv)
IMNET Systems, Inc., Optika Imaging Systems, Inc. and LanVision Systems, Inc. in
the market for its electronic document management products; (v) Transition
Systems, Inc. and Healthcare Microsystems, Inc., a division of Health Management
Systems Inc., HCIA Inc. and MediQual Systems, Inc., a division of Cardinal
Health, Inc., in the market for its decision support products; (vi) HMS and
ARTRAC, a division of Medaphis in the market for its business office outsourcing
services; and (vii) a subsidiary of Minnesota Mining and Manufacturing and
CodeMaster, in the market for its medical records products. In addition, current
and prospective customers evaluate the Company's capabilities against the merits
of their existing information systems and expertise. Furthermore, major software
information systems companies, including those specializing in the health care
industry, not presently offering products that compete with those offered by the
Company may enter the Company's markets. In addition, many of the Company's
competitors and potential competitors have significantly greater financial,
technical, product development, marketing and other resources and market
recognition than the Company. Many of the Company's competitors also currently
have, or may develop or acquire, substantial installed customer bases in the
health care industry. As a result of these factors, the Company's competitors
may be able to respond more quickly to new or emerging technologies, changes in
customer requirements and political, economic or regulatory changes in the
health care industry or to devote greater resources to the development,
promotion and sale of their products than the Company. There can be no assurance
that the Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, financial condition and results of
operations.
NEW PRODUCT DEVELOPMENT AND SYSTEM ENHANCEMENT
The Company's performance will depend in large part upon the Company's
ability to provide the increasing functionality required by its customers
through the timely development and successful introduction of new products and
enhancements to its existing suite of products. The Company has historically
devoted significant resources to product enhancements and research and
development and believes that significant continuing development efforts will be
required to sustain its operations and integrate the products and technologies
of acquired businesses. There can be no assurance that the Company will
successfully or in a timely manner develop, acquire, integrate, introduce
6.
<PAGE> 10
and market new product enhancements or products, or that product enhancements or
new products developed by the Company will meet the requirements of hospitals or
other health care providers and payors and achieve or sustain market acceptance.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders under Rule 144 and
Rule 701 of the Securities Act and through the exercise of registration rights
could have an adverse effect on the price of the Company's Common Stock. As of
May 31, 1998, approximately 1,100,000 shares are available for sale in the
public market subject to compliance with Rule 144 or Rule 701. Certain existing
stockholders holding an aggregate of 186,662 shares of Common Stock as of May
31, 1998 have rights under certain circumstances to require the Company to
register their shares for future sale.
In May 1998, the Company closed the acquisition of Medicus. In
connection with the acquisition of Medicus, the Company issued an aggregate of
1,201,221 shares of Common Stock, which includes 441,564 shares of Common Stock
issued upon the exercise of warrants issued in November 1997 to certain former
stockholders of Medicus (the "Warrants"). All of the shares of Common Stock
issued in connection with the acquisition of Medicus (including shares issuable
upon exercise of the Warrants) have been registered under the Securities Act and
are freely tradeable. In December 1997, the Company issued 1,588,701 shares of
Common Stock in connection with the RHP Mergers. The shares of Common Stock
issued in connection with the RHP Mergers have been registered for resale under
the Securities Act and are freely tradeable. An additional 242,590 shares
subject to registration rights have been registered for resale and are freely
tradeable. As a result of issuance of stock in the acquisition of Medicus and
RHP Mergers, substantial sales of the Company's Common Stock could occur
immediately after the registration of such equity securities.
Sales of a substantial number of the aforementioned shares of the
Company's Common Stock could adversely affect or cause substantial fluctuations
in the market price of the Company's Common Stock and impair the Company's
ability to raise additional capital through the sale of its securities. Sales of
substantial amounts of Common Stock in the public market under Rule 144 under
the Securities Act, or otherwise, or the perception that such sales could occur,
may adversely affect prevailing market prices of the Common Stock and could
impair the future ability of the Company to raise capital through an offering of
its equity securities.
LIMITED PROPRIETARY RIGHTS; RISK OF INFRINGEMENT
The Company relies on a combination of trade secrets, copyright and
trademark laws, nondisclosure and other contractual provisions to protect its
proprietary rights. The Company has not filed any patent applications covering
its technology. There can be no assurance that measures taken by the Company to
protect its intellectual property will be adequate or that the Company's
competitors will not independently develop products and services that are
substantially equivalent or superior to those of the Company.
Substantial litigation regarding intellectual property rights exists in
the software industry, and the Company expects that software products may be
increasingly subject to third-party infringement claims as the number of
competitors in the Company's industry segment grows and the functionality of
products overlaps. Although the Company believes that its products do not
infringe upon the proprietary rights of third parties, there can be no assurance
that third parties will not assert infringement claims against the Company in
the future or that a license or similar agreement will be available on
reasonable terms in the event of an unfavorable ruling on any such claim. In
addition, any claim may require the Company to incur substantial litigation
expenses or subject the Company to significant liabilities and could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has received notice of a claim filed with the
United States Trademark Appeal Board for the cancellation of its registered
QuanTIM(R) trademark, and also has recently received a letter from a separate
third party challenging this trademark. There can be no assurance that the
Company will be successful in its defense of these or similar claims.
7.
<PAGE> 11
RISK OF PRODUCT DEFECTS; FAILURE TO MEET PERFORMANCE CRITERIA
Products such as those offered by the Company frequently contain errors
or failures, especially when initially introduced or when new versions are
released. Although QuadraMed conducts extensive testing, software errors have
been discovered in certain enhancements and products after their introduction.
There can be no assurance that, despite testing by the Company and by current
and potential customers, errors or performance failures will not occur in
products under development or in other enhancements or products after
commencement of commercial shipments, resulting in loss of revenues and
customers, delay in market acceptance, diversion of resources, damage to the
Company's reputation or increased service and warranty costs, any of which could
have a material adverse effect upon its business, financial condition and
results of operations.
YEAR 2000
Many computer systems have experienced or will experience problems
processing dates beyond the year 1999. Therefore, some computer hardware and
software will need to be modified prior to the year 2000 in order to remain
functional. The Company is assessing both the internal readiness of its computer
systems and the compliance of its computer products and software sold to
customers for addressing the year 2000 issues. The Company expects to implement
successfully the systems and programming changes necessary to address the year
2000 issues and does not believe that the cost of such actions will have a
material adverse effect on the Company's business, results of operations or
financial condition. There can be no assurance, however, that there will not be
a delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have an
adverse effect on its business, financial condition and results of operations.
The Company has designed and tested the most current versions of its
products to be year 2000 compliant. A significant number of the Company's
customers are running product versions that are not year 2000 compliant. While
the Company has been encouraging such customers to migrate to current product
versions, it is possible that the Company may experience increased expenses in
addressing migration issues and may lose customers. In addition, there can be no
assurances that the Company's current products do not contain undetected errors
or defects associated with year 2000 date functions that may result in the
material costs to the Company. Some commentators have stated that significant
amounts of litigation will arise out of year 2000 compliance issues. Because of
the unprecedented nature of such litigation it is uncertain whether or to what
extent the Company may be affected by it.
RISK OF INTERRUPTION OF DATA PROCESSING
The Company currently processes substantially all its customer data at
its facilities in Larkspur, California and Neptune, New Jersey. While the
Company backs up its data nightly and has safeguards for emergencies such as
power interruption or breakdown in temperature controls, it has no mirror
processing site to which processing could be transferred in the case of a
catastrophic event at either of these facilities. The occurrence of a major
catastrophic event at either the Larkspur or the Neptune facility could lead to
an interruption of data processing and could have a material adverse effect on
the Company's business, financial condition and results of operations.
RISKS RELATED TO OUTSOURCING BUSINESS
The Company provides compliance, consulting and business office
outsourcing and cash flow management services, including the billing and
collection of receivables. The infrastructure for the Company's outsourcing
business was acquired by the Company. In addition, the Company often uses its
software products to provide outsourcing services. As a result, the Company has
not been required to make significant capital expenditures in order to service
existing outsourcing contracts. However, if the Company experiences a period of
substantial expansion in its outsourcing business, it may be required to make
substantial investments in capital assets and personnel, and there can be no
assurance that it will be able to assess accurately the investment required and
negotiate and perform in a profitable manner any of the outsourcing contracts it
may be awarded. The Company's failure to estimate accurately the resources and
related expenses required for a project or its failure to complete its
contractual obligations in a manner consistent with the project plan upon which
a contract was based could have a material adverse effect on its business,
financial condition and results of operations. In addition, the Company's
failure to meet a client's expectations in the performance of its services could
damage the Company's reputation and adversely affect its ability to attract new
business. Finally, the Company could incur substantial costs and expend
significant resources correcting errors in its work, and could possibly become
liable for damages caused by these errors.
8.
<PAGE> 12
GOVERNMENT REGULATION
The United States Food and Drug Administration (the "FDA") is
responsible for assuring the safety and effectiveness of medical devices under
the Federal Food, Drug and Cosmetic Act. Computer products are subject to
regulation when they are used or are intended to be used in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment or prevention
of disease, or are intended to affect the structure or function of the body. The
FDA could determine in the future that any predictive aspects of the Company's
products make them clinical decision tools subject to FDA regulation. Compliance
with these regulations could be burdensome, time consuming and expensive. The
Company also could become subject to future legislation and regulations
concerning the development and marketing of health care software systems. Such
legislation could increase the cost and time necessary to market new products
and could affect the Company in other respects not presently foreseeable. The
Company cannot predict the effect of possible future legislation and regulation.
The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in the Company's databases are
subject to substantial regulation by state governments. These state laws and
regulations govern both the disclosure and the use of confidential patient
medical record information. Although compliance with these laws and regulations
is at present principally the responsibility of the hospital, physician or other
health care provider, regulations governing patient confidentiality rights are
evolving rapidly. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal levels. This
legislation may require holders of such information to implement security
measures that may require substantial expenditures by the Company. There can be
no assurance that changes to state or federal laws will not materially restrict
the ability of health care providers to submit information from patient records
using the Company's products.
RISK OF PRODUCT-RELATED CLAIMS
Certain of the Company's products and services relate to the payment,
collection, coding and billing of health care claims and the administration of
managed care contracts. Any failure by employees of the Company or by the
Company's products to accurately assess, process or collect such claims could
result in claims against the Company by its customers. The Company has been and
currently is involved in claims for money damages related to services provided
by its accounts receivable management business. The Company maintains insurance
to protect against certain claims associated with the use of its products, but
there can be no assurance that its insurance coverage would adequately cover any
claim asserted against the Company. A successful claim brought against the
Company that is in excess of, or excluded from, its insurance coverage could
have a material adverse effect on its business, financial condition and results
of operations. Even unsuccessful claims could result in the Company's
expenditure of funds in litigation and management time and resources. There can
be no assurance that the Company will not be subject to material claims in the
future, that such claims will not result in liability in excess of the Company's
insurance coverage, that the Company's insurance will cover such claims or that
appropriate insurance will continue to be available to the Company in the future
at commercially reasonable rates. In addition, if liability of the Company were
to be established, substantial revisions to its products could be required that
may cause it to incur additional unanticipated research and development
expenses.
RISKS ASSOCIATED WITH CERTAIN INVESTMENTS
The Company has made, and may continue to make in the future, certain
investments in which it obtains a minority equity interest in certain early
stage companies. The Company does not have the ability to control the operations
of any of these companies. Investing in early stage companies is subject to
certain significant risks, and there can be no assurance that any of these
companies will be successful or achieve profitability or that the Company will
ever realize a return on its investments. In addition, to the extent any of such
companies fail or become bankrupt or insolvent, the Company may be required to
report a loss on some or all of its investment, which could have a material
adverse effect on its results of operations during a particular reporting
period.
POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law applicable to the Company could have
the effect of delaying, deterring or preventing a change in control of the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years from the date the person
became an interested stockholder unless certain conditions are
9.
<PAGE> 13
met. In addition, the Company's Certificate of Incorporation and Bylaws contain
certain provisions that could discourage potential takeover attempts and make
attempts by stockholders to change management more difficult. The Company's
Board of Directors is classified into three classes of directors serving
staggered, three-year terms and has the authority without action by the
Company's stockholders to fix the rights and preferences and issue shares of
preferred stock, and to impose various procedural and other requirements that
could make it more difficult for stockholders to effect certain corporate
actions. The Company's Certificate of Incorporation provides that directors may
be removed only by the affirmative vote of the holders of two-thirds of the
shares of capital stock of the Company entitled to vote. Any vacancy on the
Board of Directors may be filled only by vote of the majority of directors then
in office. Further, the Company's Certificate of Incorporation provides that any
"Business Combination" (as therein defined) requires the affirmative vote of
two-thirds of the shares entitled to vote, voting together as a single class.
These provisions, and certain other provisions of the Certificate of
Incorporation which may have the effect of delaying proposed stockholder actions
until the next annual meeting of stockholders, could have the effect of delaying
or preventing a tender offer for the Company's Common Stock or other changes of
control or management of the Company, which could adversely affect the market
price of the Company's Common Stock.
VOLATILITY OF DEBENTURES AND STOCK PRICES
The securities markets historically have experienced volatility which
has affected the market price of securities of many companies and which has
sometimes been unrelated to the operating performance of such companies. These
market fluctuations also may adversely affect the market price of the Debentures
and the Company's Common Stock. The trading price of the Debentures and the
Company's Common Stock could also be subject to significant fluctuations in
response to variations in quarterly results of operations, announcements of new
products or acquisitions by the Company or its competitors, governmental
regulatory action, other developments or disputes with respect to proprietary
rights, general trends in the industry and overall market conditions, and other
factors. The market prices of the Debentures and the Common Stock may also be
affected by movements in prices of debt securities and equity securities in
general.
SUBORDINATION OF DEBENTURES
The Debentures are subordinate in right of payment to all current and
future Senior Indebtedness of the Company. Senior Indebtedness consists of all
secured and certain unsecured indebtedness of the Company, whether existing on
or created or incurred after the date of the issuance of the Debentures, that is
not made subordinate to or pari passu with the Debentures by the instrument
creating the indebtedness. As of April 30, 1998, the Company had no outstanding
Senior Indebtedness. The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee. By reason of such subordination of the Debentures,
in the event of insolvency, bankruptcy, liquidation, reorganization, dissolution
or winding up of the business of the Company or upon a default in payment with
respect to any Senior Indebtedness of the Company or an event of default with
respect to such indebtedness resulting in the acceleration thereof, the assets
of the Company will be available to pay the amounts due on the Debentures only
after all Senior Indebtedness of the Company has been paid in full. See
"Description of Debentures."
LIMITATIONS ON ABILITY TO REPURCHASE UPON A REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in Control
and a Termination of Trading (each as defined herein), each holder of the
Debentures will have the right, at the holder's option, to require the Company
to repurchase all or a portion of such holder's Debentures at a purchase price
equal to 100% of the principal amount thereof plus accrued interest to the
repurchase date. The Company's ability to repurchase the Debentures upon a
Repurchase Event may be limited by the terms of the Company's Senior
Indebtedness and the subordination provisions of the Indenture. Further, the
ability of the Company to repurchase Debentures upon a Repurchase Event will be
dependent on the availability of sufficient funds and compliance with applicable
securities laws. Accordingly, there can be no assurance that the Company will be
able to repurchase the Debentures upon a Repurchase Event. The term "Repurchase
Event" is limited to certain specified transactions and may not include other
events that might adversely affect the financial condition of the Company or
result in a downgrade of the credit rating (if any) of the Debentures nor would
the requirement that the Company offer to repurchase the Debentures upon a
Repurchase Event necessarily afford holders of the Debentures protection in the
event of a highly leveraged reorganization, merger or similar transaction
involving the Company. See "Description of Debentures."
10.
<PAGE> 14
ABSENCE OF PUBLIC MARKET
There is no existing established trading market for the Debentures and
there can be no assurance as to the liquidity of any markets that may develop
for the Debentures, the ability of the holders to sell their Debentures or the
price at which holders of the Debentures may be able to sell their Debentures.
Future trading prices of the Debentures will depend on many factors, including,
among other things, prevailing interest rates, the Company's operating results,
the price of the Common Stock and the market for similar securities. The Initial
Purchasers have informed the Company that the Initial Purchasers intend to make
a market in the Debentures offered hereby; however, the Initial Purchasers are
not obligated to do so, and any such market making activity may be terminated at
any time without notice to the holders of the Debentures and in the sole
discretion of the Initial Purchasers. Prior to the resale of the Debentures
pursuant to this Prospectus, the Debentures were eligible for trading in the
PORTAL Market. Debentures sold pursuant to this Prospectus will no longer be
eligible for trading in the PORTAL Market. The Company does not intend to apply
for listing of the Debentures on any securities exchange.
11.
<PAGE> 15
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Debentures or the Shares offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings
by the fixed charges. For computation of such ratios of earnings to fixed
charges, earnings consist of net income, to which has been added fixed charges
and income taxes. Fixed charges consist of consolidated interest and debt
expense and one-third of consolidated rent expense, which approximates the
interest component of rent expense.
For all periods presented below, the Company experienced a deficiency
of earnings to fixed charges. The dollar amount of the deficiency is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR THREE MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1993 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amount of deficiency $804 $4,865 $18,831 $958 $25,634 $9,441
</TABLE>
12.
<PAGE> 16
DESCRIPTION OF DEBENTURES
The Debentures have been issued under an indenture dated as of May 1,
1998 (the "Indenture") between the Company and The Bank of New York, as trustee
(the "Trustee"). The following summaries of certain provisions of the Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture, including the
definition therein of certain terms. Wherever particular sections or defined
terms of the Indenture are referred to, such sections or defined terms are
incorporated herein by reference. Copies of the proposed form of Indenture are
available from the Company or the Initial Purchasers upon request.
GENERAL
The Debentures are unsecured obligations of the Company in the amount of
$115 million in aggregate principal amount and will mature on May 1, 2005. The
Debentures bear interest at the rate per annum shown on the front cover of this
Prospectus from the date of original issuance of Debentures pursuant to the
Indenture, or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semiannually on May 1 and November 1 of each
year, commencing November 1, 1998, to the Person in whose name the Debenture (or
any predecessor Debenture) is registered at the close of business on the
preceding April 15 or October 15, as the case may be. Interest on the Debentures
will be paid on the basis of a 360-day year of twelve 30-day months.
The Debentures have been issued in fully registered form, without
coupons and in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any transfer or exchange of the Debentures, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge and any other expenses (including the fees and expenses of
the Trustee) payable in connection therewith. The Company is not required (i) to
issue, register the transfer of or exchange any Debentures during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Debentures selected
for redemption in whole or in part, except the unredeemed portion of Debentures
being redeemed in part.
The Indenture does not contain any provisions that would provide
protection to Holders of the Debentures against a sudden and dramatic decline in
credit quality of the Company resulting from any takeover, recapitalization or
similar restructuring, except as described below under "--Certain Rights to
Require Repurchase of Debentures."
CONVERSION RIGHTS
The Debentures are convertible into Common Stock at any time prior to
redemption or final maturity, initially at the conversion price of $33.25 per
share (resulting in an initial conversion ratio of 30.075 shares per $1,000
principal amount). The right to convert Debentures which have been called for
redemption will terminate at the close of business on the second business day
preceding the Redemption Date. See "--Optional Redemption" below.
The conversion price will be subject to adjustment upon the occurrence
of any of the following events: (i) the subdivision, combination or
reclassification of outstanding shares of Common Stock; (ii) the payment in
shares of Common Stock of a dividend or distribution on any class of capital
stock of the Company; (iii) the issuance of rights or warrants to all holders of
Common Stock entitling them to acquire shares of Common Stock at a price per
share less than the Current Market Price; (iv) the distribution to holders of
Common Stock of shares of capital stock other than Common Stock, evidences of
indebtedness, cash or assets (including securities, but excluding dividends or
distributions paid exclusively in cash and dividends, distributions, rights and
warrants referred to above); (v) a distribution consisting exclusively of cash
(excluding any cash distributions referred to in (iv) above) to all holders of
Common Stock in an aggregate amount that, together with (A) all other cash
distributions (excluding any cash distributions referred to in (iv) above) made
within the 12 months preceding such distribution and (B) any cash and the fair
market value of other consideration payable in respect of any tender offer by
the Company or a subsidiary of the Company for the Common Stock consummated
within the 12 months preceding such distribution, exceeds 12.5% of the Company's
market capitalization (determined as provided in the Indenture) on the date
fixed for determining the stockholders entitled to such distribution; and (vi)
the consummation of a tender offer made by the Company or any subsidiary of the
Company for the Common Stock which involves an aggregate consideration that,
together with (X) any cash and other consideration payable in respect of any
tender offer by the Company or a subsidiary of the Company for the Common Stock
consummated within the 12 months preceding the consummation of such tender offer
and (Y) the aggregate amount of all cash distributions (excluding any cash
distributions referred
13.
<PAGE> 17
to in (iv) above) to all holders of the Common Stock within the 12 months
preceding the consummation of such tender offer, exceeds 12.5% of the Company's
market capitalization at the date of consummation of such tender offer. No
adjustment of the conversion price will be required to be made until cumulative
adjustments amount to at least one percent of the conversion price, as last
adjusted. Any adjustment that would otherwise be required to be made shall be
carried forward and taken into account in any subsequent adjustment.
In addition to the foregoing adjustments, the Company from time to time
may, to the extent permitted by law, reduce the conversion price of the
Debentures by any amount for any period of at least 20 days, in which case the
Company shall give at least 15 days notice of such decrease. The Company will
also be permitted to reduce the conversion price to such extent as it considers
to be advisable in order that any event treated for federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the holders of the
Common Stock or, if that is not possible, to diminish any income taxes that are
otherwise payable because of such event. In the case of any consolidation or
merger of the Company with any other corporation (other than one in which no
change is made in the Common Stock), or any sale or transfer of all or
substantially all of the assets of the Company, the Holder of any Debenture then
outstanding will, with certain exceptions, have the right thereafter to convert
such Debenture only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such Debenture might
have been converted immediately prior to such consolidation, merger, sale or
transfer; and adjustments will be provided for events subsequent thereto that
are as nearly equivalent as practical to the conversion price adjustments
described above.
Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion. If any
Debentures are surrendered for conversion during the period from the close of
business on any Regular Record Date through and including the next succeeding
Interest Payment Date (except any such Debentures called for redemption on a
redemption date occurring on or before such Interest Payment Date), such
Debentures when surrendered for conversion must be accompanied by payment in
next day funds of an amount equal to the interest thereon which the registered
Holder on such Regular Record Date is to receive. Except as described in the
preceding sentence, no interest will be payable by the Company on converted
Debentures with respect to any Interest Payment Date subsequent to the date of
conversion. No other payment or adjustment for interest or dividends is to be
made upon conversion.
SUBORDINATION
No payment or distribution of any assets of the Company of any kind or
character (other than payments of amounts already deposited in accordance with
the defeasance provisions of the Indenture) will be made on account of
Subordinated Obligations or on account of the purchase, redemption or other
acquisition of the Debentures upon the occurrence of any default in the payment
of any Senior Indebtedness in excess of $5,000,000 beyond any applicable grace
period, unless and until such default is cured or waived or ceases to exist or
such Senior Indebtedness is discharged.
During the continuance of any non-payment event of default with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated, no payment or distribution of any assets of the Company of any
kind or character may be made by the Company on account of Subordinated
Obligations or on account of the purchase, redemption or other acquisition of
the Debentures for the period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice by the
Company and the Trustee from any representative of a holder of Designated Senior
Indebtedness and shall end on the earlier of (i) 179 days thereafter, (ii) the
date on which such event is cured or waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged, (iii) the date on which the
maturity of any Indebtedness (other than Senior Indebtedness) shall have been
accelerated by virtue of such event or (iv) the date on which such Payment
Blockage Period shall have been terminated by notice to the Company or the
Trustee from the representative of holders of the Designated Senior Indebtedness
initiating such Payment Blockage Period, after which the Company shall resume
making any and all required payments in respect of the Debentures, including any
missed payments. Only one Payment Blockage Period may be commenced during any
period of 365 consecutive days. No event of default with respect to Designated
Senior Indebtedness that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period whether
or not within a period of 365 consecutive days, unless such event of default has
been cured or waived
14.
<PAGE> 18
for a period of not less than 90 consecutive days. In no event will a Payment
Blockage Period extend beyond 179 days.
The payment of the principal of and premium, if any, and interest on the
Debentures will, to the extent set forth in the Indenture, be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness, if
any. If there is a payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
or provision for such payment in money or money's worth before the Holders of
the Debentures will be entitled to receive any payment in respect to the
principal of or premium, if any, or interest on the Debentures. In the event of
the acceleration of the maturity of the Debentures, the holders of all Senior
Indebtedness will first be entitled to receive payment in full in cash of all
amounts due thereon or provision for such payment in money or money's worth
before the Holders of the Debentures will be entitled to receive any payment for
the principal of or premium, if any, or interest on the Debentures. No payments
on account of principal of or premium, if any, or interest on the Debentures or
on account of the purchase or acquisition of Debentures may be made if there has
occurred and is continuing a default in any payment with respect to Senior
Indebtedness, any acceleration of the maturity of any Senior Indebtedness or if
any judicial proceeding is pending with respect to any such default.
Senior Indebtedness is defined in the Indenture as all indebtedness,
liabilities and other obligations of the Company, other than the Debentures,
whether existing on the date of execution of the Indenture or thereafter
created, incurred or assumed, except any such other indebtedness, liabilities or
other obligations that by their terms or by operation of law are subordinated
to, or on a parity with, the Debentures. The Debentures will rank pari passu
with any securities which may be issued in the future on a parity with the
Debentures.
Designated Senior Indebtedness is defined in the Indenture as (i)
amounts now or hereafter outstanding under the Company's existing bank credit
facilities or indebtedness incurred to extend, refund or refinance such amounts
and (ii) any Senior Indebtedness which, at the time of determination, has an
aggregate principal amount outstanding of at least $5,000,000 and is
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company.
The Indenture provides that the Company shall not create, incur, assume
or suffer to exist any indebtedness that is subordinate in right of payment to
any Senior Indebtedness unless such indebtedness is subordinate in right of
payment to, or ranks pari passu with, the Debentures.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness by the Company or the Subsidiaries. As of April 30, 1998, the
Company had no outstanding Senior Indebtedness.
OPTIONAL REDEMPTION
The Debentures are redeemable, at the Company's option, in whole or from
time to time in part, at any time on or after May 4, 2001, upon not less than 30
nor more than 60 days' notice mailed to each Holder of Debentures to be redeemed
at its address appearing in the Security Register and prior to Maturity at the
following Redemption Prices (expressed as percentages of the principal amount)
plus accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning May 1 in the year
indicated (May 4, in the case of 2001), the redemption price shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................................................ 103.00%
2002............................................................ 102.25%
2003............................................................ 101.50%
2004............................................................ 100.75%
2005............................................................ 100.00%
</TABLE>
15.
<PAGE> 19
No sinking fund is provided for the Debentures.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, or permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties substantially as an entirety to the Company, unless (a) if
applicable, the Person formed by such consolidation or into which the Company is
merged or the Person or corporation which acquires the properties and assets of
the Company substantially as an entirety is a corporation, partnership or a
trust organized and validly existing under the laws of the United States or any
state thereof or the District of Columbia and expressly assumes payment of the
principal of and premium, if any, and interest on the Debentures and performance
and observance of each obligation of the Company under the Indenture, (b) after
consummating such consolidation, merger, transfer or lease, no Default or Event
of Default will occur and be continuing, (c) such consolidation, merger or
acquisition does not adversely affect the validity or enforceability of the
Debentures and (d) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease complies with the provisions of the
Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES
In the event of any Repurchase Event (as defined below) occurring after
the date of issuance of the Debentures and on or prior to Maturity, each Holder
of Debentures will have the right, at the Holder's option, to require the
Company to repurchase all or any part of the Holder's Debentures on the date
(the "Repurchase Date") that is 30 days after the date the Company gives notice
of the Repurchase Event as described below at a price (the "Repurchase Price")
equal to 100% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the Company
shall deposit with the Trustee or a Paying Agent an amount of money sufficient
to pay the Repurchase Price of the Debentures which are to be repaid on or
promptly following the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase Event,
as provided for below, or to repurchase the Debentures when required under the
preceding paragraph will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event,
the Company is obligated to mail to all Holders of Debentures a notice of the
occurrence of such Repurchase Event and identifying the Repurchase Date, the
date by which the repurchase right must be exercised, the Repurchase Price for
Debentures and the procedures which the Holder must follow to exercise this
right. To exercise the repurchase right, the Holder of a Debenture must deliver,
on or before the close of business on the Repurchase Date, written notice to the
Company (or an agent designated by the Company for such purpose) and to the
Trustee of the Holder's exercise of such right, together with the certificates
evidencing the Debentures with respect to which the right is being exercised,
duly endorsed for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a Change
in Control or a Termination of Trading (each as defined below).
A "Change in Control" shall occur when: (i) all or substantially all of
the Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the proportion as their
ownership of Common Stock immediately before such transaction; (iii) any person,
or any persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with the affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of all classes of capital
16.
<PAGE> 20
stock of the Company entitled to vote generally in the election of the directors
of the Company; (iv) at any time during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (v) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
A "Termination of Trading" shall occur if the Common Stock (or other
common stock into which the Debentures are then convertible) is neither listed
for trading on a U.S. national securities exchange nor approved for trading on
an established automated over-the-counter trading market in the United States.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Repurchase Event could create an event of default under
Senior Indebtedness as a result of which any repurchase could, absent a waiver,
be blocked by the subordination provisions of the Debentures. See
"--Subordination." Contractual limitations imposed by other indebtedness may
also, absent a waiver, restrict or prohibit repurchases under certain
circumstances.
In the event a Repurchase Event occurs and the Holders exercise their
rights to require the Company to repurchase Debentures, the Company intends to
comply with the applicable tender offer rules under the Exchange Act, including
Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions would not necessarily afford Holders of the
Debentures protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders. In addition, the
foregoing provisions may discourage open market purchases of the Common Stock or
a non-negotiated tender or exchange offer for such stock and, accordingly, may
limit a stockholder's ability to realize a premium over the market price of the
Common Stock in connection with any such transaction.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
the Debentures: (a) default in the payment of principal of or any premium on any
Debentures when due; (b) default in the payment of any interest on any Debenture
when due, which default continues for 30 days; (c) failure to provide timely
notice of a Repurchase Event as required by the Indenture; (d) default in the
payment of the Repurchase Price in respect of any Debenture on the Repurchase
Date therefor; (e) default in the performance of any other covenant of the
Company in the Indenture which continues for 60 days after written notice as
provided in the Indenture; (f) default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any subsidiary of
the Company or under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company or any subsidiary of the Company, whether such
indebtedness now exists or shall hereafter be created, which default shall
constitute a failure to pay the principal of indebtedness in excess of
$5,000,000 when due and payable after the expiration of any applicable grace
period with respect thereto or shall have resulted in indebtedness in excess of
$5,000,000 becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable, without such indebtedness having
been discharged, or such acceleration having been rescinded or annulled, within
a period of 10 days after there shall be have been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Debentures a written notice
specifying such default and requiring the Company to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or annulled; and (g)
certain events of bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary of the Company. The Events of Default described in
clauses (a), (b) and (d) of the preceding sentence are without regard to whether
the respective payments are prohibited by the subordination provisions of the
Indenture.
If an Event of Default with respect to the Debentures shall occur and be
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Debentures may declare the principal of and
premium, if any, on all such Debentures to be due and payable immediately, but
if the Company cures all Events of Default (except the nonpayment of interest
on, premium, if any, and principal of any Debentures) and certain other
conditions are met, such declaration may be canceled and past defaults may be
waived by the holders of a majority in principal amount of Outstanding
Debentures. If an Event of Default shall occur as a result of an
17.
<PAGE> 21
event of bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary of the Company, the aggregate principal amount of the
Debentures shall automatically become due and payable. The Company is required
to furnish to the Trustee annually a statement as to the performance by the
Company of certain of its obligations under the Indenture and as to any default
in such performance. The Indenture provides that the Trustee may withhold notice
to the Holders of the Debentures of any continuing default (except in the
payment of the principal of or premium, if any, or interest on any Debentures)
if the Trustee considers it in the interest of Holders of the Debentures to do
so.
MODIFICATION, AMENDMENTS AND WAIVERS
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 Outstanding Debentures, to execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture or modify in any manner the rights of
Holders of the Debentures, provided that without the consent of each holder of
Outstanding Debentures, no supplemental indenture may (i) change the stated
maturity of the principal of, or any installment of interest on, any Debenture,
or reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Debenture or any premium or
interest thereon is payable, or impair the right to institute suit for
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date) or modify the
provisions of the Indenture with respect to the subordination of the Debentures
in a manner adverse to the Holders, (ii) adversely affect the right to convert
the Debentures as provided in the Indenture, (iii) impair the right of Holders
of Debentures to require the Company to repurchase Debentures upon the
occurrence of a Repurchase Event or (iv) reduce the percentage in principal
amount of Outstanding Debentures, the consent of whose Holders is required for
any waiver of compliance with certain provisions of the Indenture or certain
defaults thereunder.
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of the Holders to: (a) cause the Indenture
to be qualified under the Trust Indenture Act; (b) evidence the succession of
another Person to the Company and the assumption by any such successor of the
covenants of the Company herein and in the Debentures; (c) add to the covenants
of the Company for the benefit of the Holders or an additional Event of Default,
or surrender any right or power conferred upon the Company; (d) secure the
Debentures; (e) make provision with respect to the conversion rights of Holders
in the event of a consolidation, merger or sale of assets involving the Company,
as required by the Indenture; (f) evidence and provide for the acceptance of
appointment by a successor Trustee with respect to the Debentures; or (g) cure
any ambiguity, correct or supplement any provision which may be defective or
inconsistent with any other provision, or make any other provisions with respect
to matters or questions arising under the Indenture which shall not be
inconsistent with the provisions of the Indenture; provided, however, that no
such modifications or amendment may adversely affect the interest of Holders in
any material respect.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while
Debentures remain Outstanding if (a) all Outstanding Debentures will become due
and payable at their scheduled maturity within one year or (b) all Outstanding
Debentures are scheduled for redemption without one year, and in either case the
Company has deposited with the Trustee an amount sufficient to pay and discharge
all Outstanding Debentures on the date of their scheduled maturity or the
scheduled date of redemption.
FORM, DENOMINATION AND REGISTRATION
The Debentures were issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
Global Debenture. An aggregate principal amount of $114,520,000 of the
Debentures have been issued in the form of a single, permanent global debenture
(which may be subdivided) in definitive, fully registered form without interest
coupons (hereinafter referred to as the "Global Debenture"). The Global
Debenture was deposited with the Trustee as custodian for the Depository Trust
Company ("DTC") and registered in the name of Cede & Co. ("Cede") as DTC's
nominee for credit to the respective accounts of the purchasers at DTC, Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") or Cedel Bank, Societe
18.
<PAGE> 22
Anonyme ("Cedel Bank"). Owners of beneficial interests in the Global Debenture
will not be entitled to receive physical delivery of Debentures in certificated
form ("Certificated Debentures"). The Debentures are not issuable in bearer
form. The Global Debenture may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
The Holders of Debentures may hold their interests in the Global
Debenture directly through DTC if such Holder is a participant in DTC, or
indirectly through organizations which are participants in DTC, including Cedel
Bank and Euroclear (the "Participants"). Cedel Bank and Euroclear will hold
interests in the Global Debenture on behalf of their Participants through their
respective depositaries, which in turn will hold such interests in the Global
Debenture in customers' securities accounts in the depositaries' names on the
books of DTC. Transfers between Participants will be effected in the ordinary
way in accordance with DTC rules and will be settled in same day funds. The laws
of some states require that certain persons take physical delivery of securities
in definitive form. Consequently, the ability to transfer beneficial interests
in the Global Debenture to such persons may be limited. Transfers between
Participants in Euroclear and Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between DTC Participants, on the one hand, and
directly or indirectly through Euroclear or Cedel Bank Participants, on the
other hand, will be effected in DTC in accordance with DTC rules on behalf of
Euroclear or Cedel Bank, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or Cedel Bank, as the case may be, by the counterparty in such system
in accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the Global Debenture in DTC, and making or
receiving payment in accordance with normal procedures for same day funds
settlement applicable to DTC. Cedel Bank participants and Euroclear participants
may not deliver instructions directly to the depositaries for Cedel Bank or
Euroclear.
Because of time zone differences, the securities account of a Euroclear
or Cedel Bank participant purchasing an interest in the Global Debenture from a
DTC participant will be credited during the securities settlement processing day
(which must be a Business Day for Euroclear and Cedel Bank) immediately
following the DTC settlement date, and such credit will be reported to the
relevant Euroclear or Cedel Bank participant on such processing day. Cash
received in Euroclear or Cedel Bank as a result of sales of interests in the
Global Debenture by or through a Euroclear or Cedel Bank participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Euroclear or Cedel Bank cash account only as of the
Business Day following settlement in DTC.
The Holders of Debentures who are not Participants may beneficially own
interests in the Global Debenture held by DTC only through Participants or
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC,
is the registered owner of the Global Debenture, Cede for all purposes will be
considered the sole holder of the Global Debenture. In addition, no beneficial
owner of an interest in the Global Debenture will be able to transfer that
interest except in accordance with DTC's applicable procedures (in addition to
those under the Indenture referred to herein and, if applicable, those of
Euroclear and Cedel Bank).
Payment of interest on and the redemption price (upon redemption at the
option of the Company or at the option of the Holder upon a Repurchase Event) of
the Global Debentures will be made to Cede, the nominee for DTC, as the
registered owner of the Global Debentures, by wire transfer of immediately
available funds. None of the Company, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
With respect to any payment of interest on and the redemption price
(upon redemption at the option of the Company or at the option of the Holder
upon a Repurchase Event) of the Global Debentures, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests in the Debentures
represented by the Global Debentures as shown on the records of DTC, unless DTC
has reason to believe that it will not receive payment on such payment date.
Payments by Participants to owners of beneficial interests in Debentures
represented by the Global Debentures held through such Participants will
19.
<PAGE> 23
be the responsibility of such Participants, as is now the case with securities
held for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Debentures represented by the Global Debentures
to pledge such interest to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debenture only at the direction of one or more
Participants whose accounts are credited with DTC interests in a Global
Debenture.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants in
deposited securities through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Certain of
such Participants (or their representatives), together with other entities, own
DTC. The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of Debentures under the DTC system must be made by or through
Participants which will receive a credit for the Debentures on DTC's records.
The ownership interest of each actual purchase of each Debenture (a "Beneficial
Owner") is in turn to be recorded on the Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Debentures are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Debentures, except in the event that use of the book-entry system for the
Debentures is discontinued.
The deposit of Debentures with DTC and their registration in the name of
Cede effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Debentures; DTC's records reflect only the
identity of the Participants to whose accounts such Debentures are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time. Redemption notices shall be sent to Cede. If less than all of the
Debentures due are being redeemed, DTC's practice is to determine by lot the
interest of each Participant in such Debentures due to be redeemed.
DTC may discontinue providing its services as securities depositary with
respect to the Debentures at any time by giving reasonable notice to the
Company. In the event that DTC notifies the Company that it is unwilling or
unable to continue as depositary for any Global Debenture or if at any time DTC
ceases to be a clearing agency registered as such under the Exchange Act when
DTC is required to be so registered to act as such depositary and no successor
depositary shall have been appointed within 90 days of such notification or of
the Company becoming aware of DTC's ceasing to be so registered, as the case may
be, certificates for the Debentures will be printed and delivered in exchange
for interests in such Global Debenture. Any Global Debenture that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
Debentures registered in such names as DTC shall direct. It is expected that
such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such Global
Debenture.
20.
<PAGE> 24
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates representing the Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to be reliable,
but the Company does not take responsibility for the accuracy thereof.
Certificated Debentures. An aggregate principal amount of $480,000 of
the Debentures were sold to accredited investors that are neither Qualified
Institutional Buyers nor persons acquiring such Debentures in compliance with
Regulation S under the Securities Act and were issued in definitive registered
form not evidenced by a Global Debenture. Qualified Institutional Buyers may
request that their Debentures be issued in definitive registered form. In
addition, certificated Debentures may be issued in exchange for Debentures
represented by the Global Debenture if no successor depositary is appointed by
the Company as set forth above under the paragraph entitled "--Global
Debenture."
PAYMENTS OF PRINCIPAL AND INTEREST; TRANSFER, EXCHANGE OR CONVERSION
The Indenture requires that payments in respect of the Debentures
(including principal, premium, if any, and interest) held of record by DTC be
made in same day funds. Payments in respect of the Debentures held of record by
holders other than DTC may, at the option of the Company, be made by check and
mailed to such holders of record as shown on the register for the Debentures.
The Debentures may be surrendered for transfer, exchange or conversion at the
office of the Trustee in New York, New York.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement between the Company and
the Initial Purchasers, the Company has filed with the Commission a registration
statement (the "Shelf Registration Statement") on Form S-3, of which this
Prospectus forms a part, to cover resales of Transfer Restricted Securities (as
defined below) by the holders thereof who satisfy certain conditions referred to
below. Notwithstanding the foregoing, the Company will be permitted to prohibit
offers and sales of Transfer Restricted Securities pursuant to the Shelf
Registration Statement under certain circumstances and subject to certain
conditions (any period during which offers and sales are prohibited being
referred to as a "Suspension Period"). "Transfer Restricted Securities" means
each Debenture and any share until the date on which such Debenture or share, as
the case may be, (i) has been transferred pursuant to the Shelf Registration
Statement or another registration statement covering it which has been filed
with the Commission pursuant to the Securities Act, in either case after such
registration statement has become effective under the Securities Act, (ii) has
been transferred pursuant to Rule 144 under the Securities Act, or (iii) may be
sold or transferred pursuant to Rule 144(k) under the Securities Act (or any
similar provisions then in force).
Within the time periods specified in the Registration Rights Agreement,
holders of the Transfer Restricted Securities will be required to (i) deliver
information to be used and make certain representations to the Company, in
connection therewith, (ii) be named as selling securityholders in, and (iii)
provide any comments they may wish to make on the Shelf Registration Statement
in order to have their Transfer Restricted Securities included in the Shelf
Registration Statement. The Transfer Restricted Securities of any Holder who
elects not to include such securities in the Shelf Registration Statement could
be deemed to be less liquid than if such securities were included in the Shelf
Registration Statement. In addition, there can be no assurance that the Company
will be able to maintain an effective and current registration statement as
required. The absence of such a registration statement may limit the holder's
ability to sell such Transfer Restricted Securities or adversely affect the
price at which such Transfer Restricted Securities can be sold.
The Registration Rights Agreement provides that if the Shelf
Registration Statement shall cease to be effective (without being succeeded
immediately by a replacement shelf registration statement filed and declared
effective) or usable for the offer and sale of Transfer Restricted Securities
for a period of time (including any Suspension Period) which shall exceed 60
days in the aggregate in any 12-month period during the period beginning on the
Closing Date and ending on or prior to the second anniversary of the Closing
Date (each such event a "Registration Default"), the Company will pay liquidated
damages to each Holder of Transfer Restricted Securities. The amount of
liquidated damages payable during any period in which a Registration Default
shall have occurred and be continuing is that amount which is equal to
one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount or $2.50 per annum per 30.075 shares of Common Stock (subject to
adjustment in the event of a
21.
<PAGE> 25
stock split, stock recombination, stock dividend and the like) constituting
Transfer Restricted Securities for the first 90 days during which a Registration
Default has occurred and is continuing and 50 basis points per annum per $1,000
principal amount of Debentures or $5.00 per annum per 30.075 shares of Common
Stock (subject to adjustment as set forth above) constituting Transfer
Restricted Securities for any additional days during which a Registration
Default has occurred and is continuing. The Company has agreed to pay all
accrued liquidated damages by wire transfer of immediately available funds or by
federal funds check on each Damages Payment Date (as defined in the Registration
Rights Agreement). Following the cure of a Registration Default, liquidated
damages will cease to accrue with respect to such Registration Default.
The Company shall cause the Shelf Registration Statement to remain
effective until the first to occur of (i) the second anniversary of the closing
of the sale of the Debentures to the Initial Purchasers (which date is May 1,
2000) or (ii) the date on which no security covered by the Shelf Registration
Statement remains a Transfer Restricted Security.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement.
GOVERNING LAW
The Indenture and Debentures are governed by and construed in accordance
with the laws of the State of New York, without giving effect to such State's
conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and
conduct other banking transactions with the Trustee in the ordinary course of
business.
ABSENCE OF PUBLIC TRADING MARKET
There is no existing established trading market for the Debentures and
there can be no assurance as to the liquidity of any markets that may develop
for the Debentures, the ability of the holders to sell their Debentures or the
price at which holders of the Debentures will be able to sell their Debentures.
Future trading prices of the Debentures will depend upon many factors including,
among other things, prevailing interest rates, the Company's operating results,
the price of the Common Stock and the market for similar securities. The Initial
Purchasers have informed the Company that they intend to make a market in the
Debentures offered hereby; however, the Initial Purchasers are not obligated to
do so, and any such market making activity may be terminated at any time without
notice to the holders of the Debentures. Prior to the resale of the Debentures
pursuant to this Prospectus, the Debentures were eligible for trading in the
PORTAL market. Debentures sold pursuant to this Prospectus will no longer be
eligible for trading in the PORTAL market. The Company does not intend to apply
for listing of the Debentures on any securities exchange.
22.
<PAGE> 26
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of
Preferred Stock, par value $0.01 per share. At the Company's 1998 Annual Meeting
of Stockholders, the Company's stockholders will vote on a proposal to amend the
Company's certificate of incorporation to increase the Company's total
authorized Common Stock to 50,000,000 shares. As of May 31, 1998, there were
13,466,872 shares of Common Stock outstanding, held of record by 144
stockholders. No shares of the Company's Preferred Stock were outstanding as of
such date.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of stockholders, including the election of directors.
