<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
Commission file Number 1-6247
ALZA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0142070
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
950 PAGE MILL ROAD, P.O. BOX 10950, PALO ALTO, CA 94303-0802
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 494-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ----------------------
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Units including ALZA Corporation Warrants (to purchase
Common Stock at $65 per share)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X /
State the aggregate market value of the voting stock held by
non-affiliates of the registrant, as of March 8, 1994: $1,773,982,526.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 8, 1994:
Title of Class Number of Shares
- -------------- ----------------
Common Stock 81,662,500
DOCUMENTS INCORPORATED BY REFERENCE
Part II, Items 5, 6, 7 and 8 are incorporated by reference to the
registrant's Annual Report to Stockholders for the year ended December 31,
1993; Part III, Items 10, 11, 12 and 13 are incorporated by reference to the
definitive proxy statement for the registrant's Annual Meeting of Stockholders
to be held on April 26, 1994.
<PAGE>
ALZA CORPORATION FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
TABLE OF CONTENTS
DESCRIPTION
PAGE
Item 1. BUSINESS......................................................... 3
Item 2. PROPERTIES....................................................... 14
Item 3. LEGAL PROCEEDINGS................................................ 14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 16
EXECUTIVE OFFICERS OF THE REGISTRANT......................................... 16
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS......................................................... 18
Item 6. SELECTED FINANCIAL DATA.......................................... 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................ 18
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 18
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE............................................. 18
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 19
Item 11. EXECUTIVE COMPENSATION........................................... 19
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 19
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 19
Item 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.............................................. 20
-2-
<PAGE>
PART I
ITEM 1. BUSINESS
ALZA Corporation ("ALZA") was incorporated under the laws of the state
of California on June 11, 1968, and changed its legal domicile from California
to Delaware in 1987. On February 7, 1992, ALZA acquired all outstanding
shares of Bio-Electro Systems, Inc. ("BES") in a merger; ALZA was the
surviving corporation. ALZA's mailing address is 950 Page Mill Road, P.O. Box
10950, Palo Alto, CA 94303-0802.
ALZA develops a broad range of pharmaceutical products based on ALZA's
proprietary therapeutic systems technologies. ALZA's therapeutic systems are
designed to provide controlled, predetermined rates of drug release for
extended time periods. By administering drugs in preset patterns, ALZA's
products can increase both the medical and the economic value of drugs, by
minimizing their unpleasant or harmful side effects while optimizing their
beneficial actions. In addition, ALZA's therapeutic systems can simplify drug
therapy and increase patient compliance by decreasing the frequency with which
medication must be administered.
Among the ALZA-developed products commercialized to date by client
companies are Procardia XL (registered trademark) for the treatment of angina
and hypertension, Transderm-Nitro (registered trademark) for the prevention
and treatment of angina, Nicoderm (registered trademark), an aid in smoking
cessation, and Duragesic (registered trademark) for the management of chronic
pain. In addition, more than 60 products based on ALZA's therapeutic systems
are in various stages of development and clinical evaluation, a number of
which are awaiting marketing approval in the United States and other
countries. During 1993, ALZA continued to apply its broad-based drug delivery
technologies to the development of new pharmaceutical products incorporating
many of the important drugs available today, as well as new molecular
entities.
Most of ALZA's product development activities have been undertaken
pursuant to joint development and commercialization agreements, including
agreements with many of the world's largest pharmaceutical companies. These
agreements normally provide for the pharmaceutical company client to reimburse
ALZA for costs incurred in product development and clinical evaluation. The
client receives marketing rights to the product, and ALZA receives payments
based on the client's sales of the product. In some cases ALZA manufactures
all or a portion of the client's requirements of the product; in other cases
the client manufactures the product.
In June 1993, ALZA distributed a special dividend of "Units" to ALZA
stockholders. Each Unit consisted of one share of Class A Common Stock of
Therapeutic Discovery Corporation ("TDC") and one warrant to purchase
one-eighth of one share of ALZA Common Stock. TDC was formed for the purpose
of selecting and developing new human pharmaceutical products combining ALZA's
-3-
<PAGE>
proprietary drug delivery technologies with drug compounds, and
commercializing such products, most likely through licensing to ALZA. TDC was
funded with $250 million in cash contributed by ALZA. TDC and ALZA have
entered into a research and development contract for the selection and
development of such products. ALZA has the option to license each product
developed by TDC, and to purchase all of the outstanding shares of TDC Class A
Common Stock, at a purchase price based on a predetermined formula. The
formation of TDC, and the development of products with TDC, are intended to
result in a potential pipeline of products for marketing by ALZA.
Over the last several years, ALZA has expanded its manufacturing
capacity. ALZA is also in the process of expanding its marketing activities.
ALZA expects its marketing activities to increase in the future as a result of
the marketing and co-promotion rights ALZA has retained under certain product
development and other agreements, and as a result of ALZA's arrangements with
TDC. ALZA has announced that ALZA Pharmaceuticals will commence marketing the
Testoderm (registered trademark) testosterone transdermal system in April
1994. In late March 1994, ALZA announced that the Actisite (registered
trademark) (tetracycline HCl) Periodontal Fiber had been cleared for marketing
in the United States, where it will be marketed by a partnership of ALZA and
the Procter & Gamble Company.
TECHNOLOGIES AND PRODUCTS
TRANSDERMAL SYSTEMS. ALZA's transdermal therapeutic systems provide
for the controlled delivery of drugs directly into the bloodstream through
intact skin. Transdermal systems are well-suited for the delivery of potent
drugs that are poorly absorbed and/or extensively metabolized when
administered orally. ALZA's transdermal products are thin multilayer systems,
in the form of small adhesive patches, that combine a drug reservoir with a
polymer membrane or other mechanism for the control of drug release to the
surface of intact skin, and hence into the bloodstream.
The transdermal products developed by ALZA and presently marketed in the
United States and other countries include:
- TRANSDERM SCOP (REGISTERED TRADEMARK) (scopolamine) - Applied
once every three days to prevent motion sickness.
- TRANSDERM-NITRO (nitroglycerin) - Applied once a day for the
prevention and treatment of angina pectoris.
- CATAPRES-TTS (REGISTERED TRADEMARK) (clonidine) - Applied once a
week for the treatment of high blood pressure.
- DURAGESIC (fentanyl) - Applied once every three days for the
management of chronic pain in patients requiring opioid analgesia.
-4-
<PAGE>
- NICODERM (nicotine) - Applied once a day to aid in smoking
cessation.
A number of additional transdermal products are in various stages of
development and clinical testing. The Testoderm product, which is applied
once a day for testosterone replacement in hypogonadal males, will be
introduced by ALZA Pharmaceuticals in the United States in April 1994. The
product was developed by ALZA on behalf of ALZA TTS Research Partners Ltd., a
limited partnership, which will receive royalties from ALZA based on sales of
the product. ALZA plans to market the product outside the United States
through distributors.
OSMOTIC SYSTEMS. ALZA's OROS (registered trademark) therapeutic
systems deliver compounds to the gastrointestinal tract at predetermined
controlled rates. These systems resemble conventional tablets or capsules in
appearance, but use osmosis to provide pre-programmed, controlled drug
delivery. An OROS system is comprised of a polymer membrane with one or more
laser-drilled holes surrounding a core containing the drug or drugs, with or
without osmotic or other agents. Water from the gastrointestinal tract
diffuses through the membrane at a controlled rate into the drug core, causing
the drug to be released in solution or suspension at a predetermined
controlled rate out of the laser-drilled hole(s). OROS systems are well
suited for delivering drug compounds throughout the gastrointestinal tract in
programmed delivery for local treatment or systemic absorption.
The OROS products developed by ALZA and presently marketed in the United
States and other countries include:
- PROCARDIA XL/ADALAT OROS (REGISTERED TRADEMARK) - A once a day
formulation of the calcium channel blocker nifedipine for the
treatment of both angina and hypertension.
- MINIPRESS XL (REGISTERED TRADEMARK)/ALPRESS LP (REGISTERED
TRADEMARK) - A once a day formulation of prazosin for the
treatment of hypertension (marketed in France and approved for
marketing in the United States).
- VOLMAX (REGISTERED TRADEMARK) - A twice daily dosage form of
albuterol for the treatment of asthma.
- EFIDAC/24 (REGISTERED TRADEMARK) - The first over-the-counter
once a day nasal decongestant product, introduced in the United
States in the second half of 1993.
Two additional OROS products have received "approvable" letters from the FDA,
and a number of OROS products are in various stages of development and testing
or are awaiting regulatory approval.
-5-
<PAGE>
In addition to the OROS systems described above, ALZA is currently
utilizing other osmotic technologies in the development of products. These
technologies include:
- CHRONSET (REGISTERED TRADEMARK). ALZA's Chronset therapeutic
system, currently in development for oral delivery of proteins and
peptides, provides for a predetermined delay in the release of
active compounds from an orally administered capsule.
- MUCOSAL ORAL THERAPEUTIC SYSTEMS. ALZA's Mucosal Oral
Therapeutic System (MOTS) is designed to provide controlled
delivery of drugs to the oral cavity for either local or systemic
therapy and is designed to be retained in the mouth for the
duration of administration.
- PUSH-PILL SYSTEMS. ALZA's push-pill systems are designed to
deliver large quantities of insoluble drugs on a once-a-day basis,
either at a constant rate, or in a programmed drug release profile
for delayed, patterned or pulsatile release.
- HUMAN IMPLANTABLE THERAPEUTIC SYSTEMS. ALZA's Human Implantable
Therapeutic Systems (HITS) are designed to deliver low molecular
weight compounds by diffusion, and low to high molecular weight,
water labile compounds by osmosis.
ACTISITE (TETRACYCLINE HCL) PERIODONTAL FIBER. The Actisite
(tetracycline HCl) periodontal fiber utilizes ALZA's proprietary diffusional
technology and was developed jointly with On-Site Therapeutics, Inc. The
thread-like polymeric fibers are designed to treat periodontal disease by
providing rate-controlled delivery of tetracycline for ten days after
placement in the periodontal pocket by a dental practitioner. In late March
1994, ALZA announced that the product had been cleared for marketing in the
United States, where it will be marketed by a partnership of ALZA and Procter
& Gamble. ALZA has the rights to market the Actisite product in most
countries outside of the United States, and the product has been approved in
France, Italy, Luxembourg, the United Kingdom, Germany, Denmark, Sweden and
Belgium. ALZA is marketing the product in Italy through a distributor and is
in the process of arranging for distributors to market the product in other
European countries. The product is manufactured by ALZA.
BAXTER (REGISTERED TRADEMARK) INFUSOR. The Baxter (registered
trademark) Infusor is a lightweight, disposable device for intravenous therapy
which resulted from a joint development arrangement between ALZA and Baxter
International Inc. ("Baxter"). The product is manufactured and marketed by
Baxter in the United States, Europe and Asia for the delivery of
chemotherapeutic agents and analgesics. Baxter also markets a light-weight
patient controlled analgesic unit in combination with the Baxter Infusor.
-6-
<PAGE>
OTHER ALZA PRODUCTS. ALZA has three products developed in its
earlier years which are marketed directly by ALZA in the United States, and in
other countries under distribution agreements with third parties. Those
products are:
- OCUSERT (REGISTERED TRADEMARK) - ALZA'S OCUSERT (PILOCARPINE)
Pilo-20 and Pilo-40 ocular therapeutic systems for the treatment
of glaucoma.
- PROGESTASERT (REGISTERED TRADEMARK) - The Progestasert
(progesterone) intrauterine contraceptive device provides a
contraceptive effect for one year by releasing the natural hormone
progesterone.
- ALZET (REGISTERED TRADEMARK) - Alzet mini-osmotic pumps are
transplantable, capsule-shaped units that can deliver solutions
containing a wide range of agents in laboratory animals at
controlled rates for up to four weeks.
ELECTROTRANSPORT. Electrotransport systems transport drugs across
intact skin through the use of an electrical potential gradient. ALZA's
electrotransport therapeutic systems ("ETS") are thin, flexible devices
similar in size and appearance to ALZA's transdermal systems. ETS consist of
an adhesive, a drug reservoir, electrodes and a power source/controller. The
systems are designed for the delivery of large molecules (including proteins
and peptides) and potent drugs that are poorly absorbed or extensively
metabolized in the gastrointestinal tract. ALZA has several products
utilizing this technology under development with client companies, including
an ETS-fentanyl product with Janssen Pharmaceutica.
OTHER TECHNOLOGIES. ALZA has a number of other technologies in
various stages of development, including:
- INTRAVENOUS THERAPY. Pursuant to a licensing agreement with
ALZA, Baxter has developed a MainStream (trademark) in-line drug
delivery system for the intravenous delivery of drugs. Baxter is
now in the process of preparing and filing Abbreviated New Drug
Applications for various drugs to be incorporated in the
MainStream system. ALZA's IVOS (registered trademark) system is
designed to incorporate the solid dosage form of the drug into an
intravenous system and to provide extended duration controlled
delivery of the drug, without the need to premix or reformulate
drugs prior to use. ALZA has licensed its IVOS technology on a
worldwide basis to a major health care concern for final product
development and future manufacturing and marketing.
- BIOERODIBLE POLYMERS. ALZA has under development therapeutic
systems based on bioerodible polymers. After placement in the
body, the polymer platform erodes and is absorbed. These polymers
can be used for the controlled delivery of therapeutic agents that
are
-7-
<PAGE>
physically mixed within the polymer matrix by the process of
polymer erosion, dissolution or diffusion through the polymer
matrix, pore formation in the matrix, or a combination of these
mechanisms.
- VETERINARY PRODUCTS. ALZA has under development for client
companies a number of veterinary products based on its various
technologies. These technologies include ruminal bolus osmotic
systems, implantable osmotic systems and various site-specific
systems that provide either constant or pulsatile drug delivery.
Ivomec-SR (registered trademark), a product combining Merck & Co.,
Inc.'s antiparasitic agent ivermectin with ALZA's ruminal bolus
technology to control internal and external parasites in cattle on
pasture for an entire grazing season following a single
administration, has been introduced by Merck in the United
Kingdom. Regulatory applications for approval to market the
product in the United States and other countries are on file.
Other veterinary products under development include systems for
the administration of an estrus suppressing agent, and, under an
agreement with Monsanto, growth hormones for cattle and other food
producing animals.
THERAPEUTIC DISCOVERY CORPORATION
On June 11, 1993, ALZA completed the distribution of a special dividend
of "Units" to ALZA stockholders. Each Unit consists of one share of TDC Class
A Common Stock and one warrant to purchase one-eighth of one share of ALZA
Common Stock. Holders of record of ALZA Common Stock received one Unit for
every 10 shares of ALZA Common Stock owned on May 28, 1993, with cash
distributed in lieu of fractional Units. The Units trade on the Nasdaq Stock
Market (under the trading symbol TDCAZ), and will trade only as Units until
the earlier of June 11, 1996 or the date on which ALZA exercises the Purchase
Option (as defined below) (the "Separation Date"), at which time the warrants
and TDC Class A Common Stock will trade separately. The warrants will be
exercisable at a per-share exercise price of $65 at any time after the
Separation Date and will expire, if not previously exercised, on December 31,
1999. In connection with the dividend, ALZA contributed $250 million in cash
to TDC.
TDC was formed for the purpose of selecting and developing new human
pharmaceutical products combining ALZA's proprietary drug delivery technology
with various drug compounds, and commercializing such products, most likely
through licensing to ALZA. ALZA and TDC have entered into a development
agreement (the "Development Contract") pursuant to which ALZA conducts
research and development activities on behalf of TDC. ALZA has granted to TDC
a royalty-free, nonexclusive, perpetual license to use ALZA's proprietary drug
delivery technology to develop and commercialize specified TDC products.