Holders of Common Stock have no preemptive rights to purchase or subscribe for
any stock or other securities, and there are no conversion rights or redemption
or sinking fund provisions with respect to such Common Stock. All outstanding
shares of Common Stock are, and the shares of Common Stock issuable upon
conversion of the Debentures offered hereby will be when issued, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of Preferred Stock
in one or more series and to designate the rights, preferences, limitations,
restrictions of and upon shares of each series, including voting, redemption and
conversion rights. The Board of Directors may also designate dividend rights and
preferences in liquidation. It is not possible to state the effect of the
authorization and issuance of any series of Preferred Stock upon the rights of
holders of Common Stock until the Board of Directors determines the specific
terms, rights and preferences of such a series of Preferred Stock. However, such
effects might include, among other things, restricting dividends on the Common
Stock, diluting the voting power of the Common Stock or impairing the
liquidation rights of such shares without further action by holders of Common
Stock. In addition, under certain circumstances, the issuance of Preferred Stock
may render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management, which could thereby depress
the market price of the Company's Common Stock.
WARRANTS
As of May 31, 1998, the Company had outstanding warrants to purchase
an aggregate of 871,602 shares of Common Stock at a weighted average purchase
price of $3.75 per share. All warrants are immediately exercisable.
ANTI-TAKEOVER PROVISIONS
Delaware Law
Section 203 ("Section 203") of the Delaware General Corporation Law
("DGCL") is applicable to corporate takeovers of Delaware corporations. Subject
to certain expectations set forth therein, Section 203 provides that a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless (a) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares) or (c) on or subsequent to such
date, the business combination is approved by the Board of Directors of the
corporation and by the affirmative votes of at least two-thirds of the
outstanding voting stock which is not owned by the interested
23.
<PAGE> 27
stockholder. Except as specified therein, an interested stockholder is defined
to include any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the corporation
at any time within three years immediately prior to the relevant date, and the
affiliates and associates of such person. Under certain circumstances, Section
203 makes it more difficult for an interested stockholder to effect various
business combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or bylaws, elect not to be governed by this section, effective 12
months after adoption. The Company's Certificate of Incorporation and the Bylaws
do not exclude the Company from the restrictions imposed under Section 203. It
is anticipated that the provisions of Section 203 may encourage companies
interested in acquiring the Company to negotiate in advance with the Board of
Directors of the Company since the stockholder approval requirement would be
avoided if a majority of the directors then in office approve either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder. These provisions may have the effect of
deterring hostile takeovers or delaying changes in control of the Company, which
could depress the market price of the Common Stock and deprive the stockholders
of opportunities to realize a premium on their Common Stock.
Charter and Bylaw Provisions
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that could discourage potential takeover attempts and make more
difficult attempts by stockholders to change management. The Certificate of
Incorporation and the Bylaws provide for a classified Board of Directors and
permit the Board to create new directorships and to elect new directors to serve
for the full term of the class of director in which the new directorship was
created. The terms of the directors are staggered to provide for the election of
approximately one-third of the Board members each year, with each director
serving a three-year term. The Board (or its remaining members, even though less
than a quorum) is also empowered to fill vacancies on the Board occurring for
any reason for the remainder of the term of the class of directors in which the
vacancy occurred. Stockholders may remove a director or the entire Board, and
such removal requires the affirmative vote of two-thirds of the outstanding
voting stock. The Company's Certificate of Incorporation provides that
stockholders may not take action by written consent but only at a stockholders'
meeting, and that special meetings of the stockholders of the Company may only
be called by the Chairman of the Board, a majority of the Board or by the
holders of at least 10% of the voting securities of the Company.
The Company's Certificate of Incorporation provides that, in addition to
the requirements of the DGCL, any "Business Combination" (as defined in the
Certificate of Incorporation) requires the affirmative vote of two-thirds of the
votes entitled to be cast by the holders of the Company's then outstanding
capital stock, voting together as a class, unless two-thirds of the directors
(excluding certain directors affiliated with persons interested in the Business
Combination) approve the proposed transaction.
A "Business Combination," as defined in the Company's Certificate of
Incorporation, includes (i) a merger or consolidation of the Company or any of
its subsidiaries with an "Interested Stockholder" (as defined in the Certificate
of Incorporation) or any other corporation which is, or after such transaction
would be, an "Affiliate" or "Associate" (as such terms are defined in the
Securities Exchange Act of 1934) of an Interested Stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with, or
proposed by or on behalf of, any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder involving any assets of the Company or
any subsidiary that constitute five percent or more of the total assets of the
Company; (iii) the issuance or transfer by the Company or any subsidiary of any
securities of the Company or any subsidiary to, or proposed by on behalf of, an
Interested Stockholder or any Affiliate or Associate of an Interested
Stockholder in exchange for cash, securities or other property that constitute
five percent or more of the total assets of the Company; (iv) the adoption of
any plan or proposal for the liquidation or dissolution of the Company or any
spin-off or split-up of any kind of the Company or any subsidiary, proposed by
or on behalf of an Interested Stockholder or any Affiliate or Associate of an
Interested Stockholder; or (v) any reclassification, recapitalization, or merger
or consolidation of the Company with any of its subsidiaries or any other
transaction that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of capital stock of the Company or
any of its subsidiaries that is beneficially owned by any Interested Stockholder
or an Affiliate or Associate of any Interested Stockholder.
The Company's Certificate of Incorporation defines an "Interested
Stockholder" as (i) an individual, corporation or other entity (a "person")
which is or was at any time within the two-year period preceding the date of the
transaction in question, the beneficial owner of 15% or more of the outstanding
voting securities of the
24.
<PAGE> 28
Company; (ii) an Associate or Affiliate of the Company who within the two-year
period preceding the date of the transaction in question was the beneficial
owner of 15% or more of the outstanding voting securities of the Company; or
(iii) under certain circumstances, an assignee of any of the foregoing persons.
A person is a "beneficial owner" of any stock of the Company (a) which such
person or any of its Affiliates and Associates beneficially owns, directly or
indirectly; (b) which such person or any of its Affiliates or Associates has,
directly or indirectly, (i) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding; or (c) which are
beneficially owned, directly or indirectly, by any other person with which such
person or any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock. See "Risk Factors--Potential Effect of Anti-takeover
Provisions."
The foregoing provisions of the Certificate of Incorporation and Bylaws
of the Company may deter any potential unfriendly offers or other efforts to
obtain control of the Company that are not approved by the Board of Directors
and could thereby deprive the stockholders of opportunities to realize a premium
on their Common Stock and could make removal of incumbent directors more
difficult. At the same time, these provisions may have the effect of inducing
any persons seeking control of the Company or a business combination with the
Company to negotiate terms acceptable to the Board of Directors. Such provisions
of the Company's Certificate of Incorporation and Bylaws can be changed or
amended only by the affirmative vote of the holders of at least two-thirds of
the Company's then outstanding voting stock.
REGISTRATION RIGHTS
In the event the Company proposes to register any of its securities
under the Securities Act, for its own account or otherwise at any time, certain
stockholders and warrantholders of the Company, including certain executive
officers and directors of the Company, collectively holding an aggregate of
approximately 186,662 shares of Common Stock and warrants exercisable for
Common Stock (the "Registrable Shares") as of May 31, 1998, or certain of
their permitted transferees, are entitled to notice of such registration and to
include shares of such Common Stock therein, subject to certain conditions and
limitations. In addition, the holders of certain of the Registrable Shares (the
"Original Registrable Shares") may, subject to certain conditions and
limitations, on up to two occasions require the Company, whether or not the
Company proposes to register its Common Stock for sale, to register all or part
of their Original Registrable Shares for sale to the public under the Securities
Act. The Company is obligated to pay all the expenses (other than underwriting
discounts) for each of such registrations. In addition, the holders of Original
Registrable Shares may require the Company to register all or part of their
shares on Form S-3, or any similar form, if the Company then qualifies for use
of such form, subject to certain conditions and limitations. The Company is
obligated to pay all the expenses (other than underwriting discounts) for such
S-3 registrations. See "Risk Factors--Shares Eligible for Future Sale."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar of the Common Stock is Boston
EquiServe, L.P.
25.
<PAGE> 29
SELLING SECURITYHOLDERS
The Debentures were originally issued by the Company and sold by the
Initial Purchasers in a transaction exempt from the registration requirements of
the Securities Act to persons reasonably believed by such Initial Purchasers to
be "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) or to other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act). The Selling
Securityholders (which term includes their transferees, pledgees, donees or
successors) may from time to time offer and sell pursuant to this Prospectus any
or all of the Debentures and Shares.
Set forth below are the names of each Selling Securityholder, the nature
of any position, office, or other material relationship that the Selling
Securityholder has had within the past three years with the Company or any of
its predecessors or affiliates, the principal amount of Debentures that may be
offered and sold by such Selling Securityholder pursuant to this Prospectus and
(if one percent or more) the percentage of such Debentures owned as of May 31,
1998, the number of Shares that may be offered and sold by such Selling
Securityholder pursuant to this Prospectus and (if one percent or more) the
percentage of Common Stock represented by the Shares owned by each Selling
Securityholder after conversion of the Debentures.
Any or all of the Debentures or Shares of Common Stock listed below may
be offered for sale pursuant to this Prospectus by the Selling Securityholders
from time to time. Accordingly, no estimate can be given as to the amount of the
Debentures or Shares that will be held by the Selling Securityholders upon
consummation of any such sales. In addition, the Selling Securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Debentures since the date on which the information regarding
their Debentures was provided, in transactions exempt from the registration
requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL SHARES THAT PERCENTAGE
AMOUNT OF MAY BE SOLD OF COMMON
DEBENTURES PERCENTAGE OF PURSUANT TO STOCK AFTER
THAT MAY BE DEBENTURES THIS CONVERSION OF
NAME SOLD OUTSTANDING PROSPECTUS(1) THE DEBENTURES(2)
- ----------------------------------------- ----------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Bank of New York $ 9,803,000 8.5 294,827
Bankers Trust Company 3,975,000 3.5 119,548
Bear Stearns Securities Corp. 8,400,000 7.3 252,631
Boston Safe Deposit and Trust Company 13,685,000 12.1 416,992
Bt Alex. Brown Incorporated-Fixed Income 100,000 * 3,007
Bank of Tokyo-Mitsubishi Trust Company 2,250,000 2.0 67,669
Chase Bank of Texas, N.A. 70,000 * 2,105
Chase Manhattan Bank 7,037,000 6.1 211,639
Chase Manhattan Bank/Chemical 2,075,000 1.8 62,406
Chase Manhattan Bank, Trust 750,000 * 22,556
CIBC Oppenheimer Corp. 1,250,000 1.1 37,593
Citibank, N.A. 2,060,000 1.8 61,954
Custodial Trust Company 3,245,000 2.8 97,593
Deutsche Morgan Grenfell Inc. 1,500,000 1.3 45,112
Firstar Trust Company 750,000 * 22,556
Fleet Bank of Massachusetts, N.A. 33,000 * 992
First National Bank of Maryland 200,000 * 6,015
Goldman Sachs International 1,500,000 1.3 45,112
HSBC Securities, Inc. 1,000,000 * 30,075
Investors Bank & Trust/M.F. Custody 130,000 * 3,909
Lehman Brothers, Inc. 1,500,000 1.3 45,112
Lehman Brothers International (Europe) 4,750,000 4.1 142,857
Prime Broker (LBI)
M&I Marshall & Isley Bank 100,000 * 3,007
Mercantile-Safe Deposit & Trust Company 2,720,000 2.4 81,807
Merrill, Lynch, Pierce Fenner & Smith 250,000 * 7,518
Safekeeping
Merrill, Lynch, Pierce Fenner & Smith, Inc. 1,250,000 1.1 37,593
- -Debt Sec
Morgan Stanley & Co. Incorporated 8,100,000 7.0 243,609
Norwest Bank Minnesota, National Association 355,000 * 10,676
Northern Trust Company (The) 2,675,000 2.3 80,451
PNC Bank, National Association 1,215,000 1.1 36,451
Prudential Securities Incorporated 355,000 * 10,075
Smith Barney Inc. 980,000 * 29,473
SBC Warburg Dillon Read Inc. 3,500,000 3.0 105,263
Societe Generale Securities Corporation 3,350,000 2.9 100,751
SSB - Custodian 22,455,000 19.5 675,338
Suntrust Bank, Atlanta 66,000 * 1,984
U.S. Bank National Association 100,000 * 3,007
Wachovia Bank, N.A. 1,186,000 1.0 35,669
Wells Fargo Bank, National Association 300,000 * 9,022
</TABLE>
* Less than one percent.
(1) Assumes conversion of the full amount of Debentures held by such Selling
Securityholder at the initial conversion price of $33.25 per share; such
conversion price is subject to adjustment as described under
"Description of Debentures-Conversion Rights." Accordingly, the number
of Shares issuable upon conversion of the Debentures may increase or
decrease from time to time. Fractional shares will not be issued upon
conversion of the Debentures; cash will be paid in lieu of fractional
shares, if any.
(2) The percentage of Common Stock after conversion of the Debentures
represents the percentage of the Common Stock each Selling
Securityholder will have after treating as outstanding the number of
Shares of Common Stock shown as being issuable upon the assumed
conversion by the named Selling Securityholder of the full amount of
such holder's Debentures but not assuming the conversion of the
Debentures of any other Selling Securityholder. These percentages are
based on 13,466,872 shares of Common Stock that were issued and
outstanding as of May 31, 1998 before taking into account any of the
assumed conversions.
PLAN OF DISTRIBUTION
The Debentures and the Shares are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this Prospectus. The Company has agreed, among other things,
to bear all expenses (other than underwriting discounts, selling commissions and
fees and expenses of counsel
26.
<PAGE> 30
and other advisors to holders of the Debentures and the Shares) in connection
with the registration and sale of the Debentures and the Shares covered by this
Prospectus.
The Company will not receive any of the proceeds from the offering of
the Debentures and the Shares by the Selling Securityholders. The Company has
been advised by the Selling Securityholders that the Selling Securityholders may
sell all or a portion of the Debentures and Shares beneficially owned by them
and offered hereby from time to time on any exchange on which the securities are
listed on terms to be determined at the times of such sales. The Selling
Securityholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Securityholders may from time to time
offer the Debentures or shares of Common Stock beneficially owned by them
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from the Selling
Securityholders and the purchasers of the Debentures or shares or Common Stock
from whom they may act as agent. The aggregate proceeds to the Selling
Securityholders from the sale of the Debentures or shares of Common Stock
offered by them hereby will be the purchase price of such Debentures or shares
of Common Stock less discounts and commissions, if any.
The Debentures and the Shares may be sold from time to time in one or
more transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities or by agreement between such
holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
The outstanding Common Stock is listed for trading on Nasdaq and the
Shares will be approved for listing on Nasdaq upon notice of issuance. The
Initial Purchasers have advised the Company that they are making and currently
intend to continue making a market in the Debentures; however, they are not
obligated to do so and any such market-making may be discontinued at any time
without notice, in the sole discretion of the Initial Purchasers. The Company
does not intend to apply for listing of the Debentures on any securities
exchange. Accordingly, no assurance can be given that any market for the
Debentures will be developed or maintained. See "Risk Factors-Absence of Public
Market."
In order to comply with the securities laws of certain states, if
applicable, the Debentures and Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Debentures and Shares may not be sold unless they have been
registered or qualified for sale in the applicable state or they comply with an
available exemption from the applicable registration or qualification
requirement.
The Selling Securityholders and any broker and any broker-dealers,
agents or underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any commissions
received by such broker-dealers, agents or underwriters and any profit on the
resale of the Debentures or the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Debentures
or Shares described herein, and any Selling Securityholder may transfer, devise
or gift such securities by other means not described herein.
The Debentures were originally sold to Salomon Smith Barney, Bear,
Stearns & Co. Inc. and BT Alex. Brown Incorporated, the Initial Purchasers, in
May 1998 in a private placement. The Company agreed to indemnify and hold the
Initial Purchasers harmless against certain liabilities under the Securities Act
that could arise in connection with the sale of the Debentures by the Initial
Purchasers. The Company and the Selling Securityholders are obligated to
indemnify each other against certain liabilities arising under the Securities
Act.
The Company will use its best efforts to cause the Registration
Statement to which this Prospectus relates to remain effective for a period of
two years from the effective date thereof, or until it is no longer required for
transfer of the Debentures or the underlying Common Stock. The Company is
permitted to suspend the use of this Prospectus in connection with the sales of
Debentures and Shares by holders upon the happening of an event or if there
exists any fact that makes any statement of material fact made in this
Prospectus untrue or that requires the making of additions to or changes in the
Prospectus in order to make the statements herein not misleading until such time
as the Company advises the Selling Securityholders that use of the Prospectus
may be resumed, in which case the period of time during which the Company is
required to maintain the effectiveness of this Registration Statement
27.
<PAGE> 31
shall be extended. Expenses of preparing and filing the Registration Statement
and all post-effective amendments will be borne by the Company.
28.
<PAGE> 32
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations to holders of the Debentures. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings, and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the Debentures or shares of
Common Stock and does not deal with tax consequences arising under the laws of
any foreign, state or local jurisdiction. This discussion is for general
information only, and does not purport to address all tax consequences that may
be important to particular purchasers in light of their personal circumstances,
or to certain types of purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
hold the Debentures or Common Stock in connection with a straddle) that may be
subject to special rules. This discussion assumes that each holder holds the
Debentures and the shares of Common Stock received upon conversion thereof as
capital assets.
For the purpose of this discussion, a "Non-U.S. Holder" refers to any
holder who is not a United States person. The term "United States person" means
a citizen or resident of the United States, a corporation or partnership
(including any entity taxed as a partnership for U.S. federal income tax
purposes) created or organized in the United States or any state thereof, an
estate, the income of which is includible in income for the United States
federal income tax purposes regardless of its source, or a trust if (i) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States persons have the
authority to control all substantial decisions of the trust.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE DEBENTURES AND COMMON STOCK AND THE
EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES.
TAX CONSIDERATIONS APPLICABLE TO UNITED STATES PERSONS
Interest on Debentures. Interest paid on Debentures will be taxable to a
holder as ordinary interest income in accordance with the holder's method of tax
accounting at the time that such interest is accrued or (actually or
constructively) received. The Company expects that the Debentures will not be
issued with original issue discount ("OID") within the meaning of the Code.
Constructive Dividend. Certain corporate transactions, such as
distributions of assets to holders of Common Stock, may cause a deemed
distribution to the holders of the Debentures if the conversion price or
conversion ratio of the Debentures is adjusted to reflect such corporate
transaction. Such deemed distributions will be taxable as a dividend, return of
capital, or capital gain in accordance with the earnings and profits rules
discussed under "Dividends on Shares of Common Stock."
Sale or Exchange of Debentures or Shares of Common Stock. In general, a
holder of Debentures will recognize gain or loss upon the sale, redemption,
retirement or other disposition of the Debentures measured by the difference
between the amount of cash and the fair market value of any property received
(except to the extent attributable to the payment of accrued interest) and the
holder's adjusted tax basis in the Debentures. A holder's tax basis in
Debentures generally will equal the cost of the Debentures to the holder
increased by the amount of market discount, if any, previously taken into income
by the holder or decreased by any bond premium theretofore amortized by the
holder with respect to the Debentures. In general, each holder of Common Stock
into which the Debentures have been converted will recognize gain or loss upon
the sale, exchange, redemption, or other disposition of the Common Stock under
rules similar to those applicable to the Debentures. Special rules may apply to
redemptions of the Common Stock which may result in the amount received being
treated as a dividend. Subject to the market discount rules discussed below, the
gain or loss on the disposition of the Debentures or shares of Common Stock will
be capital gain or loss. (For the basis and holding period of shares of Common
Stock. See "Conversion of Debentures.")
Conversion of Debentures. A holder of Debentures will not recognize gain
or loss on the conversion of the Debentures into shares of Common Stock (except
with respect to cash received in lieu of a fractional share of
29.
<PAGE> 33
Common Stock). The holder's tax basis in the shares of Common Stock received
upon conversion of the Debentures will be equal to the holder's aggregate basis
in the Debentures exchanged therefor (less any portion thereof allocable to cash
received in lieu of a fractional share). The holding period of the shares of
Common Stock received by the holder upon conversion of Debentures will generally
include the period during which the holder held the Debentures prior to the
conversion.
Cash received in lieu of a fractional share of Common Stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of such
fractional shares generally will equal the difference between the amount of cash
received and the amount of tax basis allocable to the fractional share.
Amortizable Bond Premium. If a holder of Debentures acquires the
Debentures at a cost that is in excess of the amount payable at maturity (after
reducing such costs by an amount equal to the value of the conversion option),
the holder may elect under Section 171 of the Code to amortize the excess cost
(as an offset to interest income) on a constant interest rate basis over the
term of such Debentures. However, because the Debentures may be redeemed at the
option of the Company at a price in excess of their principal amount, a holder
may be required to amortize any bond premium based on the earlier call date and
the call price payable at that time. If the holder makes an election to amortize
bond premium, the tax basis of all such holder's Debentures will be reduced by
the allowable bond premium amortization. The amortization election would apply
to all debt instruments held or subsequently acquired by the electing purchaser
and cannot be revoked without permission from the IRS. On conversion of
Debentures into shares of Common Stock, no additional amortization of any bond
premium would be allowed, and any remaining premium would be added to the
holder's basis in the Common Stock received.
Market Discount. The resale of Debentures may be affected by the "market
discount" provisions of the Code. For this purpose, the market discount on a
Debenture will generally be equal to the amount, if any, by which the stated
redemption price at maturity of the Debenture immediately after its acquisition
exceeds the holder's tax basis in the Debenture. Subject to a de minimis
exception, the market discount provisions generally require a holder of a
Debenture acquired at a market discount to treat as ordinary income any gain
recognized on the disposition of such Debenture to the extent of the "accrued
market discount" on such Debenture at the time of disposition. In general,
market discount on a Debenture will be treated as accruing on a straight-line
basis over the term of such Debenture, or, at the election of the holder, under
a constant yield method. Holders may elect to include accrued market discount in
income currently with respect to all market discount bonds acquired on or after
the first day of the first taxable year for which the election is effective and
for any such bond on either a straight-line or constant yield basis. In the
absence of such election, a holder of a Debenture acquired at a market discount
may be required to defer the deduction of a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the Debenture until the
Debenture is disposed of in a taxable transaction. If a holder acquires a
Debenture at a market discount and receives Common Stock upon conversion of the
Debenture, the amount of accrued market discount with respect to the converted
Debenture through the date of conversion will be treated as ordinary income upon
the disposition of the Common Stock.
Dividends on Shares of Common Stock. Distributions on shares of Common
Stock will constitute dividends for United States federal income tax purposes to
the extent of current or accumulated earnings and profits of the Company as
determined under United States federal income tax principles. Dividends paid to
holders that are United States corporations may qualify for the
dividends-received deduction.
To the extent, if any, that holders receive distributions on shares of
Common Stock that would otherwise constitute dividends for United States federal
income tax purposes but that exceed current and accumulated earnings and profits
of the Company, such distributions will be treated first as a nontaxable return
of capital reducing the holder's basis in the shares of Common Stock. Any such
distributions in excess of the holder's basis in the shares of Common Stock will
be treated as capital gain.
TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Debentures. Generally, interest paid on the Debentures to a
Non-U.S. Holder will not be subject to United States federal income tax if: (i)
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder; (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all classes of stock of the Company entitled to vote and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the
30.
<PAGE> 34
meaning of the Code; and (iii) the beneficial owner, under penalty of perjury,
certifies that the owner is not a United States person and provides the owner's
name and address. If certain requirements are satisfied, the certification
described in clause (iii) above may be provided by a securities clearing
organization, a bank, or other financial institution that holds customers'
securities in the ordinary course of its trade or business. For this purpose,
the holder of Debentures would be deemed to own constructively the Common Stock
into which they could be converted. A holder that is not exempt from tax under
these rules will be subject to United States federal income tax withholding on
interest received at a rate of 30% (or lower treaty rate) unless the interest is
effectively connected with the conduct of a United States trade or business, in
which case the interest will be subject to the United States federal income tax
on net income that applies to United States persons generally. Non-U.S. Holders
should consult applicable income tax treaties, which may provide different
rules.
Sales or Exchange of Debentures or Shares of Common Stock. A Non-U.S.
Holder generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of the Debentures or shares of
Common Stock unless (i) the gain is effectively connected with the conduct of a
trade or business within the United States by the Non-U.S. Holder, or (ii) in
the case of a Non-U.S. Holder who is a nonresident alien individual and holds
the Common Stock as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other conditions are
present. If the Company were to be classified as a "United States real property
holding corporation," different rules would apply. In such event, a Non-U.S.
Holder would be subject to federal income tax with respect to gain realized on
the disposition of Debentures or shares of Common Stock as if the gain were
effectively connected with a United States trade or business and the amount
realized would then be subject to withholding at the rate of 10%. The amount
withheld pursuant to these rules would be creditable against such Non-U.S.
Holders United States federal income tax liability and could entitle such
Non-U.S. Holder to a refund upon furnishing the required information to the
Internal Revenue Service. Non-U.S. Holders should consult applicable income tax
treaties, which may provide different rules. The Company does not anticipate
that it will at any time be a "United States real property holding corporation."
Conversion of Debentures. A Non-U.S. Holder generally will not be
subject to United States federal income tax on the conversion of a Debenture
into shares of Common Stock. To the extent a Non-U.S. Holder receives cash in
lieu of a fractional share on conversion, such cash may give rise to gain that
would be subject to the rules described above with respect to the sale or
exchange of a Debenture or Common Stock.
Dividends on Shares of Common Stock. Generally, any distribution on
shares of Common Stock to a Non-U.S. Holder will be subject to United Stated
federal income tax withholding at a rate of 30% unless the dividend is
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Holders, in which case the dividend will be subject to
the United States federal income tax on net income that applies to United States
persons generally (and, with respect to corporate holders and under certain
circumstances, the branch profits tax). Non-U.S. Holders should consult any
applicable income tax treaties, which may provide for a lower rate of
withholding or other rules different from those described above. A Non-U.S.
Holder may be required to satisfy certain certification requirements in order to
claim a reduction of or exemption from withholding under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply to
payments of interest or dividends on or the proceeds of the sale or other
disposition of the Debentures or shares of Common Stock with respect to certain
non-corporate U.S. holders. Such U.S. holders generally will be subject to
backup withholding at a rate of 31% unless the recipient of such payment
supplies a taxpayer identification number, certified under penalties of perjury,
as well as certain other information, or otherwise establishes, in the manner
prescribed by law, an exemption from backup withholding. Any amount withheld as
backup withholding is allowable as a credit against the U.S.
holder's federal income tax upon furnishing the required information.
Non-U.S. Holders. Generally, information reporting and backup
withholding of United States federal income tax at a rate of 31% may apply to
payments of principal, interest and premium (if any) to Non-U.S. Holders if the
payee fails to certify that the holder is not a United States person or if the
Company or its paying agent has actual knowledge that the payee is a United
States person. The 31% Backup withholding tax generally will not apply to
dividends paid to foreign holders outside the United States that are subject to
30% withholding as discussed above (see "Tax Considerations Applicable to
Non-U.S. Holders--Interest on Debentures") or that are subject to a tax treaty
that reduces such withholding.
31.
<PAGE> 35
The payment of the proceeds on the disposition of Debentures or shares
of Common Stock to or through the United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
unless the owner provides the certification described above or otherwise
establishes an exemption. The payment of the proceeds of the disposition by a
Non-U.S. Holder of debentures or shares of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding. However, if such
broker is a U.S. person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income from all sources
for certain periods is from activities that are effectively connected with a
United States trade or business, information reporting will apply unless such
broker has documentary evidence in its files of the owner's foreign status and
has no actual knowledge to the contrary or unless the owner otherwise
establishes an exemption. Both backup withholding and information reporting will
apply to the proceeds from such dispositions if the broker has actual knowledge
that the payee is a U.S. Holder.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 1999, subject to
certain transition rules. Non-U.S. Holders should consult their own tax advisors
with respect to the impact, if any, of the new final regulations.
THE COMPANY
Under Section 279 of the Code, interest paid or incurred by a
corporation with respect to certain convertible, subordinated indebtedness that
is utilized to provide consideration for the acquisition of stock in another
corporation (or a substantial portion of the assets of another corporation) is
not deductible for federal income tax purposes to the extent interest on such
"corporate acquisition indebtedness" as defined in Section 279 exceeds $5
million per year, reduced by the interest paid on certain other indebtedness
that does not constitute "corporate acquisition indebtedness" for purposes of
Section 279, but is used to fund corporate acquisitions. Although a portion of
the Debentures may constitute "corporate acquisition indebtedness" for purposes
of Section 279 of the Code, the Company does not currently expect that any
significant portion of the interest deductions with respect to the Debentures
will be disallowed pursuant to Section 279.
32.
<PAGE> 36
LEGAL MATTERS
Certain legal matters with respect to the legality of the Debentures and
the validity of the Common Stock being offered hereby will be passed upon for
the Company by Brobeck, Phleger & Harrison LLP, San Francisco, California.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference herein and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of FRA Acquisitions, Inc. and its
subsidiary which are not presented separately or incorporated by reference in
this Proxy Statement/Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which report is incorporated
herein by reference from the QuadraMed Annual Report on Form 10-K/A for the year
ended December 31, 1997, and has been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
33.
<PAGE> 37
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................................................ 1
Incorporation of Certain Documents by Reference....................................... 1
Information Concerning Foward-Looking Statements...................................... 2
Summary............................................................................... 3
The Company........................................................................... 3
Risk Factors.......................................................................... 4
Use of Proceeds....................................................................... 12
Ratio of Earnings to Fixed Charges.................................................... 12
Description of Debentures............................................................. 13
Description of Capital Stock.......................................................... 23
Selling Securityholders............................................................... 26
Plan of Distribution.................................................................. 26
Certain U.S. Federal Income Tax Considerations........................................ 29
Legal Matters......................................................................... 33
Experts............................................................................... 33
</TABLE>
[LOGO]
QUADRAMED CORPORATION
$115,000,000 of 5.25% Convertible
Subordinated Debentures due 2005
and 3,458,647 Shares of Common
Stock
PROSPECTUS
_____, 1998
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of Common Stock being registered, other
than underwriting discounts and commissions. All amounts are estimates except
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO
BE PAID
-------
<S> <C>
Securities and Exchange Commission registration fee ........... $33,925
Nasdaq National Market listing fee ............................ 17,500
Printing and engraving expenses ............................... 15,000
Legal fees and expenses ....................................... 15,000
Accounting fees and expenses .................................. 10,000
Miscellaneous expenses ........................................ 5,000
-------
Total ................................................... $96,425
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides in relevant part that "[a] corporation shall have power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful." With respect to derivative actions, Section 145(b) of the DGCL
provides in relevant part that "[a] corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor [by reason of that person's
service in one of the capacities specified in the preceding sentence] against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper."
Section 102(b)(7) of the DGCL provides that a corporation's certificate
of incorporation may eliminate or limit personal liability of its directors to
the corporation or its stockholders for monetary damages for breach of a
director's fiduciary duty. However, no such provision may eliminate or limit the
liability of a director for breaching such director's duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase that was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability of equitable remedies, such as injunction or rescission, for
breach of fiduciary duty.
II-1
<PAGE> 39
The Company's Second Amended and Restated Certificate of Incorporation
eliminates the personal liability of its directors to the fullest extent allowed
under the DGCL. In addition, Article 5 of the Company's Amended and Restated
Bylaws provides that the Company shall indemnify each person who is or was a
director or executive officer of the Company to the full extent permitted by the
DGCL. Such Article also provides that the Company may, but is not required to,
indemnify its employees and agents (other than directors and officers) to the
extent and in the manner permitted by the DGCL.
The Purchase Agreement (Exhibit 1.1) provides for indemnification by the
Initial Purchasers of the Registrant, its directors and executive officers and
other persons for certain liabilities, including liabilities arising under the
Securities Act of 1933.
The Registrant has entered into an indemnification agreement with each
of its directors and officers and intends to maintain insurance for the benefit
of its directors and officers insuring such persons against certain liabilities,
including liabilities under the securities laws.
ITEM 16. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
1.1 Purchase Agreement dated April 27, 1998 by and among QuadraMed
and the Initial Purchasers named therein.
4.1 Reference is made to Exhibits 3.2 and 3.4 of the Form SB-2 (as
defined herein).(1)
4.2 Form of Common Stock certificate. (1)
4.3 Amended and Restated Shareholder Rights Agreement dated June 25,
1996, by and between the Company and the investors listed on
Schedule A thereto.(1)
4.4 Registration Rights Agreement dated December 5, 1996, by and
between the Company and the investors listed on Schedule A
thereto.(2)
4.5 Registration Rights Agreement dated as of December 29, 1997, by
and among QuadraMed Corporation, Resource Health Partners, L.P.
and certain stockholders. (3)
4.6 Subordinated Indenture, dated as of May 1, 1998 between QuadraMed
and The Bank of New York.
4.7 Officers' Certificate delivered pursuant to Sections 2.3 and 11.5
of the Subordinated Indenture.
4.8 Registration Rights Agreement dated April 27, 1998 by and among
QuadraMed and the Initial Purchasers named therein.
4.9 Form of Global Debenture.
4.10 Form of Certificated Debenture.
5.1 Opinion of Brobeck, Phleger & Harrison LLP. (4)
23.1 Consent of Arthur Andersen LLP. (4)
23.2 Consent of Deloitte & Touche, LLP. (4)
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
24.1 Power of Attorney (see page II-5).
</TABLE>
II-2
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
25.1 Statement of Eligibility of Trustee.
</TABLE>
- ----------
(1) Incorporated herein by reference from the exhibit with the same number
to the Company's Registration Statement on Form SB-2, No. 333-5180-LA,
as filed with the Commission on June 28, 1996, as amended by Amendment
No. 1, Amendment No. 2 and Amendment No. 3 thereto, as filed with the
Commission on July 26, 1996, September 9, 1996, and October 2, 1996,
respectively (collectively "Form SB-2").
(2) Incorporated herein by reference from the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1997, as filed with the
Commission on August 14, 1997, as amended September 4, 1997.
(3) Incorporated herein by reference from Company's Current Report on Form
8-K, as filed with the Commission on January 13, 1998.
(4) To be filed by amendment.
(b) FINANCIAL DATA SCHEDULE
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i) and
(ii) is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15 of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 41
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-4
<PAGE> 42
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LARKSPUR,
STATE OF CALIFORNIA ON THIS 1ST DAY OF JUNE, 1998.
QuadraMed Corporation
By /s/ James D. Durham
------------------------------
James D. Durham
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, John V. Cracchiolo
and Keith M. Roberts, and each one of them, his attorneys-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement and to sign any registration statement
for the same offering covered by this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) promulgated under the Securities
Act of 1933, and all post-effective amendments thereto, and to file the same,
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that each of said attorneys-in-fact and
agents or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ James D. Durham Chairman of the Board and Chief June 1, 1998
- ---------------------------------- Executive Officer (Principal Executive
James D. Durham Officer)
/s/ John V. Cracchiolo President, Chief Operating Officer and June 1, 1998
- ---------------------------------- Secretary (Principal Financial Officer)
John V. Cracchiolo
/s/ Bernie J. Murphy Vice President, Finance and Chief June 1, 1998
- ---------------------------------- Accounting Officer (Principal
Bernie J. Murphy Accounting Officer)
/s/ John H. Austin Director June 1, 1998
- ----------------------------------
John H. Austin, M.D.
- ---------------------------------- Director , 1998
Albert L. Greene
- ---------------------------------- Director , 1998
Kenneth E. Jones
</TABLE>
II-5
<PAGE> 43
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas F. McNulty Director June 1, 1998
- ----------------------------------
Thomas F. McNulty
/s/ Joan P. Neuscheler Director June 1, 1998
- ----------------------------------
Joan P. Neuscheler
/s/ Cornelius T. Ryan Director June 1, 1998
- ----------------------------------
Cornelius T. Ryan
</TABLE>
II-6
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
1.1 Purchase Agreement dated April 27, 1998 by and among QuadraMed
and the Initial Purchasers named therein.
4.1 Reference is made to Exhibits 3.2 and 3.4 of the Form SB-2 (as
defined herein).(1)
4.2 Form of Common Stock certificate.(1)
4.3 Amended and Restated Shareholder Rights Agreement dated June 25,
1996, by and between the Company and the investors listed on
Schedule A thereto.(1)
4.4 Registration Rights Agreement dated December 5, 1996, by and
between the Company and the investors listed on Schedule A
thereto.(2)
4.5 Registration Rights Agreement dated as of December 29, 1997, by
and among QuadraMed Corporation, Resource Health Partners, L.P.
and certain stockholders.(3)
4.6 Subordinated Indenture, dated as of May 1, 1998 between QuadraMed
and The Bank of New York.
4.7 Officers' Certificate delivered pursuant to Sections 2.3 and 11.5
of the Subordinated Indenture.
4.8 Registration Rights Agreement dated April 27, 1998 by and among
QuadraMed and the Initial Purchasers named therein.
4.9 Form of Global Debenture.
4.10 Form of Certificated Debenture.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.(4)
23.1 Consent of Arthur Andersen LLP.(4)
23.2 Consent of Deloitte & Touche, LLP.(4)
23.3 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.1).
24.1 Power of Attorney (see page II-5).
25.1 Statement of Eligibility of Trustee.
</TABLE>
- ----------
(1) Incorporated herein by reference from the exhibit with the same number
to the Company's Registration Statement on Form SB-2, No. 333-5180-LA,
as filed with the Commission on June 28, 1996, as amended by Amendment
No. 1, Amendment No. 2 and Amendment No. 3 thereto, as filed with the
Commission on July 26, 1996, September 9, 1996, and October 2, 1996,
respectively (collectively "Form SB-2").
(2) Incorporated herein by reference from the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1997, as filed with the
Commission on August 14, 1997, as amended September 4, 1997.
(3) Incorporated herein by reference from Company's Current Report on Form
8-K, as filed with the Commission on January 13, 1998.
(4) To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
Execution Copy
$115,000,000
QUADRAMED CORPORATION
5.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
PURCHASE AGREEMENT
April 27, 1998
SALOMON SMITH BARNEY
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
QuadraMed Corporation, a Delaware corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell to you, as the
initial purchasers (the "Initial Purchasers"), $100,000,000 aggregate principal
amount of its 5.25% Convertible Subordinated Debentures due 2005 (the "Firm
Debentures"). The Company also proposes, upon the terms and conditions set forth
herein, to issue and sell to the Initial Purchasers up to an additional
$15,000,000 aggregate principal amount of its 5.25% Convertible Subordinated
Debentures due 2005 (the "Additional Debentures"). The Firm Debentures and the
Additional Debentures are hereinafter collectively referred to as the
"Debentures." The Debentures will be issued pursuant to the provisions of an
Indenture, to be dated as of May 1, 1998 (the "Indenture"), between the Company
and The Bank of New York, as Trustee (the "Trustee"). The Company's common
stock, $.01 par value per share, is hereinafter referred to as the "Common
Stock."
The Company wishes to confirm as follows its agreement with the Initial
Purchasers in connection with the purchase and resale of the Debentures.
1. Preliminary Offering Memorandum and Offering Memorandum. The
Debentures will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The Company has
prepared a preliminary offering memorandum, dated April 17, 1998 (the
"Preliminary Offering Memorandum"), and an offering memorandum, dated April 27,
1998 (the "Offering Memorandum"), setting forth information regarding the
Company and the Debentures. Any references herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto and any documents filed under the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder (collectively, the "Exchange
Act") which are incorporated by reference therein. As used herein, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference in the Preliminary Offering Memorandum, the Offering Memorandum or
any amendment or supplement thereto. The Company hereby confirms
<PAGE> 2
that it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offering and resale of the Debentures
by the Initial Purchasers.
The Company understands that the Initial Purchasers propose to make
offers and sales (the "Exempt Resales") of the Debentures purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom the Initial Purchasers reasonably believe to
be qualified institutional buyers ("Qualified Institutional Buyers") as defined
in Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, (ii) to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and
(7) under Regulation D of the Act) ("Accredited Investors") in private sales
exempt from registration under the Act and (iii) outside the United States to
persons other than U.S. persons in reliance upon Regulation S ("Regulation S")
under the Act (such persons specified in clauses (i), (ii) and (iii) being
referred to herein as the "Eligible Purchasers"). As used herein the terms
"United States" and "U.S. persons" have the meaning given them in Regulation S.
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Debentures (and all securities issued in exchange
therefor, in substitution thereof or upon conversion thereof (including the
Common Stock)) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS
(A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON THE
HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (A)(2), (A)(3) OR
(A)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED
-2-
<PAGE> 3
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S [TRANSFER AGENT'S] RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE [TRANSFER AGENT]. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY AFTER THE RESALE
RESTRICTION TERMINATION DATE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Debentures and, if such Debentures are
subsequently converted into Common Stock, the Common Stock, will have the
registration rights set forth in, and subject to the terms of, the registration
rights agreement (the "Registration Rights Agreement"), to be dated the date
hereof, in substantially the form of Exhibit A hereto. This Agreement, the
Indenture and the Registration Rights Agreement are hereinafter referred to
collectively as the "Operative Documents".
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Indenture or the Offering Memorandum.
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to the several Initial Purchasers and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 97% of the principal amount thereof, the principal amount of Firm
Debentures set forth opposite the name of such Initial Purchaser in Schedule I
hereto.
(a)(b) The Company also agrees, subject to all the terms and conditions
set forth herein, to sell to each Initial Purchaser, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, each Initial Purchaser
shall have the right to purchase from the Company pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Offering Memorandum (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading), the principal amount of Additional Debentures set forth
opposite the name of such Initial Purchaser in Schedule I hereto at the same
purchase price as the Firm Debentures, plus accrued interest, if any, from the
date of issuance of the Firm Debentures to the date of delivery and payment.
(c) Each Initial Purchaser has advised the Company that it proposes to
offer the Debentures for sale upon the terms and conditions set forth in this
Agreement and in the Offering Memorandum. Each Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that such Initial
Purchaser (i) is purchasing the Debentures pursuant to a private sale exempt
from registration under the Act, (ii) will not solicit offers for, or offer or
sell, the Debentures by means
-3-
<PAGE> 4
of any form of general solicitation or general advertising or in any manner
involving a public offering within the meaning of Section 4(2) of the Act, and
(iii) will solicit offers for the Debentures only from, and will offer, sell or
deliver the Debentures as part of its initial offering, only to (A) persons in
the United States whom such Initial Purchaser reasonably believes to be
Qualified Institutional Buyers, or if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchaser that each such
account is a Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, in each case, in
transactions under Rule 144A, (B) to a limited number of Accredited Investors
that make the representations to and agreements with the Company specified in
Annex A to the Offering Memorandum in private sales exempt from registration
under the Act and (C) outside the United States to persons other than U.S.
persons in reliance on Regulation S. Each Initial Purchaser has advised the
Company that it will offer the Debentures to Eligible Purchasers at a price
initially equal to 100% of the principal amount thereof, plus accrued interest,
if any, from the date of issuance of the Firm Debentures. Such price may be
changed by the Initial Purchasers at any time thereafter without notice.
(d) Each Initial Purchaser represents and warrants that it (i) has not
offered or sold, and will not offer or sell, directly or indirectly, any of the
Debentures in the United Kingdom by means of any document, other than to persons
whose ordinary business it is to buy or sell shares or debentures whether as
principal or agent (except in circumstances which do not constitute an offer to
the public within the meaning of the Companies Act 1985), (ii) has complied with
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by such Initial Purchaser in relation to the
Debentures in, from or otherwise involving the United Kingdom and (iii) has only
issued or passed on and will only issue or pass on in or from the United Kingdom
to any person any document received by such Initial Purchaser in connection with
the issue of the Debentures if the recipient is of a kind described in Article
9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996, as amended.
(e) Each Initial Purchaser represents and warrants that it has offered
and sold the Debentures and agrees that it will offer and sell the Debentures
(i) as part of its distribution at any time or (ii) otherwise during such
restricted period as may be required or imposed by applicable law, only in
accordance with Rule 903 of Regulation S or as otherwise permitted pursuant to
paragraph (c) above. Accordingly, the Initial Purchaser represents and agrees
that neither such Initial Purchaser, its affiliates nor any persons acting on
its or their behalf has engaged or will engage in any directed selling efforts
with respect to the Debentures, and it and they have complied and will comply
with the offering restrictions requirement of Regulation S. Such Initial
Purchaser agrees that, at or prior to confirmation of the sale of Debentures
other than a sale pursuant to Rule 144A, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases Debentures from such Initial Purchaser during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise during such restricted period as may be required
or imposed by applicable law, except in either case in accordance with
Regulation S (or Rule 144A) under the Securities Act. Terms used above
have the meaning given to them by Regulation S."
-4-
<PAGE> 5
The Initial Purchasers understand that the Company and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
7(c)(xviii) and 7(e) hereof, counsel to the Company and counsel to the Initial
Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Debentures and Payment Therefor. Delivery to the
Initial Purchasers of and payment for the Firm Debentures shall be made at the
office of Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00
a.m., New York City time, on May 1, 1998 (the "Closing Date"). The place of
closing for the Firm Debentures and the Closing Date may be varied by agreement
between the Initial Purchasers and the Company.
Delivery to the Initial Purchasers of and payment for any Additional
Debentures to be purchased by the Initial Purchasers shall be made at the
aforementioned office of Smith Barney Inc. at such time on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date nor earlier than three nor later than
ten business days after the giving of the notice hereinafter referred to, as
shall be specified in a written notice from the Initial Purchasers to the
Company of the Initial Purchasers' determination to purchase the principal
amount of Additional Debentures specified in such notice. The place of closing
for any Additional Debentures and the Option Closing Date for such Additional
Debentures may be varied by agreement between the Initial Purchasers and the
Company.
The Firm Debentures and any Additional Debentures which the Initial
Purchasers may elect to purchase will be delivered to the Initial Purchasers
against payment of the purchase price therefor by certified or official bank
check or checks or wire transfer payable in immediately available funds to the
order of the Company. The Debentures will be evidenced by a single global
security in definitive form (the "Global Debenture") and/or by additional
definitive securities, and will be registered, in the case of the Global
Debenture, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchasers shall request prior to 1:00 p.m., New York City time, on the
third business day preceding the Closing Date or any Option Closing Date, as the
case may be. The Debentures to be delivered to the Initial Purchasers shall be
made available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 a.m., New York City time, on the business day next
preceding the Closing Date or the Option Closing Date, as the case may be.