-8-
<PAGE>
ALZA has an option to license any products developed by TDC, on a
product-by-product basis, providing ALZA with access to a potential pipeline
of products for worldwide commercialization. If ALZA exercises its license
option for any product, ALZA will make royalty payments to TDC with respect to
such product if the product is sold by ALZA (up to a maximum of 5% of ALZA's
net sales) or, if the product is sold by a third party, sublicensing fees of
up to 50% of ALZA's sublicensing revenues with respect to the product. ALZA
has an option, exercisable on a product-by-product basis, to buy out its
royalty obligation to TDC by making a one-time payment that is a multiple of
royalties and sublicensing fees paid in specified periods.
ALZA also has an option to purchase, according to a predetermined
formula, all (but not less than all) of the outstanding shares of TDC Class A
Common Stock (the "Purchase Option"). The Purchase Option is exercisable at
any time until December 31, 1999 (or later under certain circumstances).
However, the Purchase Option will expire, in any event, on the 60th day after
TDC files with the Securities and Exchange Commission a Report on Form 10-K or
Form 10-Q containing a balance sheet showing less than an aggregate of $5
million in cash, cash equivalents, short-term investments and long-term
investments. If ALZA exercises the Purchase Option, the exercise price will
be the greatest of: (a) the greater of (i) 25 times the worldwide royalties
and sublicensing fees paid by ALZA to TDC during four specified calendar
quarters or (ii) 100 times such royalties and sublicensing fees during a
specified calendar quarter; in either case, less any amounts previously paid
by ALZA to exercise a buy-out option with respect to any product; (b) the fair
market value of one million shares of ALZA Common Stock; (c) $325 million less
all amounts paid by TDC under the Development Contract; or (d) $100 million.
The purchase price may be paid in cash, in ALZA Common Stock, or any
combination of the two, at the election of ALZA.
ALZA performs certain administrative services for TDC under an
administrative services agreement which is terminable at the option of TDC,
and for which ALZA is reimbursed its direct costs, plus certain overhead
expenses. For the year ended December 31, 1993, reimbursement to ALZA under
this agreement was approximately $120,000.
BIO-ELECTRO SYSTEMS, INC.
In February 1992, ALZA acquired all the outstanding shares of BES for
$23 per share, paid in ALZA Common Stock. BES was formed in 1988 through a
subscription offering to ALZA stockholders to develop drug delivery systems
incorporating ALZA's proprietary electrotransport and bioerodible polymer drug
delivery technologies. ALZA had an option to acquire all BES Class A Common
Stock, which ALZA exercised on November 11, 1991. The acquisition was
effected through a merger of BES into ALZA on February 7, 1992. In the
merger, an aggregate of approximately 1.9 million ALZA shares were issued to
BES stockholders in
-9-
<PAGE>
exchange for all outstanding BES shares, and ALZA assumed all BES liabilities.
RESEARCH AND DEVELOPMENT
ALZA had research revenues of $46.8 million during 1993, $39.1 million
during 1992 and $41.7 million during 1991 from clients with which ALZA has
joint research and product development agreements (including $4.9 million from
TDC in 1993 and $14.7 million from BES in 1991). ALZA's research revenues
represent the clients' reimbursement to ALZA of related costs, including an
allocation of general and administrative expenses, and therefore do not
contribute significantly to current income. ALZA spent $16.8 million on
ALZA-sponsored research and development activities during 1993 ($18.3 million
and $11.6 million in 1992 and 1991, respectively) and $36.4 million on
client-sponsored research and development activities during 1993 ($33.8
million and $29.5 million in 1992 and 1991, respectively), excluding related
reimbursable general and administrative costs. Research and development costs
are expensed as incurred.
MANUFACTURING
ALZA manufactures some or all of the product requirements for certain
client companies, including Nicoderm for Marion Merrell Dow, Duragesic for
Janssen, Procardia XL and Minipress XL for Pfizer, Catapres-TTS for Boehringer
Ingelheim, Transderm Scop and Efidac/24 for Ciba, and IVOMEC-SR for Merck.
ALZA also manufactures its Progestasert, Alzet, Ocusert and Testoderm
products. ALZA's 220,000 square foot commercial manufacturing facility is in
Vacaville, California.
Some of the materials used in manufacturing ALZA-developed products are
unique and may be available only from one or a limited number of suppliers.
ALZA attempts, where appropriate, to negotiate long-term supply arrangements
for some of these materials.
In December 1993, ALZA wrote off approximately $28.1 million related
primarily to ALZA's manufacturing activities. This write-off resulted from
both non-recurring expenses and allowances related to scale-up of the
production of certain products and to excess transdermal manufacturing
capacity and equipment resulting from ALZA's facilities expansion in
Vacaville, California. The facilities expansion was followed by lower than
anticipated Nicoderm production requirements reflecting the decline in
Nicoderm sales in 1993. A portion of the write-off also related to the
Duragesic product. In late 1993, ALZA learned that certain 25 microgram and
50 microgram Duragesic systems manufactured by ALZA may release fentanyl at a
somewhat higher rate than the designated dose. For a short period, only
limited quantities of the product were available on a "compassionate need"
basis from Janssen Pharmaceuticals. The $28.1 million write-off included
$10.1 million of inventory write-downs, $6.8 million of equipment write-offs,
$4.6 million
-10-
<PAGE>
of allowances reducing sales and receivables, and $6.6 million of anticipated
future cash outlays related to contractual product supply issues. The effect
of the write-off was to increase costs of products shipped by approximately
$22.0 million and reduce net sales by $6.1 million for the year ended December
31, 1993.
GOVERNMENTAL REGULATION
Under the United States Food, Drug, and Cosmetic Act, "new drugs" must
obtain approval from the FDA before they lawfully can be marketed in the
United States. Applications for approval must be based on extensive clinical
and other testing, the cost of which is very substantial. The packaging and
labeling of all new drug products are also subject to FDA regulation.
Approvals are required from health regulatory authorities in foreign countries
before marketing of pharmaceutical products may commence in those countries.
Requirements for approval may differ from country to country, and can involve
additional testing. There can be substantial delays in obtaining required
approvals from both the FDA and foreign regulatory authorities after
applications are filed. Even after approvals are obtained, further delays may
be encountered before the products become commercially available. Veterinary
products are subject to similar, although in some cases less extensive,
approval procedures.
All facilities and manufacturing techniques used for the manufacture of
products for clinical use or for sale must conform with "Good Manufacturing
Practices," the FDA regulations governing the production of pharmaceutical
products. From time to time, the FDA and other federal, state and local
government agencies may adopt regulations that affect the manufacturing and
marketing of ALZA-developed products.
Environmental regulations may also affect the manufacturing process. As
a pharmaceutical company, ALZA uses in its business chemicals and materials
which may be classified from time to time as hazardous or toxic materials and
which require special handling and disposal. In addition, ALZA undertakes to
minimize releases to the environment and exposure of its employees and the
public to such materials, and the costs of these activities have increased
substantially in recent years. While the cost of compliance, prevention and
clean-up have not been material to date, it is possible that such costs may
increase significantly in the future. See "Legal Proceedings" below.
PATENTS AND PATENT APPLICATIONS
As of December 31, 1993, ALZA owned more than 500 United States patents
and more than 150 pending United States patent applications relating to its
products and other technologies. ALZA has in excess of 2,000 foreign patents
and pending patent applications covering its various technologies and
products. Patents have been issued, or are expected to be issued, covering
ALZA's current technologies and products, as well as products under
development.
-11-
<PAGE>
Patent protection generally has been important in the pharmaceutical
industry. ALZA believes that its current patents, and patents that may be
obtained in the future, are important to future operations. There can be no
assurance that ALZA's currently existing patents will cover future products,
that additional patents will be issued, or that any patents now or hereafter
issued will be of commercial benefit. In the United States, patents generally
are granted for a period of seventeen years. Some of ALZA's earlier patents
covering various aspects of certain OROS and TTS dosage forms have begun to
expire, or will expire, over the next several years; however, ALZA
technologies and products are generally covered by multiple patents.
Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as
to the enforceable scope of the claims of the patent. There can be no
assurance that patents of ALZA will not be successfully challenged in the
future. The validity or enforceability of a patent after its issuance by the
patent office can be challenged in litigation. If the outcome of the
litigation is adverse to the owner of the patent, third parties may then be
able to use the invention covered by the patent, in some cases without
payment. There can be no assurance that ALZA patents will not be infringed or
successfully avoided through design innovation.
It is also possible that third parties may obtain patent or other
proprietary rights that may be necessary or useful to ALZA. In cases where
third parties are first to invent a particular product or technology, it is
possible that those parties will obtain patents that will be sufficiently
broad so as to prevent ALZA from using certain technology or from further
developing or commercializing certain products. If licenses from third
parties are necessary but cannot be obtained, commercialization of the related
products would be delayed or prevented. As ALZA expands its direct marketing
of products, ALZA may choose to license-in compounds or technologies for use
in those products.
In addition, ALZA utilizes significant unpatented proprietary
technology, and there can be no assurance that others will not develop similar
technology.
For a description of certain legal proceedings relating to patents, see
"Legal Proceedings" below.
COMPETITION
All of ALZA's current and future products will face competition both
from more traditional forms of drug delivery and from advanced delivery
systems being developed by others. This competition potentially includes all
of the pharmaceutical companies in the world, including current ALZA clients.
Many of these other pharmaceutical companies have greater financial resources,
technical staff and manufacturing and marketing capabilities than does ALZA.
A number of smaller companies also
-12-
<PAGE>
are developing drug delivery technologies. Competition in drug delivery
systems is generally based on performance characteristics and price.
Acceptance by hospitals, physicians and patients is crucial to the success of
a product. Health care reimbursement policies of government agencies and
insurers will continue to exert pressure on pricing, and various federal and
state agencies have enacted regulations requiring rebates of a portion of the
purchase price of many pharmaceutical products. Price competition may become
increasingly important as a result of the federal government administration's
stated intention to focus on the containment of health care costs.
The health care industry has continued to change rapidly as the public,
government, medical practitioners and the pharmaceutical industry focus on
ways to expand medical coverage while controlling the growth in health care
costs. Congress is working on comprehensive legislative changes which, if
enacted, could significantly affect health care companies. The President of
the United States has made this reform a top priority. The changes are
expected to put pressures on the prices charged for pharmaceutical products.
While ALZA believes the changing health care environment may increase the
value of ALZA's drug delivery products over the long term, it is impossible to
predict the impact any such legislative changes may have on ALZA.
REVENUES
In 1993, ALZA received royalty income from 12 products in the
marketplace. Approximately 60% of ALZA's 1993 royalty income has been the
result of sales of Procardia XL by Pfizer in the United States. Because the
drug nifedipine incorporated in the Procardia XL (registered trademark)
product is no longer covered by a patent, other companies may attempt to
develop products similar to Procardia XL. To date no product has been
introduced which is bio-equivalent to Procardia XL. If such a product were to
be developed and introduced, its marketing could have a significant impact on
Procardia XL sales, and therefore ALZA's royalties.
Information as to ALZA's revenues is presented below:
<TABLE>
<CAPTION>
1993 1992 1991
--------- ---------- ---------
(in thousands)
<S> <C> <C> <C>
Royalties and fees $ 113,318 $ 114,684 $ 64,142
Net sales 53,630 75,488 33,953
Research revenue 46,783 39,081 41,653
Other revenue 20,451 21,266 22,601
--------- -------- --------
Total revenues $ 234,182 $ 250,519 $ 162,349
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
Pfizer accounted for 35% of ALZA's total revenues in 1993, 29% in 1992 and 27%
in 1991; Ciba accounted for 13% of ALZA's total revenues in 1993, 10% in 1992
and 14% in 1991; and Marion Merrell Dow accounted for 10% of ALZA's total
revenues in 1993, 26% in
-13-
<PAGE>
1992 and 10% in 1991. The loss of these revenues would have a material
adverse effect on ALZA's profitability.
Research revenue from TDC during 1993 was approximately $4.9 million (2%
of total revenues). BES accounted for 9% of ALZA's total revenues in 1991.
INDUSTRY SEGMENTS; EXPORTS
ALZA's business comprises one industry segment. Export sales were $18.1
million during 1993, $12.1 million during 1992 and $2.9 million in 1991,
principally to distributors in Europe and client companies in Europe and
Canada.
EMPLOYEES
On December 31, 1993, ALZA had 1,078 employees, of whom approximately
500 were engaged in research and product development activities, approximately
340 were engaged in manufacturing activities and the remainder were working in
general, administrative and marketing areas.
ITEM 2. PROPERTIES
ALZA's corporate offices and its initial research and development campus
are located in Palo Alto, California. During 1993, ALZA continued to
develop its second research and development campus in Mountain View,
California, and its commercial manufacturing facility in Vacaville,
California. ALZA also occupies a small research facility in Spring Lake Park,
Minnesota. ALZA believes that its facilities and equipment are sufficient to
meet its current operating requirements. In addition, ALZA expects to
continue to develop its Mountain View Campus and to purchase or lease
available facilities or properties to support its long-term expansion, if and
when they become available on acceptable terms.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, various suits and claims are filed
against ALZA. In the past, ALZA's liability claims (including product
liability) have not been significant, and ALZA is not aware of any material
asserted or unasserted claims pending against ALZA. ALZA is not involved in
any legal proceedings which, in the opinion of the management, either alone or
in the aggregate, will have a material adverse effect on ALZA's financial
position or results of operations.
Two patent infringement suits were filed in late 1991 against both
Marion Merrell Dow and ALZA in connection with the commercialization of
Nicoderm. One of the suits was filed by Elan Corporation in the United States
District Court for the Northern District of California. In May 1992, this
suit was
-14-
<PAGE>
withdrawn and, under the settlement, ALZA and Marion Merrell Dow agreed to
withdraw their countersuit. The settlement had no impact on the financial
statements of any of the parties. The other suit was filed in the United
States District Court for the District of New Jersey by Ciba Corporation.
Ciba's motion for preliminary injunction against the marketing of Nicoderm was
denied in December 1991. The suit is in the discovery phase.
During the second quarter of 1993, two securities class action lawsuits
were filed against ALZA and certain of its officers and directors in the
United States District Court for the Northern District of California. The
lawsuits have been consolidated into one suit. The consolidated lawsuit
claims that ALZA issued and allowed to be issued various public statements
that were materially false and misleading, primarily with respect to the
Nicoderm product. Under a recent court order, ALZA's outside directors are to
be removed as defendants in the suit. ALZA believes that the lawsuit is
without merit and is vigorously defending it.
In July 1993, a derivative suit was filed against certain officers and
all of the directors of ALZA in the United States District Court for the
Northern District of California. The lawsuit claims that some or all of the
named persons engaged in the mismanagement of the company and improperly
obtained profits from the sale of ALZA securities. The suit has been assigned
to the same judge as the consolidated case described above. Activities on the
derivative suit have been stayed pursuant to a stipulation and a court order.
ALZA believes that the lawsuit is without merit.
ALZA has been named as a potentially responsible party ("PRP") in
connection with the cleanup of certain waste disposal or "superfund" sites.
One of these actions is the cleanup of the Hillview Porter site near ALZA's
Palo Alto facilities. ALZA believes that it did not discharge any of the
chemicals of concern at this site. Other actions in which ALZA has been named
as a PRP involve the disposal of small quantities of waste at disposal sites
which were later named as cleanup sites. ALZA does not believe that its
liability in these matters, either individually or in the aggregate, will be
material. However, because the actions involve many parties and multiple
regulatory authorities, and the cleanup and allocation of financial
responsibility can take many years, it is impossible to predict the timing or
amount of ALZA's potential liability.
Subsequent to year end, a suit was filed against ALZA by Cygnus
Therapeutics Corporation in the United States District Court for the Northern
District of California, seeking a declaration of unenforceability and
invalidity of an ALZA patent relating to transdermal administration of
fentanyl and alleging violation of antitrust laws. ALZA believes the suit to
be without merit and has filed a motion to dismiss the suit.
-15-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS FOR
NAME AGE PAST FIVE YEARS
- ------------------------ --- ------------------------------------
<S> <C> <C>
Dr. Alejandro Zaffaroni 71 Co-Chairman of the Board (since 1987)
and founder (in 1968) of ALZA;
Chairman of the Board and Chief
Executive Officer (1982-1987);
Managing Director of Affymax N.V., a
drug discovery company.