4. Agreements of the Company. The Company agrees with the several
Initial Purchasers as follows:
(a) The Company will advise the Initial Purchasers promptly and, if
requested by it, will confirm such advice in writing, within the period of time
referred to in paragraph (e) below, of any change in the Company's condition
(financial or other), business, properties, net worth or results of operations,
or of the happening of any event which requires the making of any additions to
or changes in the Offering Memorandum (as then amended or supplemented) in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or of the necessity to amend or supplement the
Offering Memorandum (as then amended or supplemented) to comply with any law.
(b) The Company will furnish to the Initial Purchasers, without charge,
as of the date of the Offering Memorandum, such number of copies of the Offering
Memorandum as may then be amended or supplemented as they may reasonably
request.
-5-
1
<PAGE> 6
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which they shall
reasonably object after being so advised or file any document which upon filing
becomes an Incorporated Document, without delivering a copy of such document to
the Initial Purchasers, prior to or concurrently with such filing.
(d) Prior to the execution and delivery of this Agreement, the Company
has delivered or will deliver to the Initial Purchasers, without charge, in such
quantities as the Initial Purchasers shall have requested or may hereafter
reasonably request, copies of the Preliminary Offering Memorandum. The Company
consents to the use, in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Debentures are offered by the Initial Purchasers and
by dealers, prior to the date of the Offering Memorandum, of each Preliminary
Offering Memorandum so furnished by the Company. The Company consents to the use
of the Offering Memorandum (and of any amendment or supplement thereto) in
accordance with the securities or Blue Sky laws of the jurisdictions in which
the Debentures are offered by the Initial Purchasers and by all dealers to whom
Debentures may be sold, in connection with the offering and sale of the
Debentures.
(e) If, at any time prior to completion of the distribution of the
Debentures by the Initial Purchasers to Eligible Purchasers, any event shall
occur that in the judgment of the Company or in the opinion of counsel for the
Initial Purchasers should be set forth in the Offering Memorandum (as then
amended or supplemented) in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Offering Memorandum, or to file under the
Exchange Act any document which upon filing becomes an Incorporated Document, to
comply with any law, the Company will forthwith prepare an appropriate
supplement or amendment thereto of such document, and will expeditiously furnish
to the Initial Purchasers and dealers a reasonable number of copies thereof. In
the event that the Company and the Initial Purchasers agree that the Offering
Memorandum should be amended or supplemented, or that a document should be filed
under the Exchange Act which upon filing becomes an Incorporated Document, the
Company, if reasonably requested by the Initial Purchasers, will promptly issue
a press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement or such document.
(f) The Company will cooperate with the Initial Purchasers and with
their counsel in connection with the qualification of the Debentures and the
Common Stock issuable upon conversion of the Debentures for offering and sale by
the Initial Purchasers and by dealers under the securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may designate and will file such
consents to service of process or other documents necessary or appropriate in
order to effect such qualification; provided that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to service of process
in suits, other than those arising out of the offering or sale of the
Debentures, in any jurisdiction where it is not now so subject.
(g) So long as any of the Debentures are outstanding, the Company will
furnish to the Initial Purchasers (i) as soon as available and upon request, a
copy of each report of the Company mailed to stockholders or filed with the
Commission, and (ii) from time to time such other information concerning the
Company as the Initial Purchasers may reasonably request.
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers
-6-
<PAGE> 7
terminating this Agreement pursuant to Section 9 or Section 10 hereof) or if
this Agreement shall be terminated by the Initial Purchasers because of any
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Initial Purchasers for all out-of-pocket expenses (including fees and
expenses of their counsel) reasonably incurred by them in connection herewith,
but without any further obligation on the part of the Company for loss of
profits or otherwise.
(i) The Company will apply the net proceeds from the sale of the
Debentures to be sold by it hereunder substantially in accordance with the
description set forth in the Offering Memorandum.
(j) Without the prior consent of Smith Barney Inc., prior to the
expiration of 90 days after the date of the Offering Memorandum, the Company
will not offer, sell, contract to sell or otherwise dispose of any Common Stock
(or any securities convertible into or exercisable or exchangeable for Common
Stock) or grant any options or warrants to purchase Common Stock, except for (i)
the sale of the Debentures to the Initial Purchasers pursuant to this Agreement
and issuances of Common Stock upon conversion of Debentures, (ii) grants of
options pursuant to the Company's Plan, (iii) issuances of Common Stock upon
exercise of options and warrants outstanding at the date hereof or issued in
accordance with the foregoing clause (ii) and (iv) issuances of Common Stock (or
any securities convertible into or exercisable for Common Stock) in connection
with the acquisition of any related business, product or technology; provided,
however, that in the case of issuances pursuant to clause (iv) above, any such
shares of Common Stock issued in acquisitions shall be contractually restricted
from resale for at least the duration of the 90-day restricted period described
above; and, provided further, however, that Common Stock issued in connection
with the Company's acquisition of Medicus Systems Corporation ("Medicus") shall
not be restricted from resale. The Company has caused or will cause each of its
current directors and executive officers to furnish a letter or letters, in the
form of Exhibit A hereto, pursuant to which each such person shall agree not to
offer, sell, contract to sell or otherwise dispose of any Common Stock (or any
securities convertible into or exercisable or exchangeable for Common Stock) for
a period of 90 days after the date of the Offering Memorandum without the prior
written consent of Smith Barney Inc., except as otherwise provided therein.
(k) Except as stated in this Agreement and in the Preliminary Offering
Memorandum and Offering Memorandum, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Debentures to facilitate the sale or resale of the Debentures. Except as
permitted by the Act, the Company will not distribute any offering material in
connection with the Exempt Resales.
(l) The Company will use its reasonable best efforts to cause the
Debentures to be eligible for trading on PORTAL.
(m) The Company will have, as of the date of this Agreement and for so
long as the Debentures are outstanding, available free from pre-emptive rights,
and reserved for issuance upon conversion of the Debentures, a number of
authorized but unissued shares of Common Stock which, when added to the number
of shares of Common Stock held in its treasury, will be sufficient to honor the
conversion in full of all outstanding Debentures.
(n) From and after the Closing Date, so long as any of the Debentures
are outstanding and are "Restricted Securities" within the meaning of Rule
144(a)(3) under the Act or, if
-7-
<PAGE> 8
earlier, until two years after the Closing Date, and during any period in which
the Company is not subject to Section 13 or 15(d) of the Exchange Act, the
Company will furnish to holders of the Debentures and prospective purchasers of
Debentures designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in connection
with resale of the Debentures.
(o) The Company agrees not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Debentures in a manner that would
require the registration under the Act of the sale to the Initial Purchasers or
the Eligible Purchasers of the Debentures.
(p) The Company agrees to comply with all of the terms and conditions of
the Registration Rights Agreement, and all agreements set forth in the
representation letters of the Company to DTC relating to the approval of the
Debentures by DTC for "book entry" transfer.
(q) The Company agrees that prior to any registration of the Debentures
pursuant to the Registration Rights Agreement, or at such earlier time as may be
so required, the Indenture shall be qualified under the Trust Indenture Act of
1939 (the "1939 Act") and will cause to be entered into any necessary
supplemental indentures in connection therewith.
5. Representations and Warranties of the Company. The Company represents
and warrants to the several Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering Memorandum with
respect to the Debentures have been prepared by the Company for use by the
Initial Purchasers in connection with the Exempt Resales. No order or decree
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment or supplement thereto, or any order asserting that
the transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been received by the Company and, to the Company's
knowledge, no proceeding for that purpose has commenced or is pending or is
contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum as
of their respective dates and the Offering Memorandum as of the Closing Date,
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Preliminary Offering Memorandum and Offering
Memorandum made in reliance upon and in conformity with information relating to
the Initial Purchasers furnished to the Company in writing by or on behalf of
the Initial Purchasers expressly for use therein.
(c) The Incorporated Documents heretofore filed were filed in a timely
manner and, when they were filed (or, if any amendment with respect to any such
document was filed, when such document was filed), conformed in all material
respects to the requirements of the Exchange Act and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and any further
Incorporated Documents will, when so filed, be filed in a timely manner and
conform in all material respects to the requirements of the Exchange Act and
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<PAGE> 9
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(d) The Indenture has been duly and validly authorized by the Company
and, upon its execution, delivery and performance by the Company and assuming
due authorization, execution, delivery and performance by the Trustee, will be a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and conforms in
all material respects to the description thereof in the Offering Memorandum; no
qualification of the Indenture under the 1939 Act is required in connection with
the offer and sale of the Debentures contemplated hereby or in connection with
the Exempt Resales.
(e) The Debentures have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in accordance with the
Indenture and delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity, and the Debentures will conform
in all material respects to the description thereof in the Offering Memorandum.
(f) All of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or, except as set forth in the Offering Memorandum,
similar rights and were issued and sold in compliance with all applicable
Federal and state securities laws; the Common Stock to be issued upon conversion
of the Debentures will be, prior to its issuance, duly authorized and reserved
for issuance and, when delivered upon conversion of the Debentures, will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; and the authorized capital stock of the Company conforms in all
material respects to the description thereof in the Offering Memorandum.
(g) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect").
(h) All of the Company's subsidiaries listed on Schedule II (as defined
in the Act) are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation duly
organized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or be in good
standing does not have a Material Adverse Effect. All of
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<PAGE> 10
the outstanding shares of capital stock of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable and, with
the exception of Medicus, are wholly owned by the Company directly or indirectly
through one of the other Subsidiaries, free and clear of any lien, adverse
claim, security interest, equity or other encumbrance ("Liens"), except as
described in the Offering Memorandum. Upon completion of the Medicus Acquisition
(as defined in the Offering Memorandum), all of the outstanding shares of
capital stock of Medicus will be wholly owned by the Company directly, free and
clear of any Liens.
(i) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties, is subject, that are not disclosed in the
Offering Memorandum and which, if adversely decided, are reasonably likely to
cause a Material Adverse Effect or materially affect the issuance of the
Debentures or the consummation of the transactions contemplated by the Operative
Documents. There are no material agreements, contracts, indentures, leases or
other instruments that are not described in the Offering Memorandum or that are
required to be filed as an exhibit to any Incorporated Document that are not so
filed. Neither the Company nor any Subsidiary is involved in any strike, job
action or labor dispute with any group of employees, and, to the Company's
knowledge, no such action or dispute is threatened.
(j) Neither the Company nor any of the Subsidiaries is (i) in violation
of its certificate or articles of incorporation or by-laws or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, except where any such
violation or violations in the aggregate would not have a Material Adverse
Effect or (ii) in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any material agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any of their respective properties may be bound, except
as may be disclosed in the Offering Memorandum.
(k) Neither the issuance, offer, sale or delivery of the Debentures, the
issuance of Common Stock upon conversion of the Debentures or the payment to
holders of Debentures of an amount of cash equal to the market price of the
underlying Common Stock in lieu of conversion into Common Stock in accordance
with the terms of the Indenture, the execution, delivery or performance of this
Agreement, the Indenture or the Registration Rights Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby or
thereby (i) requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except such as may be required
in connection with the registration under the Act of the Debentures and the
Common Stock in accordance with the Registration Rights Agreement, the
qualification of the Indenture under the 1939 Act and except for compliance with
the securities or Blue Sky laws of various jurisdictions) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the certificate or articles of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
in any material respect, any material agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound, or
violates or will violate in any material respect any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to the Company or any
of the Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien,
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<PAGE> 11
charge or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(l) The accountants, Arthur Andersen LLP and Deloitte & Touche LLP, who
have certified or shall certify the financial statements included as part of the
Offering Memorandum (or any amendment or supplement thereto), each are
independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings.
(m) The financial statements (historical and pro forma), together with
related schedules and notes forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly in all material respects the
consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of the Company and the Subsidiaries on the
basis stated in the Offering Memorandum at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; the assumptions used in preparing the pro forma financial
information and related notes and schedules included in the Offering Memorandum
are reasonable; and the other financial and statistical information and data set
forth in the Offering Memorandum (and any amendment or supplement thereto) is
accurately presented and, to the extent such information and data is derived
from the financial books and records of the Company, is prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(n) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the Registration
Rights Agreement; the execution and delivery of, and the performance by the
Company of its obligations under, this Agreement and the Registration Rights
Agreement have been duly and validly authorized by the Company, and this
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitute the valid and legally binding agreements
of the Company, enforceable against the Company in accordance with their terms,
except as the enforcement hereof and thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity, and
except as rights to indemnity and contribution hereunder and thereunder may be
limited by Federal or state securities laws or principles of public policy.
(o) Except as disclosed in the Offering Memorandum (or any amendment or
supplement thereto), subsequent to the date as of which such information is
given in the Offering Memorandum (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any material change in the
capital stock, or material increase in the short-term or long-term debt, of the
Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which could reasonably be expected to involve a
prospective material adverse change in the condition (financial or other),
business, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(p) The Company and the Subsidiaries do not own any real property. All
of the property described in the Offering Memorandum as being held under lease
by each of the Company
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<PAGE> 12
and the Subsidiaries is held by it under valid, subsisting and enforceable
leases, with only such exceptions as in the aggregate would not be expected to
have a Material Adverse Effect.
(q) Except as permitted by the Act, the Company has not distributed and,
prior to the later to occur of the Closing Date and completion of the
distribution of the Debentures, will not distribute any offering material in
connection with the offering and sale of the Debentures other than the
Preliminary Offering Memorandum and Offering Memorandum.
(r) Each of the Company and the Subsidiaries has such permits, licenses,
franchises, certificates of need and other approvals or authorizations of
governmental or regulatory authorities ("Permits") as are necessary under
applicable law to own their respective properties and to conduct their
respective business in the manner described in the Offering Memorandum except to
the extent that the failure to have such Permits would not have a Material
Adverse Effect; the Company and each of the Subsidiaries have fulfilled and
performed in all material respects all of their respective material obligations
with respect to the Permits, and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be set forth in the
Offering Memorandum and except to the extent that any such revocation or
termination would not have a Material Adverse Effect; and, except as described
in the Offering Memorandum, none of the Permits contains any restriction that
would not be expected to have a Material Adverse Effect.
(s) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any employee or agent of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, which violation
would have a Material Adverse Effect.
(t) Except as disclosed in the Offering Memorandum, the Company and each
of the Subsidiaries have filed all tax returns required to be filed, which
returns are true and correct in all material respects, and neither the Company
nor any Subsidiary is in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto, except where
the failure to file such returns and make such payments would not have a
Material Adverse Effect.
(u) No holder of any security of the Company (other than holders of the
Debentures and holders of shares of Common Stock received upon conversion
thereof) has any right to request or demand registration of shares of Common
Stock or any other security of the Company because of the consummation of the
transactions contemplated by this Agreement or the Registration Rights
Agreement, except as described in the Offering Memorandum. Except as described
in or contemplated by the Operative Documents or the Offering Memorandum, there
are no outstanding options, warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or exchangeable or
exercisable for capital stock of the Company.
(v) The Company is not and, upon sale of the Debentures to be issued and
sold thereby in accordance herewith and the application of the net proceeds to
the Company of such sale as described in the Offering Memorandum under the
caption "Use of Proceeds," will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
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<PAGE> 13
(w) When the Debentures are issued and delivered pursuant to this
Agreement, such Debentures will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Act) as any security of the Company that is listed on
a national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated interdealer quotation system.
(x) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D ("Regulation D") under the Act) of the Company has directly, or
through any agent (provided that no representation is made as to the Initial
Purchasers or any person acting on their behalf), (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security (as
defined in the Act) which is or will be integrated with the offering and sale of
the Debentures in a manner that would require the registration of the Debentures
under the Act or (ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offering
of the Debentures.
(y) The Company is not required to deliver the information specified in
Rule 144A(d)(4) in connection with the offering and resale of the Debentures by
the Initial Purchasers.
(z) Assuming (i) that the representations and warranties in Section 2
hereof are true, (ii) the Initial Purchasers comply with the covenants set forth
in Section 2 hereof and (iii) that each person to whom the Initial Purchasers
offer, sell or deliver the Debentures is a Qualified Institutional Buyer, an
Accredited Investor or a person other than a U.S. person outside the United
States in reliance on Regulation S under the Act, the purchase and sale of the
Debentures pursuant hereto (including the Initial Purchasers' proposed offering
of the Debentures on the terms and in the manner set forth in the Offering
Memorandum and Section 2 hereof) is exempt from the registration requirements of
the Act.
(aa) The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Debentures to the Initial Purchasers or by the
Initial Purchasers to Eligible Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code. The representation made by the Company in the preceding sentence is made
in reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible Purchasers as
set forth in the Offering Memorandum under the section entitled "Notice to
Investors."
(bb) The Company is not required to obtain stockholder consent or
approval pursuant to the rules of the Nasdaq National Market in connection with
the offering and sale of the Debentures.
(cc) Except as disclosed in the Offering Memorandum, the Company and its
Subsidiaries own, possess, license or have other rights to use, on reasonable
terms, all patents, patent applications, trade and service marks, trade and
service mark registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property (collectively, the
"Intellectual Property") necessary for the conduct of the Company's business as
now conducted or as proposed in the Offering Memorandum to be conducted. Except
as set forth in the Offering Memorandum under the caption
"Business--Intellectual Property," (a) to the Company's knowledge, there are no
rights of third parties to any such Intellectual Property; (b) to the Company's
best knowledge, there is no material infringement by third parties of any such
Intellectual Property; (c) there is no pending or, to the Company's best
knowledge, threatened action, suit, proceeding or claim by others challenging
the Company's rights in or to any such Intellectual Property, and the
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<PAGE> 14
Company is unaware of any facts which would form a reasonable basis for any such
claim; (d) to the Company's best knowledge, there is no pending or threatened
action, suit, proceeding or claim by others challenging the validity or scope of
any such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; (e) there is no pending or, to
the Company's knowledge, threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and the Company
is unaware of any other fact which would form a reasonable basis for any such
claim; (f) to the Company's knowledge, there is no U.S. patent or published U.S.
patent application which contains claims that dominate or may dominate any
Intellectual Property described in the Offering Memorandum as being owned by or
licensed to the Company or that interferes with the issued or pending claims of
any such Intellectual Property; and (g) there is no prior art of which the
Company is aware that may render any U.S. patent held by the Company invalid or
any U.S. patent application held by the Company unpatentable which has not been
disclosed to the U.S. Patent and Trademark Office.
Any certificate signed by any officer of the Company and delivered to
the Initial Purchasers or counsel for the Initial Purchasers in connection with
the offering of the Debentures shall be deemed a representation and warranty by
the Company, as to matters covered thereby, to each Initial Purchaser.
6. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Initial Purchaser and each person, if any, who controls
each Initial Purchaser within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or Offering
Memorandum or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to the Initial
Purchasers furnished in writing to the Company by or on behalf of any Initial
Purchaser expressly for use in connection therewith; provided, however, that the
indemnification contained in this paragraph (a) with respect to the Preliminary
Offering Memorandum shall not inure to the benefit of any Initial Purchaser (or
to the benefit of any person controlling such Initial Purchaser) on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Debentures by such Initial Purchaser to any person if the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in the Preliminary Offering Memorandum was corrected in the Offering
Memorandum and such Initial Purchaser sold Debentures to that person without
sending or giving at or prior to the written confirmation of such sale, a copy
of the Offering Memorandum (as then amended or supplemented) if the Company has
previously furnished sufficient copies thereof to such Initial Purchaser on a
timely basis. The foregoing indemnity agreement shall be in addition to any
liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Initial Purchaser or any person controlling such Initial Purchaser in respect of
which indemnity may be sought against the Company, such Initial Purchaser or
such controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses.
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<PAGE> 15
Such Initial Purchaser or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Initial Purchaser or such controlling person
unless (i) the indemnifying parties have agreed in writing to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include both the Initial Purchaser
or such controlling person and the indemnifying parties and the Initial
Purchaser or such controlling person shall have been advised by its counsel that
representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of the Initial Purchaser or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the Initial
Purchasers and controlling persons not having actual or potential differing
interests with the Initial Purchasers or among themselves, which firm shall be
designated in writing by Smith Barney Inc., and that all such fees and expenses
shall be reimbursed on a monthly basis as provided in paragraph (a) hereof. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify and
hold harmless the Initial Purchasers, to the extent provided in paragraph (a),
and any such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, and its directors and officers, and any
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the indemnity from the
Company to each Initial Purchaser set forth in paragraph (a) hereof, but only
with respect to information relating to such Initial Purchaser furnished in
writing by or on behalf of such Initial Purchaser expressly for use in the
Preliminary Offering Memorandum or Offering Memorandum or any amendment or
supplement thereto. If any action, suit or proceeding shall be brought against
the Company, any of its directors or officers, or any such controlling person
based on the Preliminary Offering Memorandum or Offering Memorandum, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Initial Purchaser pursuant to this paragraph (c), each Initial
Purchaser shall have the rights and duties given to the Company by paragraph (b)
above (except that if the Company shall have assumed the defense thereof such
Initial Purchaser shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Initial Purchaser's expense), and the
Company, its directors and officers, and any such controlling person shall have
the rights and duties given to each Initial Purchaser by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
each Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is unavailable
to an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect
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<PAGE> 16
the relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand from the offering of the Debentures, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the Initial
Purchasers on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Initial Purchasers, in each case as set forth in the table on the cover page of
the Offering Memorandum; provided that, in the event that the Initial Purchasers
shall have purchased any Additional Debentures hereunder, any determination of
the relative benefits received by the Company or the Initial Purchasers from the
offering of the Debentures shall include the net proceeds (before deducting
expenses) received by the Company, and the underwriting discounts and
commissions received by the Initial Purchasers, from the sale of such Additional
Debentures, in each case computed on the basis of the respective amounts set
forth in the notes to the table on the cover page of the Offering Memorandum.
The relative fault of the Company on the one hand and the Initial Purchasers on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or by the Initial Purchasers on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the several Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 6 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price of the Debentures underwritten by it and distributed to
the public exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling any Initial Purchaser, the Company, its directors or officers or any
person controlling the Company, (ii) acceptance of any Debentures and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Initial Purchaser or any person controlling such Initial Purchaser, or to
the Company, its directors or officers or any person controlling the Company,
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<PAGE> 17
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The obligations of
the Initial Purchasers to purchase the Firm Debentures hereunder are subject to
the following conditions:
(a) At the time of execution of this Agreement and on the Closing Date,
no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending or, to the knowledge of the Company, be
contemplated. No stop order suspending the sale of the Debentures in any
jurisdiction designated by the Initial Purchasers shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company, shall be contemplated.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Company or the Subsidiaries not
contemplated by the Offering Memorandum, which in the opinion of the Initial
Purchasers, would materially adversely affect the market for the Debentures, or
(ii) any event or development relating to or involving the Company or any
officer or director of the Company which makes any statement made in the
Offering Memorandum untrue or which, in the opinion of the Company and its
counsel or the Initial Purchasers and their counsel, requires the making of any
addition to or change in the Offering Memorandum in order to state a material
fact required by any law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Offering
Memorandum to reflect such event or development would, in the opinion of the
Initial Purchasers, materially adversely affect the market for the Debentures.
(c) The Initial Purchasers shall have received on the Closing Date an
opinion of Brobeck, Phleger & Harrison LLP, counsel for the Company, dated the
Closing Date and addressed to the Initial Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority, and all Permits as are required under applicable
law, to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum (and any amendment or supplement thereto);
the Company is duly registered and qualified to conduct its business and is in
good standing as a foreign corporation in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing or to have such Permits does not have a
Material Adverse Effect;
-17-
<PAGE> 18
(ii) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Offering Memorandum; and the
authorized capital stock of the Company conforms in all material respects as to
legal matters to the description thereof contained in the Offering Memorandum
under the caption "Description of Capital Stock";
(iii) All the shares of capital stock of the Company outstanding
prior to the issuance of the Debentures have been duly authorized and validly
issued, are fully paid and nonassessable;
(iv) The shares of Common Stock issuable upon conversion of the
Debentures have been duly authorized and when issued and delivered upon
conversion of the Debentures will be validly issued, fully paid and
nonassessable and will be free of any (A) preemptive rights under the Company's
Certificate of Incorporation or applicable Delaware law or (B) to the knowledge
of such counsel, and except as set forth in the Offering Memorandum, similar
rights that entitle or will entitle any person to acquire any Common Stock upon
the issuance of the Debentures and the issuance of the Common Stock upon
conversion of the Debentures by the Company;
(v) The Company has corporate power and authority to enter into
this Agreement and the Registration Rights Agreement and to issue, sell and
deliver the Debentures to be sold by it to the Initial Purchasers as provided
herein, and this Agreement and the Registration Rights Agreement have been duly
authorized, executed and delivered by the Company and are valid, legal and
binding agreements of the Company, enforceable against the Company in accordance
with their terms, except (A) as enforcement of rights to indemnity and
contribution hereunder and thereunder may be limited by Federal or state
securities laws or principles of public policy and (B) subject to the
qualification that the enforceability of the Company's obligations hereunder and
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles;
(vi) The Indenture has been duly and validly authorized, executed
and delivered by the Company and, assuming due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to the qualification that the
enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles; no qualification of the Indenture under the 1939 Act is
required in connection with the offer and sale of the Debentures contemplated
hereby or in connection with the Exempt Resales;
(vii) The Debentures have been duly and validly authorized by the
Company and when executed by the Company in accordance with the Indenture and,
assuming due authentication of the Debentures by the Trustee, upon delivery to
the Initial Purchasers against payment therefor in accordance with the terms
hereof, will have been validly issued and delivered, and will constitute valid
and binding obligations of the Company entitled to the benefits of the
Indenture, subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(viii) Neither the offer, sale or delivery of the Debentures, the
issuance of Common Stock upon conversion of the Debentures or the payment to
holders of Debentures of an amount of cash equal to the market price of the
underlying Common Stock in lieu of conversion into
-18-
<PAGE> 19
Common Stock in accordance with the terms of the Indenture, the execution,
delivery or performance by the Company of this Agreement, the Registration
Rights Agreement or the Indenture, compliance by the Company with the provisions
hereof or thereof nor consummation by the Company of the transactions
contemplated hereby or thereby conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, in any material respect, the
certificate or articles of incorporation or bylaws or other organizational
documents of the Company or any material agreement, indenture, lease or other
instrument to which the Company is a party or by which it or its properties is
bound that is an exhibit to any Incorporated Document or is known to such
counsel, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of
any material agreement or instrument to which it is a party or by which it may
be bound or to which any of the Company's property or assets is subject that is
an exhibit to any Incorporated Document or is known to such counsel, nor will
any such action result in any violation in any material respect of any existing
law, or any regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws and, in the case of the Registration Rights
Agreement, the Act and the Exchange Act and the 1939 Act), judgment, injunction,
order or decree known to such counsel, applicable to the Company or any of its
properties;
(ix) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Company (except as have been obtained under the Exchange Act, or such as may be
required under state securities or Blue Sky laws governing the purchase and
distribution of the Debentures and the shares of Common Stock issuable upon
conversion of the Debentures, or such as may be required to qualify the
Indenture under the 1939 Act, and such as may be required in connection with the
performance by the Company of its obligations under the Registration Rights
Agreement, as to which such counsel need not express an opinion) for the valid
issuance and sale of the Debentures to the Initial Purchasers as contemplated by
this Agreement;
(x) To the knowledge of such counsel, (A) other than as described
or contemplated in the Offering Memorandum (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against the
Company, or to which the Company, or any of its property, are subject, which are
not disclosed in the Offering Memorandum and which, if adversely decided, are
reasonably likely to cause a Material Adverse Effect or materially affect the
issuance of the Debentures or the consummation of the transactions contemplated
by the Operative Documents;
(xi) The statements in the Offering Memorandum under the captions
"Description of Debentures" and "Certain United States Federal Tax
Considerations," insofar as such statements constitute summaries of the
documents and legal matters referred to therein, fairly summarize, in all
material respects, such documents and legal matters;
(xii) When the Debentures are issued and delivered pursuant to
this Agreement, such Debentures will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated interdealer
quotation system;
(xiii) It is not necessary in connection with the offer, sale and
delivery of the Debentures to the Initial Purchasers in the manner contemplated
by this Agreement or in connection with Exempt Resales to register the
Debentures under the Securities Act;
-19-
<PAGE> 20
(xiv) The Company is not required to deliver the information
specified in Rule 144A(d)(4) in connection with the offering and resale of the
Debentures by the Initial Purchasers;
(xv) The Company is not required to obtain stockholder consent or
approval pursuant to the rules of the Nasdaq National Market in connection with
the issuance, offering and resale of the Debentures; and
(xvi) Although such counsel have not undertaken, except as
otherwise indicated in their opinion, to determine independently, and do not
assume any responsibility for, the accuracy, completeness or fairness of the
statements in the Offering Memorandum, such counsel have participated in the
preparation of the Offering Memorandum, including review and discussion of the
contents thereof, and have reviewed the Incorporated Documents, and nothing has
come to the attention of such counsel that has caused them to believe that the
Offering Memorandum, as of its date and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or that any amendment or supplement to the
Offering Memorandum, as of its respective date, and as of the Closing Date or
the Option Closing Date, as the case may be, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial and
statistical data included or incorporated by reference in the Offering
Memorandum and information furnished by or on behalf of the Initial Purchasers).
The opinion of such counsel shall be limited to the laws of the United
States, the State of California and the internal corporation law of the State of
Delaware.
(d) The Initial Purchasers shall have received on the Closing Date an
opinion of Keith M. Roberts, Esq., General Counsel of the Company, dated the
Closing Date and addressed to the Initial Purchaser to the effect that:
(i) Each Significant Subsidiary (as listed on Schedule III) is a
corporation duly organized and validly existing and in good standing under the
laws of the jurisdiction of its organization, with full corporate power and
authority, and all Permits as are required under applicable law, to own, lease,
and operate its properties and to conduct its business as described in the
Offering Memorandum (and any amendment or supplement thereto); each Subsidiary
is duly registered and qualified to conduct its business and is in good standing
as a foreign corporation in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or to be in
good standing or to have such Permits does not have a Material Adverse Effect;
all the outstanding shares of capital stock of each of the Significant
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and, with the exception of Medicus, to the knowledge of such
counsel, are wholly owned by the Company directly, or indirectly through one of
the other Subsidiaries, free and clear of any security interest, lien, adverse
claim, equity or other encumbrance ("Lien"), except as described in the Offering
Memorandum; and upon completion of the Medicus Acquisition (as defined in the
Offering Memorandum), all of the outstanding shares of capital stock of Medicus
will be wholly owned by the Company directly, free and clear of any Liens;
-20-
<PAGE> 21
(ii) Neither the offer, sale or delivery of the Debentures, the
issuance of Common Stock upon conversion of the Debentures, the execution,
delivery or performance by the Company of this Agreement, the Registration
Rights Agreement or the Indenture, compliance by the Company with the provisions
hereof or thereof nor consummation by the Company of the transactions
contemplated hereby or thereby conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, in any material respect, the
certificate or articles of incorporation or bylaws or other organizational
documents of any of the Significant Subsidiaries or any material agreement,
indenture, lease or other instrument to which any of the Significant
Subsidiaries is a party or by which any of them or any of their respective
properties is bound that is an exhibit to any Incorporated Document or is known
to such counsel, or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of any of the Significant
Subsidiaries pursuant to the terms of any material agreement or instrument to
which any of them is a party or by which any of them may be bound or to which
any of the property or assets of any of them is subject that is an exhibit to
any Incorporated Document or is known to such counsel, nor will any such action
result in any violation in any material respect of any existing law, or any
regulation, ruling (assuming compliance with all applicable state securities and
Blue Sky laws and, in the case of the Registration Rights Agreement, the Act and
the Exchange Act and the 1939 Act), judgment, injunction, order or decree known
to such counsel, applicable to any of the Significant Subsidiaries or any of
their respective properties;
(iii) To the knowledge of such counsel, other than as described
or contemplated in the Offering Memorandum (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against any of
the Subsidiaries, or to which any of the Subsidiaries, or any of their property,
are subject, which are not disclosed in the Offering Memorandum and which, if
adversely decided, are reasonably likely to cause a Material Adverse Effect or
materially affect the issuance of the Debentures or the consummation of the
transactions contemplated by the Operative Documents;
(iv) Except as described in the Offering Memorandum, such counsel
does not know of any outstanding option, warrant or other right calling for the
issuance of, and such counsel does not know of any commitment, plan or
arrangement to issue, any share of capital stock of the Company or any security
convertible into or exchangeable or exercisable for capital stock of the
Company; and except as described in the Offering Memorandum, such counsel does
not know of any holder of any securities of the Company (except for holders of
the Debentures and the Common Stock issuable upon conversion thereof) or any
other person who has the right, contractual or otherwise, to cause the Company
to sell or otherwise issue to them, or to permit them to underwrite the sale of,
any of the Debentures or the right to have any Common Stock or other securities
of the Company included in the Shelf Registration Statement or the right, as a
result of the consummation of the transactions contemplated by the Operative
Documents, to require registration under the Act of any shares of Common Stock
or other securities of the Company;
(e) The Initial Purchasers shall have received on the Closing Date an
opinion of Willkie Farr & Gallagher, counsel for the Initial Purchasers, dated
the Closing Date, and addressed to the Initial Purchasers, with respect to the
matters referred to in clauses (iv) (other than subclause (B) thereof), (v),
(vi), (vii), (xiii) and (xiv) of the foregoing paragraph (c) and such other
related matters as the Initial Purchasers may request.
(f) The Initial Purchasers shall have received letters addressed to the
Initial Purchasers, and dated the date hereof and the Closing Date, from Arthur
Andersen LLP, independent certified public accountants, substantially in the
forms heretofore approved by the Initial Purchasers.
-21-
<PAGE> 22
(g)(i) There shall not have been any change in the capital stock of the
Company nor any material increase in the short-term or long-term debt of the
Company (other than in the ordinary course of business) from that set forth or
contemplated in the Offering Memorandum (or any amendment or supplement
thereto); (ii) there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum (or any amendment or supplement
thereto), except as may otherwise be stated in the Offering Memorandum (or any
amendment or supplement thereto), any material adverse change in the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries taken as a whole; (iii) the Company and the
Subsidiaries shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to the
Company and the Subsidiaries, taken as a whole, other than those reflected in
the Offering Memorandum (or any amendment or supplement thereto); and (iv) all
the representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the date hereof
and on and as of the Closing Date as if made on and as of the Closing Date, and
the Initial Purchasers shall have received a certificate, dated the Closing Date
and signed by the chief executive officer and the chief accounting officer of
the Company (or such other officers as are acceptable to the Initial
Purchasers), to the effect set forth in this Section 7(g) and in Section 7(h)
hereof.
(h) The Company shall not have failed at or prior to the Closing Date to
have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(i) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating assigned to any
class of securities of the Company, or (ii) it is reviewing its ratings assigned
to any class of securities of the Company with a view to possible downgrading,
or with negative implications, or direction not determined.
(j) The Debentures shall have been approved for trading on PORTAL.
(k) The Company shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Initial Purchasers and counsel for the Initial
Purchasers.
Any certificate or document signed by any officer of the Company and
delivered to the Initial Purchasers, or to counsel for the Initial Purchasers,
shall be deemed a representation and warranty by the Company to the Initial
Purchasers as to the statements made therein.
The obligations of the Initial Purchasers to purchase any Additional
Debentures hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 7, except that, if any
Option Closing Date is other than the Closing Date, the certificates, opinions
and letters referred to in paragraphs (c) through (g) and paragraph (k) shall be
dated the Option Closing Date in question and the opinions called for by
paragraphs (c), (d) and (f) shall be revised to reflect the sale of Additional
Debentures.
-22-
<PAGE> 23
8. Expenses. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by them of their
obligations hereunder: (i) the preparation, printing or reproduction of the
Offering Memorandum (including financial statements thereto), and each amendment
or supplement to any of them, this Agreement and the Indenture; (ii) the
printing (or reproduction) and delivery (including postage, air freight charges
and charges for counting and packaging) of such copies of the Offering
Memorandum, the Preliminary Offering Memorandum, the Incorporated Documents, and
all amendments or supplements to any of them as may be reasonably requested for
use in connection with the offering and sale of the Debentures; (iii) the
preparation, printing, authentication, issuance and delivery of certificates for
the Debentures, including any stamp taxes in connection with the original
issuance and sale of the Debentures; (iv) the printing (or reproduction) and
delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda
and all other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Debentures; (v) the application for
quotation of the Debentures on PORTAL; (vi) the qualification of the Debentures
and the shares of Common Stock issuable upon conversion of the Debentures for
offer and sale under the securities or Blue Sky laws of the several states as
provided in Section 4(f) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Initial Purchasers relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental Blue
Sky Memoranda and such qualification); (vii) the performance by the Company of
its obligations under the Registration Rights Agreement; and (viii) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company. The Company hereby agrees
that it will pay in full on the Closing Date the fees and expenses referred to
in clause (vi) of this Section 8 by delivering to counsel for the Initial
Purchasers on such date a check payable to such counsel in the requisite amount.
9. Effective Date of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by all the parties hereto. Until such
time as this Agreement shall have become effective, it may be terminated by the
Company, by notifying the Initial Purchasers, or by the Initial Purchasers, by
notifying the Company.
Any notice under this Section 9 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
10. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company, by notice to the
Company, if prior to the Closing Date or any Option Closing Date (if different
from the Closing Date and then only as to the Additional Debentures), as the
case may be, (i) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in the judgment of
the Initial Purchasers, impracticable or inadvisable to commence or continue the
offering of the Debentures on the terms set forth on the cover page of the
Offering Memorandum or to enforce contracts for the resale of the Debentures by
the Initial Purchasers. Notice of such termination may be given to the Company
by telegram, telecopy or telephone and shall be subsequently confirmed by
letter.
-23-
2
<PAGE> 24
11. Information Furnished by the Initial Purchasers. The statements set
forth in the stabilization legend on the inside front cover, the last paragraph
on the cover page and in the third, fourth and sixth paragraphs under the
caption "Plan of Distribution" in the Preliminary Offering Memorandum and
Offering Memorandum, constitute the only information furnished by or on behalf
of the Initial Purchasers as such information is referred to in Sections 5(b)
and 6 hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4, 9 and 10
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 80 East Sir Francis Drake Blvd., Ste. 2A, Larkspur, CA 94939,
Attention: James D. Durham, Chief Executive Officer, or (ii) if to the Initial
Purchasers, c/o Smith Barney Inc., 388 Greenwich Street, New York, NY 10013,
Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company, its directors, its officers and the controlling
persons referred to in Section 6 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Initial Purchasers of any of the Debentures
in his status as such purchaser.
"Salomon Smith Barney" shall mean Smith Barney Inc. or Salomon Brothers
Inc., to the extent that either such party is a signatory to this Agreement.
13. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
-24-
<PAGE> 25
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchasers.
Very truly yours,
QUADRAMED CORPORATION
By: /s/ John V. Cracchiolo
-----------------------------
Name: John V. Cracchiolo
Title: Executive Vice President and
Chief Financial Officer
Confirmed as of the date first above mentioned.
Salomon Smith Barney
Smith Barney Inc.
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
By: Smith Barney Inc.
By: /s/ Benjamin D. Lorello
----------------------------
Name: Benjamin D. Lorello
Title: Managing Director
-25-
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of Principal Amount of
Initial Purchaser Firm Debentures Additional Debentures
----------------- ------------------- ---------------------
<S> <C> <C>
Smith Barney Inc. $ 60,000,000 $ 9,000,000
Bear, Stearns & Co. Inc. $ 20,000,000 $ 3,000,000
BT Alex. Brown Incorporated
$ 20,000,000 $ 3,000,000
Total: $100,000,000 $15,000,000
=========== ==========
</TABLE>
<PAGE> 27
SCHEDULE II
List of Subsidiaries
Medicus Systems Corporation
QuadraMed Acquisition Corporation
FRA Acquisition Inc.
1
<PAGE> 28
EXHIBIT A
[LETTERHEAD OF EXECUTIVE OFFICER, DIRECTOR OR SIGNIFICANT STOCKHOLDER OF
QUADRAMED CORPORATION]
QuadraMed Corporation
Offering of 5.25% Convertible Subordinated Debentures Due 2005
April 27, 1998
Smith Barney Inc.
Bear, Stearns & Co. Inc.
BT Alex. Brown Incorporated
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Purchase Agreement (the "Underwriting Agreement"), between QuadraMed
Corporation, a Delaware corporation (the "Company"), and each of you as Initial
Purchasers named therein, relating to an offering without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance on an exemption
pursuant to Section 4(2) under the Act of 5.25% Convertible Subordinated
Debentures Due 2005 (the "Debentures "), of the Company.
In order to induce you to enter into the Purchase Agreement, the
undersigned will not, without the prior written consent of Smith Barney Inc.,
offer, sell, contract to sell, pledge or otherwise dispose of, or file (or
participate in the filing of) a registration statement with the Securities and
Exchange Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated thereunder
with respect to, any shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company or any securities convertible into or
exercisable or exchangeable for such Common Stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of this Agreement, other than shares of Common Stock disposed of as bona fide
gifts approved by Smith Barney Inc.