Dr. Ernest Mario 55 Co-Chairman of the Board and Chief
Executive Officer of ALZA (since
August 1993); Chief Executive of Glaxo
Holding, plc (1989-1992); Chief
Executive Officer of Glaxo, Inc.
(1988-1989).
Dr. Jane E. Shaw 55 President and Chief Operating Officer
of ALZA (since 1987); Executive Vice
President, and President, ALZA
Research Division (1985-1987).
Adrian M. Gerber 56 Executive Vice President, Commercial
Development of ALZA (since May 1990);
Executive Director, Corporate
Licensing, of Merck & Co., Inc., a
pharmaceutical company (1985-1990).
Dr. Felix Theeuwes 56 Executive Vice President, Research and
Development of ALZA (since 1991) and
Chief Scientist (since 1982); Senior
Vice President (1987-1990).
James Butler 53 Vice President, Sales and Marketing
(since 1993); Vice President and
General Manager of Glaxo, Inc.'s
corporate division (1987-1993).
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C>
Bruce C. Cozadd 30 Vice President and Chief Financial
Officer of ALZA (since January 1994);
Vice President, Corporate Planning and
Analysis (1993); Manager, Strategic
Projects (1991 to 1993).
Gary S. Lyman 51 Vice President, Manufacturing of ALZA
(since 1985).
Dr. Samuel R. Saks 39 Vice President, Medical Affairs of
ALZA (since 1992); Vice President,
Clinical Research, Oncology,
Schering-Plough Corporation
(1991-1992); Vice President, Clinical
Research, XOMA Corporation
(1989-1991).
Peter D. Staple 42 Vice President and General Counsel of
ALZA (since March 1994); Vice
President and Associate General
Counsel of Chiron Corporation (1992 to
1994); Vice President and Associate
General Counsel of Cetus Corporation
(1983 to 1992).
</TABLE>
-17-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ALZA incorporates by reference the information concerning the market for
its common stock and related stockholder matters set forth at page 38 in the
Annual Report to Stockholders (the "Annual Report") attached as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
ALZA incorporates by reference the selected consolidated financial data
set forth at page 37 in the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ALZA incorporates by reference Management's Discussion and Analysis of
Financial Condition and Results of Operations set forth at pages 20 to 22 in
the Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ALZA incorporates by reference the Consolidated Financial Statements
and notes thereto set forth at pages 23 to 35 and the Report of Independent
Auditors at page 36 in the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-18-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ALZA incorporates by reference the information concerning its directors
set forth under the heading "Election of Directors" on pages 1-4 in ALZA's
definitive proxy statement dated March 14, 1994 for its Annual Meeting of
Stockholders to be held on April 26, 1994 (the "Proxy Statement").
Information concerning ALZA's executive officers appears at the end of Part I
of this report on pages 16 and 17.
ITEM 11. EXECUTIVE COMPENSATION
ALZA incorporates by reference the information ("Summary Compensation
Table," "1993 Option Grants" and "1993 Aggregated Option Exercises and Fiscal
Year-End Option Values") set forth under the heading "Executive Compensation"
on pages 4 through 10 in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ALZA incorporates by reference the information set forth under the
heading "Beneficial Stock Ownership" on pages 11 and 12 in the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ALZA incorporates by reference the information set forth under the
heading "Certain Transactions" on page 14 in the Proxy Statement.
-19-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements: Incorporated by reference to
the Annual Report (see accompanying Index to Consolidated
Financial Statements).
2. Consolidated Financial Statement Schedules: See accompanying
Index to Consolidated Financial Statement Schedules.
3. Exhibits:
3.1 Restated Certificate of Incorporation of ALZA
Corporation filed with the Delaware Secretary of State
on February 14, 1994.
3.2 Restated By-laws of ALZA Corporation as restated on
February 10, 1994.
10.1 Technology License Agreement between ALZA and
Therapeutic Discovery Corporation(1)
10.2 Development Agreement between ALZA and Therapeutic
Discovery Corporation(2)
10.3 License Option Agreement between ALZA and Therapeutic
Discovery Corporation(3)
10.4 Restated Certificate of Incorporation of Therapeutic
Discovery Corporation(4)
___________________________
(1) Incorporated by Reference to Exhibit 10.1 of the Form 10 of Therapeutic
Discovery Corporation (Commission File No. 0-21478) dated March 31, 1993, as
amended.
(2) Incorporated by Reference to Exhibit 10.2 of the Form 10 of Therapeutic
Discovery Corporation (Commission File No. 0-21478) dated March 31, 1993, as
amended.
(3) Incorporated by Reference to Exhibit 10.3 of the Form 10 of Therapeutic
Discovery Corporation (Commission File No. 0-21478) dated March 31, 1993, as
amended.
(4) Incorporated by Reference to Exhibit 3.2 of the Form 10 of Therapeutic
Discovery Corporation (Commission File No. 0-21478) dated March 31, 1993, as
amended.
-20-
<PAGE>
10.5 364-Day Credit Agreement dated November 4, 1993 among
ALZA Corporation, the participating banks and The
Chase Manhattan Bank (National Association) as agent
for the participating banks.
10.6 3-Year Credit Agreement dated November 4, 1993 among
ALZA Corporation, the participating banks and The
Chase Manhattan Bank (National Association) as agent
for the participating banks.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.7 1994 PACE Plan
10.8 Executive Deferral Plan Amendments
11 Statement regarding weighted average common and common
equivalent shares used in the computation of per share
earnings
13 Portions of Annual Report to Stockholders expressly
incorporated by reference herein
20 Proxy Statement (not to be deemed filed except as
expressly incorporated by reference herein)(5)
21 Subsidiaries
23 Consent of Ernst & Young, Independent Auditors
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1993.
____________________
(5) Incorporated by Reference to the definitive Proxy Statement, dated March
14, 1994.
-21-
<PAGE>
ALZA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, REPORT OF
INDEPENDENT AUDITORS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
PAGE NUMBER REFERENCE
-----------------------
ANNUAL REPORT FORM
TO STOCKHOLDERS 10-K
--------------- ----
Consolidated statement of operations for the
years ended December 31, 1993, 1992 and 1991 23
Consolidated balance sheet at December 31,
1993 and 1992 24
Consolidated statement of stockholders'
equity for the years ended December 31, 1993,
1992 and 1991 25
Consolidated statement of cash flows for
the years ended December 31, 1993, 1992
and 1991 26
Notes to consolidated financial statements 27-35
Report of Ernst & Young, Independent
Auditors 36
The following consolidated financial statement
schedules of ALZA Corporation are included:
I - Marketable securities - other 23-24
investments
II - Amounts receivable from related parties, 25
and underwriters, promoters, and employees
other than related parties
V - Consolidated property, plant and 26
equipment
VI - Consolidated accumulated depreciation 27
and amortization of property, plant
and equipment
VIII - Consolidated valuation and qualifying 28
accounts
IX - Short-term borrowings 29
X - Consolidated supplementary income 30
statement information
All other schedules have been omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
-22-
<PAGE>
SCHEDULE I
ALZA CORPORATION
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE OF AMOUNT AT WHICH EACH
AMOUNTS OF COST OF EACH ISSUE AT ISSUE CARRIED IN THE
NAME OF ISSUER AND TITLE OF EACH ISSUE BONDS AND NOTES EACH ISSUE BALANCE SHEET DATE BALANCE SHEET
- -------------------------------------- --------------- ---------- ------------------ --------------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
United States Treasury Securities
US Treasury Bills $ 5,000,000 $ 4,835,000 $ 4,894,000 $ 4,893,000
Commercial Paper
1st Premium Funding 3,000,000 2,971,000 2,964,000 2,971,000
American Telephone and Telegraph 5,000,000 4,946,000 4,932,000 4,946,000
Banca CRT Financial Corp 3,000,000 2,971,000 2,955,000 2,971,000
Fleet Funding 3,000,000 2,974,000 2,980,000 2,974,000
Ford 5,000,000 4,953,000 4,924,000 4,953,000
General Electric 8,945,000 8,887,000 8,887,000 8,887,000
Merrill Lynch 2,000,000 1,983,000 1,978,000 1,983,000
Norwich Funding 1,518,000 1,516,000 1,516,000 1,516,000
Pooled Certificates Corp 2,000,000 1,971,000 1,963,000 1,971,000
Sanwa 2,338,000 2,334,000 2,334,000 2,334,000
------------ ------------ ------------ ------------
Subtotal - Short-term Investments $ 40,801,000 $ 40,341,000 $ 40,327,000 $ 40,399,000
INVESTMENTS IN LONG-TERM GOVERNMENT AND
CORPORATE NOTES AND BONDS
United States Treasury Securities
US Treasury Notes $ 42,426,000 $ 42,882,000 $ 43,519,000 $ 42,820,000
United States Government Agency Notes
Federal Home Loan Bank 11,525,000 11,529,000 11,442,000 11,529,000
Federal Home Loan Marketing Corporation 2,000,000 1,998,000 1,993,000 1,998,000
Federal National Mortgage Association 13,977,000 14,961,000 14,962,000 14,958,000
Corporate Notes
American Telephone and Telegraph 3,000,000 3,269,000 3,309,000 3,203,000
Bell South 2,000,000 2,268,000 2,258,000 2,263,000
Gannett 5,000,000 4,984,000 5,064,000 4,987,000
General Electric 2,000,000 1,995,000 2,214,000 1,997,000
MCA 3,000,000 3,224,000 3,198,000 3,206,000
McDonald's 2,015,000 2,043,000 2,216,000 2,027,000
Procter & Gamble 5,000,000 4,988,000 5,124,000 4,993,000
Pittsburgh National Bank Corp 2,000,000 2,056,000 2,065,000 2,007,000
Shell Oil 4,000,000 4,163,000 4,317,000 4,149,000
Tampa Electric 1,000,000 993,000 1,006,000 993,000
Tennessee Valley Electric 2,000,000 1,996,000 2,000,000 1,996,000
Wachovia Bank 4,500,000 4,507,000 4,514,000 4,507,000
WalMart 6,000,000 5,981,000 6,120,000 5,984,000
Asset-Backed Securities
1ST USA Funding 6,750,000 4,247,000 4,245,000 4,247,000
Daimler/Benz 917,000 916,000 914,000 916,000
Discover Card Turst 1,750,000 1,991,000 1,986,000 1,991,000
Morgan Bank National Association 1,000,000 1,015,000 991,000 1,014,000
National Credit Card Trust 7,000,000 7,079,000 7,155,000 7,014,000
Sears Credit Card Trust 1,000,000 1,011,000 1,010,000 1,002,000
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE OF AMOUNT AT WHICH EACH
AMOUNTS OF COST OF EACH ISSUE AT ISSUE CARRIED IN THE
NAME OF ISSUER AND TITLE OF EACH ISSUE BONDS AND NOTES EACH ISSUE BALANCE SHEET DATE BALANCE SHEET
- -------------------------------------- --------------- ---------- ------------------ --------------------
<S> <C> <C> <C> <C>
Collateralized Mortgage Obligations
ADVANTA $ 1,825,000 $ 1,824,000 $ 1,829,000 $ 1,824,000
Federal Home Loan Marketing Corporation 5,748,000 5,774,000 5,916,000 5,773,000
Federal National Mortgage Association 12,035,000 11,994,000 11,972,000 11,993,000
Plymouth Street Limited Partnership 14,000,000 14,000,000 14,000,000 14,000,000
------------ ------------ ------------ ------------
Subtotal - Investments in Long-Term
Government and Corporate
Notes and Bonds 163,468,000 163,688,000 165,339,000 163,391,000
------------ ------------ ------------ ------------
Total Marketable Securities -
Other Investments $204,269,000 $204,029,000 $205,666,000 $203,790,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
-24-
<PAGE>
SCHEDULE II
ALZA CORPORATION
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
DECEMBER 31, 1993
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING BALANCE AT END
NAME OF DEBTOR OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
- ----------------------------- ----------- --------- ---------- -----------------
<S> <C> <C> <C> <C>
Bonnie J. Eckenhoff (Burdett)
and J. Benjamin Eckenhoff(1) $ - $273,763 $ - $273,763
<FN>
(1) Borrowers have pledged a security interest in, and delivered to ALZA,
shares of ALZA Corporation Common Stock as security for repayment in
full of the loan. The loan is due on or before May 31, 1994. Interest
accrues at a rate of 5 percent per annum.
</TABLE>
-25-
<PAGE>
SCHEDULE V
ALZA CORPORATION
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING ADDITIONS RETIREMENTS BALANCE AT
OF YEAR AT COST TRANSFERS OR SALES END OF YEAR
---------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Buildings and leasehold
improvements $ 135,728,000 $ 495,000 $ 31,743,000 $(3,549,000) $ 164,417,000
Equipment 77,187,000 6,001,000 9,172,000 (1,698,000) 90,662,000
Construction in progress 24,805,000 24,140,000 (40,915,000) (1,627,000) 6,403,000
Land and prepaid land leases 16,979,000 22,000 - - 17,001,000
------------- ------------ ----------- ----------- -------------
Total $ 254,699,000 $ 30,658,000 $ - $(6,874,000) $ 278,483,000
------------- ------------ ----------- ----------- -------------
------------- ------------ ----------- ----------- -------------
Year ended December 31, 1992:
Buildings and leasehold
improvements $ 113,036,000 $ 796,000 $ 21,896,000 $ - $ 135,728,000
Equipment 61,127,000 7,992,000 8,438,000 (370,000) 77,187,000
Construction in progress 25,381,000 33,018,000 (33,542,000) (52,000) 24,805,000
Land and prepaid land leases 13,757,000 14,000 3,208,000 - 16,979,000
------------- ------------ ----------- ----------- ------------
Total $ 213,301,000 $ 41,820,000 $ - $ (422,000) $ 254,699,000
------------- ------------ ----------- ----------- -------------
------------- ------------ ----------- ----------- -------------
Year ended December 31, 1991:
Buildings and leasehold
improvements $ 107,374,000 $ 4,563,000 $ 6,184,000 (5,085,000) $ 113,036,000
Equipment 47,086,000 5,129,000 9,758,000 (846,000) 61,127,000
Construction in progress 12,324,000 30,323,000 (17,241,000) (25,000) 25,381,000
Land and prepaid land leases 12,458,000 - 1,299,000 - 13,757,000
------------- ------------ ----------- ----------- -------------
Total $ 179,242,000 $ 40,015,000 $ - $(5,956,000) $ 213,301,000
------------- ------------ ----------- ----------- -------------
------------- ------------ ----------- ----------- -------------
</TABLE>
-26-
<PAGE>
SCHEDULE VI
ALZA CORPORATION
CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO COSTS RETIREMENTS BALANCE AT
OF YEAR AND EXPENSES OR SALES END OF YEAR
---------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Buildings and leasehold
improvements $13,299,000 $ 4,792,000 $ (492,000) $ 17,599,000
Equipment 30,972,000 8,129,000 (196,000) 38,905,000
Prepaid land leases 360,000 22,000 - 382,000
----------- ----------- ----------- ------------
Total $44,631,000 $12,943,000 $ (688,000) $ 56,886,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Year ended December 31, 1992:
Buildings and leasehold
improvements $ 9,993,000 $ 3,306,000 $ - $ 13,299,000
Equipment 25,006,000 6,196,000 (230,000) 30,972,000
Prepaid land leases 339,000 21,000 - 360,000
----------- ----------- ----------- ------------
Total $35,338,000 $ 9,523,000 $ (230,000) $ 44,631,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Year ended December 31, 1991:
Buildings and leasehold
improvements $ 8,031,000 $ 3,139,000 $(1,177,000) $ 9,993,000
Equipment 20,488,000 5,060,000 (542,000) 25,006,000
Prepaid land leases 317,000 22,000 - 339,000
----------- ----------- ----------- ------------
Total $28,836,000 $ 8,221,000 $(1,719,000) $ 35,338,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
-27-
<PAGE>
SCHEDULE VIII
ALZA CORPORATION
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO DEDUCTIONS BALANCE AT
OF YEAR INCOME (WRITE-OFFS) END OF YEAR
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
Allowance for doubtful
receivables:
1993 $ 181,000 $ 31,000 $ ( 1,000) $ 211,000
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
1992 $ 157,000 $ 31,000 $ ( 7,000) $ 181,000
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
1991 $ 141,000 $ 31,000 $ (15,000) $ 157,000
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
</TABLE>
-28-
<PAGE>
SCHEDULE IX
ALZA CORPORATION
SHORT-TERM BORROWINGS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
CATEGORY OF MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED
AGGREGATE BALANCE AT WEIGHTED OUTSTANDING OUTSTANDING DURING AVERAGE INTEREST
SHORT-TERM END OF PERIOD AVERAGE DURING THE DURING THE RATE DURING
BORROWINGS (AT PAR) INTEREST RATE PERIOD (AT PAR) PERIOD (AT PAR) THE PERIOD
- ------------ ------------- ------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Commercial Paper(1) $250,000,000 3.61% $250,000,000 $229,262,000(2) 3.59%(3)
<FN>
(1) $250 million U.S. commercial paper program supported by bank lines of
credit totaling $250 million. No borrowings have been made under the
lines of credit as of December 31, 1993.