<PAGE> 29
If for any reason the Purchase Agreement shall be terminated prior to
the Closing Date (as defined in the Purchase Agreement), the agreement set forth
above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF OFFICER, DIRECTOR OR
SIGNIFICANT STOCKHOLDER]
[NAME AND ADDRESS OF OFFICER, DIRECTOR
OR SIGNIFICANT STOCKHOLDER]
2
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
QUADRAMED CORPORATION
and
THE BANK OF NEW YORK, as Trustee
--------------------
SUBORDINATED INDENTURE
Dated as of May 1, 1998
--------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET*
Between
Provisions of Trust Indenture Act (as defined herein) and Indenture dated
as of May 1, 1998 between QuadraMed Corporation and The Bank of New York,
Trustee:
<TABLE>
<S> <C>
SECTION OF THE ACT SECTION OF INDENTURE
310(a)(1) and (2)........................................................................6.9
310(a)(3) and (4)...............................................................Inapplicable
310(b)..........................................................6.8 and 6.10(a), (b) and (d)
310(c)..........................................................................Inapplicable
311(a)..................................................................................6.14
311(b)..................................................................................6.14
311(c)..........................................................................Inapplicable
312(a)...........................................................................4.1 and 4.2
312(b)...................................................................................4.2
312(c)...................................................................................4.2
313(a)...................................................................................4.3
313(b)(1).......................................................................Inapplicable
313(b)(2)................................................................................4.3
313(c)............................................................4.3, 5.11, 6.10, 6.11, 8.2
and 12.2
313(d)...................................................................................4.3
314(a)...........................................................................3.5 and 4.2
314(b)..........................................................................Inapplicable
314(c)(1) and (2).......................................................................11.5
314(c)(3).......................................................................Inapplicable
314(d)..........................................................................Inapplicable
314(e)..................................................................................11.5
314(f)..........................................................................Inapplicable
315(a), (c) and (d)......................................................................6.1
315(b)..................................................................................5.11
315(e)..................................................................................5.12
316(a)(1).......................................................................5.9 and 5.10
316(a)(2).......................................................................Not required
316(a)(last sentence)....................................................................7.4
316(b)...................................................................................5.7
317(a)...................................................................................5.2
317(b)........................................................................3.4(a) and (b)
318(a)..................................................................................11.7
</TABLE>
*This Cross Reference Sheet is not part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS .........................................................................................................1
Section 1.1. Certain Terms Defined........................................................................................1
"Affiliate" ........................................................................................................2
"Authenticating Agent" .............................................................................................2
"Authorized Newspaper" .............................................................................................2
"Board of Directors" ...............................................................................................2
"Board Resolution" .................................................................................................2
"Business Day" .....................................................................................................3
"Capital Stock" ....................................................................................................3
"Commission" .......................................................................................................3
"Common Equity" ....................................................................................................3
"Company" ..........................................................................................................3
"Company Order" ....................................................................................................3
"Consolidated Tangible Assets" .....................................................................................3
"Corporate Trust Office" ...........................................................................................3
"Coupon" ...........................................................................................................4
"Covenant Defeasance" ..............................................................................................4
"Defaulted Interest" ...............................................................................................4
"Depositary" .......................................................................................................4
"Dollar" or "$" ....................................................................................................4
"ECU" ..............................................................................................................4
"Event of Default" .................................................................................................4
"Exchange Act" .....................................................................................................4
"Fair Value" .......................................................................................................4
"Foreign Currency" .................................................................................................4
"Global Subordinated Security" .....................................................................................4
"Holder," "Holder of Subordinated Securities," .....................................................................4
"Interest Payment Date," ...........................................................................................5
"IRS" ..............................................................................................................5
"Judgment Currency" ................................................................................................5
"Maturity," ........................................................................................................5
"Non-U.S. Person" ..................................................................................................5
"Officer's Certificate" ............................................................................................5
"Opinion of Counsel" ...............................................................................................5
"Original Issue Date" ..............................................................................................5
"Original Issue Discount Subordinated Security" ....................................................................5
"Outstanding" ......................................................................................................5
"Paying Agent" .....................................................................................................6
"Periodic Offering" ................................................................................................6
"Person" ...........................................................................................................6
"PORTAL Market" ....................................................................................................7
"Predecessor Subordinated Security" ................................................................................7
"principal" ........................................................................................................7
"QIB" or "Qualified Institutional Buyer" ...........................................................................7
"Regular Record Date" ..............................................................................................7
"Registered Global Subordinated Security" ..........................................................................7
"Registered Subordinated Security" .................................................................................7
"Regulation S" .....................................................................................................7
"Required Currency" ................................................................................................7
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"Responsible Officer" ..............................................................................................7
"Restricted Subordinated Security" .................................................................................8
"Rule 144" .........................................................................................................8
"Rule 144A" ........................................................................................................8
"Rule 144K" ........................................................................................................8
"Securities Act" ...................................................................................................8
"Security Register" and "Security Registrar" .......................................................................8
"Significant Subsidiary" ...........................................................................................8
"Special Record Date" ..............................................................................................8
"Stated Maturity," .................................................................................................8
"Subsidiary" .......................................................................................................8
"Subordinated Indenture" ...........................................................................................8
"Subordinated Security" or "Subordinated Securities" ...............................................................9
"Transfer Restriction Termination Date" ............................................................................9
"Trustee" ..........................................................................................................9
"Unregistered Subordinated Security" ...............................................................................9
"U.S. Government Obligations" ......................................................................................9
"Voting Stock" .....................................................................................................9
"Yield to Maturity" ................................................................................................9
ARTICLE II. SUBORDINATED SECURITIES.............................................................................................9
Section 2.1. Forms Generally........................................................................................9
Section 2.2. Form of Trustee's Certificate of Authentication.......................................................10
Section 2.3. Amount Unlimited; Issuable in Series..................................................................11
Section 2.4. Authentication and Delivery of Subordinated Securities................................................14
Section 2.4. Authentication and Delivery of Subordinated Securities................................................14
Section 2.5. Execution of Subordinated Securities..................................................................17
Section 2.6. Certificate of Authentication.........................................................................17
Section 2.7. Denomination and Date of Subordinated Securities; Payments of Interest................................18
Section 2.8. Registration, Transfer and Exchange...................................................................20
Section 2.9. Mutilated, Defaced, Destroyed, Lost and Stolen Subordinated Securities................................27
Section 2.10. Cancellation of Subordinated Securities; Destruction Thereof.........................................28
Section 2.11. Temporary Subordinated Securities....................................................................29
ARTICLE III. COVENANTS OF THE COMPANY.........................................................................................30
Section 3.1. Payment of Principal and Interest.....................................................................30
Section 3.2. Offices for Payments, Etc.............................................................................30
Section 3.3. Appointment to Fill a Vacancy in Office of Trustee....................................................32
Section 3.4. Paying Agents. 32
Section 3.5. Compliance Certificates...............................................................................33
Section 3.6. Corporate Existence...................................................................................33
Section 3.7. Maintenance of Properties.............................................................................34
Section 3.8. Payment of Taxes and Other Claims.....................................................................34
Section 3.9. Luxembourg Publications...............................................................................34
Section 3.10. Usury Laws...........................................................................................35
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ARTICLE IV. SECURITYHOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE...................................................35
Section 4.1. Company to Furnish Trustee Information as to Names and Addresses of Securityholders...................35
Section 4.2. Preservation of Information; Communications to Holders................................................35
Section 4.3. Reports by Trustee....................................................................................36
Section 4.4. Reports by Company....................................................................................36
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT....................................................37
Section 5.1. Event of Default Defined, Acceleration of Maturity; Waiver of Default.................................37
Section 5.2. Acceleration of Maturity; Rescission and Annulment....................................................39
Section 5.3. Collection of Indebtedness by Trustee; Trustee May Prove Debt.........................................41
Section 5.4. Trustee May File Proofs of Claims.....................................................................41
Section 5.5. Trustee May Enforce Claims Without Possession of Subordinated Securities..............................43
Section 5.6. Application of Proceeds...............................................................................43
Section 5.7. Suits for Enforcement.................................................................................45
Section 5.8. Limitations on Suits by Subordinated Security Holders.................................................45
Section 5.9. Unconditional Right of Securityholders to Institute Certain Suits.....................................46
Section 5.10. Restoration of Rights on Abandonment of Proceedings..................................................46
Section 5.11. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default..............................46
Section 5.12. Delay or Omission Not Waiver.........................................................................46
Section 5.13. Control by Holders of Subordinated Securities........................................................47
Section 5.14. Waiver of Past Defaults..............................................................................47
Section 5.15. Trustee to Give Notice of Default, But May Withhold in Certain Circumstances.........................48
Section 5.16. Right of Court to Require Filing of Undertaking to Pay Costs.........................................48
Section 5.17. Waiver of Stay or Extension Laws.....................................................................49
ARTICLE VI. CONCERNING THE TRUSTEE............................................................................................49
Section 6.1. Duties and Responsibilities of the Trustee; During Default; Prior to Default..........................49
Section 6.2. Certain Rights of the Trustee.........................................................................51
Section 6.3. Trustee Not Responsible for Recitals, Disposition of Subordinated Securities or
Application of Proceeds Thereof.......................................................................52
Section 6.4. Trustee and Agents May Hold Subordinated Securities or Coupons; Collections, Etc......................52
Section 6.5. Moneys Held by Trustee................................................................................53
Section 6.6. Compensation and Indemnification of Trustee and Its Prior Claim.......................................53
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Section 6.7. Right of Trustee to Rely on Officer's Certificate, Etc................................................53
Section 6.8. Subordinated Indentures Not Creating Potential Conflicting Interests for the Trustee..................54
Section 6.9. Qualification of Trustee: Conflicting Interests.......................................................54
Section 6.10. Persons Eligible for Appointment as Trustee..........................................................54
Section 6.11. Resignation and Removal; Appointment of Successor Trustee............................................54
Section 6.12. Acceptance of Appointment by Successor Trustee.......................................................56
Section 6.13. Merger, Conversion, Consolidation or Succession to Business of Trustee...............................58
Section 6.14. Preferential Collection of Claims Against the Company................................................58
Section 6.15. Appointment of Authenticating Agent..................................................................58
ARTICLE VII. CONCERNING THE SECURITYHOLDERS...................................................................................60
Section 7.1. Evidence of Action Taken by Securityholders...........................................................60
Section 7.2. Proof of Execution of Instruments and of Holding of Subordinated Securities...........................60
Section 7.3. Holders to be Treated as Owners.......................................................................60
Section 7.4. Subordinated Securities Owned by Company Deemed Not Outstanding.......................................61
Section 7.5. Right of Revocation of Action Taken...................................................................62
ARTICLE VIII. SUPPLEMENTAL SUBORDINATED INDENTURES............................................................................62
Section 8.1. Supplemental Subordinated Indentures Without Consent of Securityholders...............................62
Section 8.2. Supplemental Subordinated Indentures with Consent of Securityholders..................................64
Section 8.3. Effect of Supplemental Subordinated Indenture.........................................................66
Section 8.4. Documents to be Given to Trustee......................................................................66
Section 8.5. Notation on Subordinated Securities in Respect of Supplemental Subordinated Indentures................66
ARTICLE IX. CONSOLIDATION, MERGER, SALE OR CONVEYANCE.........................................................................67
Section 9.1. Company May Consolidate, Etc., Only on Certain Terms..................................................67
Section 9.2. Successor Corporation Substituted.....................................................................68
ARTICLE X. SATISFACTION AND DISCHARGE.........................................................................................68
Section 10.1. Satisfaction and Discharge of Subordinated Indenture.................................................68
Section 10.2. Application by Trustee of Funds Deposited for Payment of Subordinated Securities.....................73
Section 10.3. Repayment of Moneys Held by Paying Agent.............................................................73
Section 10.4. Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years............................73
Section 10.5. Indemnity for U.S. Government of Obligations.........................................................74
ARTICLE XI. MISCELLANEOUS PROVISIONS..........................................................................................74
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Section 11.1. Incorporators, Stockholders, Officers and Directors of Company Exempt from Individual Liability......74
Section 11.2. Provisions of Subordinated Indenture for the Sole Benefit of Parties and Holders of
Subordinated Securities and Coupons................................................................74
Section 11.3. Successors and Assigns of Company Bound by Subordinated Indenture....................................75
Section 11.4. Notices and Demands on Company, Trustee and Holders of Subordinated Securities and Coupons...........75
Section 11.5. Officer's Certificates and Opinions of Counsel; Statements to be Contained Therein...................76
Section 11.6. Payments Due on Saturdays, Sundays and Holidays......................................................77
Section 11.7. Conflict of Any Provision of Subordinated Indenture with Trust Indenture Act.........................77
Section 11.8. New York Law to Govern...............................................................................77
Section 11.9. Counterparts.........................................................................................77
Section 11.10. Effect of Headings..................................................................................77
Section 11.11. Subordinated Securities in a Foreign Currency or in ECU.............................................78
Section 11.12. Judgment Currency...................................................................................78
ARTICLE XII. REDEMPTION OF SUBORDINATED SECURITIES AND SINKING FUNDS..........................................................79
Section 12.1. Applicability of Article.............................................................................79
Section 12.2. Notice of Redemption; Partial Redemptions............................................................79
Section 12.3. Payment of Subordinated Securities Called for Redemption.............................................81
Section 12.4. Exclusion of Certain Subordinated Securities from Eligibility for Selection for Redemption...........82
Section 12.5. Mandatory and Optional Sinking Funds.................................................................83
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THIS SUBORDINATED INDENTURE, dated as of May 1, 1998, by and between
QuadraMed Corporation, a Delaware corporation (the "Company"), and The Bank of
New York, a New York banking corporation, as trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the issuance, sale,
execution and delivery, from time to time, of its unsecured evidences of
subordinated indebtedness (hereinafter referred to as the "Subordinated
Securities"), without limit as to principal amount, issuable in one or more
series, the amount and terms of each such series to be determined as hereinafter
provided; and, to provide the terms and conditions upon which the Subordinated
Securities are to be issued, authenticated and delivered, the Company has duly
authorized the execution of this Subordinated Indenture; and
WHEREAS, all acts and things necessary to make the Subordinated
Securities, when executed by the Company and authenticated and delivered by the
Trustee as in this Subordinated Indenture provided, the valid, binding and legal
subordinated obligations of the Company, and to constitute this Subordinated
Indenture a valid indenture and agreement according to its terms, have been done
and performed, and the execution of this Subordinated Indenture and the issuance
hereunder of the Subordinated Securities have in all respects been duly
authorized; and
WHEREAS, all things necessary to make this Subordinated Indenture a
valid indenture and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the
Subordinated Securities by the holders thereof, the Company and the Trustee
mutually covenant and agree for the equal and proportionate benefit of the
respective holders from time to time of the Subordinated Securities and of the
coupons, if any, appertaining thereto as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Certain Terms Defined.
The following terms (except as otherwise expressly provided or
unless the context otherwise clearly requires) for all purposes of this
Subordinated Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section. All other terms used in this
Subordinated Indenture that are defined in the Trust Indenture Act of 1939, as
<PAGE> 9
amended (the "Trust Indenture Act"), or the definitions of which in the
Securities Act of 1933, as amended (the "Securities Act"), are referred to in
the Trust Indenture Act, including terms defined therein by reference to the
Securities Act (except as herein otherwise expressly provided or unless the
context otherwise requires), shall have the meaning assigned to such terms in
the Trust Indenture Act and in the Securities Act as in effect from time to
time. All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation
unless a different time shall be specified with respect to such series of
Subordinated Securities as provided for in Section 2.3. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Subordinated Indenture as a whole and not to any particular Article, Section or
other subdivision. The terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act or any successor provision.
"Authenticating Agent" shall have the meaning set forth in Section
6.15.
"Authorized Newspaper" means a newspaper (which, in the case of The
City of New York, will, if practicable, be The Wall Street Journal (Eastern
Edition), in the case of the United Kingdom of Great Britain and Northern
Ireland (the "United Kingdom"), will, if practicable, be The Financial Times
(London Edition) and, in the case of the Grand Duchy of Luxembourg
("Luxembourg"), will, if practicable, be the Luxemburger Wort) published in an
official or common language of the county of publication customarily published
at least once a day for at least five days in each calendar week and of general
circulation in The City of New York, the United Kingdom or Luxembourg, as
applicable. If it shall be impractical in the opinion of the Trustee to make any
publication of any notice required hereby in an Authorized Newspaper, any
publication or other notice in lieu thereof which is made or given with the
approval of the Trustee shall constitute a sufficient publication of such
notice.
"Board of Directors" means either the Board of Directors of the
Company or any committee of such Board duly authorized to act on its behalf.
"Board Resolution" means a copy of one or more resolutions,
certified by the secretary or an assistant secretary of the Company to have been
duly adopted or consented to by the Board of Directors and to be in full force
and effect, and delivered to the Trustee.
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"Business Day" means, with respect to any Subordinated Security, a
day other than any day on which banking institutions in the city (or in any of
the cities, if more than one) in which amounts are payable, as specified in the
form of such Subordinated Security, are authorized or required by any applicable
law or regulation to be closed.
"Capital Stock" of any Person means any and all shares, rights to
purchase, warrants or options (whether or not currently exercisable);
participation or other equivalents of or interest in (however designated) the
equity (including without limitation common stock, preferred stock and
partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution and delivery of this Subordinated Indenture such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties on such date.
"Common Equity" of any Person means all Capital Stock of such Person
that is generally entitled to (a) vote in the election of directors of such
Person or (b) if such Person is not a corporation, vote or otherwise participate
in the selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Subordinated Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Order" means a written statement, request or order of the
Company signed in its name by the chairman of the Board of Directors, the
president, any vice president or the treasurer of the Company.
"Consolidated Tangible Assets" of any Person as of any date means
the total assets of such Person and its Subsidiaries (excluding any assets that
would be classified as "intangible assets" under generally accepted accounting
principles ("GAAP")) on a consolidated basis at such date, as determined in
accordance with GAAP, less all write-ups subsequent to the date of initial
issuance of the Securities in the book value of any asset owned by such Person
or any of its Subsidiaries.
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, as of the date of this Subordinated
Indenture, located
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<PAGE> 11
at 101 Barclay Street, Floor 21W, New York, New York 10286, Attention: Corporate
Trust Administration.
"Coupon" means any interest coupon appertaining to an Unregistered
Subordinated Security.
"Covenant Defeasance" shall have the meaning set forth in Section
10.1(C).
"Defaulted Interest" has the meaning specified in Section 2.7.
"Depositary" means, with respect to the Subordinated Securities of
any series issuable or issued in the form of one or more Registered Global
Subordinated Securities, the Person designated as Depositary by the Company
pursuant to Section 2.3 until a successor Depositary shall have become such
pursuant to the applicable provisions of this Subordinated Indenture, and
thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such Person,
"Depositary" as used with respect to the Subordinated Securities of any such
series shall mean the Depositary with respect to the Registered Global
Subordinated Securities of that series.
"Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
"ECU" means the European Currency Unit as defined and revised from
time to time by the European Monetary System of the European Community.
"Event of Default" means any event or condition specified as such in
Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Value" when used with respect to any Voting Stock means the
fair value as determined in good faith by the Board of Directors of the Company.
"Foreign Currency" means a currency issued by the government of a
country other than the United States of America.
"Global Subordinated Security" has the meaning set forth in Section
2.8(b)(i).
"Holder," "Holder of Subordinated Securities," "Securityholder" or
other similar terms mean (a) in the case of any Registered Subordinated
Security, the person in whose name such Subordinated Security is registered in
the Security Register kept by the Company for that purpose in accordance with
the terms
-4-
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hereof, and (b) in the case of any Unregistered Subordinated Security, the
bearer of such Subordinated Security, or any Coupon appertaining thereto, as the
case may be.
"Interest Payment Date," means the Stated Maturity of an installment
of interest on such Subordinated Security.
"IRS" means the Internal Revenue Service of the United States
Department of the Treasury, or any successor entity.
"Judgment Currency" has the meaning set forth in Section 11.12.
"Maturity," when used with respect to any Subordinated Security,
means the date on which the principal of such Subordinated Security becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Non-U.S. Person" means any person that is not a "U.S. person" as
such term is defined in Rule 902 of the Securities Act.
"Officer's Certificate" means a certificate signed by the chairman
of the Board of Directors, the president or any vice president or the treasurer
of the Company and delivered to the Trustee. Each such certificate shall comply
with Section 314 of the Trust Indenture Act and include the statements provided
for in Section 11.5.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel who may be an employee of the Company or other counsel. Each such
opinion shall comply with Section 314 of the Trust Indenture Act and include the
statements provided for in Section 11.5.
"Original Issue Date" of any Subordinated Security (or portion
thereof) means the earlier of (a) the date of such Subordinated Security or (b)
the date of any Subordinated Security (or portion thereof) for which such
Subordinated Security was issued (directly or indirectly) on registration of
transfer, exchange or substitution.
"Original Issue Discount Subordinated Security" means any
Subordinated Security that provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2.
"Outstanding" (except as otherwise provided in Section 7.4), when
used with reference to Subordinated Securities, means, subject to the provisions
of Section 7.4, as of any particular time, all Subordinated Securities
authenticated and delivered by the Trustee under this Subordinated Indenture,
except
-5-
<PAGE> 13
(a) Subordinated Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Subordinated Securities, or portions thereof, for the payment
or redemption of which moneys or U.S. Government Obligations (as provided
for in Section 10.1) 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, segregated and held in trust by the Company
for the Holders of such Subordinated Securities (if the Company shall act
as its own Paying Agent), provided, that if such Subordinated Securities,
or portions thereof, are to be redeemed prior to the Maturity thereof,
notice of such redemption shall have been given as herein provided, or
provisions satisfactory to the Trustee shall have been made for giving
such notice; and
(c) Subordinated Securities which shall have been paid or in
substitution for which other Subordinated Securities shall have been
authenticated and delivered pursuant to the terms of Section 2.9 (except
with respect to any such Subordinated Security as to which proof
satisfactory to the Trustee is presented that such Subordinated Security
is held by a person in whose hands such Subordinated Security is a legal,
valid and binding obligation of the Company).
In determining whether the Holders of the requisite principal amount
of Outstanding Subordinated Securities of any or all series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
the principal amount of an Original Issue Discount Subordinated Security that
shall be deemed to be Outstanding for such purposes shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Periodic Offering" means an offering of Subordinated Securities of
a series from time to time, the specific terms of which Subordinated Securities,
including, without limitation, the rate or rates of interest, if any, thereon,
the Stated Maturity or Maturities thereof and the redemption provisions, if any,
with respect thereto, are to be determined by the Company or its agents upon the
issuance of such Subordinated Securities.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
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"PORTAL Market" means Private Offerings, Resales and Trading through
Automatic Linkages Market.
"Predecessor Subordinated Security" of any particular Subordinated
Security means every previous Subordinated Security evidencing all or a portion
of the same debt as that evidenced by such particular Subordinated Security;
and, for the purposes of this definition, any Subordinated Security
authenticated and delivered under Section 2.4 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Subordinated Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Subordinated
Security.
"principal" whenever used with reference to the Subordinated
Securities or any Subordinated Security or any portion thereof, shall be deemed
to include "and premium, if any," provided, however, that such inclusion of
premium, if any, shall under no circumstances result in the double counting of
such premium for the purpose of any calculation required hereunder.
"QIB" or "Qualified Institutional Buyer" means "Qualified
Institutional Buyer" as such term is defined in Rule 144A under the Securities
Act.
"Regular Record Date" for the interest payable on any Interest
Payment Date on the securities of any series means the date specified for that
purpose as contemplated in Section 2.3.
"Registered Global Subordinated Security" means a Subordinated
Security evidencing all or a part of a series of Registered Subordinated
Securities, issued to the Depositary for such series in accordance with Section
2.4, and bearing the legend prescribed in Section 2.4 and any other legend
required by the Depositary for such series.
"Registered Subordinated Security" means any Subordinated Security
registered on the Subordinated Security Register of the Company.
"Regulation S" means Regulation S under the Securities Act, or any
successor provision.
"Required Currency" shall have the meaning set forth in Section
11.12.
"Responsible Officer" when used with respect to the Trustee means
the president, any vice president (whether or not designated by numbers or words
added before or after the title "Vice President"), the cashier, the secretary,
the treasurer, any trust officer, any assistant trust officer, any assistant
vice president, any assistant cashier, any assistant secretary, any assistant
treasurer, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those
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<PAGE> 15
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Subordinated Security" has the meaning set forth in
Section 2.8(b).
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144K" means Rule 144(k) under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 2.9.
"Significant Subsidiary" means a Subsidiary of the Company which at
the time of determination either (i) had tangible assets which, as of the
Company's most recent quarterly consolidated balance sheet, constituted at least
5% of Consolidated Tangible Assets as of such date, or (ii) had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 5% of the Company's
total consolidated revenues for such period.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.7.
"Stated Maturity," when used with respect to any Subordinated
Security or any installment of interest thereon, means the date specified in
such Subordinated Security as the fixed date on which the principal of such
Subordinated Security or such installment of interest is due and payable.
"Subsidiary" of any Person means (a) any corporation of which Common
Equity having ordinary voting power to elect a majority of the directors of such
corporation is owned by such Person directly or through one or more other
subsidiaries of such Person and (b) any entity other than a corporation in which
such Person, directly or indirectly, owns at least 50% of the Common Equity of
such entity and has the authority to manage such entity on a day-to-day basis.
"Subordinated Indenture" means this instrument as originally
executed and delivered or, if amended or supplemented as herein provided, as so
amended or supplemented or both, and shall include the forms and terms of
particular series of Subordinated Securities established as contemplated
hereunder.
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"Subordinated Security" or "Subordinated Securities" (except as
otherwise provided in Section 7.4) has the meaning stated in the first recital
of this Subordinated Indenture, or, as the case may be, Subordinated Securities
that have been authenticated and delivered under this Subordinated Indenture.
"Transfer Restriction Termination Date" means the earlier of the
first date on which (i) the Subordinated Securities of a series (other than such
Subordinated Securities acquired by the Company or any Affiliate thereof since
the issue date of such Subordinated Securities) may be sold pursuant to Rule
144K (or any successor provision) and (ii) all such Subordinated Securities have
been exchanged or sold pursuant to an effective registration statement.
"Trustee" means the Person identified as "Trustee" in the first
paragraph hereof and, subject to the provisions of Article VI, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder and if at any time there is more than one such
Person, "Trustee" as used with respect to the Subordinated Securities of any
series shall mean the trustee with respect to the Subordinated Securities of
such series.
"Unregistered Subordinated Security" means any Subordinated Security
other than a Registered Subordinated Security.
"U.S. Government Obligations" shall have the meaning set forth in
Section 10.1(A).
"Voting Stock" means stock of any class or classes having general
voting power under ordinary circumstances to elect a majority of the board of
directors, managers or trustees of the corporation in question, provided, that,
for the purposes hereof, stock which carries only the right to vote
conditionally on the happening of an event shall not be considered voting stock
whether or not such event shall have happened.
"Yield to Maturity" means the yield to maturity on a series of
securities, calculated at the time of issuance of such series, or, if
applicable, at the most recent redetermination of interest on such series, and
calculated in accordance with accepted financial practice.
ARTICLE II.
SUBORDINATED SECURITIES
Section 2.1. Forms Generally.
The Subordinated Securities of each series and the Coupons, if any,
to be attached thereto shall be substantially in such form (not inconsistent
with this Subordinated Indenture) as
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shall be established by or pursuant to one or more Board Resolutions (as set
forth in a Board Resolution or, to the extent established pursuant to but not
set forth in a Board Resolution, an Officer's Certificate detailing such
establishment) or in one or more indentures supplemental hereto, in each case
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Subordinated Indenture and may have
imprinted or otherwise reproduced thereon such legend or legends or
endorsements, not inconsistent with the provisions of this Subordinated
Indenture, as may be required to comply with any law or with any rules or
regulations pursuant thereto, or with any rules of any securities exchange or to
conform to general usage, all as may be determined by the officers executing
such Subordinated Securities and Coupons, if any, as evidenced by their
execution of such Subordinated Securities and Coupons.
The definitive Subordinated Securities and Coupons, if any, shall be
printed, lithographed or engraved on steel engraved borders or may be produced
in any other manner, all as determined by the officers executing such
Subordinated Securities and Coupons, if any, as evidenced by their execution of
such Subordinated Securities and Coupons, if any.
Section 2.2. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication on all Subordinated
Securities shall be in substantially the following form:
"This is one of the Subordinated Securities referred to in the
within-mentioned Subordinated Indenture.
The Bank of New York
as Trustee
Dated: _______________
By: _____________________________
Authorized Signatory"
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Subordinated Securities, then the Trustee's Certificate
of Authentication to be borne by the Subordinated Securities of each such series
shall be substantially as follows:
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"This is one of the Subordinated Securities referred to in the
within-mentioned Subordinated Indenture.
The Bank of New York
as Trustee
By: ___________________________
as Authenticating Agent
By: ___________________________
Authorized Signatory"
Section 2.3. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Subordinated Securities which may
be authenticated and delivered under this Subordinated Indenture is unlimited.
The Subordinated Securities may be issued in one or more series and
each such series shall be established in or pursuant to one or more Board
Resolutions (and to the extent established pursuant to but not set forth in a
Board Resolution, in an Officer's Certificate detailing such establishment) or
established in one or more indentures supplemental hereto, prior to the initial
issuance of Subordinated Securities of any series,
(1) the designation of the Subordinated Securities of the series,
which shall distinguish the Subordinated Securities of the series from the
Subordinated Securities of all other series, and which may be part of a
series of Subordinated Securities previously issued;
(2) any limit upon the aggregate principal amount of the
Subordinated Securities of the series that may be authenticated and
delivered under this Subordinated Indenture (except for Subordinated
Securities authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Subordinated Securities of the
series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3);
(3) if other than Dollars, the coin or currency in which the
Subordinated Securities of the series are denominated (including, but not
limited to, any Foreign Currency or ECU);
(4) the date or dates on which the principal of the Subordinated
Securities of the series is payable;
(5) the rate or rates at which the Subordinated Securities of the
series shall bear interest, if any, the date or dates from which such
interest shall accrue, on which such interest shall be payable and (in the
case of
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Registered Subordinated Securities) on which a record shall be taken for
the determination of Holders to whom interest is payable and/or the method
by which such rate or rates or date or dates shall be determined;
(6) the place or places where the principal of and any interest on
Subordinated Securities of the series shall be payable, if other than as
provided in Section 3.2;
(7) the right, if any, of the Company to redeem Subordinated
Securities, in whole or in part, at its option and the period or periods
within which, the price or prices at which and any terms and conditions
upon which Subordinated Securities of the series may be so redeemed,
pursuant to any sinking fund or otherwise;
(8) the obligation, if any, of the Company to redeem, purchase or
repay Subordinated Securities of the series pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option of a
Holder thereof and the price or prices at which and the period or periods
within which and any terms and conditions upon which Subordinated
Securities of the series shall be redeemed, purchased or repaid, in whole
or in part, pursuant to such obligation; (9) if other than denominations
of $1,000 and any integral multiple thereof in the case of Registered
Subordinated Securities, or $1,000 and $5,000 in the case of Unregistered
Subordinated Securities, the denominations in which Subordinated
Securities of the series shall be issuable;
(10) if other than the principal amount thereof, the portion of the
principal amount of Subordinated Securities of the series which shall be
payable upon declaration of acceleration of the Maturity thereof;
(11) if other than the coin or currency in which the Subordinated
Securities of the series are denominated, the coin or currency in which
payment of the principal of or interest on the Subordinated Securities of
such series shall be payable;
(12) if the principal of or interest on the Subordinated Securities
of the series are to be payable, at the election of the Company or a
Holder thereof, in a coin or currency other than that in which the
Subordinated Securities are denominated, the period or periods within
which, and the terms and conditions upon which, such election may be made;
(13) if the amount of payments of principal of and interest on the
Subordinated Securities of the series may be
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determined with reference to an index based on a coin or currency other
than that in which the Subordinated Securities of the series are
denominated, the manner in which such amounts shall be determined;
(14) whether the Subordinated Securities of the series will be
issuable as Registered Subordinated Securities (and if so, whether such
Subordinated Securities will be issuable as Registered Global Subordinated
Securities) or Unregistered Subordinated Securities (with or without
Coupons), or any combination of the foregoing, any restrictions applicable
to the offer, sale or delivery of Unregistered Subordinated Securities or
the payment of interest thereon and, if other than as provided in Section
2.8, the terms upon which Unregistered Subordinated Securities of any
series may be exchanged for Registered Subordinated Securities of such
series and vice versa;
(15) whether and under what circumstances the Company will pay
additional amounts on the Subordinated Securities of the series held by a
person who is not a U.S. person in respect of any tax, assessment or
governmental charge withheld or deducted and, if so, whether the Company
will have the option to redeem the Subordinated Securities of the series
rather than pay such additional amounts;
(16) if the Subordinated Securities of the series are to be
issuable in definitive form (whether upon original issue or upon exchange
of a temporary Subordinated Security of such series) only upon receipt of
certain certificates or other documents or satisfaction of other
conditions, the form and terms of such certificates, documents or
conditions;
(17) any trustees, depositaries, authenticating or paying agents,
transfer agents or registrars of any other agents with respect to the
Subordinated Securities of such series;
(18) any other events of default or covenants with respect to the
Subordinated Securities of such series;
(19) the terms of subordination applicable to any series of the
Subordinated Securities;
(20) if the Subordinated Securities of the series are to be
convertible into or exchangeable for any other security; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Subordinated Indenture).
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All Subordinated Securities of any one series and Coupons, if any,
appertaining thereto shall be substantially identical, except in the case of
Registered Subordinated Securities as to denomination and except as may
otherwise be provided by or pursuant to the Board Resolution or Officer's
Certificate referred to above or as set forth in any indenture supplemental
hereto. All Subordinated Securities of any one series need not be issued at the
same time and may be issued from time to time, consistent with the terms of this
Subordinated Indenture, if so provided by or pursuant to such Board Resolution,
such Officer's Certificate or in any indenture supplemental hereto.
Section 2.4. Authentication and Delivery of Subordinated Securities.
The Company may deliver Subordinated Securities of any series having
attached thereto appropriate Coupons, if any, executed by the Company to the
Trustee for authentication together with the applicable documents referred to
below in this Section 2.4, and the Trustee shall thereupon authenticate and
deliver such Subordinated Securities and Coupons, if any, to or upon the order
of the Company (contained in the Company Order referred to below in this
Section) or pursuant to such procedures acceptable to the Trustee and to such
recipients as may be specified from time to time by a Company Order. The
maturity date, original issue date, interest rate and any other terms of the
Subordinated Securities of such series and Coupons, if any, appertaining thereto
shall be determined by or pursuant to such Company Order and procedures. If
provided for in such procedures, such Company Order may authorize authentication
and delivery pursuant to oral or electronic instructions from the Company or its
duly authorized agent or agents, which instructions, if oral, shall be promptly
confirmed in writing. In authenticating such Subordinated Securities and
accepting the additional responsibilities under this Subordinated Indenture in
relation to such Subordinated Securities, the Trustee shall be entitled to
receive (in the case of subparagraphs (2), (3) and (4) below only at or before
the time of the first request of the Company to the Trustee to authenticate
Subordinated Securities of such series) and (subject to Section 6.1) shall be
fully protected in relying upon, the following enumerated documents unless and
until such documents have been superseded or revoked:
(1) a Company Order requesting such authentication and setting
forth delivery instructions if the Subordinated Securities and Coupons, if
any, are not to be delivered to the Company, provided that, with respect
to Subordinated Securities of a series subject to a Periodic Offering, (a)
such Company Order may be delivered by the Company to the Trustee prior to
the delivery to the Trustee of such Subordinated Securities for
authentication and delivery, (b) the Trustee shall authenticate and
deliver Subordinated Securities of such series for original issue from
time to
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time, in an aggregate principal amount not exceeding the aggregate
principal amount established for such series, pursuant to a Company Order
or pursuant to procedures acceptable to the Trustee as may be specified
from time to time by a Company Order, (c) the maturity date or dates,
original issue date or dates, interest rate or rates and any other terms
of Subordinated Securities of such series shall be determined by a Company
Order or pursuant to such procedures and (d) if provided for in such
procedures, such Company Order may authorize authentication and delivery
pursuant to oral or electronic instructions from the Company or its duly
authorized agent or agents, which instructions, if oral, shall be promptly
confirmed in writing;
(2) any Board Resolution, Officer's Certificate and/or executed
supplemental indenture referred to in Section 2.1 and 2.3 by or pursuant
to which the forms and terms of the Subordinated Securities and Coupons,
if any, were established;
(3) an Officer's Certificate setting forth the form or forms and
terms of the Subordinated Securities and Coupons, if any, stating that the
form or forms and terms of the Subordinated Securities and Coupons, if
any, have been established pursuant to Sections 2.1 and 2.3 and comply
with this Subordinated Indenture, and covering such other matters as the
Trustee may reasonably request; and
(4) Either one or more Opinions of Counsel, or a letter addressed
to the Trustee permitting it to rely on one or more Opinions of Counsel,
substantially to the effect that:
(a) the form or forms of the Subordinated Securities and Coupons,
if any, have been duly authorized and established in conformity with the
provisions of this Subordinated Indenture;
(b) in the case of an underwritten offering, the terms of the
Subordinated Securities have been duly authorized and established in
conformity with the provisions of this Subordinated Indenture, and, in the
case of an offering that is not underwritten, certain terms of the
Subordinated Securities have been established pursuant to a Board
Resolution, an Officer's Certificate or a supplemental indenture in
accordance with this Subordinated Indenture, and when such other terms as
are to be established pursuant to procedures set forth in a Company Order
shall have been established, all such terms will have been duly authorized
by the Company and will have been established in conformity with the
provisions of this Subordinated Indenture; and
(c) such Subordinated Securities and Coupons, if any, when
executed by the Company and authenticated by the
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Trustee in accordance with the provisions of this Subordinated Indenture
and delivered to and duly paid for by the purchasers thereof, and subject
to any conditions specified in such Opinion of Counsel, will have been
duly issued under this Subordinated Indenture, will be entitled to the
benefits of this Subordinated Indenture, and will be valid and binding
obligations of the Company, enforceable in accordance with their
respective terms except as the enforceability thereof may be limited by
(i) bankruptcy, insolvency or similar laws affecting creditors' rights
generally, (ii) rights of acceleration, if any, and (iii) the availability
of equitable remedies may be limited by equitable principles of general
applicability and such counsel need express no opinion with regard to the
enforceability of Section 6.6 or of a judgment denominated in a currency
other than Dollars.
In rendering such opinions, any counsel may qualify any opinions as
to enforceability by stating that such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium, fraudulent
transfer and other similar laws affecting the rights and remedies of creditors
and is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Such counsel
may rely upon opinions of other counsel (copies of which shall be delivered to
the Trustee), in which case the opinion shall state that such counsel believes
he and the Trustee are entitled so to rely. Such counsel may also state that,
insofar as such opinion involves factual matters, he has relied, to the extent
he deems proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
The Trustee shall have the right to decline to authenticate and
deliver any Subordinated Securities under this Section if the Trustee, being
advised by counsel, determines that such action may not lawfully be taken by the
Company or if the Trustee in good faith by one or more Responsible Officers
shall determine that such action would expose the Trustee to personal liability
to existing Holders or would affect the Trustee's own rights, duties or
immunities under the Subordinated Securities, this Subordinated Indenture or
otherwise.
If the Company shall establish pursuant to Section 2.3 that the
Subordinated Securities of a series are to be issued in the form of one or more
Registered Global Subordinated Securities, then the Company shall execute and
the Trustee shall, in accordance with this Section and the Company Order with
respect to such series, authenticate and deliver one or more Registered Global
Subordinated Securities that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of all of the Subordinated
Securities of such series issued and not yet canceled, (ii) shall be registered
in the name of the Depositary for such Registered
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Global Subordinated Security or Subordinated Securities or the nominee of such
Depositary, (iii) shall be delivered by the Trustee to such Depositary or
delivered or held pursuant to such Depositary's instructions and (iv) shall bear
a legend substantially to the following effect: "Unless and until it is
exchanged in whole or in part for Subordinated Securities in definitive
registered form, this Subordinated Security may not be transferred except as a
whole by the Depositary to the nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary."
Each Depositary designated pursuant to Section 2.3 must, at the time
of its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Exchange Act and any other applicable statute or
regulation.
Section 2.5. Execution of Subordinated Securities.
The Subordinated Securities and each Coupon appertaining thereto, if
any, shall be signed on behalf of the Company by the chairman or vice chairman
of its Board of Directors or its president, or any executive (senior or other),
a vice president or its treasurer. Such signatures may be the manual or
facsimile signatures of the present or any future such officers. Typographical
and other minor errors or defects in any such reproduction of the seal or any
such signature shall not affect the validity or enforceability of any
Subordinated Security that has been duly authenticated and delivered by the
Trustee.
In case any officer of the Company who shall have signed any of the
Subordinated Securities or Coupons, if any, shall cease to be such officer
before the Subordinated Security or Coupon so signed (or the Subordinated
Security to which the Coupon so signed appertains) shall be authenticated and
delivered by the Trustee or disposed of by the Company, such Subordinated
Security or Coupon nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Subordinated Security or Coupon had not
ceased to be such officer of the Company; and any Subordinated Security or
Coupon may be signed on behalf of the Company by such persons as, at the actual
date of the execution of such Subordinated Security or Coupon, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Subordinated Indenture any such person was not such an officer.
Section 2.6. Certificate of Authentication.
Only such Subordinated Securities as shall bear thereon a
certificate of authentication substantially in the form hereinbefore recited,
executed by the Trustee by the manual signature of one of its authorized
officers, shall be entitled to
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the benefits of this Subordinated Indenture or be valid or obligatory for any
purpose. No Coupon shall be entitled to the benefits of this Subordinated
Indenture or shall be valid and obligatory for any purpose until the certificate
of authentication on the Subordinated Security to which such Coupon appertains
shall have been duly executed by the Trustee. The execution of such certificate
by the Trustee upon any Subordinated Security executed by the Company shall be
conclusive evidence that the Subordinated Security so authenticated has been
duly authenticated and delivered hereunder and that the Holder is entitled to
the benefits of this Subordinated Indenture.
Section 2.7. Denomination and Date of Subordinated Securities; Payments of
Interest.
The Subordinated Securities of each series shall be issuable as
Registered Subordinated Securities or Unregistered Subordinated Securities in
denominations established as contemplated by Section 2.3 or, with respect to the
Registered Subordinated Securities of any series, if not so established, in
denominations of $1,000 and any integral multiple thereof. If denominations of
Unregistered Subordinated Securities of any series are not so established, such
Subordinated Securities shall be issuable in denominations of $1,000 and $5,000.
The Subordinated Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
officers of the Company executing the same may determine with the approval of
the Trustee, as evidenced by the execution and authentication thereof.
Each Registered Subordinated Security shall be dated the date of its
authentication. Each Unregistered Subordinated Security shall be dated as
provided in the Board Resolution referred to in Section 2.3. The Subordinated
Securities of each series shall bear interest, if any, from the date, and such
interest shall be payable on the dates, established as contemplated by Section
2.3.
Interest on any Subordinated Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Subordinated Security (or one or more
Predecessor Subordinated Securities) is registered at the close of business on
the Regular Record Date for such interest. At the option of the Company,
interest on any Subordinated Security may be paid by mailing a check to the
address of the Holder thereof as such address appears in the Subordinated
Securities Register.
Any interest on any Subordinated Security which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
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such Defaulted Interest may 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 Subordinated Securities (or
their respective Predecessor Subordinated Securities) 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 proposed to be paid on each Subordinated Security and the date of
the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed 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 15
days and not less than 10 days prior to the date of the proposed payment
and not less than 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 Holder at his address as it appears in the
Subordinated Security Register, not less than 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
Subordinated Securities (or their respective Predecessor Subordinated
Securities) are 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 on which the Subordinated Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the
Trustee.
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Subject to the foregoing provisions of this Section, each
Subordinated Security delivered under this Subordinated Indenture upon
registration of transfer of or in exchange for or in lieu of any other
Subordinated Security shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Subordinated Security.
In the case of any Subordinated Security which is converted during
the period after any Regular Record Date and on or prior to the next succeeding
Interest Payment Date (other than any Subordinated Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name that
Subordinated Security (or one or more Predecessor Subordinated Securities) is
registered at the close of business on such Regular Record Date; provided,
however, that Subordinated Securities so registered for conversion shall (except
in the case of Subordinated Securities or portions thereof which have been
called for redemption on a Redemption Date within such period) be accompanied by
payment in New York Clearing House Funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment Date
on the principal amount being surrendered for conversion. Except as otherwise
expressly provided in the immediately preceding sentence, in the case of any
Subordinated Security which is converted, interest whose Stated Maturity is
after the date of conversion of such Subordinated Security shall not be payable.
Section 2.8. Registration, Transfer and Exchange.
(a) The Company will keep at each office or agency to be
maintained for the purpose as provided in Section 3.2 for each series of
Subordinated Securities a register or registers (the register maintained in such
office and in any other office or agency of the Company designated pursuant to
Section 3.2 being herein sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations as the Company may
prescribe, it will provide for the registration of Registered Subordinated
Securities of such series and the registration of transfer of Registered
Subordinated Securities of such series. Such Security Register shall be in
written form in the English language or in any other form capable of being
converted into such form within a reasonable time. At all reasonable times such
Security Register or registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any Registered
Subordinated Security of any series at any such office or agency to be
maintained for the purpose as provided in Section 3.2, the Company shall execute
and the Trustee shall authenticate and deliver in the name of the transferee or
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transferees a new Registered Subordinated Security or Registered Subordinated
Securities of the same series, maturity date, interest rate and original issue
date in authorized denominations for a like aggregate principal amount.
Unregistered Subordinated Securities (except for any temporary
global Unregistered Subordinated Securities) and Coupons (except for Coupons
attached to any temporary global Unregistered Subordinated Securities) shall be
transferable by delivery.
At the option of the Holder thereof, Registered Subordinated
Securities of any series (other than a Registered Global Subordinated Security,
except as set forth below) may be exchanged for a Registered Subordinated
Security or Registered Subordinated Securities of such series having authorized
denominations and an equal aggregate principal amount, upon surrender of such
Registered Subordinated Securities to be exchanged at the agency of the Company
that shall be maintained for such purpose in accordance with Section 3.2 and
upon payment, if the Company shall so require, of the charges hereinafter
provided. If the Subordinated Securities of any series are issued in both
registered and unregistered form, at the option of the Holder thereof, except as
otherwise specified pursuant to Section 2.3, Unregistered Subordinated
Securities of any series may be exchanged for Registered Subordinated Securities
of such series having authorized denominations and an equal aggregate principal
amount, upon surrender of such Unregistered Subordinated Securities to be
exchanged at the agency of the Company that shall be maintained for such purpose
in accordance with Section 3.2, with, in the case of Unregistered Subordinated
Securities that have Coupons attached, all unmatured Coupons and all matured
Coupons in default thereto appertaining, and upon payment, if the Company shall
so require, of the charges hereinafter provided. At the option of the Holder
thereof, if Unregistered Subordinated Securities of any series, maturity date,
interest rate and original issue date are issued in more than one authorized
denomination, except as otherwise specified pursuant to Section 2.3, such
Unregistered Subordinated Securities may be exchanged for Unregistered
Subordinated Securities of such series having authorized denominations and an
equal aggregate principal amount, upon surrender of such Unregistered
Subordinated Securities to be exchanged at the agency of the Company that shall
be maintained for such purpose in accordance with Section 3.2 or as specified
pursuant to Section 2.3, with, in the case of Unregistered Subordinated
Securities that have Coupons attached, all unmatured Coupons and all matured
Coupons in default thereto appertaining, and upon payment, if the Company shall
so require, of the charges hereinafter provided. Registered Subordinated
Securities of any series may not be exchanged for Unregistered Subordinated
Securities of such series unless (1) otherwise specified pursuant to Section 2.3
and (2) the Company has delivered to the Trustee an Opinion of Counsel that (x)
the Company has received from the
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IRS a ruling or (y) since the date hereof, there has been a change in the
applicable Federal income tax law, in either case to the effect that the
inclusion of terms permitting Registered Subordinated Securities to be exchanged
for Unregistered Subordinated Securities would result in no Federal income tax
effect adverse to the Company or to any Holder. Whenever any Subordinated
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Subordinated Securities which the
Holder making the exchange is entitled to receive. All Subordinated Securities
and Coupons, if any, surrendered upon any exchange or transfer provided for in
this Subordinated Indenture shall be promptly canceled and, upon the Company's
written request, returned to the Company.
All Registered Subordinated Securities presented for registration of
transfer, exchange, redemption or payment shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee duly
executed, by the Holder or his attorney duly authorized in writing.
The Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any exchange
or registration of transfer of Subordinated Securities. No service charge shall
be made for any such transaction.
The Company shall not be required to exchange or register a transfer
of (a) any Subordinated Securities of any series for a period of 15 days
preceding the first mailing of notice of redemption of Subordinated Securities
of such series to be redeemed or (b) any Subordinated Securities selected,
called or being called for redemption, in whole or in part, except, in the case
of any Subordinated Security to be redeemed in part, the portion thereof not so
to be redeemed.
Notwithstanding any other provision of this Section 2.8, unless and
until it is exchanged in whole or in part for Subordinated Securities in
definitive registered form, a Registered Global Subordinated Security
representing all or a portion of the Subordinated Securities of a series may not
be transferred except as a whole by the Depositary for such series to a nominee
of such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by such Depositary or any such nominee to
a successor Depositary for such series or a nominee of such successor
Depositary.
If at any time the Depositary for any Registered Subordinated
Securities of a series represented by one or more Registered Global Subordinated
Securities notifies the Company that it is unwilling or unable to continue as
Depositary for such
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Registered Subordinated Securities or if at any time the Depositary for such
Registered Subordinated Securities shall no longer be eligible under Section
2.4, the Company shall appoint a successor Depositary eligible under Section 2.4
with respect to such Registered Subordinated Securities. If a successor
Depositary eligible under Section 2.4 for such Registered Subordinated
Securities is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company's
election pursuant to Section 2.3 that such Registered Subordinated Securities be
represented by one or more Registered Global Subordinated Securities shall no
longer be effective and the Company will execute, and the Trustee, upon receipt
of an Officer's Certificate for the authentication and delivery of definitive
Subordinated Securities of such series, will authenticate and deliver,
Subordinated Securities of such series in definitive registered form without
coupons, in any authorized denominations, in an aggregate principal amount equal
to the principal amount of the Registered Global Subordinated Security or
Subordinated Securities representing such Registered Subordinated Securities in
exchange for such Registered Global Subordinated Security or Subordinated
Securities.
The Company may at any time and in its sole discretion determine
that the Registered Subordinated Securities of any series issued in the form of
one or more Registered Global Subordinated Securities shall no longer be
represented by a Registered Global Subordinated Security or Subordinated
Securities. In such event the Company will execute, and the Trustee, upon
receipt of any Officer's Certificate for the authentication and delivery of
definitive Subordinated Securities of such series, will authenticate and
deliver, Subordinated Securities of such series in definitive registered form
without coupons, in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Registered Global Subordinated
Security or Subordinated Securities representing such Registered Subordinated
Securities, in exchange for such Registered Global Subordinated Security or
Subordinated Securities.
If specified by the Company pursuant to Section 2.3 with respect to
Subordinated Securities represented by a Registered Global Subordinated
Security, the Depositary for such Registered Global Subordinated Security may
surrender such Registered Global Subordinated Security in exchange in whole or
in part for Subordinated Securities of the same series in definitive registered
form on such terms as are acceptable to the Company and such Depositary.
Thereupon, the Company shall execute, and the Trustee shall authenticate and
deliver, without service charge,
(i) to the Person specified by such Depositary a new
Registered Subordinated Security or Subordinated Securities of the
same series, of any authorized denominations as
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requested by such Person, in an aggregate principal amount equal to
and in exchange for such Person's beneficial interest in the
Registered Global Subordinated Security; and
(ii) to such Depositary a new Registered Global
Subordinated Security in a denomination equal to the difference, if
any, between the principal amount of the surrendered Registered
Global Subordinated Security and the aggregate principal amount of
Registered Subordinated Securities authenticated and delivered
pursuant to clause (i) above.
Upon the exchange of a Registered Global Subordinated
Security for Subordinated Securities in definitive registered form without
coupons, in authorized denominations, such Registered Global Subordinated
Security shall be canceled by the Trustee or an agent of the Company or the
Trustee. Subordinated Securities in definitive registered form without coupons
issued in exchange for a Registered Global Subordinated Security pursuant to
this Section 2.8 shall be registered in such names and in such authorized
denominations as the Depositary for such Registered Global Subordinated
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee or an agent of the Company or the Trustee.
The Trustee or such agent shall deliver such Subordinated Securities to or as
directed by the Persons in whose names such Subordinated Securities are so
registered.
All Subordinated Securities issued upon any transfer or
exchange of Subordinated Securities shall be valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Subordinated Indenture, as the Subordinated Securities surrendered upon such
transfer or exchange.
Notwithstanding anything herein or in the terms of any
series of Subordinated Securities to the contrary, none of the Company, the
Trustee or any agent of the Company or the Trustee (any of which, other than the
Company, shall rely on an Officer's Certificate and an Opinion of Counsel) shall
be required to exchange any Unregistered Subordinated Security for a Registered
Subordinated Security if such exchange would result in Federal income tax
consequences adverse to the Company (such as, for example, the inability of the
Company to deduct from its income, as computed for Federal income tax purposes,
the interest payable on the Unregistered Subordinated Securities) under then
applicable United States Federal income tax laws.
(b)(i) Subordinated Securities that are distributed to
QIBs and to Non-U.S. Persons will be represented by a single, permanent global
Subordinated Security (which may be subdivided) in definitive form (the "Global
Subordinated Security").
Except as provided below, beneficial owners of a
Subordinated Security in global form shall not be entitled to
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have certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form and will not be
considered Holders of such Subordinated Securities in global form.
(i) So long as the Subordinated Securities are eligible
for book-entry settlement, and to the extent that Subordinated Securities are
held by QIBs or Non-U.S. Persons, as the case may be, in a Global Subordinated
Security, or unless otherwise required by law, no definitive Subordinated
Security, or portion thereof, in respect of which the Company or an Affiliate of
the Company held any beneficial interest shall be included in such Global
Subordinated Security until such definitive Subordinated Security is freely
tradable in accordance with Rule 144K; provided that the Trustee shall, at the
written request of the Company, issue Subordinated Securities in definitive form
upon any transfer of a beneficial interest in the Global Subordinated Security
to the Company or any Affiliate of the Company.
Any Global Subordinated Security may be endorsed with or
have incorporated in the text thereof such legends or
recitals or changes not inconsistent with the provisions of this Subordinated
Indenture as may be required by the Depositary, by the New York Stock Exchange
or by the National Association of Securities Dealers, Inc. in order for the
Subordinated Securities to be tradable on the PORTAL Market or as may be
required for the Subordinated Securities to be tradable on any other market
developed for trading of securities pursuant to Rule 144A or required to comply
with any applicable law or any regulation thereunder or with the rules and
regulations of any securities exchange upon which the Subordinated Securities
may be listed or traded or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular
Subordinated Securities are subject.
(ii) Each Subordinated Security that bears or is required
to bear the legend set forth in this Section 2.8(b)(a "Restricted Subordinated
Security") shall be subject to the restrictions on transfer provided in the
legend set forth in this Section 2.8(b), unless such restrictions on transfer
shall be waived by the written consent of the Company, and the Holder of each
Restricted Subordinated Security, by such Holder's acceptance thereof, agrees to
be bound by such restrictions on transfer. As used in this Section 2.8(b), the
term "transfer" encompasses any sale, pledge, transfer or other disposition of
any Restricted Subordinated Security.
Prior to the Transfer Restriction Termination Date, any
certificate evidencing a Subordinated Security shall bear a legend in
substantially the following form, unless otherwise agreed by the Company (with
written notice thereof to the Trustee):
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THE SUBORDINATED SECURITY (THE "SECURITY") EVIDENCED HEREBY HAS NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED
HEREBY EXCEPT (A) TO QUADRAMED CORPORATION (THE "COMPANY") OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE FOR THE SECURITIES A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (E) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR
(F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR
TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE FOR THE
SECURITIES. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE FOR THE SECURITIES
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY OR THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL
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BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATIONS UNDER THE SECURITIES ACT.
Following the Transfer Restriction Termination Date, any
Subordinated Security or security issued in exchange or substitution therefor
(other than Subordinated Securities acquired by the Company or any Affiliate
thereof since the issue date of the Subordinated Securities) may upon surrender
of such Subordinated Security for exchange to the Security Registrar in
accordance with the provisions of this Section 2.8, be exchanged for a new
Subordinated Security or Subordinated Securities, of like tenor and aggregate
principal amount, which shall not bear the restrictive legend required by this
Section 2.8(b).
Section 2.9. Mutilated, Defaced, Destroyed, Lost and Stolen Subordinated
Securities.
In case any temporary or definitive Subordinated Security
or any Coupon appertaining to any Subordinated Security shall be mutilated,
defaced, destroyed, lost or stolen, the Company in its discretion may execute
and, upon the written request of any officer of the Company, the Trustee shall
authenticate and deliver, a new Subordinated Security of the same series,
maturity date, interest rate and original issue date, bearing a number or other
distinguishing symbol not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Subordinated Security, or in lieu of
and in substitution for the Subordinated Security so destroyed, lost or stolen
with Coupons corresponding to the Coupons appertaining to the Subordinated
Securities so mutilated, defaced, destroyed, lost or stolen, or in exchange or
substitution for the Subordinated Security to which such mutilated, defaced,
destroyed, lost or stolen Coupon appertained, with Coupons appertaining thereto
corresponding to the Coupons so mutilated, defaced, destroyed, lost or stolen.
In every case the applicant for a substitute Subordinated Security or Coupon
shall furnish to the Company and to the Trustee and any agent of the Company or
the Trustee such security or indemnity as may be required by them to indemnify
and defend and to save each of them harmless and, in every case of destruction,
loss or theft, evidence to their satisfaction of the destruction, loss or theft
of such Subordinated Security or Coupon and of the ownership thereof, and in the
case of mutilation or defacement shall surrender the Subordinated Security and
related Coupons to the Trustee or such agent.
Upon the issuance of any substitute Subordinated Security
or Coupon, 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 (including
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the fees and expenses of the Trustee) or its agent connected therewith. In case
any Subordinated Security or Coupon which has matured or is about to mature or
has been called for redemption in full shall become mutilated or defaced or be
destroyed, lost or stolen, the Company may instead of issuing a substitute
Subordinated Security, pay or authorize the payment of the same or the relevant
Coupon (without surrender thereof except in the case of a mutilated or defaced
Subordinated Security or Coupon), if the applicant for such payment shall
furnish to the Company and to the Trustee and any agent of the Company or the
Trustee such security or indemnity as any of them may require to save each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company and the Trustee and any agent of the Company
or the Trustee evidence to their satisfaction of the destruction, loss or theft
of such Subordinated Security or Coupons and of the ownership thereof.
Every substitute Subordinated Security or Coupon of any
series issued pursuant to the provisions of this Section by virtue of the fact
that any such Subordinated Security or Coupon is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Subordinated Security or Coupon shall be at any
time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this
Subordinated Indenture equally and proportionately with any and all other
Subordinated Securities or Coupons of such series duly authenticated and
delivered hereunder. All Subordinated Securities and Coupons shall be held and
owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, defaced or destroyed, lost or stolen Subordinated Securities and
Coupons 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 of negotiable instruments or other securities without
their surrender.
Section 2.10. Cancellation of Subordinated Securities; Destruction Thereof.
All Subordinated Securities and Coupons surrendered for
payment, redemption, registration of transfer or exchange, or for credit against
any payment in respect of a sinking or analogous fund, if any, if surrendered to
the Company or any agent of the Company or the Trustee or any agent of the
Trustee, shall be delivered to the Trustee or its agent for cancellation or, if
surrendered to the Trustee, shall be canceled by it; and no Subordinated
Securities or Coupons shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Subordinated Indenture. The Trustee
or its agent shall dispose of canceled Subordinated Securities and Coupons held
by it and return such cancelled Subordinated Securities to the
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Company. If the Company or its agent shall acquire any of the Subordinated
Securities or Coupons, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Subordinated Securities or
Coupons unless and until the same are delivered to the Trustee or its agent for
cancellation.
Section 2.11. Temporary Subordinated Securities.
Pending the preparation of definitive Subordinated
Securities for any series, the Company may execute and the Trustee shall
authenticate and deliver temporary Subordinated Securities for such series
(printed, lithographed, typewritten or otherwise reproduced, in each case in
form satisfactory to the Trustee). Temporary Subordinated Securities of any
series shall be issuable as Registered Subordinated Securities without coupons,
or as Unregistered Subordinated Securities with or without coupons attached
thereto, of any authorized denomination, and substantially in the form of the
definitive Subordinated Securities of such series but with such omissions,
insertions and variations as may be appropriate for temporary Subordinated
Securities, all as may be determined by the Company with the concurrence of the
Trustee as evidenced by the execution and authentication thereof. Temporary
Subordinated Securities may contain such references to any provisions of this
Subordinated Indenture as may be appropriate. Every temporary Subordinated
Security shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with like
effect, as the definitive Subordinated Securities. Without unreasonable delay
the Company shall execute and shall furnish definitive Subordinated Securities
of such series and thereupon temporary Registered Subordinated Securities of
such series may be surrendered in exchange therefor without charge at each
office or agency to be maintained by the Company for that purpose pursuant to
Section 3.2 and, in the case of Unregistered Subordinated Securities, at any
agency maintained by the Company for such purpose as specified pursuant to
Section 2.4, and the Trustee shall authenticate and deliver in exchange for such
temporary Subordinated Securities of such series an equal aggregate principal
amount of definitive Subordinated Securities of the same series having
authorized denominations and, in the case of Unregistered Subordinated
Securities, having attached thereto any appropriate Coupons. Until so exchanged,
the temporary Subordinated Securities of any series shall be entitled to the
same benefits under this Subordinated Indenture as definitive Subordinated
Securities of such series, unless otherwise established pursuant to Section 2.3.
The provisions of this Section are subject to any restrictions or limitations on
the issue and delivery of temporary Unregistered Subordinated Securities of any
series that may be established pursuant to Section 2.4 (including any provision
that Unregistered Subordinated Securities of such series initially be issued in
the form of a single global Unregistered Subordinated Security to be delivered
to a depositary or agency located outside the United
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States and the procedures pursuant to which definitive or global Unregistered
Subordinated Securities of such series would be issued in exchange for such
temporary global Unregistered Subordinated Security).
ARTICLE III.
COVENANTS OF THE COMPANY
Section 3.1. Payment of Principal and Interest.
The Company covenants and agrees for the benefit of each
series of Subordinated Securities that it will duly and punctually pay or cause
to be paid the principal of, and interest on, if any, each of the Subordinated
Securities of such series (together with any additional amounts payable pursuant
to the terms of such Subordinated Securities) at the place or places, at the
respective time or times and in the manner provided in such Subordinated
Securities and in the Coupons, if any, appertaining thereto and in this
Subordinated Indenture. The interest on Subordinated Securities with Coupons
attached (together with any additional amounts payable pursuant to the terms of
such Subordinated Securities) shall be payable only upon presentation and
surrender of the several Coupons for such interest installments as are evidenced
thereby as they severally mature. If any temporary Unregistered Subordinated
Security provides that interest thereon may be paid while such Subordinated
Security is in temporary form, the interest on any such temporary Unregistered
Subordinated Security (together with any additional amounts payable pursuant to
the terms of such Subordinated Security) shall be paid, as to the installments
of interest evidenced by Coupons attached thereto, if any, only upon
presentation and surrender thereof, and, as to the other installments of
interest, if any, only upon presentation of such Subordinated Securities for
notation thereon of the payment of such interest, in each case subject to any
restrictions that may be established pursuant to Section 2.4. The interest, if
any, on Registered Subordinated Securities (together with any additional amounts
payable pursuant to the terms of such Subordinated Securities) shall be payable
only to or upon the written order of the Holders thereof and, at the option of
the Company, may be paid by wire transfer or by mailing checks for such interest
payable to or upon the written order of such Holders at their last addresses as
they appear on the Security Register of the Company.
Section 3.2. Offices for Payments, Etc.
So long as any Registered Subordinated Securities are
authorized for issuance pursuant to this Subordinated Indenture or are
outstanding hereunder, the Company will maintain in the Borough of Manhattan,
The City of New York, an office or agency where the Registered Subordinated
Securities of each series may be presented for payment, where the Subordinated
Securities of
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each series may be presented for exchange as is provided in this Subordinated
Indenture, where the Subordinated Securities of each series may be surrendered
for conversion and, if applicable, pursuant to Section 2.4 and where the
Registered Subordinated Securities of each series may be presented for
registration of transfer as in this Subordinated Indenture provided.
The Company will maintain one or more offices or agencies
in a city or cities located outside the United States (including any city in
which such an agency is required to be maintained under the rules of any stock
exchange on which the Subordinated Securities of such series are listed) where
the Unregistered Subordinated Securities, if any, of each series and Coupons, if
any, appertaining thereto may be presented for payment. No payment on any
Unregistered Subordinated Security or Coupon will be made upon presentation of
such Unregistered Subordinated Security or Coupon at an agency of the Company
within the United States nor will any payment be made by transfer to an account
in, or by mail to an address in, the United States unless pursuant to applicable
United States laws and regulations then in effect such payment can be made
without tax consequences adverse to the Company. Notwithstanding the foregoing,
payments in Dollars of Unregistered Subordinated Securities of any series and
Coupons appertaining thereto which are payable in Dollars may be made at an
agency of the Company maintained in the Borough of Manhattan, The City of New
York if such payment in Dollars at each agency maintained by the Company outside
the United States for payment on such Unregistered Subordinated Securities is
illegal or effectively precluded by exchange controls or other similar
restrictions.
The Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where notices and demands to or upon the
Company in respect of the Subordinated Securities of any series, the Coupons
appertaining thereto or this Subordinated Indenture may be served.
The Company will give to the Trustee written notice of the
location of each such office or agency and of any change of location thereof. In
case the Company shall fail to maintain any agency required by this Section to
be located in the Borough of Manhattan, The City of New York, or shall fail to
give such notice of the location or for any change in the location of any of the
above agencies, presentations and demands may be made and notices may be served
at the Corporate Trust Office of the Trustee.
The Company may from time to time designate one or more
additional offices or agencies where the Subordinated Securities of a series and
any Coupons appertaining thereto may be presented for payment, where the
Subordinated Securities of that series may be presented for exchange as provided
in this Subordinated Indenture and pursuant to Section 2.4 and where the
Registered Subordinated Securities of that series may be presented for
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registration of transfer as in this Subordinated Indenture provided, and the
Company may from time to time rescind any such designation, as the Company may
deem desirable or expedient; provided, that no such designation or rescission
shall in any manner relieve the Company of its obligations to maintain the
agencies provided for in this Section. The Company shall give to the Trustee
prompt written notice of any such designation or rescission thereof.
Section 3.3. Appointment to Fill a Vacancy in Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy
in the office of Trustee, will appoint, in the manner provided in Section 6.10,
a Trustee, so that there shall at all times be a Trustee with respect to each
series of Subordinated Securities hereunder.
Section 3.4. Paying Agents.
Whenever the Company shall appoint a Paying Agent other
than the Trustee with respect to the Subordinated Securities of any series, 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,
(a) that it will hold all sums received by it as such agent
for the payment of the principal of or interest on the Subordinated
Securities of such series (whether such sums have been paid to it by
the Company or by any other obligor on the Subordinated Securities of
such series) in trust for the benefit of the Holders of the
Subordinated Securities of such series, or Coupons appertaining
thereto, if any, or of the Trustee;
(b) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Subordinated Securities
of such series) to make any payment of the principal of or interest
on the Subordinated Securities of such series when the same shall be
due and payable; and
(c) that it will pay any such sums so held in trust by it
to the Trustee upon the Trustee's written request at any time during
the continuance of the failure referred to in the foregoing clause
(b).
The Company will, on or prior to each due date of the
principal of or interest on the Subordinated Securities of such series, deposit
with the Paying Agent a sum sufficient to pay such principal or interest so
becoming due, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of any failure to take such action.
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If the Company shall act as its own Paying Agent with
respect to the Subordinated Securities of any series, it will, on or before each
due date of the principal of or interest on the Subordinated Securities of such
series, set aside, segregate and hold in trust for the benefit of the Holders of
the Subordinated Securities of such series or the Coupons appertaining thereto a
sum sufficient to pay such principal or interest so becoming due. The Company
will promptly notify the Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding,
but subject to Section 10.1, the Company may at any time, for the purpose of
obtaining a satisfaction and discharge with respect to one or more or all series
of Subordinated Securities hereunder, or for any other reason, pay or cause to
be paid to the Trustee all sums held in trust for any such series by the Company
or any Paying Agent hereunder, as required by this Section, such sums to be held
by the Trustee upon the trusts herein contained.
Anything in this Section to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Sections 10.3 and 10.4.
Section 3.5. Compliance Certificates.
The Company will furnish to the Trustee on or before
January 31 in each year (beginning with January 31, 1999) a brief certificate
(which need not comply with Section 11.5) from the principal executive,
financial or accounting officer of the Company stating that in the course of the
performance by the signer of his or her duties as an officer of the Company he
or she would normally have knowledge of any default or non-compliance by the
Company in the performance of any covenants or conditions contained in this
Subordinated Indenture, stating whether or not he or she has knowledge of any
such default or non-compliance and, if so, describing each such default or non-
compliance of which the signer has knowledge and the nature thereof.
Section 3.6. Corporate Existence.
Subject to Article IX, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, that the Company shall
not be required to preserve any such right, license or franchise, if, in the
judgment of the Company, the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole and
the loss thereof is not disadvantageous in any material respect to the
Securityholders.
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Section 3.7. Maintenance of Properties.
The Company will cause all properties used in 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 time except to the
extent that the Company may be prevented from so doing by circumstances beyond
its control; provided, that nothing in this Section shall prevent the Company
from discontinuing the operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company desirable in the conduct of the business of the Company or any
Subsidiary and not disadvantageous in any material respect to the
Securityholders.
Section 3.8. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent: (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary; and (b)
all lawful claims for labor, materials, and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings; and provided further that the Company shall not be required to
cause to be paid or discharged any such tax, assessment, charge or claim if the
Company shall determine that such payment is not advantageous to the conduct of
the business of the Company and its Subsidiaries taken as a whole and that the
failure so to pay or discharge is not disadvantageous in any material respect to
the Securityholders.
Section 3.9. Luxembourg Publications.
In the event of the publication of any notice pursuant to
Section 5.15, 6.11(a), 6.12, 8.2, 10.4 or 13.2, the party making such
publication in the Borough of Manhattan, The City of New York and London shall
also, to the extent that notice is required to be given to Holders of
Subordinated Securities of any series by applicable Luxembourg law or stock
exchange regulation, as evidenced by an Officer's Certificate delivered to such
party, make a similar publication in Luxembourg.
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Section 3.10. Usury Laws.
The Company covenants and agrees: (a) not to insist upon, or plead,
or in any manner whatsoever claim the benefit or the advantage of the usury law
of any jurisdiction against the Trustee or the Holders in connection with any
claim, action or proceeding which may be brought by the Trustee or the Holders
in order to enforce any right or remedy under this Subordinated Indenture; and
(b) to resist any and all efforts to compel the Company to claim the benefit or
the advantage of the usury law of any jurisdiction against the Trustee or the
Holders in connection with any claim, action or proceeding which may be brought
by the Trustee or the Holders in order to enforce any right or remedy under this
Indenture.
ARTICLE IV.
SECURITYHOLDER LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
Section 4.1. Company to Furnish Trustee Information as to Names and Addresses of
Securityholders.
If and so long as the Trustee shall not be the Security
Registrar for the Subordinated Securities of any series, the Company and any
other obligor on the Subordinated Securities will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the Holders of the Registered Subordinated
Securities of such series pursuant to Section 312 of the Trust Indenture Act:
(a) semi-annually not more than 5 days after each Regular
Record Date for the payment of interest on such Registered
Subordinated Securities, as hereinabove specified, as of such record
date and on dates to be determined pursuant to Section 2.4 for
non-interest bearing Registered Subordinated Securities in each year;
and
(b) at such other times as the Trustee may reasonably
request in writing, within thirty days after receipt by the Company
of any such request as of a date not more than 15 days prior to the
time such information is furnished.
Section 4.2. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 4.1 and the names
and addresses of Holders received by the Trustee in its capacity as Subordinated
Security Registrar. The Trustee may destroy any list furnished to it as provided
in Section 4.1 upon receipt of a new list so furnished.
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(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Subordinated Indenture or under the
Subordinated Securities, and the corresponding rights and duties of the Trustee,
shall be as provided by the Trust Indenture Act.
(c) Every Holder of Subordinated Securities, 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 made pursuant to the Trust Indenture Act.
Section 4.3. Reports by Trustee.
(a) Within 60 days after May 15 of each year, commencing
May 15, 1998, the Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Subordinated Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Subordinated Securities are listed, with the Commission and with the
Company. The Company will notify the Trustee when the Subordinated Securities
are listed on any stock exchange.
Section 4.4. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, 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. Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
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ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
Section 5.1. Event of Default Defined, Acceleration of Maturity; Waiver of
Default.
"Event of Default" with respect to Subordinated Securities
of any series, wherever used herein, means each one of the following events
which shall have occurred and be continuing (whatever the reason for such Event
of Default and whether it shall be occasioned by the subordination provisions of
any series of Subordinated Securities or 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):
(a) default in the payment of any installment of interest
upon any of the Subordinated Securities of such series as and when
the same shall become due and payable, and continuance of such
default for a period of 30 days; or
(b) default in the payment of all or any part of the
principal, or any premium, on any of the Subordinated Securities of
such series as and when the same shall become due and payable either
at Maturity, upon any redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund installment
as and when the same shall become due and payable by the terms of the
Subordinated Securities of such series; or
(d) 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 Subordinated Securities of such series or contained in
this Subordinated Indenture (other than a covenant or agreement
included in this Subordinated Indenture solely for the benefit of a
series of Subordinated Securities other than such series) for a
period of 60 days after the date on which written notice specifying
such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that the Company remedy the same, shall have
been given by registered or certified mail, return receipt requested,
to the Company by the Trustee, or to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the
Outstanding Subordinated Securities of the series to which such
covenant or agreement relates; or
(e) default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any
Subsidiary or under any mortgage, indenture or
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instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the
Company or any Subsidiary, whether such indebtedness now exists or
shall hereafter be created, which default shall constitute a failure
to pay the principal of indebtedness in excess of $5,000,000 when due
and payable after the expiration of any applicable grace period with
respect thereto or shall have resulted in indebtedness in excess of
$5,000,000 becoming or being declared due and payable prior to the
date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 10 days after there
shall have been given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at 25% in aggregate principal
amount of the Subordinated Securities of each such affected series
then Outstanding hereunder a written notice specifying such default
and requiring the Company to cause such indebtedness to be discharged
or cause such acceleration to be rescinded or annulled; or
(f) a court having jurisdiction in the premises shall enter
a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or any
Significant Subsidiary for any substantial part of its or their
property or ordering the winding up or liquidation of its or their
affairs, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(g) the Company or any Significant Subsidiary shall
commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such
law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or any Significant Subsidiary or for
any substantial part of its or their property, or make any general
assignment for the benefit of creditors; or
(h) any other Event of Default provided in the supplemental
indenture, Board Resolution or Officer's Certificate under which such
series of Subordinated Securities is issued or in the form of
Subordinated Security for such series.
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Section 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default described in clause (a), (b), (c),
(d), (e) or (h) of Section 5.1 (if the Event of Default under clause (d) or (h),
as the case may be, is with respect to less than all series of Subordinated
Securities then Outstanding) occurs and is continuing, then, and in each and
every such case, except for any series of Subordinated Securities the principal
of which shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Subordinated
Securities of each such affected series then Outstanding hereunder (each such
series voting as a separate class) by notice in writing to the Company (and to
the Trustee if given by Securityholders), may declare the entire principal (or,
if the Subordinated Securities of any such affected series are Original Issue
Discount Subordinated Securities, such portion of the principal amount as may be
specified in the terms of such series) of all Subordinated Securities of all
such affected series, and the interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration, the same shall become
immediately due and payable.
If an Event of Default described in clause (d) or (h) of
Section 5.1 with respect to all series of Subordinated Securities then
Outstanding, occurs and is continuing, then, and in each and every such case,
unless the principal of all of the Subordinated Securities shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of all of the Subordinated Securities then
Outstanding hereunder (treated as one class) by notice in writing to the Company
(and to the Trustee if given by Securityholders), may declare the entire
principal (or, if the Subordinated Securities of any series are Original Issue
Discount Subordinated Securities, such portion of the principal amount as may be
specified in the terms of such series) of all of the Subordinated Securities
then Outstanding, and the interest accrued thereon, if any, to be due and
payable immediately, and upon such declaration, the same shall become
immediately due and payable. If an Event of Default described in clause (f) or
(g) of Section 5.1 shall occur, the principal amount of all outstanding
Subordinated Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
The foregoing provisions are subject to the condition that
if, at any time after the principal (or, if the Subordinated Securities are
Original Issue Discount Subordinated Securities, such portion of the principal
as may be specified in the terms thereof) of the Subordinated Securities of any
series (or of all the Subordinated Securities, as the case may be) shall have
been so declared due and payable, and before any judgment or decree
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for the payment of the moneys due shall have been obtained or entered as
hereinafter provided,
(A) the Company shall pay or shall deposit with the
Trustee a sum sufficient to pay
(i) all matured installments of interest upon all
the Subordinated Securities of each such series (or all the
Subordinated Securities, as the case may be); and
(ii) the principal of any and all Subordinated
Securities of each such series (or of all the Subordinated
Securities, as the case may be) which shall have become due
otherwise than by acceleration; and
(iii) interest upon such principal and, to the
extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest, at the
same rate as the rate of interest or Yield to Maturity (in
the case of Original Issue Discount Subordinated
Securities) specified in the Subordinated Securities of
each such series (or at the respective rates of interest or
Yields to Maturity of all the Subordinated Securities, as
the case may be) to the date of such payment or deposit;
and
(iv) all amounts payable to the Trustee pursuant
to Section 6.6; and
(B) all Events of Default under the Subordinated Indenture,
other than the non-payment of the principal of Subordinated
Securities which shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as provided herein,
then and in every such case the Holders of a majority in aggregate principal
amount of all the Subordinated Securities of each such series, each such series
voting as a separate class (or of all the Subordinated Securities, as the case
may be, voting as a single class), then Outstanding, by written notice to the
Company and to the Trustee, may waive all defaults with respect to each such
series (or with respect to all the Subordinated Securities, as the case may be)
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 shall impair any right consequent thereon.
For all purposes under this Subordinated Indenture, if a
portion of the principal of any Original Issue Discount Subordinated Securities
shall have been accelerated and declared due and payable pursuant to the
provisions hereof, then, from and after such declaration, unless such
declaration has been
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rescinded and annulled, the principal amount of such Original Issue Discount
Subordinated Securities shall be deemed, for all purposes hereunder, to be such
portion of the principal thereof as shall be due and payable as a result of such
acceleration, and payment of such portion of the principal thereof as shall be
due and payable as a result of such acceleration, together with interest, if
any, thereon and all other amounts owing thereunder, shall constitute payment in
full of such Original Issue Discount Subordinated Securities.
Section 5.3. Collection of Indebtedness by Trustee; Trustee May Prove Debt.
The Company covenants that (a) in case default shall be
made in the payment of any installment of interest on any of the Subordinated
Securities of any series when such interest shall have become due and payable,
and such default shall have continued for a period of 30 days, or (b) in case
default shall be made in the payment of all or any part of the principal of any
of the Subordinated Securities of any series when the same shall have become due
and payable, whether upon Maturity of the Subordinated Securities of such series
or upon any redemption or by declaration or otherwise, then upon demand of the
Trustee, the Company will pay to the Trustee for the benefit of the Holders of
the Subordinated Securities of such series the whole amount that then shall have
become due and payable on all Subordinated Securities of such series, and such
Coupons, for principal and interest, as the case may be (with interest to the
date of such payment upon the overdue principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Subordinated Securities) specified in the
Subordinated Securities of such series); and in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection, and
such other amount due the Trustee under Section 6.6 in respect of Subordinated
Securities of such series.
Until such demand is made by the Trustee, the Company may
pay the principal of and interest on the Subordinated Securities of any series
to the registered Holders, whether or not the Subordinated Securities of such
series be overdue.
Section 5.4. Trustee May File Proofs of Claims.
In case the Company shall fail forthwith to pay such
amounts upon such demand, the Trustee, in its own name as
trustee of an express trust, shall be entitled and empowered to institute any
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against the
Company or other obligor upon the Subordinated Securities and collect in the
manner provided by law out of the property of the Company or
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other obligor upon the Subordinated Securities, wherever situated, all the
moneys adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the
Company or any other obligor upon the Subordinated
Securities under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or other similar 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 its property or such other obligor, or in case of
any other comparable judicial proceedings relative to the Company or other
obligor upon the Subordinated Securities, or to the creditors or property of the
Company or such other obligor, the Trustee, irrespective of whether the
principal of the Subordinated Securities 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,
shall be entitled and empowered, by intervention in such proceedings or
otherwise:
(a) to file and prove a claim or claims for the whole
amount of principal and interest (or, if the Subordinated Securities
of any series are Original Issue Discount Subordinated Securities,
such portion of the principal amount as may be specified in the terms
of such series) owing and unpaid in respect of the Subordinated
Securities of any series, and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for amounts payable to the Trustee under
Section 6.6) and of the Securityholders allowed in any judicial
proceedings relative to the Company or other obligor upon the
Subordinated Securities, or to the creditors or property of the
Company or such other obligor; and
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the holders of the Subordinated Securities of any
series in any election of a receiver, assignee, trustee or a standby
trustee in arrangement, reorganization, liquidation or other
bankruptcy or insolvency proceedings, custodian or other person
performing similar functions in respect of any such proceedings; and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Securityholders
and of the Trustee on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official performing similar
functions in respect of any such proceedings is hereby authorized by
each of the Securityholders to make payments to the Trustee, and, in
the event that the Trustee shall consent to the making of
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payments directly to the Securityholders, to pay to the Trustee its
costs and expenses of collection and all other amounts due to it
pursuant to Section 6.6.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Subordinated Securities of any series or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Securityholder in any such proceeding, except as aforesaid in clause (b).
Section 5.5. Trustee May Enforce Claims Without Possession of Subordinated
Securities.
All rights of action and of asserting claims under this
Subordinated Indenture, or under any of the Subordinated Securities of any
series or Coupons appertaining to such Subordinated Securities, may be enforced
by the Trustee without the possession of any of the Subordinated Securities of
such series or Coupons appertaining to such Subordinated Securities or the
production thereof in any trial or other proceedings relative thereto, and any
such action or proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall awarded
to the Trustee for ratable distribution to the Holders of the Subordinated
Securities or Coupons appertaining to such Subordinated Securities in respect of
which such action was taken, after payment of all sums due to the Trustee under
Section 6.6 in respect of such Subordinated Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Subordinated
Indenture to which the Trustee shall be a party) the Trustee shall be held to
represent all the Holders of the Subordinated Securities or Coupons appertaining
to such Subordinated Securities in respect to which such action was taken, and
it shall not be necessary to make any Holders of such Subordinated Securities or
Coupons appertaining to such Subordinated Securities parties to any such
proceedings.
Section 5.6. Application of Proceeds.
Any moneys collected by the Trustee pursuant to this
Article in respect of any series shall be applied in the following order at the
date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal or interest, upon presentation of the several
Subordinated Securities and Coupons appertaining to such Subordinated Securities
in respect of which monies have been collected and stamping (or otherwise
noting) thereon the payment, or issuing Subordinated Securities of such series
in reduced principal amounts in exchange for the presented Subordinated
Securities of
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like series if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses applicable to
such series of Subordinated Securities in respect of which monies
have been collected, including all amounts due to the Trustee and
each predecessor Trustee pursuant to Section 6.6 in respect to such
series of Subordinated Securities;
SECOND: In case the principal of the Subordinated
Securities of such series in respect of which moneys have been
collected shall not have become and be then due and payable, to the
payment of interest on the Subordinated Securities of such series in
default in the order of the Maturity of the installments on such
interest, with interest (to the extent that such interest has been
collected by the Trustee and is permitted by applicable law) upon the
overdue installments of interest at the same rate as the rate of
interest or Yield to Maturity (in the case of Original Issue Discount
Subordinated Securities) specified in such Subordinated Securities,
such payments to be made ratably to the persons entitled thereto,
without discrimination or preference;
THIRD: In case the principal of the Subordinated Securities
of such series in respect of which moneys have been collected shall
have become and shall be then due and payable, to the payment of the
whole amount then owing and unpaid upon all the Subordinated
Securities of such series for principal and interest, with interest
upon the overdue principal, and (to the extent that such interest has
been collected by the Trustee and is permitted by applicable law)
upon the overdue installations of interest at the same rate as the
rate of interest or Yield to Maturity (in the case of Original Issue
Discount Subordinated Securities) specified in the Subordinated
Securities of such series; and in case such moneys shall be
insufficient to pay in full the whole amount so due and unpaid upon
the Subordinated Securities of such series, then to the payment of
such principal and interest or Yield to Maturity, without preference
or priority of principal over interest or Yield to Maturity, or of
interest or Yield to Maturity over principal, or of any installment
of interest over any other installment of interest or of any
Subordinated Security of such series over any other Subordinated
Security of such series, ratably to the aggregate of such principal
and accrued and unpaid interest or Yield to Maturity; and
FOURTH: To the payment of the remainder, if any, to the
Company or any other person lawfully entitled thereto.
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Section 5.7. Suits for Enforcement.
In case an Event of Default has occurred, has not been
waived and is continuing, the Trustee may in its discretion proceed to protect
and enforce the rights vested in it by this Subordinated Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Subordinated Indenture or in aid of the exercise of
any power granted in this Subordinated Indenture or to enforce any other legal
or equitable right vested in the Trustee by this Subordinated Indenture or by
law.
Section 5.8. Limitations on Suits by Subordinated Security Holders.
No Holder of any Subordinated Security of any series or of
any Coupon appertaining thereto shall have any right by virtue or by availing of
any provision of this Subordinated Indenture to institute any action or
proceeding at law or in equity or in bankruptcy or otherwise upon or under or
with respect to this Subordinated Indenture or such Subordinated Security, or
for the appointment of a trustee, receiver, liquidator, custodian or other
similar official or for any other remedy hereunder or thereunder, unless (a)
such Holder previously shall have given to the Trustee written notice of an
Event of Default with respect to Subordinated Securities of such series and of
the continuance thereof, as hereinbefore provided, and (b) the Holders of not
less than 25% in aggregate principal amount of the Subordinated Securities of
such affected series then Outstanding (treated as a single class) shall have
made written request upon the Trustee to institute such action or proceedings in
its own name as Trustee hereunder and shall have offered to the Trustee such
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and (c) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity shall have failed to institute
any such action or proceeding, and (d) no direction inconsistent with such
written request shall have been given to the Trustee pursuant to Section 5.13;
it being understood and intended, and being expressly covenanted by the taker
and Holder of every Subordinated Security or Coupon with every other taker and
Holder and the Trustee, that no one or more Holders of Subordinated Securities
of any series or Coupons appertaining to such Subordinated Securities shall have
any right in any manner whatever by virtue or by availing of any provision of
this Subordinated Indenture or any Subordinated Security to affect, disturb or
prejudice the rights of any other such taker or Holder of Subordinated
Securities or Coupons appertaining to such Subordinated Securities, or to obtain
or seek to obtain priority over or preference to any other such taker or Holder
or to enforce any right under this Subordinated Indenture or any Subordinated
Security, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of
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Subordinated Securities of the applicable series and Coupons appertaining to
such Subordinated Securities. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
Section 5.9. Unconditional Right of Securityholders to Institute Certain Suits.
Notwithstanding any other provision in this Subordinated
Indenture and any provision of any Subordinated Security, the right of any
Holder of any Subordinated Security or Coupon to receive payment of the
principal of and interest on such Subordinated Security or Coupon on or after
the respective due dates expressed in such Subordinated Security or Coupon or
the applicable redemption dates provided for in such Subordinated Security, to
convert such Subordinated Securities of any series in accordance with terms that
may be established pursuant to Section 2.3, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 5.10. Restoration of Rights on Abandonment of Proceedings.
In case the Trustee shall have proceeded to enforce any
right under this Subordinated Indenture and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee, then and in every such case the Company and the
Trustee shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and
the Securityholders shall continue as though no such proceedings had been taken.
Section 5.11. Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default.
Except as provided in Section 5.8, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders of
Subordinated Securities or Coupons is intended to be exclusive of any other
right or remedy and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 5.12. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of
Subordinated Securities or Coupons to exercise any right or power accruing upon
any Event of Default occurring and continuing as
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aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein. Every power and
remedy given by this Subordinated Indenture, any Subordinated Security or law to
the Trustee or to the Holders of Subordinated Securities or Coupons may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or, subject to Section 5.8, by the Holders of Subordinated Securities or
Coupons.
Section 5.13. Control by Holders of Subordinated Securities.
The Holders of a majority in aggregate principal amount of
the Subordinated Securities of each series affected (with each such series
voting as a separate class) at the time Outstanding shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to the Subordinated Securities of such series by this
Subordinated Indenture; provided, that such direction shall not be otherwise
than in accordance with law and the provisions of this Subordinated Indenture
and provided, further, that (subject to the provisions of Section 6.1) the
Trustee shall have the right to decline to follow any such direction if (a) the
Trustee, being advised by counsel, shall determine that the action or proceeding
so directed may not lawfully be taken; or (b) if the Trustee by its board of
directors, the executive committee, or a trust committee of directors or
Responsible Officers of the Trustee shall determine in good faith that the
action or proceedings so directed would involve the Trustee in personal
liability; or (c) if the Trustee in good faith shall so determine that the
actions or forbearances specified in or pursuant to such direction would be
unduly prejudicial to the interests of Holders of the Subordinated Securities of
all affected series not joining in the giving of said direction, it being
understood that (subject to Section 6.1) the Trustee shall have no duty to
ascertain whether or not such actions or forbearances are unduly prejudicial to
such Holders.
Nothing in this Subordinated Indenture shall impair the
right of the Trustee in its discretion to take any action deemed proper by the
Trustee and which is not inconsistent with such direction or directions by
Securityholders.
Section 5.14. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Maturity of
any Subordinated Securities as provided in Section 5.2, the Holders of a
majority in aggregate principal amount of the Subordinated Securities of such
series (each series voting as a separate class) at the time Outstanding with
respect to which an Event of Default shall have occurred and be continuing
(voting as a single class) may on behalf of the Holders of all such Subordinated
Securities waive any past default or Event of
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Default described in Section 5.1 and its consequences, except a default in
respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Subordinated Security affected. In the
case of any such waiver, the Company, the Trustee and the Holders of all such
Subordinated Securities shall be restored to their former positions and rights
hereunder, respectively, and such default shall cease to exist and be deemed to
have been cured and not to have occurred for purposes of this Subordinated
Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
Section 5.15. Trustee to Give Notice of Default, But May Withhold in Certain
Circumstances.
The Trustee shall, within 90 days after the occurrence of a
default with respect to the Subordinated Securities of any series actually known
to a Responsible Officer of the Trustee, give notice of all defaults with
respect to that series known to the Trustee (i) if any Unregistered Subordinated
Securities of that series are then Outstanding, to the Holders thereof, by
publication at least once in an Authorized Newspaper in the Borough of
Manhattan, The City of New York and at least once in an Authorized Newspaper in
London (and, if required by Section 3.9, at least once in an Authorized
Newspaper in Luxembourg) and (ii) to all Holders of Subordinated Securities of
such series in the manner and to the extent provided in Section 313(c) of the
Trust Indenture Act, unless in each case such defaults shall have been cured
before the mailing or publication of such notice (the term "default" for the
purpose of this Section being hereby defined to mean any event or condition
which is, or with notice or lapse of time or both would become, an Event of
Default); provided, that, except in the case of default in the payment of the
principal of or interest on any of the Subordinated Securities of such series,
or in the payment of any sinking fund installment on such series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors or
trustees and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders
of such series.
Section 5.16. Right of Court to Require Filing of Undertaking to Pay Costs.
All parties to this Subordinated Indenture agree, and each
Holder of any Subordinated Security or Coupon 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 Subordinated Indenture or
in any suit against the Trustee for any action taken, suffered 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,
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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; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Securityholder or
group of Securityholders of any series holding in the aggregate more than 10% in
aggregate principal amount of the Subordinated Securities of such series, or, in
the case of any suit relating to or arising under clause (d) or (h) of Section
5.1 (if the suit relates to Subordinated Securities of more than one but less
than all series), 10% in aggregate principal amount of Subordinated Securities
then Outstanding and affected thereby, or in the case of any suit relating to or
arising under clause (d) or (h) (if the suit under clause (d) or (h) relates to
all the Subordinated Securities then Outstanding), (f) or (g) of Section 5.1,
10% in aggregate principal amount of all Subordinated Securities then
Outstanding, or to any suit instituted by any Securityholder for the enforcement
of the payment of the principal of or interest on any Subordinated Security on
or after the due date expressed in such Subordinated Security or any date fixed
for redemption.
Section 5.17. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Subordinated Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VI.
CONCERNING THE TRUSTEE
Section 6.1. Duties and Responsibilities of the Trustee; During Default; Prior
to Default.
Prior to the occurrence of an Event of Default with respect
to the Subordinated Securities of a particular series and after the curing or
waiving of all Events of Default which may have occurred with respect to such
series, the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Subordinated Indenture with respect to such
series of Subordinated Securities. In case an Event of Default with respect to
the Subordinated Securities of a series has occurred and has not been cured or
waived, the Trustee shall exercise with respect to such series of Subordinated
Securities such of the rights and powers vested in it by this Subordinated
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Indenture with respect to such series of Subordinated Securities, and use the
same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
No provision of this Subordinated 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 with
respect to the Subordinated Securities of any series and after the
curing or waiving of all such Events of Default with respect to such
series which may have occurred:
(i) the duties and obligations of the Trustee
with respect to the Subordinated Securities of any series
shall be determined solely by the express provisions of
this Subordinated Indenture, and the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this
Subordinated Indenture, and no implied covenants or
obligations shall be read into this Subordinated Indenture
against the Trustee; and
(ii) the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Subordinated Indenture; but in the
case of any such statements, certificates or opinions which
by any provision 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 Subordinated Indenture;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders pursuant to Section 5.13 relating
to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Subordinated Indenture.
None of the provisions contained in this Subordinated
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the
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performance of any of its duties or in the exercise of any of its rights or
powers, if there shall be reasonable ground for believing that the repayment of
such funds or adequate indemnity against such liability is not reasonably
assured to it.
The provisions of this Section 6.1 are in furtherance of
and subject to Section 315 of the Trust Indenture Act.
Section 6.2. Certain Rights of the Trustee.
In furtherance of and subject to the Trust Indenture Act,
and subject to Section 6.1:
(a) the Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any resolution,
Officer's Certificate or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon, security or other paper or document believed
by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officer's
Certificate (unless other evidence in respect thereof is specifically
prescribed herein or in the terms established in respect of any
series); 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 of its selection
and any advice or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted to be taken by it hereunder in good faith and in reliance
thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Subordinated
Indenture at the request, order or direction of any of the
Securityholders pursuant to the provisions of this Subordinated
Indenture, unless such Securityholders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee against the
costs, expenses and liabilities which might be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Subordinated Indenture;
(f) prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of
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Default, 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, consent,
order, approval, appraisal, bond, debenture, note, coupon, security,
or other paper or document unless requested in writing so to do by
the Holders of not less than a majority in aggregate principal amount
of the Subordinated Securities of all series affected then
Outstanding; provided, 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 Subordinated Indenture, the
Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of
every such investigation 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
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys not regularly in its employ and the
Trustee shall not be responsible for any misconduct or negligence on
the part of any such agent or attorney appointed with due care by it
hereunder.
Section 6.3. Trustee Not Responsible for Recitals, Disposition of Subordinated
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Subordinated
Securities, except the Trustee's certificates 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 representation as to the
validity or sufficiency of this Subordinated Indenture or of the Subordinated
Securities or Coupons. The Trustee shall not be accountable for the use or
application by the Company of any of the Subordinated Securities or of the
proceeds thereof.
Section 6.4. Trustee and Agents May Hold Subordinated Securities or Coupons;
Collections, Etc.
The Trustee or any agent of the Company or of the Trustee,
in its individual or any other capacity, may become the owner or pledgee of
Subordinated Securities or Coupons with the same rights it would have if it were
not the Trustee or such agent and may otherwise deal with the Company and
receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee or such agent.
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Section 6.5. Moneys Held by Trustee.
Subject to the provisions of Section 10.4 hereof, all
moneys received by the Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by mandatory
provisions of law. Neither the Trustee nor any agent of the Company or the
Trustee shall be under any liability for interest on any moneys received by it
hereunder.
Section 6.6. Compensation and Indemnification of Trustee and Its Prior Claim.