(2) The average amount outstanding during the period was computed by
performing a weighted average calculation of commercial paper
outstanding since inception of the commercial paper program on November
1, 1993.
(3) The weighted average interest rate during the period was computed by
dividing annualized commercial paper interest expense for 1993 by the
weighted average amount of commercial paper outstanding during the
period.
</TABLE>
-29-
<PAGE>
SCHEDULE X
ALZA CORPORATION
CONSOLIDATED SUPPLEMENTARY INCOME
STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
EXPENSES 1993 1992 1991
- ------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $3,306,000 $3,199,000 $2,486,000
Taxes, other than payroll
and income taxes 3,717,000 3,396,000 2,424,000
</TABLE>
Amount for advertising costs and depreciation and amortization of
intangible assets are not presented as such amounts are less than 1% of total
sales and revenues in each of the years presented.
-30-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ALZA CORPORATION
By [DR. ERNEST MARIO]
---------------------------------
Dr. Ernest Mario
Chief Executive Officer
Date: March 29, 1994
-31-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
[DR. ALEJANDRO ZAFFARONI] [RUDOLPH A. PETERSON]
- ------------------------------ --------------------------------
Dr. Alejandro Zaffaroni Rudolph A. Peterson
Co-Chairman of the Board of Director
Directors Date: March 29, 1994
Date: March 29, 1994
[DR. ERNEST MARIO] [DR. JANE E. SHAW]
- ------------------------------ --------------------------------
Dr. Ernest Mario Dr. Jane E. Shaw
Co-Chairman of the Board of Director
Directors, Director and Chief Date: March 29, 1994
Executive
Date: March 29, 1994
[WILLIAM G. DAVIS] [ISAAC STEIN]
- ------------------------------ --------------------------------
William G. Davis Isaac Stein
Director Director
Date: March 29, 1994 Date: March 29, 1994
[JULIAN N. STERN]
- ------------------------------ --------------------------------
Martin S. Gerstel Julian N. Stern
Director Director
Date: Date: March 29, 1994
[DR. ROBERT J. GLASER] [BRUCE C. COZADD]
- ------------------------------ --------------------------------
Dr. Robert J. Glaser Bruce C. Cozadd
Director Vice President, Chief
Date: March 29, 1994 Financial Officer and
Principal Accounting Officer
Date: March 29, 1994
[DEAN O. MORTON]
- ------------------------------
Dean O. Morton
Director
Date: March 29, 1994
- 32 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
3.1 Restated Certificate of Incorporation
3.2 Restated By-laws
10.5 364-Day Credit Agreement
10.6 3-Year Credit Agreement
10.7 1994 PACE Plan
10.8 Executive Deferral Plan Amendments
11 Statement regarding weighted average
common and common equivalent shares
used in computation of per share
earnings
13 Portions of Annual Report to
Stockholders incorporated into Form 10-K
21 Subsidiaries
23 Consent of Ernst & Young, Independent
Auditors
</TABLE>
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ALZA CORPORATION
(originally incorporated under the name
Delaware ALZA Corporation on March 9, 1987)
1. NAME. The name of the corporation is ALZA Corporation.
2. REGISTERED OFFICE. The address of the registered office of the
corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
3. PURPOSES. The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
4. CAPITAL STOCK. This corporation is authorized to issue two classes of
stock, which shall be known as Preferred Stock and Common Stock. The total
number of shares of stock of all classes that this corporation is authorized to
issue is 300,100,000. Each share of each class of stock of this corporation
shall have a par value of $.01. The total number of shares of Preferred Stock
which this corporation is authorized to issue is 100,000. The total number of
shares of Common Stock which this corporation is authorized to issue is
300,000,000.
The Preferred Stock of this corporation may be issued as a class, without
series or, if so determined from time to time by the Board of Directors, in one
or more series, each series to be expressly designated by a distinguishing
number, letter or title. The Preferred Stock, and each series thereof, shall
have such voting powers and other rights, privileges, preferences and
restrictions as shall be set forth in the resolutions of the Board of Directors
providing for the issuance of such Preferred Stock. There is hereby expressly
granted to the Board of Directors of this corporation the authority to fix or
alter any and all of the rights, preferences, privileges and restrictions and
other terms of the Preferred Stock and any series thereof, and the number of
shares constituting any such series and the designation thereof and to increase
or decrease the number of shares of any series subsequent to the issuance of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status they had prior to
the adoption of the resolution originally setting forth the number of shares of
such series.
1
<PAGE>
5. BOARD OF DIRECTORS.
(a) The number of directors which shall constitute the
whole Board of Directors of this corporation shall be determined in accordance
with the bylaws of the corporation.
(b) Nomination of candidates for election to the Board of Directors
shall be made as provided in the bylaws of the corporation.
(c) The Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III, which shall be as nearly equal in
number as possible. Each director shall serve for a term ending on the date of
the third annual meeting of stockholders following the annual meeting at which
the director was elected; provided, however, that each initial director in Class
I shall hold office until the annual meeting of stockholders in 1988; each
initial director in Class II shall hold office until the annual meeting of
stockholders in 1989; and each initial director in Class III shall hold office
until the annual meeting of stockholders in 1990. Notwithstanding the foregoing
provisions of this Article, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or removal.
(d) In the event of any increase or decrease in the authorized number
of directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(e) Newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office
(and not by stockholders), even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
(f) The provisions set forth in this Article 5 may not be amended or
repealed in any respect without (i) the affirmative vote of not less than 75
percent of the Board of Directors; or (ii) the affirmative vote of not less than
80 percent of the outstanding shares of capital stock of the corporation
entitled to vote in an election of directors.
2
<PAGE>
6. BYLAWS. In furthermore and not in limitation of the powers conferred
by statute, the Board of Directors and the stockholders of the corporation are
each expressly authorized to adopt, amend or repeal the bylaws of the
corporation subject to any particular provisions concerning amendments set forth
in this Certificate of Incorporation or the bylaws of the corporation.
7. MANAGEMENT OF BUSINESS. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS.
(a) ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS. No director of
the corporation shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit.
(b) INDEMNIFICATION AND INSURANCE.
(1) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding whether civil, criminal, administrative or investigative (a
"proceeding"), because he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit plans), whether
the basis of the proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than that law permitted
the corporation to provide before such amendment), against all expense,
liability and loss (including attorneys' fees, judgements, penalties, fines,
Employee Retirement Income Security Act of 1974 excise taxes or penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith; provided, however, that the
3
<PAGE>
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof)initiated by such person only if
the proceeding (or part thereof) was authorized by the Board of Directors of the
corporation. Such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators. The right to indemnification
conferred by this Section shall be a contract right which may not be
retroactively amended and shall include the right to be paid by the corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service with respect to an employee benefit plan)
in advance of the final disposition of the proceeding shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if ultimately it shall be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the indemnification of directors and officers.
(2) NONEXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
(3) INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
9. STOCKHOLDER MEETINGS.
(a) SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose or purposes whatsoever may be called at any time only by the Board of
Directors, the Chairman of the Board or the President of the corporation.
4
<PAGE>
(b) NO ACTION WITHOUT MEETING. At any time when the corporation has
more than one stockholder of any class of capital stock, no action required to
be taken or which may be taken at any annual or special meeting of the
stockholders of such class of capital stock of the corporation may be taken
without a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
10. VOTE REQUIRED FOR BUSINESS COMBINATIONS.
(a) In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as expressly provided in Section (b) of
this Article 10, any Business Combination (as hereinafter defined) with a
Related Person (as hereinafter defined) shall require the affirmative vote of
the holders of at least eighty percent of the voting power of all of the then
outstanding shares of all classes of stock of the corporation entitled to vote
for the election of directors (the "Voting Stock"), voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by law or in
any agreement.
(b) The provisions of this Article 10 shall not apply to any Business
Combination if:
(i) A majority of the Continuing Directors (as hereinafter
defined) of the corporation has by resolution approved the Business Combination
either in advance of or subsequent to such Related Person's having become a
Related Person;
(ii) The Business Combination is solely between the corporation
and another corporation, one hundred percent of the Voting Stock of which is
owned directly or indirectly by the corporation; or
(iii) The Business Combination is a merger or consolidation and
the cash or fair market value (as determined by a majority of the Continuing
Directors) of the property, securities or other consideration to be received per
share by holders of stock of the corporation in the Business Combination is not
less than the Highest Per Share Price or the Highest Equivalent Price (as these
terms are hereinafter defined) paid by the Related Person in acquiring any of
the corporation's stock.
(c) For the purpose of this Article 10:
(i) The term "Business Combination" shall mean (A) any merger or
consolidation of the corporation with or into a Related Person, (B) any sale,
lease, exchange, transfer or other
5
<PAGE>
disposition, including, without limitation, a mortgage or any other security
device, of all or any Substantial Part (as hereinafter defined) of the assets of
the corporation or any subsidiary of the corporation, to a Related Person, (C)
any merger or consolidation of a Related Person with or into the corporation or
a subsidiary of the corporation, (D) the issuance of any securities of the
corporation or a subsidiary of the corporation to a Related Person, (E) any
recapitalization that would have the effect of increasing the voting power in
the corporation of a Related Person, and (F) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of Business Combination.
(ii) The term "Related Person" shall mean and include any person,
corporation or other entity which, alone or together with (A) its "Affiliates"
and "Associates" (as defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect at the date of the
adoption of this Article 10 by the stockholders of the corporation
(collectively, and as so in effect, the "Exchange Act")) or (B) members of a
"group" (as defined with reference to Rule 13d-1(f) of the Exchange Act) of
which such person, corporation or other entity is a member, "beneficially owns"
(as defined in Rule 13d-3 of the Exchange Act) shares of the outstanding capital
stock of the corporation which, in the aggregate, have 20 percent or more of the
total combined power to elect directors of the corporation.
(iii) For the purposes of subparagraph (b)(iii) of this
Article 10, the term "other consideration to be received" shall include, without
limitation, common stock of the corporation retained by its existing public
stockholders in the event of a Business Combination in which the corporation is
the surviving corporation.
(iv) The term "Continuing Director" shall mean a Director who is
unaffiliated with the Related Person and who was a member of the Board of
Directors of the corporation immediately prior to the time that the Related
Person involved in a Business Combination became a Related Person.
(v) The term "Substantial Part" shall mean more than 30 percent
of the value of the total consolidated assets of the corporation and its
subsidiaries taken as a whole as of the end of its most recent fiscal year ended
prior to the time the determination is made.
(vi) The terms "Highest Per Share Price" and "Highest Equivalent
Price" as used in this Article 10 shall mean the following: If there is only
one class of capital stock of the corporation issued and outstanding, the
Highest Per Share Price shall mean the highest price that can be determined by a
6
<PAGE>
majority of the Continuing Directors to have been paid at any time by the
Related Person for any share or shares of that class of capital stock. If there
is more than one class of capital stock of the corporation issued and
outstanding, the Highest Equivalent Price shall mean with respect to each class
of capital stock of the corporation, the amount determined by a majority of the
Continuing Directors, on whatever basis they believe is appropriate, to be the
highest per share price equivalent to the highest per share price that can be
determined to have been paid at any time by the Related Person for any share or
shares of any class of capital stock of the corporation. In determining the
Highest Per Share Price and Highest Equivalent Price, all purchases by the
Related Person shall be taken into account regardless of whether the shares were
purchased before or after the Related Person became a Related Person. Also, the
Highest Per Share Price and the Highest Equivalent Price shall include any
brokerage commissions, transfer taxes and soliciting dealers' fees paid by the
Related Person with respect to the shares of capital stock of the corporation
acquired by the Related Person.
(d) The Board of Directors of the corporation shall have the power
and duty to determine for the purposes of this Article 10, on the basis of
information then known to it, whether any person, corporation or other entity is
a Related Person. Any such determination made in good faith shall be conclusive
and binding for all purposes of this Article 10.
(e) The provisions set forth in this Article 10 may not be repealed
or amended in any respects without:
(i) The affirmative vote of not less than 80 percent of the
Board of Directors and of a majority of the Continuing Directors, and
(ii) The affirmative vote as to all stock held by the holders of
80 percent or more of the outstanding Voting Stock, voting together as a single
class;
PROVIDED, HOWEVER, that the provisions of this paragraph (e) shall not apply to,
and the vote referred to in subparagraphs (i) and (ii) above shall not be
required for any amendment or repeal of any provision of this Article 10 that is
recommended to the stockholders by a resolution adopted by (A) a majority of the
Board of Directors, and (B) not less than 80 percent of the Continuing
Directors, in which case any such amendment or repeal shall require only the
affirmative vote of a majority of the Voting Stock.
11. AMENDMENTS. The corporation reserves the right to amend and repeal
any provision contained in this Certificate of Incorporation, and to take other
corporate action to the extent and in the manner now or hereafter permitted or
prescribed by the
7
<PAGE>
laws of the State of Delaware subject to the provisions of Article 5(g) and
Article 10(e) of this Certificate of Incorporation. All rights herein conferred
are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned officers have executed this
Restated Certificate of Incorporation on February 12, 1994 and do hereby certify
that this Restated Certificate of Incorporation, which restates and integrates,
and does not further amend the provisions of this corporation's Certificate of
Incorporation, there being no discrepancy between such provisions and the
provisions of this Restated Certificate of Incorporation, was duly adopted by
the Board of Directors of this corporation in accordance with Section 245 of the
Delaware General Corporation Law.
ALZA Corporation
By: /s/ Dr. Ernest Mario
__________________________
Dr. Ernest Mario,
Co-Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Julian N. Stern
__________________________
Julian N. Stern,
Secretary
8
<PAGE>
Exhibit 3.2
RESTATED BYLAWS
OF
ALZA CORPORATION
REGISTERED OFFICE AND REGISTERED AGENT
1. REGISTERED OFFICE. The registered office of the corporation shall be
in the City of Wilmington County of New Castle, State of Delaware.
2. OTHER OFFICES. The corporation may also have offices at such other
places, both within or without the State of Delaware, as the Board of Directors
may from time to time determine or the business of the corporation may require.
MEETINGS OF STOCKHOLDERS
3. TIME AND PLACE OF MEETINGS. All meetings of the stockholders shall be
held at such time and place, either within or without the State of Delaware, as
shall be fixed by the Board of Directors and stated in the notice or waiver of
notice of the meeting.
4. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time and
place as the Board of Directors shall each year designate.
5. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes prescribed in the notice of meeting, may be called only by
the Board of Directors, the Chairman of the Board or the President of the
corporation.
1
<PAGE>
6. NO ACTION WITHOUT MEETING. At any time when the corporation has more
than one stockholder of any class of capital stock, no action required to be
taken or which may be taken at any annual or special meeting of the stockholders
of such class of capital stock of the corporation may be taken without a
meeting, and the power of stockholders to consent in writing without a meeting,
to the taking of any action is specifically denied.