The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to such compensation as the
parties shall agree in writing from time to time (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust) and the Company covenants and agrees to pay or reimburse the Trustee and
each predecessor trustee upon its request for all reasonable expense,
disbursements and advances incurred or made by or on behalf of it in accordance
with any of the provisions of this Subordinated Indenture (including the
compensation and the expenses and disbursements of its counsel and of all agents
and other persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee and each predecessor trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Subordinated Indenture or the
trusts hereunder and its duties hereunder, including the costs and expenses of
defending itself against or investigating any claim of liability in the
premises. The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor trustee and to pay or reimburse the
Trustee and each predecessor trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Subordinated Indenture. Such additional
indebtedness shall be a senior claim to that of the Subordinated Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Subordinated
Securities or Coupons, and the Subordinated Securities are hereby subordinated
to such senior claim.
Section 6.7. Right of Trustee to Rely on Officer's Certificate, Etc.
Subject to Sections 6.1 and 6.2, whenever in the
administration of the trusts of this Subordinated Indenture the Trustee shall
deem it necessary or desirable that a matter be
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proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by an Officer's Certificate delivered to the Trustee, and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Subordinated Indenture upon the faith thereof.
Section 6.8. Subordinated Indentures Not Creating Potential Conflicting
Interests for the Trustee.
The following indentures are hereby specifically described
for the purposes of Section 310(b)(1) of the Trust Indenture Act: this
Subordinated Indenture with respect to the Subordinated Securities of any other
series.
Section 6.9. Qualification of Trustee: Conflicting Interests.
The Trustee shall comply with Section 310(b) of the Trust
Indenture Act.
Section 6.10. Persons Eligible for Appointment as Trustee.
The Trustee for each series of Subordinated Securities
hereunder shall at all times be a corporation or banking association organized
and doing business under the laws of the United States of America, any State
thereof or the District of Columbia, that has (or, in the case of a corporation
or banking association included in a bank holding company system, whose related
bank holding company has) a combined capital and surplus of at least
$50,000,000, and which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by Federal, state or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 6.11.
The provisions of this Section 6.10 are in furtherance of
and subject to Section 310(a) of the Trust Indenture Act.
Section 6.11. Resignation and Removal; Appointment of Successor Trustee.
(a) The Trustee, or any trustee or trustees hereafter
appointed, may at any time resign with respect to one or more or
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all series of Subordinated Securities by giving written notice of resignation to
the Company. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee or trustees with respect to the applicable
series by written instrument in duplicate, executed by authority of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee or trustees. If no successor
trustee shall have been so appointed with respect to any series and have
accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Securityholder
who has been a bona fide Holder of a Subordinated Security or Subordinated
Securities of the applicable series for at least six months may, subject to the
provisions of Section 5.12, 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:
(i) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act with respect to any series
of Subordinated Securities after written request therefor by the
Company or by any Securityholder who has been a bona fide Holder of a
Subordinated Security or Subordinated Securities of such series for
at least six months; or
(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 6.10 and Section 310(a) of the Trust
Indenture Act and shall fail to resign after written request therefor
by the Company or by any Securityholder; or
(iii) the Trustee shall become incapable of acting with
respect to any series of Subordinated Securities, or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator 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 with respect to the
applicable series of Subordinated Securities and appoint a successor trustee for
such series by written instrument, in duplicate, executed by order of the Board
of Directors of the Company, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 315(e) of the Trust Indenture Act, any Securityholder who
has been a bona fide
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Holder of a Subordinated Security or Subordinated Securities of such series 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 with respect to such series. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee. If no successor trustee
shall have been so appointed with respect to any series and have accepted
appointment within 30 days after such removal, the removed trustee may petition
any court of competent jurisdiction for the appointment of a successor trustee.
(c) The Holders of a majority in aggregate principal amount
of the Subordinated Securities of each series at the time outstanding may at any
time remove the Trustee with respect to Subordinated Securities of such series
and appoint a successor trustee with respect to the Subordinated Securities of
such series by delivering to the Trustee so removed, to the successor trustee so
appointed and to the Company the evidence provided for in Section 7.1 of the
action in that regard taken by the Securityholders.
(d) Any resignation or removal of the Trustee with respect
to any series and any appointment of a successor trustee with respect to such
series pursuant to any of the provisions of this Section 6.11 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 6.12.
Section 6.12. Acceptance of Appointment by Successor Trustee.
Any successor trustee appointed as provided in Section 6.11
shall execute 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 with respect to all or any applicable
series shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all rights, powers, duties and
obligations with respect to such series of its predecessor hereunder, with like
effect as if originally named as trustee for such series hereunder; but,
nevertheless, on the written request of the Company or of the successor trustee,
upon payment of its charges then unpaid, the trustee ceasing to act shall,
subject to Section 10.4, pay over to the successor trustee all moneys at the
time held by it hereunder and shall execute and deliver an instrument
transferring to such successor trustee all such rights, powers, duties and
obligations. 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 prior claim upon all
property or funds held or collected by such trustee to secure any amounts then
due it pursuant to the provisions of Section 6.6.
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If a successor trustee is appointed with respect to the
Subordinated Securities of one or more (but not all) series, the Company, the
predecessor trustee and each successor trustee with respect to the Subordinated
Securities of any applicable series shall execute and deliver an indenture
supplemental hereto which shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the predecessor trustee with respect to the Subordinated Securities of any
series as to which the predecessor trustee is not retiring shall continue to be
vested in the predecessor trustee, and shall add to or change any of the
provisions of this Subordinated Indenture as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts under separate
indentures.
No successor trustee with respect to any series of
Subordinated Securities shall accept appointment as provided in this Section
6.12 unless at the time of such acceptance such successor trustee shall be
qualified under Section 310(b) of the Trust Indenture Act and eligible under the
provisions of Section 6.10.
Upon acceptance of appointment by any successor trustee as
provided in this Section 6.12, the Company shall give notice thereof (a) if any
Unregistered Subordinated Securities of a series affected are then Outstanding,
to the Holders thereof, by publication of such notice at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New York and at
least once in an Authorized Newspaper in London (and, if required by Section
3.9, at least once in an Authorized Newspaper in Luxembourg), (b) if any
Unregistered Subordinated Securities of a series affected are then Outstanding,
to the Holders thereof who have filed their names and addresses with the Trustee
pursuant to Section 313(c)(2) of the Trust Indenture Act, by mailing such notice
to such Holders at such addresses as were so furnished to the Trustee (and the
Trustee shall make such information available to the Company for such purpose)
and (c) to the Holders of Registered Subordinated Securities of each series
affected, by mailing such notice to such Holders at their addresses as they
shall appear on the registry books. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
6.11. If the Company fails to give such notice within ten days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
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Section 6.13. Merger, Conversion, Consolidation or Succession to Business of
Trustee.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided, that such corporation shall be qualified under Section
310(b) of the Trust Indenture Act and eligible under the provisions of Section
6.10, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Subordinated Indenture any of the
Subordinated Securities of any series shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Subordinated
Securities so authenticated; and, in case at that time any of the Subordinated
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Subordinated Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee; and in all such
cases such certificate shall have the full force which it is anywhere in the
Subordinated Securities of such series or in this Subordinated Indenture
provided that the certificate of the Trustee shall have; provided, that the
right to adopt the certificate of authentication of any predecessor trustee or
to authenticate Subordinated Securities of any series in the name of any
predecessor trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
Section 6.14. Preferential Collection of Claims Against the Company.
If this Subordinated Indenture is qualified under the Trust
Indenture Act, the Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship listed in Section 311(b) of
the Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent indicated.
Section 6.15. Appointment of Authenticating Agent.
As long as any Subordinated Securities of a series remain
Outstanding, the Trustee may, by an instrument in writing, appoint with the
approval of the Company an authenticating agent (the "Authenticating Agent")
which shall be authorized to act on behalf of the Trustee to authenticate
Subordinated Securities, including Subordinated Securities issued upon exchange,
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registration of transfer, partial redemption or pursuant to Section 2.9.
Subordinated Securities of each such series authenticated by such Authenticating
Agent shall be entitled to the benefits of this Subordinated Indenture and shall
be valid and obligatory for all purposes as if authenticated by the Trustee.
Whenever reference is made in this Subordinated Indenture to the authentication
and delivery of Subordinated Securities of any series by the Trustee or to the
Trustee's Certificate of Authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent for such series and a Certificate of Authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any State,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $45,000,000 (determined as provided in Section
6.10 with respect to the Trustee) and subject to supervision or examination by
Federal or State authority.
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, conversion or consolidation to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate agency business of any Authenticating Agent,
shall continue to be the authenticating Agent with respect to all series of
Subordinated Securities for which it served as Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such Authenticating Agent. Any Authenticating Agent may at any time, and if
it shall cease to be eligible shall, resign by giving written notice of
resignation to the Trustee 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 in accordance with the provisions of this Section 6.15 with respect to
one or more series of Subordinated Securities, the Trustee shall upon receipt of
a Company Order appoint a successor Authenticating Agent and the Company shall
provide notice of such appointment to all Holders of Subordinated Securities of
such series in the manner and to the extent provided in Section 11.4. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent. The Company agrees to pay to the Authenticating Agent for such series
from time to time reasonable compensation. The Authenticating Agent for the
Subordinated Securities of any series shall have no responsibility or liability
for any action taken by it as such at the direction of the Trustee.
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Sections 6.2, 6.3, 6.4, 6.6 and 7.3 shall be applicable to
any Authenticating Agent.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
Section 7.1. Evidence of Action Taken by Securityholders.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Subordinated Indenture to be
given or taken by a specified percentage in principal amount of the
Securityholders of any or all series may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such specified
percentage of Securityholders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee.
Proof of execution of any instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Subordinated Indenture and (subject
to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Article.
Section 7.2. Proof of Execution of Instruments and of Holding of Subordinated
Securities.
Subject to Sections 6.1 and 6.2, the execution of any
instrument by a Securityholder or his agent or proxy may be proved 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 or
Subordinated Securities shall be proved by the Security Register or by a
certificate of the registrar thereof.
Section 7.3. Holders to be Treated as Owners.
The Company, the Trustee and any agent of the Company or
the Trustee may deem and treat the person in whose name any Subordinated
Security shall be registered upon the Security Register for such series as the
absolute owner of such Subordinated Security (whether or not such Subordinated
Security 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 and, subject to the provisions of this Subordinated Indenture,
interest on such Subordinated Security and for all other purposes; and neither
the Company nor the Trustee nor any agent of the Company or the Trustee shall be
affected by any notice to the contrary. The Company, the Trustee and any agent
of the Company or the Trustee may treat the Holder of any Unregistered
Subordinated Security and the Holder of any Coupon as the absolute owner of such
Unregistered Subordinated Security or Coupon (whether or not such Unregistered
Subordinated
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Security or Coupon shall be overdue) for the purpose of receiving payment
thereof or on account thereof and for all other purposes and neither the
Company, the Trustee, nor any agent of the Company or the Trustee shall be
affected by any notice to the contrary. All such payments so made to any such
person, 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 moneys payable
upon any such Unregistered Subordinated Security or Coupon.
If the Subordinated Securities of any series are issued in
the form of one or more Global Subordinated Securities, the Depository therefor
may grant proxies to Persons having a beneficial ownership in such Global
Subordinated Security or Subordinated Securities for purposes of voting or
otherwise responding to any request for consent, waiver or other action which
the Holder of such Subordinated Security is entitled to grant or take under this
Subordinated Indenture and the Trustee shall accept such proxies for the
purposes granted; provided that neither the Trustee nor the Company shall have
any obligation with respect to the grant of or solicitation by the Depository of
such proxies.
Section 7.4. Subordinated Securities Owned by Company Deemed Not Outstanding.
In determining whether the Holders of the requisite
aggregate principal amount of Outstanding Subordinated Securities of any or all
series have concurred in any request, demand, authorization, direction, notice,
consent, waiver or other action by Securityholders under this Subordinated
Indenture, Subordinated Securities which are owned by the Company or any other
obligor on the Subordinated Securities with respect to which such determination
is being made 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 Subordinated Securities with respect to which such determination
is being made shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such action only
Subordinated Securities which a Responsible Officer of the Trustee knows are so
owned shall be so disregarded. Subordinated Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Subordinated Securities and that the pledgee is not the Company or any
other obligor upon the Subordinated Securities or 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 Subordinated Securities. In
case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the
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Company shall furnish to the Trustee promptly an Officer's Certificate listing
and identifying all Subordinated Securities, 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 Sections 6.1 and 6.2, the Trustee shall be entitled to accept such
Officer's Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Subordinated Securities not listed therein are Outstanding
for the purpose of any such determination.
Section 7.5. Right of Revocation of Action Taken.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 7.1, of the taking of any action by the Holders
of the percentage in aggregate principal amount of the Subordinated Securities
of any or all series, as the case may be, specified in this Subordinated
Indenture in connection with such action, any Holder of a Subordinated Security
the serial number of which is shown by the evidence to be included among the
serial numbers of the Subordinated Securities the Holders of which have
consented to such action may, by filing written notice at the Corporate Trust
Office and upon proof of holding as provided in this Article, revoke such action
so far as concerns such Subordinated Security. Except as aforesaid any such
action taken by the Holder of any Subordinated Security shall be conclusive and
binding upon such Holder and upon all future Holders and owners of such
Subordinated Security and of any Subordinated Securities issued in exchange or
substitution therefor or on registration of transfer thereof, irrespective of
whether or not any notation in regard thereto is made upon any such Subordinated
Security. Any action taken by the Holders of the percentage in aggregate
principal amount of the Subordinated Securities of any or all series, as the
case may be, specified in this Subordinated Indenture in connection with such
action shall be conclusively binding upon the Company, the Trustee and the
Holders of all the Subordinated Securities affected by such action.
ARTICLE VIII.
SUPPLEMENTAL SUBORDINATED INDENTURES
Section 8.1. Supplemental Subordinated Indentures Without Consent of
Securityholders.
The Company, when authorized by a resolution of its Board
of Directors (which resolution may provide general terms or parameters for such
action and may provide that the specific terms of such action may be determined
in accordance with or pursuant to a Company Order), 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:
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(a) to cause the Subordinated Indenture to be qualified
under the Trust Indenture Act; or
(b) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Subordinated Securities; or
(c) to add to the covenants of the Company for the benefit
of the Holders of all or any series of Subordinated Securities (and
if such covenants are to be for the benefit of less than all series
of Subordinated Securities, stating that such covenants are expressly
being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(d) to add any additional Events of Default for the
benefit of the Holders of all or any series of Subordinated
Securities (and if such additional Events of Default are to be for
the benefit of less than all series of Subordinated Securities,
stating that such additional Events of Default are expressly being
included solely for the benefit of such series); or
(e) to add to or change any of the provisions of this
Subordinated Indenture to such extent as shall be necessary to permit
or facilitate the issuance of Subordinated Securities in bearer form,
registrable or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of
Subordinated Securities in uncertificated form; or
(f) to add to, change or eliminate any of the provisions
of this Subordinated Indenture in respect of one or more series of
Subordinated Securities, provided that any such addition, change or
elimination (A) shall neither (i) apply to any Subordinated Security
of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii)
modify the rights of the Holder of any such Subordinated Security
with respect to such provision or (B) shall become effective only
when there is no such Subordinated Security Outstanding; or
(g) to secure the Subordinated Securities; or
(h) to establish the form or terms of Subordinated
Securities of any series as permitted by Sections 2.1 and 2.3; or
(i) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Subordinated Securities of one or more series and to add to or change
any of the provisions of this Subordinated
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Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11; or
(j) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect
to matters or questions arising under this Subordinated Indenture,
provided that such action pursuant to this Clause (j) shall not
adversely affect the interests of the Holders of Subordinated
Securities of any series in any material respect; or
(k) to make provision with respect to the conversion
rights of Holders in the event of a consolidation, merger or sale of
assets involving the Company, as required in this Subordinated
Indenture; or
(l) to supplement any of the provisions of the
Subordinated Indenture to such extent as shall be necessary to permit
or facilitate the defeasance and discharge of any series of
Subordinated Securities pursuant to Article X, provided that any such
action shall not adversely affect the interests of the Holders of
Subordinated Securities of such series or any other series of
Subordinated Securities in any material respect.
Section 8.2. Supplemental Subordinated Indentures with Consent of
Securityholders.
With the consent of the Holders of a majority in principal
amount of the Outstanding Subordinated Securities of each series affected by
such supplemental indenture, by act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner eliminating any of the
provisions of this Subordinated Indenture or of modifying in any manner the
rights of the Holders of Subordinated Securities of such series under this
Subordinated Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Subordinated
Security affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Subordinated
Security, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof,
or reduce the amount of the principal of an Original Issue Discount
Subordinated Security or any other Subordinated Security which would
be due and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2, or change any place of payment
where, or the coin or currency in which,
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any Subordinated Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or modify the
provisions of this Subordinated Indenture with respect to the
subordination of the Subordinated Securities in a manner adverse to
the Holders, or
(b) reduce the percentage in principal amount of the
Outstanding Subordinated Securities of any series, the consent of
whose Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver (of compliance
with certain provisions of this Subordinated Indenture or certain
defaults hereunder and their consequences) provided for in this
Subordinated Indenture, or
(c) modify any of the provisions of this Section 8.2 or
Section 5.14, except to increase any such percentage or to provide
that certain other provisions of this Subordinated Indenture cannot
be modified or waived without the consent of the Holder of each
Outstanding Subordinated Security affected thereby; provided,
however, that this clause shall not be deemed to require the consent
of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section 8.2, or the deletion
of this proviso, in accordance with the requirements of Sections 6.11
and 8.1(i).
A supplemental indenture which changes or eliminates any
covenant or other provision of this Subordinated Indenture which has expressly
been included solely for the benefit of one or more particular series of
Subordinated Securities, or which modifies the rights of Holders of Subordinated
Securities of such series, or of Coupons appertaining to such Subordinated
Securities, with respect to such covenant or provision, shall be deemed not to
affect the rights under this Subordinated Indenture of the Holders of
Subordinated Securities of any other series or of the Coupons appertaining to
such Subordinated Securities.
Upon the request of the Company, accompanied by a copy of a
resolution of the Board of Directors (which resolution may provide general terms
or parameters for such action and may provide that the specific terms of such
action may be determined in accordance with or pursuant to a Company Order)
certified by the secretary or an assistant secretary of the Company authorizing
the execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of the Holders of the Subordinated Securities
as aforesaid and other documents, if any, required by Section 7.1, 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
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Subordinated Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the
Securityholders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Section 8.3. Effect of Supplemental Subordinated Indenture.
Upon the execution of any supplemental indenture pursuant
to the provisions hereof, this Subordinated Indenture shall be and be deemed to
be modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this
Subordinated Indenture of the Trustee, the Company and the Holders of
Subordinated Securities of each series affected thereby 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 Subordinated Indenture for any and all purposes.
Section 8.4. Documents to be Given to Trustee.
The Trustee, subject to the provisions of Sections 6.1 and
6.2, may receive an Officer's Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article VIII complies with the applicable provisions of this Subordinated
Indenture.
Section 8.5. Notation on Subordinated Securities in Respect of Supplemental
Subordinated Indentures.
Subordinated Securities of any series authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article may bear a notation in form approved by the Trustee
for such series as to any matter provided for by such supplemental indenture or
as to any action taken by Securityholders. If the Company or the Trustee shall
so determine, new Subordinated Securities of any series so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Subordinated Indenture contained in any such supplemental
indenture may be prepared by the Company, authenticated by the Trustee and
delivered in exchange for the Subordinated Securities of such series then
Outstanding.
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ARTICLE IX.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any
other Person, or convey, transfer or lease its properties and assets
substantially as an entirety to any other Person, and the Company shall not
permit any other Person to consolidate with or merge into the Company or convey,
transfer or lease its properties and assets substantially as an entirety to the
Company, unless:
(a) in case the Company shall consolidate with or merge
into another Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the Person formed
by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer, or which leases, the
properties and assets of the Company substantially as an entirety
shall be a corporation, partnership or trust, shall be organized and
validly existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and any premium and interest on all the
Subordinated Securities and the performance or observance of every
covenant of this Subordinated Indenture on the part of the Company to
be performed or observed and any conversion rights shall be provided
for in accordance with the terms that may be established pursuant to
Section 2.3, if applicable, or as otherwise specified pursuant to
Section 2.3, by supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the Person (if
other than the Company) formed by such consolidation or into which
the Company shall have been merged or by the Person which shall have
acquired the Company's assets;
(b) immediately after giving effect to such consolidation,
merger, conveyance, transfer or lease, no Event of Default, and no
event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing;
(c) such consolidation, merger, conveyance, transfer or
lease does not adversely affect the validity or enforceability of the
Subordinated Securities; and
(d) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
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stating that such consolidation, merger, conveyance, transfer or
lease and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture (if any), comply with
this Subordinated Indenture and the Subordinated Securities and that
all conditions precedent herein provided for relating to such
transaction have been satisfied.
Section 9.2. Successor Corporation Substituted.
The successor corporation formed by such consolidation or
into which the Company is merged or to which such conveyance, transfer or lease
is made shall succeed to and be substituted for, and may exercise every right
and power of, the Company under this Subordinated Indenture with the same effect
as if such successor corporation had been named as the Company herein, and
thereafter (except in the case of a lease to another Person) the predecessor
corporation shall be relieved of all obligations and covenants under the
Subordinated Indenture and the Subordinated Securities and, in the event of such
conveyance or transfer, any such predecessor corporation may be dissolved and
liquidated.
ARTICLE X.
SATISFACTION AND DISCHARGE
Section 10.1. Satisfaction and Discharge of Subordinated Indenture.
(A) If at any time (i) the Company shall have paid or
caused to be paid the principal of and interest on all the Subordinated
Securities of any series Outstanding hereunder and all unmatured Coupons
appertaining thereto (other than Subordinated Securities of such series and
Coupons appertaining thereto which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.9) as and when the same
shall have become due and payable, or (ii) the Company shall have delivered to
the Trustee for cancellation all Subordinated Securities of any series
theretofore authenticated and all unmatured Coupons appertaining thereto (other
than any Subordinated Securities of such series and Coupons appertaining thereto
which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 2.9) or (iii) in the case of any series
of Subordinated Securities where the exact amount (including the currency of
payment) of principal of and interest due on which can be determined at the time
of making the deposit referred to in clause (b) below, (a) all the Subordinated
Securities of such series and all unmatured Coupons appertaining thereto not
theretofore 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 (b) the Company shall
have irrevocably deposited
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or caused to be deposited with the Trustee as trust funds in trust the entire
amount in (i) cash (other than moneys repaid by the Trustee or any Paying Agent
to the Company in accordance with Section 10.4), (ii) in the case of any series
of Subordinated Securities the payments on which may only be made in Dollars,
direct obligations of the United States of America, backed by its full faith and
credit ("U.S. Government Obligations"), maturing as to principal and interest at
such times and in such amounts as will insure the availability of cash
sufficient to pay at such Maturity or upon such redemption, as the case may be,
or (iii) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay (a) the principal and
interest on all Subordinated Securities of such series and Coupons appertaining
thereto on each date that such principal or interest is due and payable and (b)
any mandatory sinking fund payments on the dates on which such payments are due
and payable in accordance with the terms of the Subordinated Indenture and the
Subordinated Securities of such series; (x) the principal and interest on all
Subordinated Securities of such series and Coupons appertaining thereto on each
date that such principal or interest is due and payable and (y) any mandatory
sinking fund payments on the dates on which such payments are due and payable in
accordance with the terms of the Subordinated Indenture and the Subordinated
Securities of such series; and if, in any such case, the Company shall also pay
or cause to be paid all other sums payable hereunder by the Company, then this
Subordinated Indenture shall cease to be of further effect (except as to (i)
rights of registration of transfer and exchange of Subordinated Securities of
such Series and of Coupons appertaining thereto and the Company's right of
optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed,
lost or stolen Subordinated Securities or Coupons, (iii) rights of holders of
Subordinated Securities and Coupons appertaining thereto to receive payments of
principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration), and remaining rights of the Holders to
receive mandatory sinking fund payments, if any, (iv) any optional redemption
rights of such series of Subordinated Securities to the extent to be exercised
to make such call for redemption within one year, (v) the rights, obligations,
duties and immunities of the Trustee hereunder, including those under Section
6.6, (vi) the rights of the Holders of securities of such series and Coupons
appertaining thereto as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and (vii) the
obligations of the Company under Section 3.2 and the Trustee, on demand of the
Company accompanied by an Officer's Certificate and an Opinion of Counsel and at
the cost and expense of the Company, shall execute proper instruments
acknowledging such satisfaction of and discharging this Subordinated Indenture;
provided, that the rights of Holders of the Subordinated Securities and Coupons
to receive amounts in respect of principal of and interest on the Subordinated
Securities and Coupons held by them shall not be
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delayed longer than required by then applicable mandatory rules or policies of
any securities exchange upon which the Subordinated Securities are listed. The
Company agrees to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred and to compensate the Trustee for any services
thereafter rendered by the Trustee in connection with this Subordinated
Indenture or the Subordinated Securities of such series.
(B) The following provisions shall apply to the
Subordinated Securities of each series unless specifically otherwise provided in
a Board Resolution, Officer's Certificate or indenture supplemental hereto
provided pursuant to Section 2.3. In addition to discharge of the Subordinated
Indenture pursuant to the next preceding paragraph, in the case of any series of
Subordinated Securities the exact amounts (including the currency of payment) of
principal of and interest due on which can be determined at the time of making
the deposit referred to in clause (a) below, the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Subordinated Securities
of such a series and the Coupons appertaining thereto on the date of the deposit
referred to in subparagraph (a) below, and the provisions of this Subordinated
Indenture with respect to the Subordinated Securities of such series and Coupons
appertaining thereto shall no longer be in effect (except as to (i) rights of
registration of transfer and exchange of Subordinated Securities of such series
and of Coupons appertaining thereto and the Company's right of optional
redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Subordinated Securities or Coupons, (iii) rights of Holders of
Subordinated Securities and Coupons appertaining thereto to receive payments of
principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration), and remaining rights of the Holders to
receive mandatory sinking fund payments, if any, (iv) any optional redemption
rights of such series of Subordinated Securities to the extent to be exercised
to make such call for redemption within one year, (v) the rights, obligations,
duties and immunities of the Trustee hereunder, (vi) the rights of the Holders
of Subordinated Securities of such series and Coupons appertaining thereto as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them and (vii) the obligations of the Company under
Section 3.2 and the Trustee, at the expense of the Company, shall at the
Company's request, execute proper instruments acknowledging the same, if
(a) with reference to this provision the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of the
Subordinated Securities of such series and Coupons appertaining
thereto (i) cash in an amount, or (ii) in the case of any series of
Subordinated
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Securities the payments on which may only be made in Dollars, U.S.
Government Obligations, maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash or
(iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay (a) the principal and interest on all Subordinated
Securities of such series and Coupons appertaining thereto on each
date that such principal or interest is due and payable and (b) any
mandatory sinking fund payments on the dates on which such payments
are due and payable in accordance with the terms of the Subordinated
Indenture and the Subordinated Securities of such series;
(b) such deposit will not result in a breach or violation
of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound;
(c) the Company has delivered to the Trustee an Opinion of
Counsel based on the fact that (x) the Company has received from, or
there has been published by, the IRS a ruling or (y) since the date
hereof, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and such opinion shall
confirm that, the Holders of the Subordinated Securities of such
series and Coupons appertaining thereto will not recognize income,
gain or loss for United States Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject
to United States Federal income tax on the same amount and in the
same manner and at the same times, as would have been the case if
such deposit, defeasance and discharge had not occurred; and
(d) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the defeasance
contemplated by this provision have been complied with.
(C) The Company shall be released from its obligations
under Sections 3.6 and 9.1 and unless otherwise provided for in the Board
Resolution, Officer's Certificate or Subordinated Indenture supplemental hereto
establishing such series of Subordinated Securities, from all covenants and
other obligations referred to in Section 2.3(18) or 2.3(20) with respect to such
series of Subordinated Securities, and any Coupons appertaining thereto,
outstanding on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance
means that, with respect to the Outstanding Subordinated Securities of any
series, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in such
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Section, whether directly or indirectly by reason of any reference elsewhere
herein to such Section or by reason of any reference in such Section to any
other provision herein or in any other document and such omission to comply
shall not constitute an Event of Default under Section 5.1, but the remainder of
this Subordinated Indenture and such Subordinated Securities and Coupons shall
be unaffected thereby. The following shall be the conditions to application of
this subsection (C) of this Section 10.1:
(a) The Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of the
Subordinated Securities of such series and coupons appertaining
thereto, (i) cash in an amount, or (ii) in the case of any series of
Subordinated Securities the payments on which may only be made in
Dollars, U.S. Government Obligations maturing as to principal and
interest at such times and in such amounts as will insure the
availability of cash or (iii) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay (a) the principal and interest on all
Subordinated Securities of such series and Coupons appertaining
thereof and (b) any mandatory sinking fund payments on the day on
which such payments are due and payable in accordance with the terms
of the Subordinated Indenture and the Subordinated Securities of such
series;
(b) No Event of Default or event which with notice or lapse
of time or both would become an Event of Default with respect to the
Subordinated Securities shall have occurred and be continuing on the
date of such deposit;
(c) Such covenant defeasance shall not cause the Trustee to
have a conflicting interest as defined in Section 6.9 and for
purposes of the Trust Indenture Act with respect to any securities of
the Company;
(d) Such covenant defeasance shall not result in a breach
or violation of, or constitute a default under, this Subordinated
Indenture or any other agreement or instrument to which the Company
is a party or by which it is bound;
(e) Such covenant defeasance shall not cause any
Subordinated Securities then listed on any registered national
securities exchange under the Exchange Act to be delisted;
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(f) The Company shall have delivered to the Trustee an
Officer's Certificate and Opinion of Counsel to the effect that the
Holders of the Subordinated Securities of such series and Coupons
appertaining thereto will not recognize income, gain or loss for
United States Federal income tax purposes as a result of such
covenant defeasance and will be subject to United States Federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(g) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to the covenant
defeasance contemplated by this provision have been complied with.
Section 10.2. Application by Trustee of Funds Deposited for Payment of
Subordinated Securities.
Subject to Section 10.4, all moneys deposited with the
Trustee (for other trustee) pursuant to Section 10.1 shall be held in trust and
applied by it to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), to the Holders of the
particular Subordinated Securities of such series and of Coupons appertaining
thereto for the payment or redemption of which such moneys have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest; but such money need not be segregated from other funds except to the
extent required by law.
Section 10.3. Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Subordinated Indenture with respect to Subordinated Securities of any series,
all moneys then held by any Paying Agent under the provisions of this
Subordinated Indenture with respect to such series of Subordinated Securities
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 moneys.
Section 10.4. Return of Moneys Held by Trustee and Paying Agent Unclaimed for
Two Years.
Any moneys deposited with or paid to the Trustee or any
Paying Agent for the payment of the principal of and any premium and interest on
any Subordinated Security and any series of Coupons attached thereto and not so
applied but remaining unclaimed for two years under applicable law shall be
transferred by the Trustee to the Company in accordance with applicable laws,
and the Holder of such Subordinated Security of such series and of any Coupons
appertaining thereto shall thereafter look only to
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such Persons for any payment which such Holder may be entitled to collect and
all liability of the Trustee and such Paying Agent with respect to such moneys
shall thereupon cease.
Section 10.5. Indemnity for U.S. Government of Obligations.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 10.1 or the principal or interest
received in respect of such obligations.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
Section 11.1. Incorporators, Stockholders, Officers and Directors of Company
Exempt from Individual Liability.
No recourse under or upon any obligation, covenant or
agreement contained in this Subordinated Indenture, or in any Subordinated
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such or against any past, present or future stockholder,
officer or director, as such, of the Company or of any successor, either
directly or through the Company or any successor, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Subordinated Securities and the
Coupons, if any, appertaining thereto by the Holders thereof and as part of the
consideration for the issue of the Subordinated Securities and the Coupons
appertaining thereto.
Section 11.2. Provisions of Subordinated Indenture for the Sole Benefit of
Parties and Holders of Subordinated Securities and Coupons.
Nothing in this Subordinated Indenture, in the Subordinated
Securities or in the Coupons appertaining thereto, expressed or implied, shall
give or be construed to give to any person, firm or corporation, other than the
parties thereto and their successors and the Holders of the Subordinated
Securities or Coupons, if any, any legal or equitable right, remedy or claim
under this Subordinated Indenture or under any covenant or provision herein
contained, all such covenants and provisions being for the sole benefit of the
parties hereto and their successors and of the Holders of the Subordinated
Securities or Coupons, if any.
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Section 11.3. Successors and Assigns of Company Bound by Subordinated Indenture.
All the covenants, stipulations, promises and agreements in
this Subordinated Indenture contained by or in behalf of the Company shall bind
its successors and assigns, whether so expressed or not.
Section 11.4. Notices and Demands on Company, Trustee and Holders of
Subordinated Securities and Coupons.
Any notice or demand which by any provision of this
Subordinated Indenture is required or permitted to be given or served by the
Trustee or by the Holders of Subordinated Securities or Coupons, if any, to or
on the Company may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Company is filed by the Company with the Trustee)
to QuadraMed Corporation, 80 East Sir Francis Drake Blvd., Ste. 2A, Larkspur, CA
94939, Attention: Secretary. Any notice, direction, request or demand by the
Company or any Holder of Subordinated Securities or Coupons, if any, to or upon
the Trustee shall be deemed to have been sufficiently given or served by being
deposited postage prepaid, first-class mail (except as otherwise specifically
provided herein) addressed (until another address of the Trustee is filed by the
Trustee with the Company) to The Bank of New York, 101 Barclay street, 2IW, New
York, NY 10286, Attention: Corporate Trust Administration.
Where this Subordinated Indenture provides for notice to
Holders of Registered Subordinated Securities, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class mail, postage prepaid, to each Holder entitled thereto, at his last
address as it appears in the Security Register. In any case where notice to such
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this
Subordinated Indenture provides for notice in any manner, such notice may be
waived in writing by the person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of or irregularities
in regular mail service, it shall be impracticable to mail notice to the Company
when such notice is required to the given pursuant to any provision of this
Subordinated Indenture, then any manner of giving such notice as shall be
reasonably satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice.
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Section 11.5. Officer's Certificates and Opinions of Counsel; Statements to be
Contained Therein.
Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Subordinated
Indenture, the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent provided for in this Subordinated
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, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Subordinated Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion provided for in this
Subordinated Indenture and delivered to the Trustee with respect to compliance
with a condition or covenant provided for in this Subordinated Indenture shall
include (a) a statement that the person making such certificate or opinion has
read such covenant or condition, (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based, (c) a statement that, in the
opinion of such person, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with and (d) a statement as to whether
or not, in the opinion of such person, such condition or covenant has been
complied with.
Any certificate, statement or opinion of an officer of the
Company may be based, insofar as it relates to legal matters, upon a certificate
or opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based, insofar as it
relates to factual matters or information with respect to which is in the
possession of the Company, upon the certificate, statement or opinion of or
representations by an officer of officers of the Company, unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
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case may be, knows that the certificate or opinion of or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of
public accountants filed with and directed to the Trustee shall contain a
statement that such firm is independent.
Section 11.6. Payments Due on Saturdays, Sundays and Holidays.
If the date of Maturity of interest on or principal of the
Subordinated Securities of any series or any Coupons appertaining thereto or the
date fixed for redemption or repayment of any such Subordinated Security or
Coupon shall not be a Business Day, then payment of interest or principal 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 after such
date.
Section 11.7. Conflict of Any Provision of Subordinated Indenture with Trust
Indenture Act.
If and to the extent that any provision of this
Subordinated Indenture limits, qualifies or conflicts with duties imposed by, or
with another provision (an "incorporated provision") included in this
Subordinated Indenture by operation of Sections 310 to 318, inclusive, of the
Trust Indenture Act, such imposed duties or incorporated provision shall
control.
Section 11.8. New York Law to Govern.
THIS SUBORDINATED INDENTURE AND EACH SUBORDINATED SECURITY
AND COUPON SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW
YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
Section 11.9. Counterparts.
This Subordinated 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.
Section 11.10. Effect of Headings.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
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Section 11.11. Subordinated Securities in a Foreign Currency or in ECU.
Unless otherwise specified in an Officer's Certificate
delivered pursuant to Section 2.3 of this Subordinated Indenture with respect to
a particular series of Subordinated Securities, whenever for purposes of this
Subordinated Indenture any action may be taken by the Holders of a specified
percentage in aggregate principal amount of Subordinated Securities of all
series or all series affected by a particular action at the time Outstanding
and, at such time, there are Outstanding Subordinated Securities of any series
which are denominated in a coin or currency other than Dollars (including ECUs),
then the principal amount of Subordinated Securities of such series which shall
be deemed to be Outstanding for the purpose of taking such action shall be that
amount of Dollars that could be obtained for such amount at the Market Exchange
Rate. For purposes of this Section 11.11, Market Exchange Rate shall mean the
noon Dollar buying rate in The New York City for cable transfers of that
currency as published by the Federal Reserve Bank of New York; provided, in the
case of ECUs, Market Exchange Rate shall mean the rate of exchange determined by
the Commission of the European Communities (or any successor thereto) as
published in the Official Journal of the European Communities (such publication
or any successor publication, the "Journal"). If such Market Exchange Rate is
not available for any reason with respect to such currency, the Trustee shall be
provided with such quotation of the Federal Reserve Bank of New York or, in the
case of ECUs, the rate of exchange as published in the Journal, as of the most
recent available date, or quotations or, in the case of ECUs, rates of exchange
from one or more major banks in The City of New York or in the country of issue
of the currency in question, which for purposes of the ECU shall be Brussels,
Belgium, or such other quotations or, in the case of ECU, rates of exchange as
the Trustee shall deem appropriate. The provisions of this paragraph shall apply
in determining the equivalent principal amount in respect of Subordinated
Securities of a series denominated in a currency other than Dollars in
connection with any action taken by Holders of Subordinated Securities pursuant
to the terms of this Subordinated Indenture.
Section 11.12. Judgment Currency.
The Company agrees, to the fullest extent that it may
effectively do so under applicable law, that (a) if for the purpose of obtaining
judgment in any court it is necessary to convert the sum due in respect of the
principal of or interest on the Subordinated Securities of any series (the
"Required Currency") into a currency in which a judgment will be rendered (the
"Judgment Currency"), the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The City
of New York the Required Currency with the Judgment Currency on the day on which
final unappealable judgment is entered, unless such day is not a New
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York Banking Day, then, to the extent permitted by applicable law, the rate of
exchange used shall be the rate at which in accordance with normal banking
procedures the Trustee could purchase in The City of New York the Required
Currency with the Judgment Currency on the New York Banking Day preceding the
day on which final unappealable judgment is entered and (b) its obligations
under this Subordinated Indenture to make payments in the Required Currency (i)
shall not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment (whether or not entered in accordance with subsection (a)), in any
currency other than the Required Currency, except to the extent that such tender
or recovery shall result in the actual receipt, by the payee, of the full amount
of the Required Currency expressed to be payable in respect of such payments,
(ii) shall be enforceable as an alternative or additional cause of action for
the purpose of recovering in the Required Currency the amount, if any, by which
such actual receipt shall fall short of the full amount of the Required Currency
so expressed to be payable and (iii) shall not be affected by judgment being
obtained for any other sum due under this Subordinated Indenture. For purposes
of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday
or a legal holiday in The City of New York or a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to close.
ARTICLE XII.
REDEMPTION OF SUBORDINATED SECURITIES AND SINKING FUNDS
Section 12.1. Applicability of Article.
The provisions of this Article shall be applicable to the
Subordinated Securities of any series which are redeemable before their Maturity
or to any sinking fund for the retirement of Subordinated Securities of a series
except as otherwise specified as contemplated by Section 2.3 for Subordinated
Securities of such series.
Section 12.2. Notice of Redemption; Partial Redemptions.
Notice of redemption to the Holders of Registered
Subordinated Securities of any series to be redeemed as a whole or in part at
the option of the Company shall be given by mailing notice of such redemption by
first class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to such Holders of Subordinated
Securities of such series at their last addresses as they shall appear upon the
registry books. Notice of redemption to the Holders of Unregistered Subordinated
Securities to be redeemed as a whole or in part, who have filed their names and
addresses with the Trustee pursuant to Section 313(c)(2) of the Trust Indenture
Act shall be given by mailing notice of such redemption, by first class mail,
postage prepaid, at least 30 days and not more than 60 prior to the date fixed
for redemption, to such Holders at
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such addresses as were so furnished to the Trustee (and, in the case of any such
notice given by the Company, the Trustee shall make such information available
to the Company for such purpose). Notice of redemption to all other Holders of
Unregistered Subordinated Securities shall be published in an Authorized
Newspaper in the Borough of Manhattan, The City of New York and in an Authorized
Newspaper in London (and, if required by Section 3.9, in an Authorized Newspaper
in Luxembourg), in each case, once in each of two successive calendar weeks, the
first publication to be not less than 30 nor more than 60 days prior to the date
fixed for redemption. Any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Subordinated Security of a series designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of such Subordinated Security of such series.
The notice of redemption shall include a description of the
Subordinated Securities, including CUSIP number, the date fixed for redemption,
the redemption price, the place or places of payment, that payment will be made
upon presentation and surrender of such Subordinated Securities and, in the case
of Subordinated Securities with Coupons attached thereto, of all Coupons
appertaining thereto maturing after the date fixed for redemption, that such
redemption is pursuant to the mandatory or optional sinking fund, or both, if
such be the case, that interest accrued to the date fixed for redemption will be
paid as specified in such notice and that on and after said date interest
thereon or on the portions thereof to be redeemed will cease to accrue. In case
any Subordinated Security of a series 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 Subordinated Security, a new Subordinated Security or
Subordinated Securities of such series in principal amount equal to the
unredeemed portion thereof will be issued.
The notice of redemption of Subordinated Securities of any
series to be redeemed at the option of the Company shall be given by the Company
or, at the Company's request, by the Trustee in the name and at the expense of
the Company.
On or before the redemption date specified in the notice of
redemption given as provided in this Section, 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 holder in trust as provided in
Section 3.4) an amount of money sufficient to redeem on the redemption date all
the Subordinated Securities of such series so called for redemption at the
appropriate redemption price, together with accrued interest to the date fixed
for redemption. The Company will deliver to the Trustee at least 70 days prior
to the date
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fixed for redemption, or such shorter period as shall be acceptable to the
Trustee, an Officer's Certificate stating the aggregate principal amount of
Subordinated Securities to be redeemed, the redemption price and the date fixed
for redemption. In case of a redemption at the election of the Company prior to
the expiration of any restriction on such redemption, the Company shall deliver
to the Trustee, prior to the giving of any notice of redemption to Holders
pursuant to this Section, an Officer's Certificate stating that such restriction
has been complied with.
If less than all the Subordinated Securities of a series
are to be redeemed, the Trustee shall select by lot, pro rata or in such manner
as it shall deemed appropriate and fair, in its sole discretion, Subordinated
Securities of such series to be redeemed in whole or in part. Subordinated
Securities may be redeemed in part in multiples equal to the minimum authorized
denomination for Subordinated Securities of such series or any multiple thereof.
The Trustee shall promptly notify the Company in writing of the Subordinated
Securities of such series selected for redemption and, in the case of any
Subordinated Securities of such series selected for partial redemption, the
principal amount thereof to be redeemed. For all purposes of this Subordinated
Indenture, unless the context otherwise requires, all provisions relating to the
redemption of Subordinated Securities of any series shall relate, in the case of
any Subordinated Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Subordinated Security which has been or
is to be redeemed.
Section 12.3. Payment of Subordinated Securities Called for Redemption.
If notice of redemption has been given as above provided,
the Subordinated Securities or portions of Subordinated Securities specified in
such notice shall become due and payable on the date and at the place stated in
such notice at the applicable redemption price, together with interest accrued
to the date fixed for redemption, and on and after said date (unless the Company
shall default in the payment of such Subordinated Securities at the redemption
price, together with interest accrued to said date) interest on the Subordinated
Securities or portions of Subordinated Securities so called for redemption shall
cease to accrue, and the unmatured Coupons, if any, appertaining thereto shall
be void, and, except as provided in Sections 6.5 and 10.4, such Subordinated
Securities shall cease from and after the date fixed for redemption to be
entitled to any benefit or security under this Subordinated Indenture, and the
Holders thereof shall have no right in respect of such Subordinated Securities
except the right to receive the redemption price thereof and unpaid interest to
the date fixed for redemption. On presentation and surrender of such
Subordinated Securities at a place of payment specified in said notice, together
with all Coupons, if any, appertaining thereto maturing after the date fixed for
redemption, said Subordinated
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Securities or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with interest accrued
thereon to the date fixed for redemption; provided, that payment of interest
becoming due on or prior to the date fixed for redemption shall be payable in
the case of Subordinated Securities with Coupons attached thereto, to the
Holders of the Coupons for such interest upon surrender thereof, and in the case
of Registered Subordinated Securities, to the Holder of such Registered
Subordinated Securities registered as such on the relevant record date, subject
to the terms and provisions of Section 2.3 and 2.7 hereof.
If the Company fails to deposit the funds for redemption
with the Trustee and any Subordinated Security called for redemption shall not
be so paid upon surrender thereof for redemption, the principal shall, until
paid or duly provided for, bear interest from the date fixed for redemption at
the rate of interest or Yield to Maturity (in the case of an Original Issue
Discount Subordinated Security) borne by such Subordinated Security.
If any Subordinated Security with Coupons attached thereto
is surrendered for redemption and is not accompanied by all appurtenant Coupons
maturing after the date fixed for redemption, the amount of Subordinated
Securities fixed for redemption shall be reduced by the amount of missing
Coupons; provided, however, that the surrender of such missing Coupon or Coupons
may be waived by the Company and the Trustee, if there be furnished to each of
them such security or indemnity as they may require to save each of them
harmless.
Upon presentation of any Subordinated Security redeemed in
part only, the Company shall execute and the Trustee shall authenticate and
deliver to or on the order of the Holder thereof, at the expense of the Company,
a new Subordinated Security or Subordinated Securities of such series, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Subordinated Security so presented.
Section 12.4. Exclusion of Certain Subordinated Securities from Eligibility for
Selection for Redemption.