7. NOTICE.
(a) Written notice of the place, date, and time of all meetings of the
stockholders shall be given not less than ten nor more than 60 days before the
date on which the meeting is to be held to each stockholder entitled to vote at
such meeting, except as otherwise provided herein or required by law (meaning,
here and hereinafter, as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation of the corporation).
(b) When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken and the
adjournment is for not more than thirty days; provided, however, that if the
date of any adjourned meeting is more than thirty days after the date for which
the meeting was originally noticed, or if a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business may be transacted which might have been transacted at the original
2
<PAGE>
meeting.
8. NOMINATIONS AND PROPOSALS.
(a) The Board of Directors of the corporation may nominate candidates for
election as directors of the corporation and may propose such other matters for
approval of the stockholders as the board deems necessary or appropriate.
(b) Any stockholder entitled to vote for directors may nominate candidates
for election as directors of the corporation; provided, however, that so long as
the corporation has more than one stockholder, no nominations for director of
the corporation by any person other than the Board of Directors shall be
presented to any meeting of stockholders unless the person making the nomination
is a record stockholder and shall have delivered a written notice to the
Secretary of the corporation no later than the close of business 60 days in
advance of the stockholder meeting or ten days after the date on which notice of
the meeting is first given to the stockholders, whichever is later. Such notice
shall (i) set forth the name and address of the person advancing such nomination
and the nominee, together with such information concerning the person making the
nomination and the nominee as would be required by the appropriate Rules and
Regulations of the Securities and Exchange Commission to be included in a proxy
statement soliciting proxies for the election of such nominee, and (ii) shall
include the duly executed written consent of such nominee to serve as director
if elected.
(c) No proposal by any person other than the Board of Directors shall be
submitted for the approval of the stockholders at any regular or special meeting
of the stockholders of the
3
<PAGE>
corporation unless the person advancing such proposal shall have delivered a
written notice to the Secretary of the corporation no later than the close of
business 60 days in advance of the stockholder meeting or ten days after the
date on which notice of the meeting is first given to the stockholders,
whichever is later. Such notice shall set forth the name and address of the
person advancing the proposal, any material interest of such person in the
proposal, and such other information concerning the person making such proposal
and the proposal itself as would be required by the appropriate Rules and
Regulations of the Securities and Exchange Commission to be included in a proxy
statement soliciting proxies for the proposal.
9. QUORUM AND REQUIRED VOTE.
(a) At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote on the subject matter at the
meeting, present in person or by proxy shall constitute a quorum, unless or
except to the extent that the presence of a larger number may be required by
law. Except as provided in Section 42 of these bylaws or as may be required by
law, the affirmative vote of a majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders.
(b) If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
(c) If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote
4
<PAGE>
thereat, stating that it will be held with those present constituting a quorum,
then, except as provided in Section 42 of these bylaws or as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum, and
all matters shall be determined by a majority of the votes cast at such meeting.
10. VOTE REQUIRED FOR BUSINESS COMBINATION.
(a) In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as expressly provided in Subparagraph
(b) of this Section 10, any Business Combination (as hereinafter defined) with a
Related Person (as hereinafter defined) shall require the affirmative vote of
the holders of at least eighty percent of the voting power of all of the then
outstanding shares of all classes of stock of the corporation entitled to vote
for the election of directors (the "Voting Stock"), voting together as a single
class. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by law or in
any agreement.
(b) The provisions of this Section 10 shall not apply to any Business
Combination if:
(i) A majority of the Continuing Directors (as hereinafter defined)
of the corporation then in office has by resolution approved the Business
Combination either in advance of or subsequent to such Related Person's having
become a Related Person;
(ii) The Business Combination is solely between the
5
<PAGE>
corporation and another corporation, one hundred percent of the Voting Stock of
which is owned directly or indirectly by the corporation; or
(iii) The Business Combination is a merger or consolidation and the
cash or fair market value (as determined by a majority of the Continuing
Directors) of the property, securities or other consideration to be received per
share by holders of stock of the corporation in the Business Combination is not
less than the Highest Per Share Price or the Highest Equivalent Price (as these
terms are hereinafter defined) paid by the Related Person in acquiring any of
the corporation's stock.
(c) For the purpose of this Section 10:
(i) The term "Business Combination" shall mean (A) any merger or
consolidation of the corporation with or into a Related Person, (B) any sale,
lease, exchange, transfer or other disposition, including, without limitation, a
mortgage or any other security device, of assets of the corporation or any
subsidiary of the corporation, to a Related Person if such assets constitute a
Substantial Part (as hereinafter defined), (C) any merger or consolidation of a
Related Person with or into the corporation or a subsidiary of the corporation,
(D) the issuance of any securities of the corporation or a subsidiary of the
corporation to a Related Person, (E) any recapitalization that would have the
effect of increasing the voting power in the corporation of a Related Person,
and (F) any agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination.
6
<PAGE>
(ii) The term "Related Person" shall mean any individual,
corporation or other entity which, alone or together with (A) its "Affiliates"
and "Associates" (as defined in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934 as in effect at the date of the
adoption of this Section 10 by the stockholders of the corporation
(collectively, and as so in effect, the "Exchange Act")) or (B) members of a
"group" (as defined with reference to Section 13(d)(3) of the Exchange Act) of
which such individual, corporation or other entity is a member, "beneficially
owns" (as defined in Rule 13d-3 of the Exchange Act) shares of the outstanding
common stock of the corporation which, in the aggregate, have (or, in the case
of convertible securities, would have, if such convertible securities were, at
the time the determination is being made, convertible and had been converted) 20
percent or more of the total combined power to elect directors of the
corporation.
(iii) For the purposes of subparagraph (b)(iii) of this Section 10,
the term "other consideration to be received" shall include, without limitation,
common stock of the corporation retained by its existing stockholders in the
event of a Business Combination in which the corporation is the surviving
corporation.
(iv) The term "Continuing Director" shall mean a director who is
unaffiliated with the Related Person and who was a member of the Board of
Directors of the corporation immediately prior to the time that the Related
Person involved in a Business Combination became a Related Person.
7
<PAGE>
(v) The term "Substantial Part" shall mean assets having a book
value in excess of 30 percent of the book value of the total consolidated assets
of the corporation and its subsidiaries taken as a whole as of the end of its
most recent fiscal year ended prior to the time the determination is made.
(vi) The terms "Highest Per Share Price" and "Highest Equivalent
Price" shall mean the following: If there is only one class of capital stock of
the corporation issued and outstanding, the Highest Per Share Price shall mean
the highest price that can be determined by a majority of the Continuing
Directors then in office to have been paid at any time by the Related Person for
any share or shares of that class of capital stock. If there is more than one
class of capital stock of the corporation issued and outstanding, the Highest
Equivalent Price shall mean, with respect to each class of capital stock of the
corporation, the amount determined by a majority of the Continuing Directors
then in office, on whatever basis they believe is appropriate, to be the highest
per share price equivalent to the highest per share price that can be determined
to have been paid at any time by the Related Person for any share or shares of
any class of capital stock of the corporation. In determining the Highest Per
Share Price and Highest Equivalent Price, all purchases by the Related Person
shall be taken into account regardless of whether the shares were purchased
before or after the Related Person became a Related Person. Also, the Highest
Per Share Price and the Highest Equivalent Price shall include any brokerage
commissions, transfer taxes and soliciting dealers' fees paid by the Related
Person with respect to the shares of capital stock of the
8
<PAGE>
corporation acquired by the Related Person.
(d) A majority of the Continuing Directors of the corporation then in
office (including directors purporting, in good faith, to be Continuing
Directors) shall have the power and duty to determine, for the purposes of this
Section 10, on the basis of information then known to them, whether any
individual, corporation or other entity is a Related Person. Any such
determination made in good faith shall be conclusive and binding for all
purposes of this Section 10.
(e) The provisions set forth in this Section 10 may not be repealed or
amended in any respect without:
(i) The affirmative vote of not less than 80 percent of the Board
of Directors and of a majority of the Continuing Directors then in office, and
(ii) The affirmative vote of the holders of 80 percent or more of
the Voting Stock, voting together as a single class;
PROVIDED, HOWEVER, that the provisions of this paragraph (e) shall not apply to
any amendment or repeal of any provision of this Section 10 that is recommended
to the stockholders by a resolution adopted by (A) a majority of the Board of
Directors, and (B) not less than 80 percent of the Continuing Directors then in
office, in which case any such amendment or repeal shall require only the
affirmative vote of a majority of the Voting Stock.
11. ORGANIZATIONS. The Chairman of the Board or, in his or
her absence, the President of the corporation or, in the absence
9
<PAGE>
of both, such person as may be designated by the Board of Directors or, if there
is no such designation, such person as may be chosen by the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
shall call to order any meeting of the stockholders and act as chairman of the
meeting.
12. CONDUCT OF BUSINESS. The Chairman of any meeting of stockholders
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to him or her in order.
13. PROXIES AND VOTING. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedures established for
the meeting.
14. STOCK LIST. A complete list of stockholders entitled to vote at any
meeting of stockholders, arranged in alphabetical order and showing the address
of each such stockholder and the number of shares of each class registered in
his or her name, shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the whole
time thereof and shall be open to the examination of any stockholder present.
10
<PAGE>
BOARD OF DIRECTORS
15. POWERS. The business and affairs of the corporation shall be managed
by or under the direction of its Board of Directors.
16. NUMBER, CLASSIFICATION AND TERM OF OFFICE. The number of directors of
the corporation who shall constitute the whole board shall be ten but may be
increased or decreased from time to time either by a resolution or bylaw duly
adopted by the Board of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term ending
on the date of the third annual meeting of stockholders following the annual
meeting at which the director was elected; provided, however, that each initial
director in Class I shall hold office until the annual meeting of stockholders
in 1988; each initial director in Class II shall hold office until the annual
meeting of stockholders in 1989; and each initial director in Class III shall
hold office until the annual meeting of stockholders in 1990. Notwithstanding
the foregoing, each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal.
17. REMOVAL. Any director may be removed from office, only with cause, by
the holders of a majority of the shares entitled to vote in an election of
directors.
18. RESIGNATIONS. A director may resign at any time by giving written
notice to the corporation. Such resignation shall be effective when given
unless the director specifies a later time. The resignation shall be effective
regardless of whether
11
<PAGE>
it is accepted by the corporation.
19. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES. In the event of any
increase or decrease in the authorized number of directors, any newly-created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so as
to maintain such classes as nearly equal in number as possible. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director. Newly-created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office (and not by stockholders), even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
20. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be
held at such place or places, on such date or dates, and at such time or times
as shall have been established by the Board of Directors and publicized among
all directors. A notice of each regular meeting shall not be required.
21. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President or any two directors.
12
<PAGE>
22. NOTICE OF MEETINGS.
(a) Special meetings, and regular meetings not fixed as provided in these
Bylaws, shall be held upon four days' notice by mail or two days' notice
delivered personally or by telephone or telegraph to each director who does not
waive such notice. The notice shall state the place, date and time of the
meeting. Unless otherwise indicated in the notice, any and all business may be
transacted at a special meeting.
(b) Notice of a reconvened meeting need not be given if the place, date
and time of the reconvened meeting are announced at the meeting at which the
adjournment is taken and the adjournment is not for more than 24 hours. If a
meeting is adjourned for more than 24 hours, notice of the reconvened meeting
shall be given prior to the time of that reconvened meeting to the directors who
were not present at the time of the adjournment.
23. ACTION WITHOUT MEETING. Except as required by law, any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting if all members of the Board
of Directors or any committee thereof, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the Board of
Directors or committee.
24. MEETING BY TELEPHONE. Except as required by law, members of the Board
of Directors or any committee thereof may participate in the meeting of the
Board of Directors or committee by means of conference telephone or similar
communications equipment if all persons who participate in the meeting can hear
13
<PAGE>
each other. Such participation in a meeting shall constitute presence in person
at such meeting.
25. QUORUM AND MANNER OF ACTING. At any meeting of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for all purposes. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors. If a quorum
shall fail to attend any meeting, a majority of those present may adjourn the
meeting to another place, date or time, without further notice or waiver
thereof. Except as provided herein, the act of the majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
26. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors by a
vote of a majority of the whole Board, may from time to time designate
committees of the Board, with such lawfully delegable powers and duties as it
thereby confers, to serve at the pleasure of the Board and shall for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may exercise the power
and authority of the Board of Directors to declare a dividend or to authorize
the issuance of stock if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. The
principles set forth in Sections 15
14
<PAGE>
through 25 of these Bylaws shall apply to committees of the Board of Directors
and to actions taken by such committees. All members of any Audit Committee of
this Company designated by the Board of Directors shall be directors who are not
also employees of the corporation.
27. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
or a committee thereof, and may receive fixed fees and other compensation for
their services as directors. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation for
such service.
OFFICERS
28. TITLES. The officers of the corporation shall be chosen by the Board
of Directors and shall include a Chairman of the Board or a President or both, a
Secretary and a Treasurer. The Board of Directors may also appoint one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers or other officers.
Any number of offices may be held by the same person. All officers shall perform
their duties and exercise their powers subject to the Board of Directors.
29. ELECTION, TERM OF OFFICE AND VACANCIES. The officers shall be elected
annually by the Board of Directors at its regular meeting following the annual
meeting of the stockholders,
15
<PAGE>
and each officer shall hold office until the next annual election of officers
and until the officer's successor is elected and qualified, or until the
officer's death, resignation or removal. Any officer may be removed at any
time, with or without cause, by the Board of Directors. Any vacancy occurring
in any office may be filled by the Board of Directors.
30. RESIGNATION. Any officer may resign at any time upon notice to the
corporation without prejudice to the rights, if any, of the corporation under
any contract to which the officer is a party. The resignation of an officer
shall be effective when given unless the officer specifies a later time. The
resignation shall be effective regardless of whether it is accepted by the
corporation.
31. CHIEF EXECUTIVE OFFICER. The Board of Directors shall designate
either the Chairman of the Board or the President as the chief executive officer
and may prescribe the duties and powers of the chief executive officer. In the
absence of such a designation, the Chairman of the Board shall be the chief
executive officer. If there is no Chairman of the Board, the President shall be
the chief executive officer. Subject to the provisions of these Bylaws and to
the direction of the Board of Directors, the chief executive officer shall have
the responsibility for the general management and control of the business and
affairs of the corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him or her by the Board of Directors. Either the Chairman of the
Board or the
16
<PAGE>
President and such other officers as may, from time to time, be expressly
designated by the Board of Directors shall have power to sign all stock
certificates, contracts and other instruments of the corporation which are
authorized.
32. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall issue all
authorized notices for, and shall keep minutes of, all meetings of the
stockholders and the Board of Directors. He or she shall have charge of the
corporate books and shall perform such other duties as the Board of Directors
may from time to time prescribe. At the request of the Secretary, or in the
Secretary's absence or disability, any Assistant Secretary shall perform any of
the duties of the Secretary and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the Secretary.
33. TREASURER AND ASSISTANT TREASURERS. Unless the Board of Directors
designates another chief financial officer, the Treasurer shall be the chief
financial officer of the corporation. Unless otherwise determined by the Board
of Directors or the chief executive officer, the Treasurer shall have custody of
the corporate funds and securities, shall keep adequate and correct accounts of
the corporation's properties and business transactions, shall disburse such
funds of the corporation as may be ordered by the Board or the chief executive
officer (taking proper vouchers for such disbursements), and shall render to the
chief executive officer and the Board, at regular meetings of the Board or
whenever the Board may require, an account of all transactions and the financial
condition of the
17
<PAGE>
corporation. At the request of the Treasurer, or in the Treasurer's absence or
disability, any Assistant Treasurer may perform any of the duties of the
Treasurer and when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the Treasurer.
34. OTHER OFFICERS. The other officers of the corporation, if any, shall
exercise such powers and perform such duties as the Board of Directors or the
chief executive officer shall prescribe.
35. COMPENSATION. The Board of Directors shall fix the compensation of
the chief executive officer and may fix the compensation of other employees of
the corporation, including the other officers. If the Board does not fix the
compensation of the other officers, the chief executive officer shall fix such
compensation.
36. ACTIONS WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the Chairman of the Board, the
President or any officer of the corporation authorized by the Chairman of the
Board or the President, shall have power to vote and otherwise act on behalf of
the corporation, in person or by proxy, at any meeting of stockholders of, or
with respect to any action of stockholders of, any other corporation in which
the corporation may hold securities and otherwise shall have power to exercise
any and all rights and powers which the corporation may possess by reason of its
ownership of securities in such other corporation.
18
<PAGE>
STOCK AND DIVIDENDS
37. CERTIFICATES OF STOCK. Each stockholder shall be entitled to a
certificate signed by, or in the name of, the corporation by the Chairman, the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer, certifying the number of shares
owned by him or her. Any or all of the signatures on the certificates may be
facsimile.
38. TRANSFERS OF STOCK. Transfers of stock shall be made only upon the
transfer books of the corporation kept at an office of the corporation or by
transfer agents designated to transfer shares of the stock of the corporation.
Except where a certificate is issued in accordance with the next sentence of
this Section, an outstanding certificate for the number of shares involved shall
be surrendered for cancellation before a new certificate is issued therefor. In
the event of the loss, theft or destruction of any certificate of stock, another
may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
39. REGULATIONS. The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the Board
of Directors may establish.
RECORD DATE
40. RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at
19
<PAGE>
any meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix in advance, a record date, which shall not be more than 60 nor less than
ten days before the date of such meeting, nor more than 60 days prior to any
other action. If no record date is fixed, the record date (1) for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (2) for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
reconvened meeting.
WAIVER OF NOTICE
41. WAIVER OF NOTICE. Whenever notice is required to be given by law or
these Bylaws, a written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
20
<PAGE>
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Unless so required by the Certificate of Incorporation or these
Bylaws, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
AMENDMENTS
42. AMENDMENTS. These Bylaws may be amended or repealed or new bylaws may
be adopted by the stockholders or by the Board of Directors. Notwithstanding
the foregoing, no provision of Section 10 may be amended or repealed except in
accordance with Section 10(e) and no provision of Sections 16 or 19 may be
amended or repealed except by a resolution adopted by the affirmative vote of
not less than 75% of the members of the Board of Directors or by the affirmative
vote of the holders of at least 80% of the outstanding shares of capital stock
entitled to vote in an election of directors.
MISCELLANEOUS
43. FISCAL YEAR. The fiscal year of the corporation shall be as fixed by
the Board of Directors.
44. TIME PERIODS. In applying any provision of these Bylaws which
requires that an act be done or not done within a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event,
21
<PAGE>
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
45. FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the corporation may be used
whenever and as authorized by the Board of Directors.
46. CORPORATE SEAL. The Board of Directors may provide a suitable seal,
containing the name of the corporation, which seal shall be in the charge of the
Secretary. Duplicates of the seal may be kept and used by the Treasurer or by
an Assistant Secretary or Assistant Treasurer.
47. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each member
of any committee designated by the Board of Directors, and each officer of the
corporation shall, in the performance of his or her duties, be fully protected
in relying in good faith upon the books of account or other records of the
corporation, including reports made to the corporation by any of its officers,
by an independent certified public accountant or by an appraiser.
This is to certify that these Restated Bylaws were duly adopted by the
Board of Directors of this corporation on February 10, 1994.
Julian N. Stern
-----------------------------
Julian N. Stern,
Secretary
22
<PAGE>
Exhibit 10.5
EXECUTION COUNTERPART
********************************************************************
ALZA CORPORATION
_____________________________
364-DAY CREDIT AGREEMENT
Dated as of November 4, 1993
______________________________
$125,000,000
______________________________
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
********************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . 14
1.03 Classes and Types of Loans. . . . . . . . . . . . . 14
Section 2. Commitments, Loans, Notes and Prepayments. . . . . 15
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . 15
2.02 Borrowings of Syndicated Loans. . . . . . . . . . . 15
2.03 Money Market Loans. . . . . . . . . . . . . . . . . 15
2.04 Changes of Commitments. . . . . . . . . . . . . . . 19
2.05 Facility Fee. . . . . . . . . . . . . . . . . . . . 20
2.06 Lending Offices . . . . . . . . . . . . . . . . . . 20
2.07 Several Obligations; Remedies Independent . . . . . 20
2.08 Notes . . . . . . . . . . . . . . . . . . . . . . . 20
2.09 Optional Prepayments. . . . . . . . . . . . . . . . 21
2.10 Extension of Commitment Termination Date. . . . . . 21
Section 3. Payments of Principal and Interest . . . . . . . . 22
3.01 Repayment of Loans. . . . . . . . . . . . . . . . . 22
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . 22
Section 4. Payments; Pro Rata Treatment;
Computations; Etc. . . . . . . . . . . . . . . . 23
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . 23
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . 24
4.03 Computations. . . . . . . . . . . . . . . . . . . . 24
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . 24
4.05 Certain Notices . . . . . . . . . . . . . . . . . . 25
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . 25
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . 26
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . 27
5.01 Additional Costs. . . . . . . . . . . . . . . . . . 27
5.02 Limitation on Types of Loans. . . . . . . . . . . . 29
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . 30
5.04 Treatment of Affected Loans . . . . . . . . . . . . 30
5.05 Compensation. . . . . . . . . . . . . . . . . . . . 30
5.06 U.S. Taxes. . . . . . . . . . . . . . . . . . . . . 31
Section 6. Conditions Precedent . . . . . . . . . . . . . . . 32
6.01 Initial Loan. . . . . . . . . . . . . . . . . . . . 32
6.02 Initial and Subsequent Loans. . . . . . . . . . . . 33
Section 7. Representations and Warranties . . . . . . . . . . 33
7.01 Corporate Existence . . . . . . . . . . . . . . . . 33
7.02 Financial Condition . . . . . . . . . . . . . . . . 34
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . 34
i
<PAGE>
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . 34
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . 34
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . 35
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . 35
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . 35
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Investment Company Act. . . . . . . . . . . . . . . 35
7.11 Public Utility Holding Company Act. . . . . . . . . 35
7.12 Material Agreements and Liens . . . . . . . . . . . 36
7.13 Environmental Matters . . . . . . . . . . . . . . . 36
7.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . 37
7.15 True and Complete Disclosure. . . . . . . . . . . . 37
7.16 Subordinated Debentures . . . . . . . . . . . . . . 37
Section 8. Covenants of the Company . . . . . . . . . . . . . 37
8.01 Financial Statements, Etc.. . . . . . . . . . . . . 37
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . 40
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . 40
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . 41
8.05 Prohibition of Fundamental Changes. . . . . . . . . 41
8.06 Limitation on Liens . . . . . . . . . . . . . . . . 42
8.07 Indebtedness. . . . . . . . . . . . . . . . . . . . 43
8.08 Consolidated Tangible Net Worth . . . . . . . . . . 44
8.09 Interest Coverage Ratio . . . . . . . . . . . . . . 44
8.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . 44
8.11 Lines of Business . . . . . . . . . . . . . . . . . 44
8.12 Transactions with Affiliates. . . . . . . . . . . . 44
8.13 Use of Proceeds . . . . . . . . . . . . . . . . . . 44
Section 9. Events of Default. . . . . . . . . . . . . . . . . 45
Section 10. The Agent . . . . . . . . . . . . . . . . . . . . 47
10.01 Appointment, Powers and Immunities . . . . . . . . 47
10.02 Reliance by Agent. . . . . . . . . . . . . . . . . 48
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . 48
10.04 Rights as a Bank . . . . . . . . . . . . . . . . . 49
10.05 Indemnification. . . . . . . . . . . . . . . . . . 49
10.06 Non-Reliance on Agent and Other Banks. . . . . . . 49
10.07 Failure to Act . . . . . . . . . . . . . . . . . . 49
10.08 Resignation or Removal of Agent. . . . . . . . . . 50
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . 50
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . 50
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . 50
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . 51
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . 52
11.05 Successors and Assigns . . . . . . . . . . . . . . 52
11.06 Assignments and Participations . . . . . . . . . . 52
11.07 Survival . . . . . . . . . . . . . . . . . . . . . 54
11.08 Captions . . . . . . . . . . . . . . . . . . . . . 54
11.09 Counterparts . . . . . . . . . . . . . . . . . . . 54
11.10 Governing Law; Submission to Jurisdiction. . . . . 54
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . 55
11.12 Treatment of Certain Information;
Confidentiality. . . . . . . . . . . . . . . . . 55
11.13 Existing Credit Agreements . . . . . . . . . . . . 56
SCHEDULE I - Material Agreements and Liens . . . . . . . . . 73
SCHEDULE II - Subsidiaries. . . . . . . . . . . . . . . . . . 74
ii
<PAGE>
EXHIBIT A-1 - Form of Syndicated Note . . . . . . . . . . . . 75
EXHIBIT A-2 - Form of Money Market Note . . . . . . . . . . . 78
EXHIBIT B-1 - Form of Opinion of Counsel to the Company . . . 81
EXHIBIT B-2 - Form of Opinion of the Vice President, Legal
of the Company. . . . . . . . . . . . . . . . 85
EXHIBIT C - Form of Opinion of Special New York
Counsel to the Agent. . . . . . . . . . . . . 88
EXHIBIT D - Form of Money Market Quote Request. . . . . . . 91
EXHIBIT E - Form of Money Market Quote. . . . . . . . . . . 93
EXHIBIT F - Form of Confidentiality Agreement . . . . . . . 95
iii
<PAGE>
364-DAY CREDIT AGREEMENT dated as of November 4, 1993, between: ALZA
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each of the lenders that is a signatory
hereto identified under the caption "BANKS" on the signature pages hereto or
that, pursuant to Section 11.06(b) hereof, shall become a "Bank" hereunder
(individually, a "Bank" and, collectively, the "Banks"); and THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION), a national banking association, as agent for the
Banks (in such capacity, together with its successors in such capacity, the
"Agent").
The Company has requested that the Banks make loans to it in an
aggregate principal amount not exceeding $125,000,000 at any one time
outstanding and the Banks are prepared to make such loans upon the terms and
conditions hereof. Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event, any
Person that owns directly or indirectly securities having 15% or more of the
voting power for the election of directors or other governing body of a
corporation or 15% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries, (b) none of the Subsidiaries of the Company shall be Affiliates
and (c) Affiliate shall not include (i) any pharmaceutical company clients of
the Company or of any of its Subsidiaries or (ii) any Person in which the
Company or any of its Subsidiaries owns an interest, direct or indirect, for the
purpose of undertaking research, development, manufacturing and/or distribution
of pharmaceutical products or technologies with any Person(s) actively engaged
in any of the foregoing.
1
<PAGE>
"Applicable Lending Office" shall mean, for each Bank and for each
Type of Loan, the "Lending Office" of such Bank (or of an affiliate of such
Bank) designated for such Type of Loan on the signature pages hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Agent and the Company as the office by which
its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean, with respect to each Type of Loan
during each period set forth in the schedule below, the percentage per annum set
forth opposite such period under such Type of Loan in such schedule:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
Rating Base Rate Loans Eurodollar Loans
<S> <C> <C>
Level I Period 0.00% 0.2500%
Level II Period 0.00% 0.3750%
Level III Period 0.00% 0.7500%
</TABLE>
Notwithstanding the foregoing, for any day on which the unpaid
principal amount of Loans hereunder exceeds 33-1/3% of the aggregate amount of
the Commitments, the Applicable Margins shall be increased by 0.1250% over what
it otherwise would have been under the foregoing provisions of this definition.
Any change in the Applicable Margin for any Type of Loan by reason of
a change in the Standard & Poor's Rating or the Moody's Rating shall become
effective on the date of announcement or publication by the respective rating
agencies of a change in such rating or, in the absence of such announcement or
publication, on the effective date of such changed rating.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans that bear interest at
rates based upon the Base Rate.
"Business Day" shall mean (a) any day on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to the giving of notices or quotes in connection with a LIBOR Auction or to a
borrowing of, a payment or prepayment of principal of or interest on, or the
Interest Period for, a Eurodollar Loan or a LIBOR Market Loan or a notice by the
Company with respect to any such borrowing, payment, prepayment or Interest
Period, any day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be
2
<PAGE>
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Chase" shall mean The Chase Manhattan Bank (National Association).
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean, as to each Bank, the obligation of such Bank
to make Syndicated Loans pursuant to Section 2.01 hereof in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set opposite such Bank's name on the signature pages hereof under the caption
"Commitment" (as the same may be reduced at any time or from time to time
pursuant to Section 2.04 hereof). The original aggregate principal amount of
the Commitments is $125,000,000.
"Commitment Termination Date" shall mean the date 364 days after the
date hereof, as the same may be extended pursuant to Section 2.10 hereof;
provided that, if such date is not a Business Day, the Commitment Termination
Date shall be the next preceding Business Day.
"Consolidated Net Worth" shall mean, as at any date, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, plus
(b) the amount of additional paid-in capital, plus
(c) the amount of retained earnings (or in the case of an accumulated
deficit, minus the amount of such deficit), minus
(d) the cost of treasury stock.
"Consolidated Tangible Net Worth" shall mean, at any date, the sum of
(a) Consolidated Net Worth minus (b) the book value of all assets which should
be classified as intangibles (without duplication of deductions in respect of
items already deducted in arriving at retained earnings) but in any event
including goodwill, minority interests, research and development costs,
trademarks, trade names, copyrights, patents and franchises, unamortized debt
discount and expense, all reserves and any write-up in the book value of assets
resulting from a revaluation thereof subsequent to June 30, 1993, for the
Company and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), plus (c) the aggregate amount of
in-process research and development expenses up to but not exceeding
$100,000,000 in the aggregate, less 50% of the aggregate increase in the amount
of capital stock issued (plus any related additional paid-in capital), in
connection with the acquisition of any Person(s) or Property.
3
<PAGE>
"Default" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms. The terms
"Dispose" and "Disposed" used as a verb shall have a correlative meaning.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBIT" shall mean, for any period, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), the sum of (i) consolidated income (calculated before
interest expense, taxes, minority interests and extraordinary and unusual items)
for such period plus (ii) prepayment and make-whole premiums and cost and
expenses associated with the redemption of the Subordinated Debentures during
such period.
"Environmental Claim" shall mean, with respect to any Person, any
written notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence of Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to
emissions, discharges, Releases or threatened Releases of pollutants,
contaminants, chemicals, toxic or hazardous substances or wastes or other
Hazardous Materials into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or toxic or hazardous
substances, wastes or other Hazardous Materials.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries of (i) any capital
4
<PAGE>
stock, (ii) any warrants or options exercisable in respect of capital stock
(other than any warrants or options issued to directors, officers, employees or
consultants of the Company or any of its Subsidiaries pursuant to employee
benefit plans established in the ordinary course of business and any
capital stock of the Company issued upon the exercise of such warrants
or options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the Company or any of
its Subsidiaries or (b) the receipt by the Company or any of its Subsidiaries
after the date hereof of any capital contribution (whether or not evidenced by
any equity security issued by the recipient of such contribution); provided
that Equity Issuance shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company or (y) any capital contribution by the Company or any Wholly Owned
Subsidiary of the Company to any Subsidiary of the Company.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class,
or partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"Eurodollar Loans" shall mean Syndicated Loans that bear interest at
rates based on rates referred to in the definition of "Fixed Base Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for the Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the Fixed Base Rate for such
Loan for such Interest Period divided by 1 minus the Reserve Requirement (if
any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 9 hereof.