Subordinated Securities shall be excluded from eligibility
for selection for redemption if they are identified by registration and
certificate number in an Officer's Certificate delivered to the Trustee at least
40 days prior to the last date on which notice of redemption may be given as
being owned of record and beneficially by, and not pledged or hypothecated by,
either (a) the Company or (b) an entity specifically identified in such written
statement as directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company.
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Section 12.5. Mandatory and Optional Sinking Funds.
The minimum amount of any sinking fund payment provided for
by the terms of the Subordinated Securities of any series is herein referred to
as a "mandatory sinking fund payment," and any payment in excess of such minimum
amount provided for by the terms of the Subordinated Securities of any series is
herein referred to as an "optional sinking fund payment." The date on which a
sinking fund payment is to be made is herein referred to as the "sinking fund
payment date."
In lieu of making all or any part of any mandatory sinking
fund payment with respect to any series of Subordinated Securities in cash, the
Company may at its option (a) deliver to the Trustee Subordinated Securities of
such series theretofore purchased or otherwise acquired (except upon redemption
pursuant to the mandatory sinking fund) by the Company or receive credit for
Subordinated Securities of such series (not previously so credited) theretofore
purchased or otherwise acquired (except as aforesaid) by the Company and
delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive
credit for optional sinking fund payments (not previously so credited) made
pursuant to this Section, or (c) receive credit for Subordinated Securities of
such series (not previously so credited) redeemed by the Company through any
optional redemption provision contained in the terms of such series.
Subordinated Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund redemption price specified in such
Subordinated Securities.
On or before the 60th day next preceding each sinking fund
payment date for any series, the Company will deliver to the Trustee an
Officer's Certificate (which need not contain the statements required by Section
11.5) (a) specifying the portion of the mandatory sinking fund payment to be
satisfied by payment of cash and the portion to be satisfied by credit of
Subordinated Securities of such series and the basis for such credit, (b)
stating that none of the Subordinated Securities of such series has theretofore
been so credited, (c) stating that no defaults in the payment of interest or
Events of Default with respect to such series have occurred (which have not been
waived or cured) and are continuing and (d) stating whether or not the Company
intends to exercise its right to make an optional sinking fund payment with
respect to such series and, if so, specifying the amount of such optional
sinking fund payment which the Company intends to pay on or before the next
succeeding sinking fund payment date. Any Subordinated Securities of such series
to be credited and required to be delivered to the Trustee in order for the
Company to be entitled to credit therefor as aforesaid which have not
theretofore been delivered to the Trustee shall be delivered for cancellation
pursuant to Section 2.10 to the Trustee with such Officer's Certificate (or
reasonably promptly thereafter if acceptable to the Trustee). Such Officer's
Certificate shall be irrevocable and upon its receipt by the
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Trustee the Company shall become unconditionally obligated to make all the cash
payments or payments therein referred to, if any, on or before the next
succeeding sinking fund payment date. Failure of the Company, on or before any
such 60th day, to deliver such Officer's Certificate and Subordinated Securities
specified in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Company (i)
that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without the
option to deliver or credit Subordinated Securities of such series in respect
thereof and (ii) that the Company will make no optional sinking fund payment
with respect to such series as provided in this Section.
If the sinking fund payment or payments (mandatory or
optional or both) to be made in cash on the next succeeding sinking fund payment
date plus any unused balance of any preceding sinking fund payments made in cash
shall exceed $50,000 (or the equivalent thereof in any Foreign Currency or ECU)
or a lesser sum in Dollars (or the equivalent thereof in any Foreign Currency or
ECU) if the Company shall so request with respect to the Subordinated Securities
of any particular series, such cash shall be applied on the next succeeding
sinking fund payment date to the redemption of Subordinated Securities of such
series at the sinking fund redemption price together with accrued interest to
the date fixed for redemption. If such amount shall be $50,000 (or the
equivalent thereof in any Foreign Currency or ECU) or less and the Company makes
no such request then it shall be carried over until a sum in excess of $50,000
(or the equivalent thereof in any Foreign Currency or ECU) is available. The
Trustee shall select, in the manner provided in Section 12.2, for redemption on
such sinking fund payment date a sufficient principal amount of Subordinated
Securities of such series to absorb said cash, as nearly as may be, and shall
(if requested in writing by the Company) inform the Company of the serial
numbers of the Subordinated Securities of such series (or portions thereof) so
selected. Subordinated Securities shall be excluded from eligibility for
redemption under this Section if they are identified by registration and
certificate number in an Officer's Certificate delivered to the Trustee at least
60 days prior to the sinking fund payment date as being owned of record and
beneficially by, and not pledged or hypothecated by, either (a) the Company or
(b) an entity specifically identified in such Officer's Certificate as directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company. The Trustee, in the name and at the expense of the
Company (or the Company, if it shall so request the Trustee in writing) shall
cause notice of redemption of the Subordinated Securities of such series to be
given in substantially the manner provided in Section 12.2 (and with the effect
provided in Section 12.3) for the redemption of Subordinated Securities of such
series in part at the option of the Company. The amount of any sinking fund
payments not so applied or allocated to the
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redemption of Subordinated Securities of such series shall be added to the next
cash sinking fund payment for such series and, together with such payment, shall
be applied in accordance with the provisions of this Section. Any and all
sinking fund moneys held on the Stated Maturity date of the Subordinated
Securities of any particular series (or earlier, if such maturity is
accelerated), which are not held for the payment or redemption of particular
Subordinated Securities of such series shall be applied, together with other
moneys, if necessary, sufficient for the purpose, to the payment of the
principal of, and interest on, the Subordinated Securities of such series at
Maturity.
On or before each sinking fund payment date, the Company
shall pay to the Trustee in cash or shall otherwise provide for the payment of
all interest accrued to the date fixed for redemption on Subordinated Securities
to be redeemed on the next following sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any
Subordinated Securities of a series with sinking fund moneys or give any notice
of redemption of Subordinated Securities for such series by operation of the
sinking fund during the continuance of a default in payment of interest on such
Subordinated Securities or of any Event of Default except that, where the giving
of notice of redemption of any Subordinated Securities shall theretofore have
been made, the Trustee shall redeem or cause to be redeemed such Subordinated
Securities, provided that it shall have received from the Company a sum
sufficient for such redemption. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default shall
occur, and any moneys thereafter paid into the sinking fund, shall, during the
continuance of such default or Event of Default be deemed to have been collected
under Article V and held for the payment of all such Subordinated Securities. In
case such Event of Default shall have been waived as provided in Section 5.14 or
the default cured on or before the sixtieth day preceding the sinking fund
payment date in any year, such moneys shall thereafter be applied on the next
succeeding sinking fund payment date in accordance with this Section to the
redemption of such Subordinated Securities.
[Signature page follows]
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<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have caused this
Subordinated Indenture to be duly executed and attested as of the date first
written above.
QUADRAMED CORPORATION
By: /s/ Keith Roberts
-------------------------------------
Name: Keith Roberts
Title: Executive Vice President
and General Counsel
Attest:
By:
-----------------------------
THE BANK OF NEW YORK
as Trustee
By: /s/ Mary Beth A. Lewicki
-------------------------------------
Name: Mary Beth A. Lewicki
Title: Assistant Vice President
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<PAGE> 94
STATE OF CALIFORNIA )
: ss.:
COUNTY OF MARIN )
On the 30th day of April, 1998, before me personally came
Keith Roberts, to me known, who, being by me duly sworn, did depose and say that
he is Executive Vice President and General Counsel of QuadraMed Corporation, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
[NOTARIAL SEAL] /s/ Violet Caamano
----------------------------------------
Notary Public
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<PAGE> 1
EXHIBIT 4.7
QUADRAMED CORPORATION
OFFICERS' CERTIFICATE PURSUANT TO
SECTIONS 2.3 AND 11.5 OF THE SUBORDINATED INDENTURE
James D. Durham and John V. Cracchiolo do hereby certify that they
are the Chairman of the Board, President and Chief Executive Officer and
Executive Vice President, Chief Financial Officer and Secretary, respectively,
of QuadraMed Corporation, a Delaware corporation (the "Company"), and do further
certify, pursuant to resolutions of the Board of Directors of the Company
adopted on April 7, 1998 (the "Resolutions"), and in accordance with Sections
2.3 and 11.5 of the Subordinated Indenture (the Subordinated Indenture as
amended and supplemented by the Resolutions is herein referred to as the
"Subordinated Indenture") dated as of May 1, 1998 between the Company and The
Bank of New York, as trustee (the "Trustee"), as follows:
1. A series of subordinated securities to be issued under the
Subordinated Indenture and designated as the Company's 5.25% Convertible
Subordinated Debentures due 2005 (the "Debentures") has been authorized. The
following terms shall apply to the Debentures:
(a) The Debentures shall be limited to $115,000,000 in
aggregate principal amount (including any over-allotment option) and shall
mature on May 1, 2005;
(b) The Debentures shall bear interest at the rate of
5.25% per annum from May 1, 1998, payable semiannually on each May 1 and
November 1, commencing November 1, 1998;
(c) The Debentures shall be issued initially in part as
global debentures in registered form in the name of the Depositary (hereinafter
defined) or its nominee in such denominations otherwise as in the form attached
hereto as Annex A (the "Form of Debenture") with such changes thereto as may be
required in the process of printing or otherwise producing the Debentures not
affecting the substance thereof;
(d) The Depositary for the global Debentures shall be The
Depository Trust Company;
(e) The global Debentures shall be exchangeable for
definitive Debentures in registered form substantially the same as the global
Debentures in denominations of $1,000 or any integral multiple thereof upon the
terms and in accordance with the provisions of the Subordinated Indenture;
(f) The Debentures shall be payable (as to both principal
and interest) when and as the same shall become due at the office of the
Trustee, 101 Barclay Street, 21W, New York, New
<PAGE> 2
York 10286, provided that, as long as any part of the Debentures are in the form
of one or more global Debentures, payments of interest with respect thereto may
be made by wire transfer and provided further, that with respect to Debentures
issued in definitive form, the Company elects to exercise its option to have
interest payable by check mailed to the registered owners' address as they
appear on the Register, as kept by the Trustee on each Record Date; and
(g) The Record Dates for the Debentures shall be April 15
and October 15, as the case may be, preceding each interest payment date.
2. The Form of Debenture sets forth certain of the terms required to
be set forth in this certificate pursuant to Section 2.3 of the Subordinated
Indenture, and said terms are incorporated herein by reference. The Debentures
were issued at the initial offering price of 100% of principal amount.
3. In addition to the covenants set forth in Article 3 of the
Subordinated Indenture, the Debentures shall include the following additional
covenant:
"SECTION 3.10 Limitations on Certain Other Subordinated
Indebtedness.
The Company shall not create, incur, assume or suffer to
exist any Indebtedness that is subordinate in right of payment to
any Senior Indebtedness unless such indebtedness by its terms or the
terms of the instrument creating or evidencing such indebtedness is
subordinate in right of payment to, or ranks pari passu with, the
Debentures."
4. In addition to the Events of Default set forth in Section 5.1 of
the Subordinated Indenture, the following additional Events of Default shall
apply with respect to the Debentures and shall be subject to the other
provisions of Article 5 of the Subordinated Indenture:
(i) failure to provide timely notice of a Repurchase Event
as required by the Subordinated Indenture; and
(ii) default in the payment of the Repurchase Price in
respect of any Debentures on the Repurchase Date therefore.
5. In addition to the purposes for which a supplemental indenture
may be entered into without the consent of the Holders of the Debentures, the
following shall be considered a purpose:
"to make any provision with respect to the conversion
rights of Holders of Debentures pursuant to the requirements
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<PAGE> 3
of Paragraph 8 herein, in the event of a consolidation, merger or
sale of assets involving the Company."
6. In addition to the limitations on supplemental indentures with
the consent of Holders set forth in Section 8.2 of the Subordinated Indenture,
the following limitations shall apply with respect to the Debentures and shall
be subject to the other provisions of Article 8 of the Subordinated Indenture:
(i) impair the right of Holders of Debentures to require
the Company to repurchase Debentures upon the occurrence of a Repurchase Event;
and
(ii) make any change that adversely affects the right to
convert any security as provided in Paragraph 8 herein or pursuant to Section
2.3 of the Subordinated Indenture (except as permitted by Section 8.1 of the
Subordinated Indenture).
7. The Debentures shall be subordinated in right of payment to
Senior Indebtedness upon the following terms and conditions:
7.1. Debentures Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a
Debenture, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Paragraph 7 (subject
to the provisions of Article 10 of the Subordinated Indenture), the indebtedness
represented by the Debentures and the payment of the principal of (and premium,
if any) and interest on each and all of the Debentures (including any
repurchases or payments pursuant to Paragraph 9 herein) are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Indebtedness.
7.2. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (1) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to a substantial part of its assets, or (2) any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or (3) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company, then and in any such event specified in (1), (2) or
(3) above (each such event, if any, herein sometimes referred to as a
"Proceeding") the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders
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<PAGE> 4
of Senior Indebtedness, before the Holders of the Debentures are entitled to
receive any payment or distribution of any kind or character, whether in cash,
property or securities, on account of principal of (or premium, if any) or
interest on the Debentures or on account of any purchase (including any
repurchase pursuant to Paragraph 9 herein) or other acquisition of Debentures by
the Company or any Subsidiary of the Company (all such payments, distributions,
purchases and acquisitions herein referred to, individually and collectively, as
a "Debentures Payment"), and to that end the holders of all Senior Indebtedness
shall be entitled to receive, for application to the payment thereof, any
Debentures Payment which may be payable or deliverable in respect of the
Debentures in any such Proceeding.
In the event that, notwithstanding the foregoing
provisions of this subparagraph 7.2, the Trustee or the Holder of any Debenture
shall have received any Debentures Payment before all Senior Indebtedness is
paid in full or payment thereof provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness, and if
such fact shall, at or prior to the time of such Debentures Payment, have been
made known to the Trustee pursuant to subparagraph 7.10 or, as the case may be,
such Holder, then and in such event such Debentures Payment shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, 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.
For purposes of this Paragraph 7 only, the words "any
payment or distribution of any kind or character, whether in cash, property or
securities" shall not be deemed to include a payment or distribution of stock or
securities of the Company provided for by a plan of reorganization or
readjustment authorized by an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy law
or of any other corporation provided for by such plan of reorganization or
readjustment, which stock or securities are subordinated in right of payment to
all then outstanding Senior Indebtedness to substantially the same extent as, or
to a greater extent than, the Debentures are so subordinated as provided in this
Paragraph 7. The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution or the Company following
the conveyance or transfer of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article 9 of the Subordinated Indenture shall not be deemed a Proceeding for
the purposes of this subparagraph 7.2 if the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance
or transfer such properties and assets
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<PAGE> 5
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article 9 of the Subordinated Indenture.
7.3. Prior Payment to Senior Indebtedness Upon
Acceleration of Debentures.
In the event that any Debentures are declared due and
payable before their Stated Maturity, then and in such event the holders of the
Senior Indebtedness outstanding at the time such Debentures so become due and
payable shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Indebtedness, or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, before the Holders of
the Debentures are entitled to receive any Debentures Payment (including any
payment which may be payable by reason of the payment of any other indebtedness
of the Company being subordinated to the payment of the Debentures).
In the event that, notwithstanding the foregoing, the
Company shall make any Debentures Payment to the Trustee or any Holder of
Debentures prohibited by the foregoing provisions of this Paragraph 7, and if
such fact shall, at or prior to the time of such Debentures Payment, have been
made known to the Trustee pursuant to subparagraph 7.10 or, as the case may be,
such Holder, then and in such event such Debentures Payment shall be paid over
and delivered forthwith to the Company.
The provisions of this subparagraph 7.3 shall not apply to
any Debentures Payment with respect to which subparagraph 7.2 would be
applicable.
7.4. No Payment in Certain Circumstances.
(a) No payment or distribution of any assets of the
Company of any kind or character shall be made on account of the Debentures or
on account of the purchase, redemption or other acquisition of the Debentures
upon the occurrence of any default in the payment of any Senior Indebtedness in
excess of $5,000,000 beyond any applicable grace period with respect thereto,
unless and until such default is cured or waived or ceases to exist or such
Senior Indebtedness is discharged.
(b) During the continuation of any non-payment event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, no payment or distribution of any assets of
the Company of any kind or character shall be made by the Company on account of
Subordinated Obligations or on account of the purchase, redemption or other
acquisition of the Debentures for the period specified below (the "Payment
Blockage Period"). The Payment Blockage Period shall commence upon the receipt
of notice by the
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<PAGE> 6
Company or the Trustee from any representative of a holder of Designated Senior
Indebtedness and shall end on the earlier of (i) 179 days thereafter, (ii) the
date on which such event is cured or waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged, (iii) the date on which the
maturity of any indebtedness (other than Senior Indebtedness) shall have been
accelerated by virtue of such event, or (iv) the date on which such Payment
Blockage Period shall have been terminated by notice to the Company or the
Trustee from the representative of holders of the Designated Senior Indebtedness
initiating such Payment Blockage Period, after which the Company shall resume
making any and all required payments in respect of the Debentures, including any
missed payments. Only one Payment Blockage Period may be commenced during any
period of 365 consecutive days. No event of default with respect to Designated
Senior Indebtedness that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period whether
or not within a period of 365 consecutive days, unless such event of default has
been cured or waived for a period of not less than 90 consecutive days. In no
event may a Payment Blockage Period extend beyond 179 days.
In the event that, notwithstanding the foregoing, the
Company shall make any Debentures Payment to the Trustee or any Holder of
Debentures prohibited by the foregoing provisions of this subparagraph 7.4, and
if such fact shall, at or prior to the time of such Debentures Payment, have
been made known to the Trustee or, as the case may be, such Holder, then and in
such event such Debentures Payment shall be paid over and delivered forthwith to
the Company.
The Trustee shall give prompt written notice to the
Company of any notice from a holder of Senior Indebtedness received by the
Trustee pursuant to subparagraph 7.10 which would prohibit the making of any
payment to or by the Trustee with respect to any Debentures.
The provisions of this subparagraph 7.4 shall not apply to
any Debentures Payment with respect to which subparagraph 7.2 would be
applicable.
7.5. Payment Permitted If No Default.
Nothing contained in this Paragraph 7 or elsewhere in the
Subordinated Indenture or in any of the Debentures shall prevent (1) the
Company, at any time except during the pendency of any Proceeding referred to in
subparagraph 7.2 or under the conditions described in subparagraph 7.3 or 7.4
from making Debentures Payments, or (2) the application by the Trustee of any
money deposited with it hereunder to Debentures Payments or the retention of
such Debentures Payment by Holders of Debentures,
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<PAGE> 7
if, at the time of such application by the Trustee, it did not have knowledge
that such Debentures Payment would have been prohibited by the provisions of
this Paragraph 7.
7.6. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to
become due on or in respect of Senior Indebtedness, or the provision for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Indebtedness, the Holders of 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 Paragraph 7 (equally and ratably
with the holders of all indebtedness of the Company which by its express terms
is subordinated to 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 such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Debentures shall be paid in full. For 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 Debentures or the Trustee would
be entitled except for the provisions of this Paragraph 7, and no payments over
pursuant to the provisions of this Paragraph 7 to the holders of Senior
Indebtedness by Holders of Debentures or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of the Debentures, be deemed to be a payment or distribution by the Company to
or on account of the Senior Indebtedness.
7.7. Provisions Solely to Define Relative Rights.
The provisions of this Paragraph 7 are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Debentures on the one hand and the holders of Senior Indebtedness on the other
hand. Nothing contained in this Paragraph 7 or elsewhere in this Subordinated
Indenture or in the Debentures is intended to or shall (1) impair, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of Debentures the principal of (and
premium, if any) and interest on the Debentures, and to make any repurchases of
the Debentures required by Paragraph 9 hereof, as and when the same shall become
due and payable in accordance with the terms hereof; or (2) affect the relative
rights against the Company of the Holders of Debentures and creditors of the
Company other than the holders of Senior Indebtedness; or (3) prevent the
Trustee or the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under the Subordinated Indenture,
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<PAGE> 8
subject to the rights, if any, under this Paragraph 7 of the holders of Senior
Indebtedness to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
7.8. Trustee to Effectuate Subordination and Payment
Provisions.
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 and payment provisions
provided in this Paragraph 7 and appoints the Trustee his attorney-in-fact for
any and all such purposes.
7.9. No Waiver of Subordination Provisions.
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 the Subordinated Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Debentures, without incurring responsibility to the Holders of
the Debentures and without impairing or releasing the subordination provided in
this Paragraph 7 or the obligations hereunder of the Holders of Debentures to
the holders of Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in any manner for
the collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
7.10. Notice to Trustee.
The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Debentures. Notwithstanding the
provisions of this Paragraph 7 or any other provision of the Subordinated
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts
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<PAGE> 9
which would prohibit the making of any payment to or by the Trustee in respect
of the Debentures, unless and until the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.1 of the Subordinated Indenture,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this subparagraph 7.10 at least three Business Days prior to the date upon which
by the terms hereof any money may become payable for any purpose (including,
without limitation, the payment of the principal of (and premium, if any) or
interest on, or amounts payable upon redemption or repurchase of, any
Debenture), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within three
Business Days prior to such date.
Subject to the provisions of Section 6.1 of the
Subordinated Indenture, the Trustee 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 trustee therefor) to establish that such notice has been
given by a holder of Senior Indebtedness (or a trustee therefor). 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 Paragraph 7, 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 Paragraph 7, 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.
7.11. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Paragraph 7, the Trustee, subject to the provisions of
Section 6.1 of the Subordinated Indenture, and the Holders of Debentures shall
be entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such Proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the
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<PAGE> 10
Holders of Debentures, for the purpose of ascertaining the Persons entitled to
participate in such payment or 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 Paragraph 7.
7.12. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to Holders
of Debentures or to the Company or to any other Person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Paragraph 7 or otherwise.
7.13. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled
to all the rights set forth in this Paragraph 7 with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in the Subordinated Indenture
shall deprive the Trustee of any of its rights as such holder.
Nothing in this Paragraph 7 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 6.6 of the Subordinated
Indenture.
7.14. Paragraph Applicable to Paying Agents.
In case 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 Paragraph 7 shall in such case (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 Paragraph 7 in addition to or in place of the
Trustee; provided, however, that subparagraph 7.13 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as Paying
Agent.
8. The Debentures shall be convertible into shares of Common Stock of
the Company upon the following terms and conditions:
8.1. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this
Paragraph 8, at the option of the Holder thereof, any
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<PAGE> 11
Debentures or any portion of the principal amount thereof which is $1,000 or an
integral multiple of $1,000 may be converted at the principal amount thereof, or
of such portion thereof, into fully paid and nonassessable shares (calculated as
to each conversion to the nearest 1/100 of a share) of Common Stock of the
Company at the conversion price, determined as hereinafter provided, in effect
at the time of conversion. Such conversion right shall expire at the close of
business on May 1, 2005. In case a Debenture or portion thereof is called for
redemption at the election of the Company, such conversion right in respect of
the Debentures shall expire at the close of business on the second business day
preceding the Redemption Date.
The price at which shares of Common Stock shall be
delivered upon conversion (herein called the "conversion price") shall be
initially $33.25 per share of Common Stock. The conversion price shall be
adjusted in certain instances as provided in this Paragraph 8.
8.2. Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder
of any Debenture to be converted shall surrender such Debenture, duly endorsed
or assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 3.2 of the Subordinated
Indenture, accompanied by written notice of conversion in the form provided on
the Debenture (or such other notice as is acceptable to the Company) at such
office or agency that the Holder elects to convert such Debenture or, if less
than the entire principal amount thereof is to be converted, the portion thereof
to be converted. Debentures issued as global Debentures will be converted in
accordance with the standing instructions and procedures of the Depositary and
its participants. Debentures surrendered for conversion during the period from
the close of business on any Regular Record Date through and including the next
Interest Payment Date shall (except in the case of Debentures or portions
thereof which have been called for redemption on a Redemption Date occurring on
or before such Interest Payment Date) be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount of
Debentures being surrendered for conversion. Subject to the provisions of
Section 2.7 of the Subordinated Indenture relating to the payment of Defaulted
Interest by the Company, the interest payment with respect to a Debenture called
for redemption on a Redemption Date during the period from the close of business
on any Regular Record Date through and including the next Interest Payment Date
shall be payable on such Interest Payment Date to the Holder of such Debenture
at the close of business on such Regular Record Date notwithstanding the
conversion of such Debenture after such Regular Record Date and on or prior to
such Interest Payment Date, and the Holder converting such Debenture need not
include a
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<PAGE> 12
payment of such interest payment amount upon surrender of such Debenture for
conversion. Except as provided in the preceding sentence and subject to the
final paragraph of Section 2.7 of the Subordinated Indenture, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Debentures surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
Debentures shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Debentures for conversion in accordance with the foregoing provisions, and at
such time the rights of the Holders of such Debentures as Holders shall cease,
and the Person or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction of
a share, as provided in subparagraph 8.3.
In the case of any Debenture which is converted in part
only, upon such conversion 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 aggregate principal
amount equal to the unconverted portion of the principal amount of such
Subordinated Security.
8.3. Fractions of Shares.
No fractional shares of Common Stock shall be issued upon
conversion of Debentures. If more than one Debenture shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Debentures (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Debenture or Debentures (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to such fraction multiplied by the Closing
Price per share of Common Stock (consistent with subparagraph 8.4(h) below) at
the close of business on the day of conversion (or, if such day is not a Trading
Day, on the Trading Day immediately preceding such day).
8.4. Adjustment of Conversion Price.
(a) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in Common Stock,
the conversion price in effect at the opening of business on the day following
the date fixed for the
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<PAGE> 13
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 date 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 date fixed for such determination. For the purposes of this clause (a), 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.
(b) In case the Company shall issue rights, options or
warrants to all holders of its Common Stock (not being available on an
equivalent basis to Holders of the Debentures upon conversion) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price on the date fixed for the determination of stockholders
entitled to receive such rights, options or warrants, the conversion price in
effect at the opening of business on the day following the date fixed for such
determination 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 date fixed for such determination
plus the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this clause (b), 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 issue any rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(c) In case 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 each 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
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<PAGE> 14
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 evidences of its indebtedness,
shares of any class of its capital stock or other assets (including securities,
but excluding any rights, options or warrants referred to in clause (b) of this
subparagraph 8.4, any dividend or distribution paid exclusively in cash referred
to in clause (e) of this subparagraph 8.4, any dividend or distribution referred
to in clause (a) of this subparagraph 8.4 and any merger or consolidation to
which subparagraph 8.11 applies), 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 the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price on the date
fixed for such determination less the then fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution filed with the Trustee) of the portion of the assets, shares
or evidences of indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution.
(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 Paragraph 9 applies or as
part of a distribution referred to in clause (d) of this subparagraph 8.4) in an
aggregate amount that, combined together with (1) the aggregate amount of any
other distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to this clause (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 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 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to clause (f) of
this subparagraph 8.4 has been made, exceeds 12.5% of the product of the Current
Market Price on the date for the determination of holders of shares of Common
Stock entitled to receive such distribution times the number of shares of Common
Stock outstanding on such date, then,
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and in each such case, immediately after the close of business on such date for
determination, 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 the date fixed for determination
of the stockholders entitled to receive such distribution by a fraction (i) the
numerator of which shall be equal to the Current Market Price on the date fixed
for such determination less an amount equal to the quotient of (x) the excess of
such combined amount over such 12.5% and (y) the number of shares of Common
Stock outstanding on such date for determination and (ii) the denominator of
which shall be equal to the Current Market Price on such date for determination.
(f) In case a tender offer made by the Company or any
Subsidiary 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
offer, by the Company or any Subsidiary for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to this clause (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 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to clause (e) of this Section has been made, exceeds 12.5% of the product of the
Current Market Price 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 (i) the
numerator of which shall be equal to (A) the product of (I) the current market
price per share of the Common Stock (determined as provided in clause (h) of
this subparagraph 8.4) on the date of the Expiration Time and (II) the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time less (B) the amount of cash plus the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the
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acceptance (up to any maximum specified in the terms of the tender offer) of
Purchased Shares, and (ii) the denominator of which shall be equal to the
product of (A) the current market price per share of the Common Stock
(determined as provided in clause (h) of this subparagraph 8.4) as of the
Expiration Time and (B) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number 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").
(g) The reclassification of Common Stock into securities
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which subparagraph 8.11 applies) shall be
deemed to involve (i) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such reclassification
shall be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and the "date fixed for such
determination" within the meaning of clause (d) of this subparagraph 8.4), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of clause (c)
of this subparagraph 8.4).
(h) For the purpose of any computation under clauses (b),
(d), (e) and (f) of this subparagraph 8.4, the current market price per share of
Common Stock (the "Current Market Price") on any date shall be deemed to be the
average of the daily Closing Prices for the 5 consecutive Trading Days selected
by the Company commencing not more than 20 Trading Days before, and ending not
later than, the earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring such computation. The
"Closing Price" for each Trading Day shall be the reported last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the New York Stock Exchange or, if the Common Stock is not listed or admitted
to trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations system ("NASDAQ")
National Market System ("NASDAQ/NMS") or, if not listed or admitted to trading
on NASDAQ/NMS, on NASDAQ, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or NASDAQ/NMS or quoted on NASDAQ,
the average of the closing bid
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<PAGE> 17
and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose. For purposes of this paragraph, the term "'ex' date", when used with
respect to any issuance or distribution, shall mean the first date on which the
Common Stock trades regular way on such exchange or in such market without the
right to receive such issuance or distribution.
(i) No adjustment in the conversion price shall be
required to be made until cumulative adjustments (plus any adjustments not
previously made by reason of this paragraph (i)) amount to at least 1% of the
conversion price, as last adjusted; provided, however, that any adjustments
which by reason of this subparagraph (i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this subparagraph (i) shall be made to the nearest cent.
(j) In addition to those required by clauses (a), (b),
(c), (d), (e) and (f) of this subparagraph 8.4, the Company from time to time
may make such reductions in the conversion price by any amount, (i) to the
extent permitted by law for any period of at least 20 days, in which case the
Company shall give 15 days notice of such decrease and (ii) to such extent as it
considers to be advisable in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
holders of shares of Common Stock or, if that is not possible, to diminish any
income taxes that are otherwise payable because of such event. The Company shall
have the power to resolve any ambiguity or correct any error in this clause (j)
and its actions in so doing shall be final and conclusive.
8.5. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein
provided:
(a) the Company shall compute the adjusted conversion
price in accordance with subparagraph 8.4 and shall prepare a certificate signed
by the Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at each office or agency maintained
for the purpose of conversion of Debentures pursuant to Section 3.2 of the
Subordinated Indenture; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall forthwith be
required, and as soon as practicable after it is required, such notice shall be
mailed by the Company to all
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Holders of Debentures at their last addresses as they shall appear in the
Security Register.
8.6. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; 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 shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the Company's outstanding Common Stock (or shall
amend any such tender offer);
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures pursuant to Section 3.2 of the
Subordinated Indenture, and shall cause to be mailed to all Holders at their
last addresses as they shall appear in the Security Register, at least 20 days
(or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, 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, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation, winding up or tender offer is expected to
become effective, and the date or dates as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation, winding up or tender offer. Neither the failure to
give such notice nor any defect therein shall affect the legality or validity of
the proceedings described in clauses (a) through (d) of this
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subparagraph 8.6. If at the time the Trustee shall not be the conversion agent,
a copy of such notice shall also forthwith be filed by the Company with the
Trustee.
8.7. Company to Reserve Common Stock.
The Company shall at all times reserve and keep available
out of its authorized but unissued Common Stock, for the purpose of effecting
the conversion of Debentures, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Debentures.
8.8. Taxes on Conversions.
The Company will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Common Stock on conversion of
Debentures pursuant hereto. 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 shares of Common Stock in a name other than that of the Holder
of the Debenture or Debentures to be converted, and no such issue or delivery
shall be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
8.9. Covenant as to Common Stock.
The Company covenants that all shares of Common Stock
which may be issued upon conversion of Debentures will upon issue be fully paid
and nonassessable and, except as provided in subparagraph 8.8, the Company will
pay all taxes, liens and charges with respect to the issue thereof.
8.10. Cancellation of Converted Debentures.
All Debentures delivered for conversion shall be delivered
to the Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 2.10 of the Subordinated Indenture.
8.11. Provisions in Case of Consolidation, Merger or Sale
of Assets.
In case of any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company) or any sale or transfer of all or substantially all of the assets
of the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
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each Debenture then outstanding shall have the right thereafter, during the
period such Debenture shall be convertible as specified in subparagraph 8.1, to
convert such Debenture only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock of the Company into which such
Debenture might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Stock of the Company is
not a Person with which the Company consolidated or into which the Company
merged or which merged into the Company or to which such sale or transfer was
made, as the case may be ("Constituent Person"), or an Affiliate of a
Constituent Person, and failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer is not the same for each share of Common Stock of the Company
held immediately prior to such consolidation, merger, sale or transfer by others
than a Constituent Person or an Affiliate thereof and in respect of which such
rights of election shall not have been exercised ("non-electing share"), then
for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares. Such supplemental indenture
shall provide for adjustments which, for events subsequent to the effective date
of such supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Paragraph 8. The above
provisions of this Paragraph 8 shall similarly apply to successive
consolidations, mergers, sales or transfers.
8.12. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment
under this Paragraph 8 should be made, how it should be made or what it should
be. The Trustee makes no representation as to the validity or value of any
securities or assets issued upon conversion of Debentures. The Trustee shall not
be responsible for the Company's failure to comply with this Paragraph 8.
9. The Debentures shall be subject to repurchase at the option of
the Holders upon the following terms and conditions:
9.1. Right to Require Repurchase.
In the event that a Repurchase Event (as hereinafter
defined) shall occur after the date of issuance of the Debentures, then each
Holder of Debentures shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Debentures, or any portion of the principal
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<PAGE> 21
amount thereof that is an integral multiple of $1,000, on the date (the
"Repurchase Date") that is 30 days after the date of the Company Notice (as
defined in subparagraph 9.2), for cash at a purchase price (the "Repurchase
Price") equal to 100% of the principal amount of the Debentures to be
repurchased, together with accrued and unpaid interest to the Repurchase Date.
Such right to require the repurchase of the Debentures shall not continue after
a discharge of the Company from its obligations with respect to the Debentures
in accordance with Article 10 of the Subordinated Indenture, unless a Repurchase
Event shall have occurred prior to such discharge.
9.2. Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Debentures, on or before the 15th calendar day
after the occurrence of a Repurchase Event, the Company or, at the request (and
expense) of the Company, the Trustee, shall mail to all Holders of Debentures a
notice (the "Company Notice") of the occurrence of the Repurchase Event and of
the repurchase right set forth herein arising as a result thereof.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must
be exercised,
(3) the Repurchase Price for the Debentures, and
(4) a description of the procedure which a Holder
of Debentures must follow to exercise a repurchase right.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Debentures.
If any of the foregoing provisions are inconsistent with
applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder of Debentures
shall deliver to the Company (or an agent designated by the Company for such
purpose) and to the Trustee on or before the close of business on the Repurchase
Date (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Debentures
to be repurchased, a statement that an election to exercise the repurchase right
is being made thereby, and (ii) the Debentures with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the Company.
Such written notice shall be irrevocable, except that the right of the
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<PAGE> 22
Holder to convert the Debentures with respect to which the repurchase right is
being exercised shall continue until the close of business on the Repurchase
Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid the
Repurchase Price in cash to the Holder on the Repurchase Date, together with
accrued and unpaid interest to the Repurchase Date payable with respect to the
Debentures as to which the purchase right has been exercised; provided, however,
that installments of interest that mature on or prior to the Repurchase Date
shall be payable in cash to the Holders of such Debentures, or one or more
predecessor Debentures, registered as such at the close of business on the
relevant Regular Record Date according to the terms and provisions of Article 2
of the Subordinated Indenture.
(d) If any Debenture surrendered for repurchase shall not
be so paid on the Repurchase Date, the principal shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate borne by the Debenture and each Debenture shall remain convertible into
Common Stock until the principal of such Debenture shall have been paid or duly
provided for.
(e) Any Debenture which is to be repurchased only in part
shall be surrendered to the Trustee (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such Debenture
without service charge, a new Debenture or Debentures, containing identical
terms and conditions, of any authorized denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Debenture so surrendered.
(f) Prior to the Repurchase Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 3.4 of
the Subordinated Indenture) an amount of money sufficient to pay the Repurchase
Price of the Debentures that are to be repaid on the Repurchase Date.
9.3. "Change of Control," "Termination of Trading" and
"Repurchase Event" Defined.
(a) A Change of Control or a Termination of Trading shall
constitute a "Repurchase Event" giving rise to the right under this Paragraph 9
on the part of each Holder of a Debenture to require, at the Holder's option,
the Company to repurchase such Holder's Debentures.
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<PAGE> 23
(b) For purposes of this Paragraph 9, "Change of Control"
shall occur when: (i) all or substantially all of the Company's assets are sold
as an entirety to any Person or related group of Persons; (ii) there shall be
consummated any consolidation or merger of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation or
merger with a wholly owned subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
each case other than a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the total voting power of
all classes of capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation immediately after such
consolidation or merger in substantially the same proportion as their ownership
of Common Stock immediately before such transaction; (iii) any Person, or any
Persons acting together which would constitute a "group" for purposes of Section
13(d) of the Exchange Act, together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the Company; (iv) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (v) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
(c) For purposes of this Paragraph 9, a "Termination of
Trading" shall occur if the Common Stock (or other common stock into which the
Debentures are then convertible) is neither listed for trading on a U.S.
national securities exchange nor approved for trading on an established
automated over-the-counter trading market in the United States.
10. In addition to the definitions set forth in Article 1 of the
Subordinated Indenture, the Debentures shall include the following additional
definitions, which, in the event of a conflict with the definitions of terms in
the Subordinated Indenture, shall control:
"Change of Control" shall have the meaning specified in subparagraph
9.3.
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<PAGE> 24
"Closing Price" has the meaning specified in subparagraph 8.4(h).
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company and which is not subject to redemption by the Company. However, subject
to the provisions of subparagraph 8.11, 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 instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
and which are not subject to redemption by the Company; provided, that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable 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.
"Current Market Price" has the meaning specified in subparagraph
8.4(h).
"Debentures Payment" has the meaning specified in subparagraph 7.2.
"Designated Senior Indebtedness" means (i) amounts now or hereafter
outstanding under the Company's existing bank credit facilities or indebtedness
incurred to extend, refund or refinance such amounts and (ii) any Senior
Indebtedness which, at the time of determination, has an aggregate principal
amount outstanding of at least $5.0 million and is specifically designated in
the instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"NASDAQ" and "NASDAQ/NMS" have the meanings specified in subparagraph
8.4(h).
"Repurchase Date" has the meaning specified in subparagraph 9.1.
"Repurchase Event" has the meaning specified in subparagraph 9.3(d).
"Repurchase Price" has the meaning specified in subparagraph 9.15.
"Senior Indebtedness" means all indebtedness, liabilities or other
obligations of the Company, other than the Debentures, whether existing on the
date of execution of this Indenture or
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<PAGE> 25
thereafter created, incurred or assumed, except any such other indebtedness,
liabilities or other obligations that by their terms or by operation of law are
subordinated to, or subordinated on a parity with, the Debentures.
"Subordinated Obligations" means any principal of, premium, if any,
and interest on the Debentures payable pursuant to the terms of the Debentures
or upon acceleration, including any amounts received upon the exercise of rights
of rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Debentures or
amounts corresponding to such principal, premium, if any, or interest on the
Debentures.
"Termination of Trading" has the meaning specified in subparagraph
9.3(b).
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
11. The Debentures shall not be subject to any defeasance pursuant to
Section 10.1 of the Subordinated Indenture.
12. Each of the undersigned is authorized to approve the form, terms
and conditions of the Debentures pursuant to the Resolutions.
13. Attached hereto as Annex B is a true and correct copy of the
Resolutions.
14. Attached hereto as Annex C are true and correct copies of the
letter addressed to the Trustee entitling the Trustee to rely on the Opinion of
Counsel attached thereto, which Opinion relates to the Debentures and complies
with Section 11.5 of the Subordinated Indenture.
15. Each of the undersigned has reviewed the provisions of the
Subordinated Indenture, including the covenants and conditions precedent
pertaining to the issuance of the Debentures.
16. In connection with this certificate each of the undersigned has
examined documents, corporate records and certificates and has spoken with other
officers of the Company.
17. Each of the undersigned has made such examination and
investigation as is necessary to enable him to express an informed opinion as to
whether or not the covenants and conditions precedent of the Subordinated
Indenture pertaining to the issuance of the Debentures have been satisfied.
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<PAGE> 26
18. In our opinion all of the covenants and conditions precedent
provided for in the Subordinated Indenture for the issuance of the Debentures
have been satisfied.
19. If and to the extent that any provision of this certificate
qualifies or conflicts with any provision of the Subordinated Indenture, the
provisions of this certificate shall control.
Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Subordinated Indenture or the
Debentures, as the case may be.
[signature page follows]
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<PAGE> 27
IN WITNESS WHEREOF, each of the undersigned officers has executed
this certificate this 1st day of May 1998.
/s/ James D. Durham
----------------------------------
Name: James D. Durham
Title: Chief Executive Officer
/s/ John V. Cracchiolo
----------------------------------
Name: John V. Cracchiolo
Title: Executive Vice President
and Chief Financial Officer
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<PAGE> 1
Exhibit 4.8
Execution Copy
REGISTRATION RIGHTS AGREEMENT
Dated as of April 27, 1998
relating to
Up to $115,000,000 Aggregate Principal Amount
of 5.25% Convertible Subordinated
Debentures due 2005
by and between
QuadraMed Corporation
and
Smith Barney Inc.,
Bear, Stearns & Co. Inc. and
BT Alex. Brown Incorporated
This Registration Rights Agreement (the "Agreement") is made and
entered into as of April 27, 1998, by and between QuadraMed Corporation, a
Delaware corporation (the "Company") and Smith Barney Inc., Bear, Stearns & Co.
Inc. and BT Alex. Brown Incorporated (the "Initial Purchasers"), who have
purchased $100,000,000 aggregate principal amount ($115,000,000 aggregate
principal amount if the over-allotment option is exercised in full) of 5.25%
Convertible Subordinated Debentures due 2005 (the "Debentures") of the Company
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to a Purchase Agreement, dated
April 27, 1998 (the "Purchase Agreement"), between the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to closing under the Purchase Agreement. All defined terms used but not defined
herein shall have the meanings ascribed to them in the Indenture (as defined
herein).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
Closing Date: The date on which all the Debentures are sold by
the Company to the Initial Purchasers.
Commission: The Securities and Exchange Commission.
<PAGE> 2
Common Stock: The voting Common Stock, par value $0.01 per share,
of the Company.
Damages Payment Date: With respect to the Debentures or the
Common Stock, as applicable, each Interest Payment Date as defined in the
Indenture.
Effectiveness Target Date: As defined in Section 4.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Debentures inside the United States to (i) certain
"qualified institutional buyers" (as such term is defined in Rule 144A under the
Act) and (ii) certain "accredited investors," as defined in Rule 501 of
Regulation D under the Act, and outside the United States in reliance on
Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of May 1, 1998, among the
Company and The Bank of New York, as trustee (the "Trustee"), pursuant to which
the Debentures are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture.
NASD: National Association of Securities Dealers, Inc.
Offering Memorandum: The Offering Memorandum, dated April 27,
1998, and all amendments and supplements thereto, relating to the Debentures and
prepared by the Company pursuant to the Purchase Agreement.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Preliminary Prospectus: As defined in Section 3(g).
Prospectus: The prospectus included in the Shelf Registration
Statement (as defined herein), as amended or supplemented by any Prospectus
Supplement with respect to the terms of the offering of any portion of the
Transfer Restricted Securities (as defined herein) covered by the Shelf
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments, and all material which may be
incorporated by reference into such prospectus.
Prospectus Supplement: As defined in Section 5(b).
Record Holder: (i) With respect to any Damages Payment Date
relating to the Debentures, each Person who is registered on the books of the
Registrar as the holder of Debentures on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall occur and (ii)
with respect to any Damages Payment Date relating to the Common Stock, each
Person who is a holder of record of such Common Stock fifteen (15) days prior to
the Damages Payment Date.
Shelf Registration Statement: As defined in Section 3(a) hereof.
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<PAGE> 3
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Debenture and share of
Common Stock of the Company issuable upon conversion of a Debenture, until each
such Debenture or share (i) has been effectively registered under the Act and
disposed of in accordance with the Shelf Registration Statement covering it,
(ii) is distributed to the public pursuant to Rule 144 or (iii) may be sold or
transferred pursuant to Rule 144(k) (or any similar provisions then in force)
under the Act or otherwise.
Underwriter: Any Underwriter, placement agent, selling broker,
dealer manager, qualified independent Underwriter or similar securities industry
professional.
Underwritten Registration or Underwritten Offering: An offering
in which securities of the Company are sold to an Underwriter or with the
assistance of such Underwriter for reoffering to the public on a firm commitment
or best efforts basis.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) The Company shall cause to be filed with the Commission, on
or prior to 60 days after the Closing Date, a shelf registration statement
pursuant to Rule 415 under the Act (as may then be amended, the "Shelf
Registration Statement") on Form S-1, or Form S-3 if the use of such form is
then available, to cover resales of Transfer Restricted Securities by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Holders of
such Transfer Restricted Securities shall have provided the representations
required pursuant to Section 3(g) hereof. The Company shall use its reasonable
best efforts to cause such Shelf Registration Statement to be declared effective
by the Commission on or prior to 150 days after the Closing Date. The Company
shall use its reasonable best efforts to keep such Shelf Registration Statement
continuously effective for a period ending two years following the Closing Date
or such shorter period that will terminate when each of the Transfer Restricted
Securities covered by the Shelf Registration Statement shall cease to be a
Transfer Restricted Security. The Company further agrees to use its reasonable
best efforts to prevent the happening of any event that would cause the Shelf
Registration Statement to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or to be not effective and usable for
resale of the Transfer Restricted Securities during the period that such Shelf
Registration Statement is required to be effective and usable.