"Existing Credit Agreements" shall mean the 364-Day Credit Agreement
and the 3-Year Credit Agreement, each dated as of October 14, 1993, between the
Company, the banks party thereto and Chase, as agent for such banks.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on
5
<PAGE>
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (a) if the day for which such rate is to be determined is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day and (b) if such rate is not so published for any Business Day, the
Federal Funds Rate for such Business Day shall be the average rate charged to
Chase on such Business Day on such transactions as determined by the Agent.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate Loan for
the Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Agent, of the rates
per annum quoted by the respective Reference Banks at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) on the date two Business Days
prior to the first day of such Interest Period for the offering by the
respective Reference Banks to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of such Eurodollar Loan or LIBOR
Market Loan to be made by the respective Reference Banks. If any Reference Bank
is not participating in any Fixed Rate Loans during the Interest Period
therefor, the Fixed Base Rate for such Loans for such Interest Period shall be
determined by reference to the amount of such Loans that such Reference Bank
would have made or had outstanding had it been participating in such Loan;
provided that in the case of any LIBOR Market Loan, the Fixed Base Rate for such
Loan shall be determined with reference to deposits of $10,000,000. If
anyReference Bank does not timely furnish such information for determination of
any Fixed Base Rate, the Agent shall determine such Fixed Base Rate on the basis
of the information timely furnished by the remaining Reference Banks.
"Fixed Rate Loans" shall mean Eurodollar Loans and, for the purposes
of the definition of "Fixed Base Rate" in this Section 1.01 and in Section 5
hereof, LIBOR Market Loans.
"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
6
<PAGE>
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
have a correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or
other materials or substances that are now or hereafter become defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or
words of similar import under any Environmental Law and (c) any other chemical
or other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than (i)
trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered and (ii) deferred compensation
owing to employees and former employees, directors and former directors; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
account of such Person; (e) Capital Lease Obligations of such Person; and (f)
Indebtedness of others Guaranteed by such Person.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
EBIT for such period to (b) Interest Expense for such period.
"Interest Expense" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations) accrued or capitalized
during such period (whether or not actually paid during such period) plus (b)
the net amount payable (or minus the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period).
"Interest Period" shall mean:
(a) with respect to any Eurodollar Loan, each period commencing on
the date such Eurodollar Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the
7
<PAGE>
Company may select as provided in Section 4.05 hereof, except that each
Interest Period that commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day
of the appropriate subsequent calendar month;
(b) With respect to any Set Rate Loan, the period commencing on the
date such Set Rate Loan is made and ending on any Business Day up to 180
days thereafter, as the Company may select as provided in Section 2.03(b)
hereof;
(c) With respect to any LIBOR Market Loan, the period commencing on
the date such LIBOR Market Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 2.03(b)
hereof, except that each Interest Period that commences on the last
Business Day of a calendar month (or any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month; and
(d) with respect to any Base Rate Loan, the period commencing on the
date such Base Rate Loan is made and ending on the earlier of the first
Quarterly Date thereafter or the Commitment Termination Date.
Notwithstanding the foregoing: (i) if any Interest Period for any Loan would
otherwise end after the Commitment Termination Date in effect at the date of
such Loan, such Interest Period shall not be available hereunder; (ii) each
Interest Period that would otherwise end on a day that is not a Business Day
shall endon the next succeeding Business Day (or, in the case of an Interest
Period for a Eurodollar Loan or a LIBOR Market Loan, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iii) no Interest Period for any Loan (other than a Base Rate
Loan or a Set Rate Loan) shall have a duration of less than one month and, if
the Interest Period for any Eurodollar or LIBOR Market Loan would otherwise be a
shorter period, such Loan shall not be available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"Investment" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent
or otherwise, to resell such Property to such Person), but excluding any such
advance, loan or extension of credit having a term not
8
<PAGE>
exceeding 90 days representing the purchase price of inventory or supplies sold
by such Person in the ordinary course of business; (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person; or (d) the entering
into of any Interest Rate Protection Agreement.
"Level I Period" shall mean any period during which (a) no Event of
Default shall have occurred and be continuing, (b) the Standard & Poor's Rating
is at or above A1 (or any successor rating) and (c) the Moody's Rating is at or
above P1 (or any successor rating).
"Level II Period" shall mean any period, other than a Level I Period,
during which (a) no Event of Default shall have occurred and be continuing, (b)
the Standard & Poor's Rating is at or above A2 (or any successor rating) and (c)
the Moody's Rating is at or above P2 (or any successor rating).
"Level III Period" shall mean any period that is not a Level I Period
or a Level II Period.
"Leverage Ratio" shall mean, at any time, the ratio of Total Debt to
Total Capital at such time.
"LIBO Margin" shall have the meaning assigned to such
term in Section 2.03(c)(ii)(C) hereof.
"LIBO Rate" shall mean, for any LIBOR Market Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Agent to be equal to the rate of interest specified in the definition of "Fixed
Base Rate" in this Section 1.01 for the Interest Period for such Loan divided by
1 minus the Reserve Requirement (if any) for such Loan for such Interest Period.
"LIBOR Auction" shall mean a solicitation of Money Market Quotes
setting forth LIBO Margins based on the LIBO Rate pursuant to Section 2.03
hereof.
"LIBOR Market Loans" shall mean Money Market Loans interest rates on
which are determined on the basis of LIBO Rates pursuant to a LIBOR Auction.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loans" shall mean Syndicated Loans and Money Market Loans.
"Long-Term Credit Agreement" shall mean the 3-Year Credit Agreement
dated the date hereof between the Company, the Banks and Chase, as agent for the
Banks, as the same may be modified and supplemented and in effect from time to
time.
9
<PAGE>
"Majority Banks" shall mean, subject to the last paragraph of Section
11.04 hereof, Banks having more than 50% of the aggregate amount of the
Commitments or, if the Commitments shall have terminated, Banks holding more
than 50% of the aggregate unpaid principal amount of the Loans.
"Margin Stock" shall mean "margin stock" within the meaning of
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the Property, business, operations or financial condition of the Company and its
Subsidiaries taken as a whole, (b) the ability of the Company to perform its
obligations hereunder or under the Notes, (c) the validity or enforceability of
this Agreement or of the Notes, (d) the rights and remedies of the Banks and the
Agent hereunder and under the Notes or (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith.
"Material Subsidiary" shall mean, at any time, a Subsidiary of the
Company that as of such time meets the definition of a "significant subsidiary"
contained as of the date hereof in Regulation S-X of the Securities and Exchange
Commission.
"Money Market Borrowing" shall have the meaning assigned to such term
in Section 2.03(b) hereof.
"Money Market Loan Limit" shall have the meaning assigned to such term
in Section 2.03(c)(ii) hereof.
"Money Market Loans" shall mean the loans provided for
by Section 2.03 hereof.
"Money Market Notes" shall mean the promissory notes provided for by
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Money Market Quote" shall mean an offer in accordance with Section
2.03(c) hereof by a Bank to make a Money Market Loan with one single specified
interest rate.
"Money Market Quote Request" shall have the meaning assigned to such
term in Section 2.03(b) hereof.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
corporation thereto.
"Moody's Rating" shall mean, at any time, the then current rating
(including the failure to rate) by Moody's of the Company's commercial paper.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean the aggregate amount of all cash
received by the Company and its Subsidiaries in respect of any Equity Issuance
net of reasonable expenses
10
<PAGE>
incurred by the Company and its Subsidiaries in connection therewith.
"Notes" shall mean the Syndicated Notes and the Money
Market Notes.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount under this Agreement or any Note that is not paid when
due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 2% plus the Base Rate as in effect from time to time plus the
Applicable Margin for Base Rate Loans; provided that, if the amount so in
default is principal of a Eurodollar Loan or a Money Market Loan and the due
date thereof is a day other than the last day of the Interest Period therefor,
the "Post-Default Rate" for such principal shall be, for the period from and
including such due date to but excluding the last day of such Interest Period,
2% plus the interest rate for such Loan as provided in Section 3.02 hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
"Principal Office" shall mean the principal office of Chase, located
on the date hereof at 1 Chase Manhattan Plaza, New York, New York 10081.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first
such day after the date of this Agreement.
"Reference Banks" shall mean Chase, First Interstate Bank of
California and The Toronto-Dominion Bank (or their respective Applicable Lending
Offices, as the case may be).
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
11
<PAGE>
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Bank of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for the Interest Period for any
Eurodollar Loan or LIBOR Market Loan, the average maximum rate at which reserves
(including, without limitation, any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves required to
be maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by reference
to which the Fixed Base Rate for Eurodollar Loans or LIBOR Market Loans (as the
case may be) is to be determined as provided in the definition of "Fixed Base
Rate" in this Section 1.01 or (ii) any category of extensions of credit or other
assets that includes Eurodollar Loans or LIBOR Market Loans.
"Set Rate" shall have the meaning assigned to such term in Section
2.03(c)(ii)(D) hereof.
"Set Rate Auction" shall mean a solicitation of Money Market Quotes
setting forth Set Rates pursuant to Section 2.03 hereof.
"Set Rate Loans" shall mean Money Market Loans the interest rates on
which are determined on the basis of Set Rates pursuant to a Set Rate Auction.
"Standard & Poor's" shall mean Standard & Poor's Corporation or any
successor corporation thereto.
"Standard & Poor's Rating" shall mean, at any time, the then current
rating (including the failure to rate) by Standard & Poor's of the Company's
commercial paper.
"Subordinated Debentures" shall mean the 7 1/2% zero coupon
convertible subordinated debentures due 2010 issued by the Company.
"Subordinated Indebtedness" shall mean, collectively, (a) Indebtedness
of the Company in respect of the Subordinated Debentures and (b) other
Indebtedness (i) for which the Company
12
<PAGE>
is directly and primarily liable, (ii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated and (iii) that is
subordinated in right of payment to the obligations of the Company to pay
principal of and interest on the Loans and Notes and all other amounts payable
hereunder on the following terms: the maturity thereof shall not be prior to the
then Commitment Termination Date hereunder, nor shall any principal amortization
be required prior to such Commitment Termination Date; no payments of principal
thereof or interest thereon shall be made following the occurrence and during
the continuance of an Event of Default; and the covenants and events of default
provided therein shall not be more burdensome on the Company in any material
respect than the covenants and the Events of Default set forth herein, and (iv)
that is evidenced by documentation consistent with the foregoing and otherwise
in form and substance satisfactory to the Majority Banks in their reasonable
determination.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Syndicated Loans" shall mean the loans provided for by Section 2.01
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Syndicated Notes" shall mean the promissory notes provided for by
Section 2.08(a) hereof and all promissory notes delivered in substitution or
exchange thereof, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Total Capital" shall mean, at any time, Consolidated Net Worth plus
Total Debt.
"Total Debt" shall mean, at any time, the aggregate outstanding
principal amount of all Indebtedness of the Company and its Subsidiaries (other
than Subordinated Indebtedness) at such time that is, or would (if a
consolidated balance sheet of the Company and its Subsidiaries existed at such
time) be, reflected on a consolidated balance sheet of the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP).
"Type" shall have the meaning assigned to such term in Section 1.03
hereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or
13
<PAGE>
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Banks hereunder shall (unless otherwise disclosed to the Banks in writing at the
time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Banks hereunder (which, prior to the delivery of the
first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as of December 31, 1992 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Banks pursuant to Section 8.01 hereof (or,
prior to the delivery of the first financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as of
December 31, 1992 referred to in Section 7.02 hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Banks shall so object
in writing within 30 days after delivery of such financial statements, in either
of which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made (which, if objection is made in respect of
the first financial statements delivered under Section 8.01 hereof, shall mean
the audited financial statements referred to in Section 7.02 hereof).
(b) The Company shall deliver to the Banks at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not change
the last day of its fiscal year from December 31 of each year, or the last days
of the first three fiscal quarters in each of its fiscal years from March 31,
June 30 and September 30 of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan refers to whether such Loan is
a Money Market Loan or a Syndicated Loan, each of which constitutes a Class.
The "Type"
14
<PAGE>
of a Loan refers to whether such Loan is a Base Rate Loan, a Eurodollar Loan, a
Set Rate Loan or a LIBOR Market Loan, each of which constitutes a Type. Loans
may be identified by both Class and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans. Each Bank severally agrees, on the terms and conditions of
this Agreement, to make loans to the Company in Dollars during the period from
and including the date hereof to but not including the Commitment Termination
Date in an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of the Commitment of such Bank as in effect from time to
time; provided that the aggregate unpaid principal amount of all Syndicated
Loans, together with the aggregate unpaid principal amount of all Money Market
Loans, at any one time outstanding shall not exceed the aggregate amount of the
Commitments at such time. Subject to the terms and conditions of this Agreement,
during such period the Company may borrow, repay and reborrow the amount of the
Commitments by means of Base Rate Loans and Eurodollar Loans; provided that
there may be no more than ten different Interest Periods for both Syndicated
Loans and Money Market Loans outstanding at the same time (for which purpose
Interest Periods described in different lettered clauses of the definition of
the term "Interest Period" shall be deemed to be different Interest Periods even
if they are coterminous).
2.02 Borrowings of Syndicated Loans. The Company shall give the Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing of
Syndicated Loans hereunder, each Bank shall make available the amount of the
Syndicated Loan or Loans to be made by it on such date to the Agent, at account
number NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal
Office, in immediately available funds, for account of the Company. The amount
so received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 Money Market Loans.
(a) In addition to borrowings of Syndicated Loans, at any time prior
to the Commitment Termination Date the Company may, as set forth in this Section
2.03, request the Banks to make offers to make Money Market Loans to the Company
in Dollars. The Banks may, but shall have no obligation to, make such offers and
the Company may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03. Money Market Loans may be LIBOR Market
Loans or Set Rate Loans (each a "Type" of Money Market Loan), provided that:
(i) there may be no more than ten different Interest Periods for both
Syndicated Loans and Money Market Loans outstanding at the same time (for which
purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous);
15
<PAGE>
(ii) the aggregate unpaid principal amount of all Money Market Loans,
together with the aggregate unpaid principal amount of all Syndicated Loans, at
any one time outstanding shall not exceed the aggregate amount of the
Commitments at such time.
(b) When the Company wishes to request offers to make Money Market
Loans, it shall give the Agent (which shall promptly notify the Banks) notice (a
"Money Market Quote Request") so as to be received no later than 11:00 a.m. New
York time on (x) the fourth Business Day prior to the date of borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Business Day next preceding
the date of borrowing proposed therein, in the case of a Set Rate Auction (or,
in any such case, such other time and date as the Company and the Agent, with
the consent of the Majority Banks, may agree). The Company may request offers to
make Money Market Loans for up to three different Interest Periods in a single
notice (for which purpose Interest Periods in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous); provided that the request for
each separate Interest Period shall be deemed to be a separate Money Market
Quote Request for a separate borrowing (a "Money Market Borrowing"). Each such
notice shall be substantially in the form of Exhibit D hereto and shall specify
as to each Money Market Borrowing:
(i) the proposed date of such borrowing, which shall be a Business
Day;
(ii) the aggregate amount of such Money Market Borrowing, which shall
be at least $10,000,000 (or a larger multiple of $1,000,000) but shall not
cause the limits specified in Section 2.03(a) hereof to be violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Money Market Quotes requested for a particular
Interest Period are seeking quotes for LIBOR Market Loans or Set Rate
Loans; and
(v) if the Money Market Quotes requested are seeking quotes for Set
Rate Loans, the date (which may be no earlier than the Business Day
immediately following the date on which the Money Market Quote Request is
given) on which the Money Market Quotes are to be submitted if it is before
the proposed date of borrowing (the date on which such Money Market Quotes
are to be submitted is called the "Quotation Date").
Except as otherwise provided in this Section 2.03(b), no Money Market Quote
Request shall be given within five Business Days (or such other number of days
as the Company and the Agent, with the consent of the Majority Banks, may agree)
of any other Money Market Quote Request.