Upon the occurrence of any event that would cause the Shelf
Registration Statement (i) to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) to be not effective and usable for
resale of Transfer Restricted Securities during the period that such Shelf
Registration Statement is required to be
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<PAGE> 4
effective and usable, the Company shall as promptly as reasonably practicable
file an amendment to the Shelf Registration Statement, in the case of clause
(i), correcting any such misstatement or omission, and in the case of either
clause (i) or (ii), use its reasonable best efforts to cause such amendment to
be declared effective and such Shelf Registration Statement to become usable as
soon as reasonably practicable thereafter.
(b) None of the Company nor any of its security holders (other
than: (1) the Holders of Transfer Restricted Securities in such capacity and (2)
certain holders of the Company's securities as described in the Offering
Memorandum) shall have the right to include any of the Company's securities in
the Shelf Registration Statement.
(c) If (i) only Debentures are to be registered in the Shelf
Registration Statement and the Holders of a majority in aggregate principal
amount of the Debentures to be registered in the Shelf Registration Statement so
elect, or (ii) any shares of Common Stock issued upon conversion of Debentures
are to be included in the Shelf Registration Statement and the Holders of a
majority of the shares of Common Stock to be registered in the Shelf
Registration Statement so elect, an offering of Transfer Restricted Securities
pursuant to the Shelf Registration Statement may by effected in the form of an
Underwritten Offering. In such event, and if the Underwriter advises the Company
and the Holders of such Transfer Restricted Securities in writing that in their
opinion the amount of Transfer Restricted Securities proposed to be sold in such
offering exceeds the amount of Transfer Restricted Securities which can be sold
in such offering, there shall be included in such Underwritten Offering the
amount of such Transfer Restricted Securities which in the opinion of such
Underwriters can be sold, and such amount or number of shares shall be allocated
pro rata among the Holders of such Transfer Restricted Securities on the basis
of the principal amount or number of shares of Transfer Restricted Securities
requested to be included by such Holders. The Holders of the Transfer Restricted
Securities to be registered shall pay all underwriting discounts and commissions
of such Underwriters.
(d) If any of the Transfer Restricted Securities covered by the
Shelf Registration Statement are to be sold in an Underwritten Offering, the
Underwriter(s) that will administer the offering will be selected by the Holders
of a majority of the aggregate principal amount of Debentures included in the
Registration Statement and/or the Holders of a majority of shares of Common
Stock included in the Shelf Registration Statement and issued upon conversion of
the Debentures; provided, however, that such Underwriter(s) shall be reasonably
satisfactory to the Company.
(e) Each Holder whose Transfer Restricted Securities are covered
by a Shelf Registration Statement filed pursuant to this Section 3 agrees, upon
the request of the Underwriter(s) in any Underwritten Offering, not to effect
any public sale or distribution of securities of the Company of the same class
as the securities included in such Shelf Registration Statement, including a
sale pursuant to Rule 144 under the Act (except as part of such registration),
during the 10-day period prior to, and during the 90-day period beginning on,
the closing date of any such Underwritten Offering made pursuant to such Shelf
Registration Statement, to the extent timely notified in writing by such
Underwriter(s).
The foregoing provisions of this Section 3(e) shall not apply to
any Holder of Transfer Restricted Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its request to
participate in any such Underwritten Offering, not to effect any public sale or
distribution of any of its Transfer Restricted Securities commencing on the date
of sale of such Transfer Restricted Securities unless it has provided 90 days'
prior written notice of such sale or distribution to the Underwriter(s).
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<PAGE> 5
(f) The Company agrees not to effect any public or private offer,
sale or distribution of Securities of the same quality and nature as the
Transfer Restricted Securities to be registered in an Underwritten Offering,
including a sale pursuant to Regulation D under the Act, during the 10-day
period prior to, and during the 90-day period beginning on, the closing date of
each Underwritten Offering made pursuant to the Shelf Registration Statement, to
the extent timely notified in writing by the Underwriter(s) (except as part of
such registration, if permitted, or pursuant to registrations on Forms S-4 or
S-8 or any successor form to such Forms), unless the Underwriter(s) shall
consent in writing to a shorter period of time; provided, however, that any such
agreement shall permit (A) the issuance by the Company of any shares of Common
Stock issued to employees of the Company or to any other eligible person
pursuant to any employee stock option plan, stock ownership plan, stock bonus
plan or stock compensation plan of the Company in effect on the date of such
Underwritten Offering, (B) the issuance by the Company of Common Stock upon the
conversion of securities, or the exercise of options or warrants, outstanding at
the date of such Underwritten Offering and (C) issuances of Common Stock (or any
securities convertible into or exercisable for Common Stock) in connection with
the acquisition of any related business, product or technology; provided,
however, that in the case of issuances pursuant to paragraph (C) above, any such
shares of Common Stock issued in connection with the Medicus Acquisition (as
defined in the Offering Memorandum) shall be freely tradeable and any such
shares of Common Stock issued in other acquisitions shall be contractually
restricted from resale for at least the duration of the 90-day restricted period
described above.
(g) No Holder of Transfer Restricted Securities may include any
of its Transfer Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless such Holder furnishes to the Company in
writing, within 10 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus (a
"Preliminary Prospectus") included therein.
SECTION 4. LIQUIDATED DAMAGES
(a) If (i) the Shelf Registration Statement is not filed with the
Commission on or prior to 60 days after the Closing Date, (ii) the Shelf
Registration Statement has not been declared effective by the Commissioner
within 150 days after the Closing Date (the "Effectiveness Target Date"), or
(iii) the Shelf Registration Statement is filed and declared effective but shall
thereafter cease to be effective or useable for resale without being succeeded
immediately by any additional Shelf Registration Statement filed and declared
effective (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the Company will pay liquidated damages to each Holder
of Transfer Restricted Securities who has complied with such Holder's
obligations under this Agreement, during the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount of Debentures or $2.50 per annum per 30.075 shares of Common Stock
(subject to adjustment in the event of stock splits, stock recombinations, stock
dividends and the like) constituting Transfer Restricted Securities held by such
Holder and 50 basis points per annum per $1,000 principal amount of Debentures
or $5.00 per annum per 30.075 shares of Common Stock (subject to adjustment as
set forth above) constituting Transfer Restricted Securities for any additional
days during which a Registration Default has occurred and is continuing. All
accrued liquidated damages shall be paid to Record Holders by wire transfer of
immediately available funds or by federal funds check by the Company on each
Damages Payment Date. Following the cure of all Registration Defaults,
liquidated damages will cease to accrue with respect to such Registration
Default. No Liquidated Damages shall be payable with respect to any week
commencing three years or more after the Closing Date.
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<PAGE> 6
All of the Company's obligations set forth in the preceding
paragraph which are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
In connection with the Shelf Registration Statement, the Company
will use its reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution or disposition thereof, and pursuant
thereto the Company will as expeditiously as possible after the Closing Date:
(a) prepare and file with the Commission a Shelf Registration
Statement relating to the registration on Form S-1, or Form S-3 if the use of
such form is then available, for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof and
shall include all financial statements required to be included or incorporated
by reference therein; cooperate and assist in any filings required to be made
with the NASD and use its reasonable best efforts to cause such Shelf
Registration Statement to become effective and approved by such governmental
agencies or authorities as may be necessary to enable the selling Holders to
consummate the disposition of such Transfer Restricted Securities; provided,
however, that before filing a Shelf Registration Statement or any Prospectus, or
any amendments or supplements thereto, the Company will furnish to the Holders
and the Underwriter(s), if any, copies of all such documents proposed to be
filed (except that the Company shall not be required to furnish any exhibits to
such documents, including those incorporated by reference, unless so requested
by a Holder in writing), and the Company will not file any Shelf Registration
Statement or amendment thereto or any Prospectus or any supplement thereto to
which (i) the Underwriter(s), if any, shall reasonably object or (ii) if there
are no Underwriters and if (A) only Debentures are to be registered in the Shelf
Registration Statement and the Holders of a majority in aggregate principal
amount of the Debentures registered in the Shelf Registration Statement shall
reasonably object, or (B) any shares of Common Stock issued upon conversion of
the Debentures are included in the Shelf Registration Statement and the Holders
of a majority of the shares of Common Stock so registered in the Shelf
Registration Statement shall reasonably object, in each such case within five
business days after the receipt thereof. A Holder or Underwriter, if any, shall
be deemed to have reasonably objected to such filing if the Shelf Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed to be
filed contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading which misstatement or omission is specifically identified
to the Company in writing within such five business days;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective for the applicable
period set forth in Section 3(a) hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold; cause the Prospectus to be supplemented
by any required supplement thereto (a "Prospectus Supplement"), and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully
with the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Shelf Registration
Statement, Prospectus or Prospectus Supplement;
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<PAGE> 7
(c) if requested by the Holders of Transfer Restricted
Securities, or if the Transfer Restricted Securities are being sold in an
Underwritten Offering, the Underwriter(s) of such Underwritten Offering,
promptly incorporate in the Prospectus, any Prospectus Supplement or
post-effective amendment to the Shelf Registration Statement such information as
the Underwriters and/or the Holders of Transfer Restricted Securities being sold
agree should be included therein relating to the plan of distribution of the
Transfer Restricted Securities, including, without limitation, information with
respect to the principal amount of Transfer Restricted Securities being sold to
such Underwriter(s), the purchase price being paid therefor and any other terms
with respect to the offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus, Prospectus
Supplement or post-effective amendment as soon as practicable after the Company
is notified of the matters to be incorporated in such Prospectus, Prospectus
Supplement or post-effective amendment;
(d) advise the Underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing,
(i) when the Prospectus or any Prospectus Supplement or post-effective amendment
to the Shelf Registration Statement has been filed, and, with respect to the
Shelf Registration Statement or any post-effective amendment thereto, when the
same has become effective, (ii) of any request by the Commission for amendments
to the Shelf Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (iv) if at any time the representations and
warranties of the Company contemplated by paragraph (m)(i) below cease to be
true and correct, and (v) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of any
additions to or changes in the Shelf Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the Shelf
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(e) promptly following the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or the
Prospectus subsequent to the initial filing of the Shelf Registration Statement,
provide copies of such document (excluding exhibits, unless requested by a
Holder in writing) to the Holders;
(f) furnish, upon request, to each Holder and each of the
Underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein and
all exhibits (excluding exhibits to documents incorporated by reference therein
unless requested by such Holder);
(g) deliver to each selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of any Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto as such
Persons may reasonably request; the Company consents to the use of any
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<PAGE> 8
Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto by each of the selling Holders and each of the Underwriter(s), if any,
in connection with the public offering and the sale of the Transfer Restricted
Securities covered by any Preliminary Prospectus and the Prospectus or any
amendments or supplements thereto;
(h) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the Underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or Underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdiction of the Transfer Restricted Securities covered
by the Shelf Registration Statement; provided, however, that the Company shall
not be required (i) to register or qualify as a foreign corporation where it is
not now so qualified, (ii) to take any action that would subject it to the
service of process in suits, other than as to matters and transactions relating
to the Shelf Registration Statement, in any jurisdiction where it is not now so
subject, or (iii) to take any action that would subject it to taxation in any
jurisdiction in an amount greater than it would be so subject without having
taken such action;
(i) cooperate with the selling Holders and the Underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
Underwriter(s), if any, may request at least two business days prior to any sale
of Transfer Restricted Securities;
(j) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the
Underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (h) above;
(k) if any fact or event contemplated by clause (d)(v) above
shall exist or have occurred, prepare a post-effective amendment or supplement
to the Shelf Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(l) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Shelf Registration Statement and
provide the Trustee under the Indenture and/or the transfer agent for the Common
Stock with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(m) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as may
reasonably be required in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to the Shelf Registration Agreement, in
connection with an Underwritten Registration, and (i) make such representations
and warranties to the Holders and the Underwriter(s), in form, substance and
scope as they may reasonably request and as are customarily made by issuers to
Underwriters in primary Underwritten Offerings and covering matters including,
but not limited to, those set forth in the Purchase Agreement; (ii) obtain
opinions of counsel to the Company and updates thereof in customary form and
covering matters
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<PAGE> 9
reasonably requested by the Underwriter(s) of the type customarily covered in
legal opinions to Underwriters in connection with primary Underwritten Offerings
addressed to each selling Holder and the Underwriter requesting the same and
covering the matters as may be reasonably requested by such Holders and
Underwriters; (iii) obtain, to the extent permitted by Statement on Auditing
Standards No. 72 or any successor Statement thereto, "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the selling Holders of Transfer Restricted Securities and the
Underwriters requesting the same, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters to
Underwriters in connection with primary Underwritten Offerings; (iv) set forth
in full or incorporate by reference in the underwriting agreement the
indemnification provisions and procedures of Section 7 hereof with respect to
all parties to be indemnified pursuant to said Section; and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of the
Transfer Restricted Securities being sold or the Underwriter(s) of such
Underwritten Offering to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement entered into by the
Company pursuant to this clause (m). The above shall be done at or prior to each
closing under such underwriting agreement, as and to the extent required
thereunder;
(n) make available at reasonable times and in a reasonable manner
for inspection by a representative of the Holders of the Transfer Restricted
Securities, any Underwriter participating in any disposition pursuant to such
Shelf Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the Underwriters, all financial and other records,
pertinent corporate documents and properties of the Company and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such Holder, Underwriter, attorney or accountant in connection
with such Shelf Registration Statement prior to its effectiveness, provided,
however, that such representatives, attorneys or accountants shall agree to keep
confidential (which agreement shall be confirmed in writing in advance to the
Company if the Company shall so request) all information, records or documents
made available to such persons which are not otherwise available to the general
public unless disclosure of such records, information or documents is required
by court or administrative order (of which the Company shall have been given
prior notice and an opportunity to defend) after the exhaustion of all appeals
therefrom, and to use such information obtained pursuant to this provision only
in connection with the transaction for which such information was obtained, and
not for any other purpose;
(o) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders, as soon as practicable, a consolidated earnings
statement, which consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act, for the twelve-month period (i) commencing at the end
of any fiscal quarter in which Transfer Restricted Securities are sold to
Underwriters in a firm commitment or best efforts Underwritten Offering or (ii)
if not sold to Underwriters in such an offering, beginning with the first month
of the Company's first fiscal quarter commencing after the effective date of the
Shelf Registration Statement;
(p) cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner;
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<PAGE> 10
(q) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at the
earliest possible moment;
(r) cause all Transfer Restricted Securities covered by the Shelf
Registration Statement to be listed on each securities exchange or quotation
system on which similar securities issued by the Company are then listed if
requested by the Holders of a majority in aggregate principal amount and/or
number of shares of such Transfer Restricted Securities or the Underwriters, if
any; cause the Debentures covered by the Shelf Registration Statement to be
rated with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of such Debentures or the Underwriters;
and
(s) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
Underwriter (including any "qualified independent Underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD).
Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading or necessary to cause such
Shelf Registration Statement not to omit a material fact with respect to such
Holder necessary in order to make the statements therein not misleading.
Each Holder agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 5(d)(v) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings with respect to the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities current at the time of receipt of such notice. In the
event Company shall give any such notice, the time period regarding the
effectiveness of Shelf Registration Statement set forth in Section 3(a) hereof
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 5(d)(v) hereof to and
including the date when each selling Holder covered by such Shelf Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof or shall have received the
Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement (the "Registration Expenses") will be borne by
the Company, regardless whether a Shelf Registration Statement becomes
effective, including without limitation:
(i) all registration and filing fees and expenses (including
filings made with the NASD);
(ii) and expenses of compliance with federal securities or
state blue sky laws;
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<PAGE> 11
(iii) expenses of printing (including, without limitation,
expenses of printing or engraving certificates for the Transfer
Restricted Securities in a form eligible for deposit with
Depository Trust Company and of printing the Prospectus and any
Preliminary Prospectus), messenger and delivery services and
telephone;
(iv) reasonable fees and disbursements of counsel for the
Company and for the Holders of the Transfer Restricted
Securities (subject to the provisions of Section 6(b) hereof);
(v) fees and disbursements of all independent certified
public accountants of the Company (including the expenses of any
special audit and "cold comfort" letters required by or
incidental to the preparation and filing of a Shelf Registration
Statement and Prospectus and the disposition of Transfer
Restricted Securities);
(vi) fees and expenses associated with any NASD filing
required to be made in connection with the Shelf Registration
Statement, including, if applicable, the fees and expenses of
any "qualified independent Underwriter" (and its counsel) that
is required to be retained in accordance with the rules and
regulations of the NASD; and
(vii) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange or quotation system in
accordance with Section 5(q) hereof.
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company. The Holders of Transfer Restricted
Securities shall bear the expense of any broker's commission or Underwriters'
discount or commission.
(b) In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities being
registered pursuant to such Shelf Registration Statement for the fees and
disbursements of not more than one counsel chosen by the Holders of a majority
of the principal amount of the Debentures to be included in the Shelf
Registration Statement, provided, however, that in the case of an Underwritten
Offering which includes shares of Common Stock, such counsel shall be chosen by
the Holders of a majority of the shares of Common Stock to be included in such
Underwritten Offering.
Notwithstanding the provisions of this Section 6(b), each Holder
of Transfer Restricted Securities shall pay all Registration Expenses to the
extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder
(each such Holder an "Indemnified Holder"), each agent, employee, officer and
director of any Indemnified Holder and each person that controls each
Indemnified Holder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, and agents, employees, officers and directors or any such
controlling person of any Indemnified Holder from and against any and all
losses, claims, damages, judgments, liabilities and expenses (including the
reasonable fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) as they are
incurred which arise out of or based upon any untrue statement or alleged untrue
statement of a
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<PAGE> 12
material fact contained in the Shelf Registration Statement or the Prospectus or
any amendment or supplement thereto or any Preliminary Prospectus or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except (i) the Company shall not be liable to any Indemnified
Holder in any such case insofar as such losses, claims, damages, judgments,
liabilities or expenses arise out of, or are based upon, any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to such Indemnified Holder or Indemnified Underwriter
furnished in writing by such Indemnified Holder to the Company expressly for use
therein and (ii) the Company shall not be liable to any Indemnified Holder under
the indemnity agreement in this Section 7(a) with respect to any Preliminary
Prospectus to the extent that any such loss, claim, damage, judgment, liability
or expense results solely from the fact that any Indemnified Holder sold
Transfer Restricted Securities to a person to whom there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the Prospectus
as then amended or supplemented, if the Company has previously furnished
sufficient copies thereof to the Indemnified Holder.
(b) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
Indemnified Holder with respect to which indemnity may be sought against the
Company pursuant to this Section 7, such Indemnified Holder shall promptly
notify the Company in writing, and the Company shall have the right to assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Holder and payment of all fees and expenses; provided,
however, that the omission so to notify the Company shall not relieve the
Company from any liability that they may have to any Indemnified Holder (except
to the extent that the Company is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). An Indemnified Holder
shall have the right to employ separate counsel in any such action or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Holder unless (i) the
Company agrees in writing to pay such fees and expenses, (ii) the Company has
failed promptly to assume the defense and employ counsel satisfactory to the
Indemnified Holder or (iii) the named parties to any such action or proceeding
(including any unpleaded parties) include both the Indemnified Holder and the
Company and such Indemnified Holder shall have been advised in writing by its
counsel that representation of them and the Company by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation has been proposed) due to actual or potential differing
interests between them (in which case the Company shall not have the right to
assume the defense of such action on behalf of such Indemnified Holder). It is
understood that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated in writing by the Holders of the majority of the aggregate principal
amount of Debentures and/or the number of shares of Common Stock on behalf of
such Indemnified Holders, and that all such fees and expenses shall be
reimbursed as they are incurred. The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company, but if settled with the written consent of the Company, or if there is
a final judgment with respect thereto, the Company agrees to indemnify and hold
harmless each Indemnified Holder from and against any loss or liability by
reason of such settlement or judgment. The Company shall not, without the prior
written consent of each Indemnified Holder affected thereby, effect any
settlement of any pending or threatened proceeding in which such Indemnified
Holder has sought indemnity hereunder, unless such settlement includes an
unconditional release of such Indemnified Holder from all liability arising out
of such action, claim, litigation or proceeding.
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<PAGE> 13
(c) Each Indemnified Holder agrees to indemnify and hold harmless
the Company, its directors, its officers who sign the Registration Statement and
any person controlling the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act (collectively, the "Company Indemnified
Parties") to the same extent as the foregoing indemnity from the Company to any
Indemnified Holder, but only with respect to information relating to each
Indemnified Holder furnished to the Company in writing by each Indemnified
Holder, expressly for use in the Registration Statement, Prospectus (or any
amendment or supplement thereto), or any Preliminary Prospectus. In case any
action shall be brought against any Company Indemnified Party based on the
Registration Statement, Prospectus (or any amendment or supplement thereto), or
any Preliminary Prospectus and in respect of which indemnification may be sought
against each Indemnified Holder pursuant to this Section 7(c), each Indemnified
Holder shall have the rights and duties given to the Company by Section 7(a)
(except that if the Company shall have assumed the defense thereof, each
Indemnified Holder may, but shall not be required to, employ separate counsel
therein and participate in the defense thereof and the fees and expenses of such
counsel shall be at the expense of the Indemnified Holder) and the Company
Indemnified Parties shall have the rights and duties given to the Indemnified
Holders by Section 7(b).
(d) If the indemnification provided for in this Section 7 is
unavailable to any party entitled to indemnification pursuant to Section 7(a) or
7(c), then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, judgments, liabilities and expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and each Indemnified Holder on the other
from the offering of the Transfer Restricted Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and each Indemnified Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
judgments, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and each Indemnified Holder on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total net proceeds from the
offering (before deducting expenses) received by each Indemnified Holder, as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and each Indemnified Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Indemnified Holder on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and each Indemnified Holder agree that it would
not be just and equitable if contribution pursuant to Section 7(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 7(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not found guilty of such fraudulent misrepresentation.
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<PAGE> 14
(f) The Company shall also indemnify each Underwriter
participating in the distribution (as described in such registration statement),
their officers and directors and each person who controls such persons (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Holders.
(g) The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability that any indemnifying party may
otherwise have to any indemnified party.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any of
the Debentures or shares of Common Stock that are Transfer Restricted Securities
remain outstanding or, if earlier, two years from the Closing Date, and during
any such period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, to make available to the Initial Purchasers or any beneficial
owner of the Debentures or shares of such Common Stock in connection with any
sale thereof and any prospective purchaser of such Debentures or Common Stock
from such Initial Purchaser or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements, (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements and (c) furnishes the Company in writing information in accordance
with Section 3(g) and agrees to indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and any person
controlling the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the extent contemplated by Section 7(c).
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the Underwriter(s) that will administer the offering will be selected
by the Holders of the Transfer Restricted Securities included in such offering
in the manner specified in Section 3(c); provided, however, that such
Underwriters must be reasonably satisfactory to the Company.
SECTION 11. MISCELLANEOUS
(a) Remedies. Each Holder of Transfer Restricted Securities, in
addition to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and granted by law, including recovery of
damages, will be entitled to specific performance of such Holder's rights under
this Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
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<PAGE> 15
(b) No Inconsistent Agreements. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders of Transfer Restricted
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities under any
other agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of a majority in aggregate principal amount of the Debentures constituting
Transfer Restricted Securities affected by such amendment, modification,
supplement, waiver or departure (provided that, if any such Transfer Restricted
Securities are shares of Common Stock issued upon conversion of Debentures,
consents by Holders of such shares shall be calculated as if such conversions
had not taken place). Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders of Transfer Restricted Securities whose securities are being sold
pursuant to such Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders of Transfer Restricted Securities
shall be valid only with the written consent of Holders of at least 66-2/3% of
the Transfer Restricted Securities being sold, in each case calculated in
accordance with the provisions of Section 3(c).
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder of Transfer Restricted Securities, at the
address set forth on the records of the Registrar under the
Indenture, with a copy to the Registrar; and
(ii) if to the Company or an Initial Purchaser, initially at
its address set forth in the Purchase Agreement and thereafter
at such other address, notice of which is given in accordance
with the provisions of this Section.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder of Transfer Restricted Securities unless
and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder; and provided further that nothing herein shall be
deemed to permit any assignment, transfer or any disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire
-15-
<PAGE> 16
Transfer Restricted Securities, in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement and by taking and holding such Transfer Restricted
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contacts made and to be performed within the State of New York.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the securities sold pursuant to the Purchase Agreement. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
-16-
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
QUADRAMED CORPORATION
By: /s/ John V. Cracchiolo
-------------------------------
Name: John V. Cracchiolo
Title: Executive Vice President
and Chief Financial Officer
SMITH BARNEY INC.
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
By: Smith Barney Inc.
By: /s/ Benjamin D. Lorello
-------------------------------
Name: Benjamin D. Lorello
Title: Managing Director
-17-
<PAGE> 1
Exhibit 4.9
THIS DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS DEBENTURE IS EXCHANGEABLE FOR DEBENTURES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
DEBENTURE (OTHER THAN A TRANSFER OF THIS DEBENTURE AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
SUCH LIMITED CIRCUMSTANCES.
UNLESS THIS DEBENTURE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
DEBENTURE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SUBORDINATED SECURITY (THE "SECURITY") HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (A)(2), (A)(3) OR (A)(7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS
<PAGE> 2
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH
OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY
AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, IS DEEMED TO HAVE AGREED TO
BE BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF
APRIL 27, 1998, BY AND AMONG THE COMPANY, SALOMON SMITH BARNEY, SMITH BARNEY
INC., BEAR, STEARNS & CO. INC. AND BT ALEX. BROWN INCORPORATED (THE
"REGISTRATION RIGHTS AGREEMENT").
-2-
<PAGE> 3
NO. 001 CUSIP NO. 74730WAA9
$114,520,000
QUADRAMED CORPORATION
5.25% CONVERTIBLE SUBORDINATED DEBENTURE DUE May 1, 2005
QuadraMed Corporation, a corporation duly organized and existing under
the laws of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of One Hundred Fourteen Million Five Hundred and Twenty Thousand
Dollars ($114,520,000) on May 1, 2005, and to pay interest thereon from and
including the date of initial issuance of Securities under the Indenture, or
from and including the most recent Interest Payment Date to which interest has
been paid or duly provided for, semiannually on May 1 and November 1 in each
year, commencing November 1, 1998, at the rate of 5.25% per annum, until the
principal hereof is paid or made available for payment. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15 or October 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Payment of
the principal of (and premium, if any) and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, The City of New York, and in such other cities, if any, as
the Company may designate in writing to the Trustee, in such coin or currency of
the United States of America as at the time of payment is legal tender for
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 address of
the Person entitled thereto as such address shall appear in the Security
Register.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee (as defined below) under the Indenture (as defined
below), by the manual signature of one of its authorized officers, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
Capitalized terms used in this Security which are defined in the
Indenture shall have the respective meanings assigned to them in the Indenture.
Pursuant to the Registration Rights Agreement, if a Registration Default
(as defined in the Registration Rights
-3-
<PAGE> 4
Agreement) has occurred, the Company has agreed to pay liquidated damages to
each Holder of Transfer Restricted Securities (as defined in the Registration
Rights Agreement) which has complied with its obligations under the Registration
Rights Agreement. The amount of liquidated damages payable during any period in
which a Registration Default shall have occurred and be continuing is that
amount which is equal to one-quarter of one percent (25 basis points) per annum
per $1,000 principal amount or $2.50 per annum per 30.075 shares of common stock
(subject to adjustment in the event of a stock split, stock recombination, stock
dividend and the like) constituting Transfer Restricted Securities for the first
90 days during which a Registration Default has occurred and is continuing and
50 basis points per annum per $1,000 principal amount of Securities or $5.00 per
annum per 30.075 shares of Common Stock (subject to adjustment as set forth
above) constituting Transfer Restricted Securities for any additional days
during which a Registration Default has occurred and is continuing. The Company
will pay all accrued liquidated damages by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date (as
defined in the Registration Rights Agreement). Following the cure of a
Registration Default, liquidated damages will cease to accrue with respect to
such Registration Default.
-4-
<PAGE> 5
NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR THE
INTEREST ON THIS DEBENTURE OR FOR ANY CLAIM BASED HEREON, OR OTHERWISE IN
RESPECT HEREOF, OR BASED ON OR IN RESPECT OF THE INDENTURE OR ANY INDENTURE
SUPPLEMENTAL THERETO AGAINST ANY INCORPORATOR, STOCKHOLDER, OFFICER OR DIRECTOR,
AS SUCH, PAST OR PRESENT OR FUTURE OF THE COMPANY OR OF ANY SUCCESSOR THEREOF,
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.
THE PROVISIONS OF THIS SECURITY ARE CONTINUED ON THE REVERSE SIDE HEREOF
AND SUCH CONTINUED PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH AT THIS PLACE.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile.
QUADRAMED CORPORATION
By
-------------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities
referred to in the
within-mentioned Indenture.
The Bank of New York, as Trustee
By
-------------------------------
Authorized Signatory
Dated:
-------------------------------
-5-
<PAGE> 6
REVERSE SIDE OF DEBENTURE
This Security is one of a duly authorized issue of Securities of the
Company designated as its 5.25% Convertible Subordinated Debentures due 2005
(herein called the "Securities"), limited in aggregate principal amount to
$115,000,000 (including the initial purchasers' over-allotment option), issued
and to be issued under a Subordinated Indenture, dated as of May 1, 1998, the
resolution adopted by the Company's Board of Directors on April 7, 1998, and the
Officers' Certificate dated May 1, 1998 (herein collectively called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the holders of
Senior Indebtedness and the Holders of the Securities, and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before the
close of business on May 1, 2005, or in case this Security or a portion hereof
is called for redemption or repurchase, then in respect of this Security or such
portion hereof until and including, but (unless the Company defaults in making
the payment due upon redemption or repurchase, as the case may be) not after,
the close of business on the second business day preceding the Redemption Date
or the close of business on the Repurchase Date, respectively, to convert this
Security (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into fully paid and non-assessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock of the Company at a conversion
price equal to $33.25 aggregate principal amount of securities for each share of
Common Stock (or at the current adjusted conversion price if an adjustment has
been made as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank, to the Company at its office or
agency in the Borough of Manhattan, The City of New York, and in such other
cities, if any, as the Company may designate in writing to the Trustee, with the
form of conversion notice hereon executed by the Holder hereof evidencing such
Holder's election to convert this Security, or if less than the entire principal
amount hereof is to be converted, the portion hereof to be converted, and, in
case such surrender shall be made during the period from the close of business
on any Regular Record Date next preceding any Interest Payment Date to the close
of business on such Interest Payment Date (unless this Security or the portion
thereof being converted has been called for redemption on a Redemption Date
within such period), also accompanied by payment
-6-
<PAGE> 7
in New York Clearing House or other funds acceptable to the Company of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of this Security then being converted. Subject to the aforesaid
requirement for payment and, in the case of a conversion after the Regular
Record Date next preceding any Interest Payment Date and on or before such
Interest Payment Date, to the right of the Holder of this Security of record at
such Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made on
conversion for interest accrued hereon or for dividends on the Common Stock
issued on conversion. No fractions of shares or scrip representing fractions of
shares will be issued on conversion, but instead of any fractional interest the
Company shall pay a cash adjustment as provided in the Indenture. The conversion
price is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the transfer of substantially all of the assets of the
Company, the Indenture shall be amended, without the consent of any Holders of
Securities, so that this Security, if then outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of debentures, cash and other property
receivable upon the consolidation, merger or transfer by a holder of the number
of shares of Common Stock into which this Security might have been converted
immediately prior to such consolidation, merger or transfer (assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of non-electing
shares).
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by first class mail, at any time on or after May 4, 2001,
as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount):
If redeemed during the 12-month period beginning May 1 of the years indicated
(May 4, in the case of 2001), the redemption price shall be:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2001 103.00%
2002 102.25%
2003 101.50%
2004 100.75%
2005 100.00%
</TABLE>
-7-
<PAGE> 8
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Indenture provides that if a Repurchase Event (as defined therein)
occurs, each Holder of Securities shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase all of such
Holder's Securities, or any portion thereof that is an integral multiple of
$1,000, for cash at a price equal to 100% of the principal amount of such
Securities to be repurchased, together with accrued interest to the Repurchase
Date, but any interest installment the Stated Maturity of which is on or prior
to such Repurchase Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption, conversion or repurchase of this Security in
part only, a new Security or Securities for the portion hereof not redeemed,
converted or repurchased will be issued in the name of the Holder hereof upon
the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all amounts then due on all Senior Indebtedness of
the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Debentures and interest accrued thereon may be declared due and payable
in the manner and with the effect provided in the Indenture. The Indenture
provides that in certain events such declaration and its consequences may be
waived by the holders of a majority in aggregate principal amount of the
Debentures then outstanding.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with
-8-
<PAGE> 9
respect to the Securities, the Holders of not less than 25% in principal amount
of the Securities at the time Outstanding shall have made written request to the
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not
have received from the Holders of a majority in principal amount at the time
Outstanding a written direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein or of the right to convert this Security
in accordance with the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
-9-
<PAGE> 10
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT UNDER
THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Security, 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) (Cust)
entireties under Uniform Gifts to Minors Act ______
JT TEN - as joint tenants with (State)
right of Survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above list.
-10-
<PAGE> 11
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- --------------------------------------------------------------------------------
this Security and all rights thereunder hereby irrevocably constituting and
appointing
_____________________________________________________________, Attorney, to
transfer this Security on the books of the Trustee, with full power of
substitution in the premises.
Dated:_____________________ ____________________________________
____________________________________
Notice: The signature(s) on this
Assignment must correspond with the
name(s) as written upon the face of
this Security in every particular,
without alteration or enlargement or
any change whatsoever.
Signature Guaranty:_______________
-11-
<PAGE> 12
SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITIES
TO REFLECT CHANGES IN PRINCIPAL AMOUNT
Schedule A
Changes to Principal Amount of Global Securities
<TABLE>
<CAPTION>
Principal Amount of
Convertible Subordinated Debentures due 2005
by which this Global
Security is to be
Reduced or Increased, Remaining Principal
and Reason for Amount of this Notation
Date Reduction or Increase Global Security Made By
- ---- --------------------- --------------- -------
<S> <C> <C> <C>
</TABLE>
-12-
<PAGE> 13
[FORM OF CONVERSION NOTICE.]
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture, and directs that the shares issuable
and deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If this Notice is being delivered on a date after
the close of business on a Regular Record Date and prior to the opening of
business on the related Interest Payment Date (unless the Security or the
portion thereof being converted has been called for redemption on a Redemption
Date within such period), this Notice is accompanied by payment in funds
acceptable to the Company, of an amount equal to the interest payable on such
Interest Payment Date of the principal of the Security to be converted. If
shares or Securities 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 by the undersigned on account of
interest accompanies this Security.
Principal Amount to be Converted
(in an integral multiple of
$1,000, if less than all):
$_________________________________
Dated_______________________________ _____________________________
Signature (s)
Fill in for registration of shares of Common Stock and Security if to be
issued otherwise than to the registered holder.
________________________________________ Social Security or other
Taxpayer Identification Number
________________________________________
(Name)
________________________________________
(Address)
________________________________________
Please print Name and Address
(including zip code number)
-13-
<PAGE> 1
Exhibit 4.10
THIS SUBORDINATED SECURITY (THE "SECURITY") HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (A)(2), (A)(3) OR (A)(7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF
THIS SECURITY AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, IS DEEMED TO HAVE AGREED TO
BE BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF
APRIL 27, 1998, BY AND AMONG THE COMPANY, SALOMON SMITH BARNEY, SMITH BARNEY
INC., BEAR, STEARNS & CO. INC. AND BT ALEX. BROWN INCORPORATED (THE
"REGISTRATION RIGHTS AGREEMENT").
-2-
<PAGE> 2
NO. _____ CUSIP NO. 74730WAB7
$____________
QUADRAMED CORPORATION
5.25% CONVERTIBLE SUBORDINATED DEBENTURE DUE May 1, 2005
QuadraMed Corporation, a corporation duly organized and existing under
the laws of Delaware (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Smith Barney Inc., or registered assigns,
the principal sum of --------------------------- ($-------) on May 1, 2005, and
to pay interest thereon from and including the date of initial issuance of
Securities under the Indenture, or from and including the most recent Interest
Payment Date to which interest has been paid or duly provided for, semiannually
on May 1 and November 1 in each year, commencing November 1, 1998, at the rate
of 5.25% per annum, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the April 15 or October 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
and in such other cities, if any, as the Company may designate in writing to the
Trustee, in such coin or currency of the United States of America as at the time
of payment is legal tender for 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 address of the Person entitled thereto as such address shall
appear in the Security Register.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee (as defined below) under the Indenture (as defined
below), by the manual signature of one of its authorized officers, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
Capitalized terms used in this Security which are defined in the
Indenture shall have the respective meanings assigned to them in the Indenture.
Pursuant to the Registration Rights Agreement, if a Registration Default
(as defined in the Registration Rights Agreement) has occurred, the Company has
agreed to pay liquidated
-3-
<PAGE> 3
damages to each Holder of Transfer Restricted Securities (as defined in the
Registration Rights Agreement) which has complied with its obligations under the
Registration Rights Agreement. The amount of liquidated damages payable during
any period in which a Registration Default shall have occurred and be continuing
is that amount which is equal to one-quarter of one percent (25 basis points)
per annum per $1,000 principal amount or $2.50 per annum per 30.075 shares of
common stock (subject to adjustment in the event of a stock split, stock
recombination, stock dividend and the like) constituting Transfer Restricted
Securities for the first 90 days during which a Registration Default has
occurred and is continuing and 50 basis points per annum per $1,000 principal
amount of Securities or $5.00 per annum per 30.075 shares of Common Stock
(subject to adjustment as set forth above) constituting Transfer Restricted
Securities for any additional days during which a Registration Default has
occurred and is continuing. The Company will pay all accrued liquidated damages
by wire transfer of immediately available funds or by federal funds check on
each Damages Payment Date (as defined in the Registration Rights Agreement).
Following the cure of a Registration Default, liquidated damages will cease to
accrue with respect to such Registration Default.
-4-
<PAGE> 4
NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR THE
INTEREST ON THIS DEBENTURE OR FOR ANY CLAIM BASED HEREON, OR OTHERWISE IN
RESPECT HEREOF, OR BASED ON OR IN RESPECT OF THE INDENTURE OR ANY INDENTURE
SUPPLEMENTAL THERETO AGAINST ANY INCORPORATOR, STOCKHOLDER, OFFICER OR DIRECTOR,
AS SUCH, PAST OR PRESENT OR FUTURE OF THE COMPANY OR OF ANY SUCCESSOR THEREOF,
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.
THE PROVISIONS OF THIS SECURITY ARE CONTINUED ON THE REVERSE SIDE HEREOF
AND SUCH CONTINUED PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH AT THIS PLACE.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, manually or in facsimile.
QUADRAMED CORPORATION
By
-------------------------------
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities
referred to in the
within-mentioned Indenture.
The Bank of New York, as Trustee
By
-------------------------------
Authorized Signatory
Dated:___________________________
-5-
<PAGE> 5
REVERSE SIDE OF DEBENTURE
This Security is one of a duly authorized issue of Securities of the
Company designated as its 5.25% Convertible Subordinated Debentures due 2005
(herein called the "Securities"), limited in aggregate principal amount to
$115,000,000 (including the initial purchasers' over-allotment option), issued
and to be issued under a Subordinated Indenture, dated as of May 1, 1998, the
resolution adopted by the Company's Board of Directors on April 7, 1998, and the
Officers' Certificate dated May 1, 1998 (herein collectively called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the holders of
Senior Indebtedness and the Holders of the Securities, and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before the
close of business on May 1, 2005, or in case this Security or a portion hereof
is called for redemption or repurchase, then in respect of this Security or such
portion hereof until and including, but (unless the Company defaults in making
the payment due upon redemption or repurchase, as the case may be) not after,
the close of business on the second business day preceding the Redemption Date
or the close of business on the Repurchase Date, respectively, to convert this
Security (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into fully paid and non-assessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock of the Company at a conversion
price equal to $33.25 aggregate principal amount of securities for each share of
Common Stock (or at the current adjusted conversion price if an adjustment has
been made as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank, to the Company at its office or
agency in the Borough of Manhattan, The City of New York, and in such other
cities, if any, as the Company may designate in writing to the Trustee, with the
form of conversion notice hereon executed by the Holder hereof evidencing such
Holder's election to convert this Security, or if less than the entire principal
amount hereof is to be converted, the portion hereof to be converted, and, in
case such surrender shall be made during the period from the close of business
on any Regular Record Date next preceding any Interest Payment Date to the close
of business on such Interest Payment Date (unless this Security or the portion
thereof being converted has been called for redemption on a Redemption Date
within such period), also accompanied by payment
-6-
<PAGE> 6
in New York Clearing House or other funds acceptable to the Company of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of this Security then being converted. Subject to the aforesaid
requirement for payment and, in the case of a conversion after the Regular
Record Date next preceding any Interest Payment Date and on or before such
Interest Payment Date, to the right of the Holder of this Security of record at
such Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made on
conversion for interest accrued hereon or for dividends on the Common Stock
issued on conversion. No fractions of shares or scrip representing fractions of
shares will be issued on conversion, but instead of any fractional interest the
Company shall pay a cash adjustment as provided in the Indenture. The conversion
price is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the transfer of substantially all of the assets of the
Company, the Indenture shall be amended, without the consent of any Holders of
Securities, so that this Security, if then outstanding, will be convertible
thereafter, during the period this Security shall be convertible as specified
above, only into the kind and amount of debentures, cash and other property
receivable upon the consolidation, merger or transfer by a holder of the number
of shares of Common Stock into which this Security might have been converted
immediately prior to such consolidation, merger or transfer (assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of non-electing
shares).
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by first class mail, at any time on or after May 4, 2001,
as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount):
If redeemed during the 12-month period beginning May 1 of the years indicated
(May 4, in the case of 2001), the redemption price shall be:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2001 103.00%
2002 102.25%
2003 101.50%
2004 100.75%
2005 100.00%
</TABLE>
-7-
<PAGE> 7
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Indenture provides that if a Repurchase Event (as defined therein)
occurs, each Holder of Securities shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase all of such
Holder's Securities, or any portion thereof that is an integral multiple of
$1,000, for cash at a price equal to 100% of the principal amount of such
Securities to be repurchased, together with accrued interest to the Repurchase
Date, but any interest installment the Stated Maturity of which is on or prior
to such Repurchase Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption, conversion or repurchase of this Security in
part only, a new Security or Securities for the portion hereof not redeemed,
converted or repurchased will be issued in the name of the Holder hereof upon
the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all amounts then due on all Senior Indebtedness of
the Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Debentures and interest accrued thereon may be declared due and payable
in the manner and with the effect provided in the Indenture. The Indenture
provides that in certain events such declaration and its consequences may be
waived by the holders of a majority in aggregate principal amount of the
Debentures then outstanding.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with
-8-
<PAGE> 8
respect to the Securities, the Holders of not less than 25% in principal amount
of the Securities at the time Outstanding shall have made written request to the
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not
have received from the Holders of a majority in principal amount at the time
Outstanding a written direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein or of the right to convert this Security
in accordance with the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
-9-
<PAGE> 9
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS DEBENTURE SHALL BE DEEMED TO BE A CONTRACT UNDER
THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF.
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Security, 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) (Cust)
entireties under Uniform Gifts to Minors Act______
JT TEN - as joint tenants with (State)
right of Survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the above list.
-10-
<PAGE> 10
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including
postal zip code of assignee)
- --------------------------------------------------------------------------------
this Security and all rights thereunder hereby irrevocably constituting
and appointing
_________________________________________________________ , Attorney, to
transfer this Security on the books of the Trustee, with full power of
substitution in the premises.
Dated:___________________________ ___________________________________
___________________________________
Notice: The signature(s) on this
Assignment must correspond with the
name(s) as written upon the face of
this Security in every particular,
without alteration or enlargement or
any change whatsoever.
Signature Guaranty:_______________
-11-
<PAGE> 11
[FORM OF CONVERSION NOTICE.]
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture, and directs that the shares issuable
and deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If this Notice is being delivered on a date after
the close of business on a Regular Record Date and prior to the opening of
business on the related Interest Payment Date (unless the Security or the
portion thereof being converted has been called for redemption on a Redemption
Date within such period), this Notice is accompanied by payment in funds
acceptable to the Company, of an amount equal to the interest payable on such
Interest Payment Date of the principal of the Security to be converted. If
shares or Securities 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 by the undersigned on account of
interest accompanies this Security.
Principal Amount to be Converted
(in an integral multiple of
$1,000, if less than all):
$______________________________
Dated________________________________ _____________________________
Signature (s)
Fill in for registration of shares of Common Stock and Security if to be
issued otherwise than to the registered holder.
_____________________________ Social Security or other
Taxpayer Identification Number
_____________________________
(Name)
_____________________________
(Address)
_____________________________
Please print Name and Address
(including zip code number)
-12-
<PAGE> 1
CONFORMED COPY
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
QUADRAMED CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 59-1992861
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
80 East Sir Francis Drake Blvd., Ste 2A Larkspur, California 94939
(Address of principal executive offices) (Zip code)
----------------------
5.25% Convertible Subordinated Debentures
(Title of the indenture securities)
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Name Address
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE> 3
CONFORMED COPY
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 18th day of May, 1998.
THE BANK OF NEW YORK
By: /s/ WALTER N. GITLIN
-------------------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
<PAGE> 4
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell .. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 35,019,608
LESS: Allowance for loan and
lease losses ..................... 627,350
LESS: Allocated transfer risk
reserve .......................... 0
Loans and leases, net of unearned
income, allowance, and reserve ... 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
------------
Total assets ......................... $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices ................ $ 27,031,362
Noninterest-bearing ................ 11,899,507
Interest-bearing ................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ................ 590,999
Interest-bearing ................... 13,203,450
Federal funds purchased and Securities
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Dollar Amounts
LIABILITIES in Thousands
<S> <C>
sold under agreements to repurchase 2,338,881
Demand notes issued to the U.S.
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years ..... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
------------
Total liabilities .................... 51,192,576
------------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
------------
Total equity capital ................. 4,961,011
------------
Total liabilities and equity
capital ............................ $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
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Thomas A. Renyi -
Alan R. Griffith - Directors
J. Carter Bacot -
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