(c) (i) Each Bank may submit one or more Money Market Quotes, each
containing an offer to make a Money Market Loan in response to any Money
Market Quote Request; provided that, if the Company's request under Section
2.03(b) hereof specified more than one Interest Period, such Bank may make
16
<PAGE>
a single submission containing one or more Money Market Quotes for each such
Interest Period. Each Money Market Quote must be submitted to the Agent not
later than (x) 2:00 p.m. New York time on the fourth Business Day prior to the
proposed date of borrowing, in the case of a LIBOR Auction or (y) 11:00 a.m. New
York time on the Quotation Date, in the case of a Set Rate Auction (or, in any
such case, such other time and date as the Company and the Agent, with the
consent of the Majority Banks, may agree); provided that any Money Market Quote
may be submitted by Chase (or its Applicable Lending Office) only if Chase (or
such Applicable Lending Office) notifies the Company of the terms of the offer
contained therein not later than (x) 1:00 p.m. New York time on the fourth
Business Day prior to the proposed date of borrowing, in the case of a LIBOR
Auction or (y) 10:45 a.m. New York time on the Quotation Date, in the case of a
Set Rate Auction. Subject to Sections 5.02(b), 5.03, 6.02 and 9 hereof, any
Money Market Quote so made shall be irrevocable except with the consent of the
Agent given on the instructions of the Company.
(ii) Each Money Market Quote shall be substantially in the form of
Exhibit E hereto and shall specify:
(A) the proposed date of borrowing and the Interest Period
therefor;
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount shall be at least
$5,000,000 (or a larger multiple of $1,000,000); provided that the
aggregate principal amount of all Money Market Loans for which a Bank
submits Money Market Quotes (x) may be greater or less than the
Commitment of such Bank but (y) may not exceed the principal amount of
the Money Market Borrowing for a particular Interest Period for which
offers were requested;
(C) in the case of a LIBOR Auction, the margin above or below
the applicable LIBO Rate (the "LIBO Margin") offered for each such
Money Market Loan, expressed as a percentage (rounded upwards, if
necessary, to the nearest 1/10,000th of 1%) to be added to or
subtracted from the applicable LIBO Rate;
(D) in the case of a Set Rate Auction, the rate of interest per
annum (rounded upwards, if necessary, to the nearest 1/10,000th of 1%)
offered for each such Money Market Loan (the "Set Rate"); and
(E) the identity of the quoting Bank.
Unless otherwise agreed by the Agent and the Company, no Money Market Quote
shall contain qualifying, conditional or similar language or propose terms
other than or in addition to those set forth in the applicable Money Market
Quote Request and, in particular, no Money Market Quote may be conditioned
upon acceptance by the Company of all (or some specified minimum) of the
principal amount of the Money Market Loan for which such Money Market Quote
is being made, provided that the submission by any Bank containing more
17
<PAGE>
than one Money Market Quote may be conditioned on the Company not
accepting offers contained in such submission that would result in such
Bank making Money Market Loans pursuant thereto in excess of a specified
aggregate amount (the "Money Market Loan Limit").
(d) The Agent shall (x) in the case of a Set Rate Auction, as
promptly as practicable after the Money Market Quote is submitted (but in any
event not later than 11:15 a.m. New York time on the Quotation Date) or (y) in
the case of a LIBOR Auction, by 4:00 p.m. New York time on the day a Money
Market Quote is submitted, notify the Company of the terms (i) of any Money
Market Quote submitted by a Bank that is in accordance with Section 2.03(c)
hereof and (ii) of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank with
respect to the same Money Market Quote Request. Any such subsequent Money Market
Quote shall be disregarded by the Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Agent's notice to the Company shall specify (A) the aggregate
principal amount of the Money Market Borrowing for which offers have been
received and (B) the respective principal amounts and LIBO Margins or Set Rates,
as the case may be, so offered by each Bank (identifying the Bank that made each
Money Market Quote).
(e) Not later than noon New York time on (x) the third Business Day
prior to the proposed date of borrowing, in the case of a LIBOR Auction or (y)
the Quotation Date, in the case of a Set Rate Auction (or, in any such case,
such other time and date as the Company and the Agent, with the consent of the
Majority Banks, may agree), the Company shall notify the Agent of its acceptance
or nonacceptance of the offers so notified to it pursuant to Section 2.03(d)
hereof (which notice shall specify the aggregate principal amount of offers from
each Bank for each Interest Period that are accepted, it being understood that
the failure of the Company to give such notice by such time shall constitute
nonacceptance) and the Agent shall promptly notify each affected Bank. The
notice from the Agent shall also specify the aggregate principal amount of
offers for each Interest Period that were accepted and the lowest and highest
LIBO Margins and Set Rates that were accepted for each Interest Period. The
Company may accept any Money Market Quote in whole or in part (provided that any
Money Market Quote accepted in part shall be at least $5,000,000 or a larger
multiple of $1,000,000); provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the aggregate principal amount of each Money Market Borrowing
shall be at least $10,000,000 (or a larger multiple of $1,000,000) but
shall not cause the limits specified in Section 2.03(a) hereof to be
violated;
(iii) acceptance of offers may, subject to clause (v) below, be
made only in ascending order of LIBO Margins or Set Rates, as the case may
be, in each case beginning with the lowest rate so offered;
(iv) the Company may not accept any offer where the
18
<PAGE>
Agent has advised the Company that such offer fails to comply with Section
2.03(c)(ii) hereof or otherwise fails to comply with the requirements of
this Agreement (including, without limitation, Section 2.03(a) hereof);
(v) the aggregate principal amount of each Money Market Borrowing
from any Bank may not exceed any applicable Money Market Loan Limit of such
Bank.
If offers are made by two or more Banks with the same LIBO Margins or Set Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Company among such Banks as nearly as
possible (in amounts of at least $5,000,000 or larger multiples of $1,000,000)
in proportion to the aggregate principal amount of such offers. Determinations
by the Company of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Bank whose offer to make any Money Market Loan has been
accepted in accordance with the terms and conditions of this Section 2.03 shall,
not later than 1:00 p.m. New York time on the date specified for the making of
such Loan, make the amount of such Loan available to the Agent at account number
NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal Office
in immediately available funds, for account of the Company. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company on such date by depositing the same,
in immediately available funds, in an account of the Company maintained with
Chase at the Principal Office designated by the Company.
(g) The amount of any Money Market Loan made by any Bank shall not
constitute a utilization of such Bank's Commitment.
(h) The Company shall pay to the Agent a fee of $3,000 each time the
Company gives a Money Market Quote Request to the Agent.
2.04 Changes of Commitments.
(a) The Commitments shall automatically terminate on the Commitment
Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) so long as no Syndicated Loans or Money Market Loans are outstanding, to
terminate the Commitments and (ii) to reduce the aggregate unused amount of the
Commitments (for which purpose use of the Commitments shall be deemed to include
the aggregate principal amount of all Money Market Loans); provided that (x) the
Company shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (y) each partial reduction shall be in an aggregate
amount at least equal to $10,000,000 (or a larger multiple of $1,000,000).
(c) The Commitments once terminated or reduced may not be reinstated.
19
<PAGE>
2.05 Facility Fee. The Company shall pay to the Agent for account of
each Bank a facility fee on the amount of such Bank's Commitment as then in
effect (whether or not utilized), for the period from and including the date of
this Agreement to but not including the earlier of the date such Commitment is
terminated and the Commitment Termination Date, at a rate per annum equal to (a)
0.1250% during any Level I Period, (b) 0.1875% during any Level II Period and
(c) 0.2500% during any Level III Period. Accrued facility fee shall be payable
on each Quarterly Date and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date. Any change in a facility fee by
reason of a change in the Standard & Poor's Rating or the Moody's Rating shall
become effective on the date of announcement or publication by the respective
rating agencies of a change in such rating or, in the absence of such
announcement or publication, on the effective date of such changed rating.
2.06 Lending Offices. The Loans of each Type made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office for Loans of
such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor the Agent shall be responsible for the failure of any other
Bank to make a Loan to be made by such other Bank, and no Bank shall have any
obligation to the Agent or any other Bank for the failure by such Bank to make
any Loan required to be made by such Bank. The amounts payable by the Company at
any time hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank or the Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.
2.08 Notes.
(a) The Syndicated Loans made by each Bank shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-1
hereto, dated the date hereof, payable to such Bank in a principal amount equal
to the amount of its Commitment as originally in effect and otherwise duly
completed.
(b) The Money Market Loans made by any Bank shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-2
hereto, dated the date hereof, payable to such Bank and otherwise duly
completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period of each Loan of each Class made by each Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, prior to any transfer of the Note evidencing the Loans of such
Class held by it, endorsed by such Bank on the schedule attached to such Note or
any continuation thereof; provided that the failure of such Bank to make any
such recordation or endorsement shall not affect the obligations of the Company
to make a payment when due of any amount owing hereunder or under such Note in
respect
20
<PAGE>
of the Loans to be evidenced by such Note.
(d) No Bank shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Bank's
Commitment, Loans and Notes pursuant to Section 11.06 hereof.
2.09 Optional Prepayments. Subject to Sections 4.04 and 5.05 hereof,
the Company shall have the right to prepay Loans at any time or from time to
time, provided that the Company shall give the Agent notice of each such
prepayment as provided in Section 4.05 hereof (and, upon the date specified in
any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder).
2.10 Extension of Commitment Termination Date. (a) The Company may,
by notice to the Agent (which shall promptly deliver a copy to each of the
Banks) not less than 60 days and not more than 90 days prior to the Commitment
Termination Date then in effect hereunder (the "Existing Commitment Termination
Date"), request that the Banks extend the Commitment Termination Date for an
additional 364 days from the Consent Date (as defined below). Each Bank, acting
in its sole discretion, shall, by notice to the Company and the Agent given on
the date (and, subject to the proviso below, only on the date) 30 days prior to
the Existing Commitment Termination Date (provided, if such date is not a
Business Day, then such notice shall be given on the next succeeding Business
Day)(the "Consent Date"), advise the Company whether or not such Bank agrees to
such extension; provided that each Bank that determines not to extend the
Commitment Termination Date (a "Non-extending Bank") shall notify the Agent
(which shall notify the Company) of such fact promptly after such determination
(but in any event no later than the Consent Date) and any Bank that does not
advise the Company on or before the Consent Date shall be deemed to be a
Non-extending Bank. The election of any Bank to agree to such extension shall
not obligate any other Bank to agree.
(b) The Company shall have the right on or before the Consent Date to
replace each Non-extending Bank with, and otherwise add to this Agreement, one
or more other banks (which may include any Bank, each prior to the Consent Date
an "Additional Commitment Bank") with the approval of the Agent (which approval
shall not be unreasonably withheld), each of which Additional Commitment Banks
shall have entered into an agreement in form and substance satisfactory to the
Company and the Agent pursuant to which such Additional Commitment Bank shall,
effective as of the Existing Commitment Termination Date, undertake a Commitment
(if any such Additional Commitment Bank is a Bank, its Commitment shall be in
addition to such Bank's Commitment hereunder on such date).
(c) If (and only if) at the close of business on the Consent Date
Banks holding Commitments that, together with the additional Commitments of the
Additional Commitment Banks that will become effective on the Existing
Commitment Termination Date, aggregate 100% of the aggregate amount of the
Commitments (not including the additional Commitments of the Additional
Commitment Banks) at the open of business on the Consent Date shall have agreed
to extend the Existing Commitment Termination Date, then, effective as of the
Existing Commitment Termination
21
<PAGE>
Date, the Existing Commitment Termination Date shall be extended to the date
falling 364 days after the Consent Date (provided, if such date is not a
Business Day, then such Commitment Termination Date as so extended shall be
the next preceding Business Day) and each Additional Commitment Bank shall
thereupon become a "Bank" for all purposes of this Agreement.
Notwithstanding the foregoing, the extension of the Existing Commitment
Termination Date shall not be effective with respect to any Bank unless:
(i) no Default shall have occurred and be continuingon the date of the
notice requesting such extension, on the Consent Date or on the Existing
Commitment Termination Date;
(ii) each of the representations and warranties of the Company in Section 7
hereof shall be true and correct in all material respects on and as of the
date of the notice requesting such extension, the Consent Date and the
Existing Commitment Termination Date with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date); and
(iii) each Non-extending Bank shall have been paid in full by the Company all
amounts owing to such Bank hereunder on or before the Existing Commitment
Termination Date.
Even if the Existing Commitment Termination Date is extended as aforesaid, the
Commitment of each Non-extending Bank shall terminate on the Existing
Commitment Termination Date.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Company hereby promises to pay to the Agent for
account of each Bank the principal of each Loan made by such Bank, and each
Loan shall mature, on the last day of the Interest Period therefor.
3.02 Interest. The Company hereby promises to pay to the Agent for account
of each Bank interest on the unpaid principal amount of each Loan made by such
Bank for the period from and including the date of such Loan to but excluding
the date such Loan shall be paid in full, at the following rates per annum:
(a) if such Loan is a Base Rate Loan, the Base Rate (as in effect from time
to time) plus the Applicable Margin;
(b) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan for
the Interest Period therefor plus the Applicable Margin;
(c) if such Loan is a LIBOR Market Loan, the LIBO Rate for such Loan for the
Interest Period therefor plus (or minus) the LIBO Margin quoted by the Bank
making such Loan in accordance with Section 2.03 hereof; and
(d) if such Loan is a Set Rate Loan, the Set Rate for such Loan for the
Interest Period therefor quoted by the Bank making such Loan in accordance
with Section 2.03
22
<PAGE>
hereof.
Notwithstanding the foregoing, the Company hereby promises to pay to
the Agent for account of each Bank interest at the applicable Post-Default Rate
on any principal of any Loan made by such Bank and on any other amount payable
by the Company hereunder or under the Notes held by such Bank to or for account
of such Bank, that shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) on the last day
of the Interest Period therefor and, if such Interest Period is longer than 90
days (in the case of a Set Rate Loan) or three months (in the case of a
Eurodollar Loan or a LIBOR Market Loan), at 90-day or three-month intervals,
respectively, following the first day of such Interest Period, and (ii) in the
case of any Loan, upon the payment or prepayment thereof (but only on the
principal amount so paid or prepaid), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand and interest on
any Fixed Rate Loan that is converted into a Base Rate Loan pursuant to Section
5.04 hereof shall be payable on the date of conversion (but only on the
principal amount so converted). Promptly after the determination of any interest
rate provided for herein or any change therein, the Agent shall give notice
thereof to the Banks to which such interest is payable and to the Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Company under this
Agreement and the Notes shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Agent at account
number NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal
Office, not later than 1:00 p.m. New York time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day), provided that if
a new Loan is to be made by any Bank on a date the Company is to repay any
principal of an outstanding Loan of such Bank, such Bank shall apply the
proceeds of such new Loan to the payment of the principal to be repaid and only
an amount equal to the difference between the principal to be borrowed and the
principal to be repaid shall be made available by such Bank to the Agent as
provided in Section 2.02 hereof or paid by the Company to the Agent pursuant to
this Section 4.01, as the case may be.
(b) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Bank, specify to the Agent (which shall
so notify the intended recipient(s) thereof) the Loans or other amounts payable
by the Company hereunder to which such payment is to be applied (and in the
event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Agent shall distribute such payment to the Banks
for application in such manner as the Majority Banks, subject to Section 4.02
hereof, may determine to be appropriate).
23
<PAGE>
(c) Each payment received by the Agent under this Agreement or any
Note for account of any Bank shall be paid by the Agent promptly to such Bank,
in immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan or other obligation in respect of which such payment is
made.
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Syndicated Loans of a particular Type from the
Banks under Section 2.01 hereof shall be made from the Banks, and each
termination or reduction of the amount of the Commitments under Section 2.04
hereof shall be applied to the respective Commitments of the Banks, pro rata
according to the amounts of their respective Commitments; (b) the making of
Loans of a particular Type (other than conversions provided for by Section 5.04
hereof) shall be made pro rata among the Banks according to the amounts of their
respective Commitments and the then current Interest Period for each Eurodollar
Loan shall be coterminous; (c) each payment or prepayment of principal of
Syndicated Loans by the Company shall be made for account of the Banks pro rata
in accordance with the respective unpaid principal amounts of the Syndicated
Loans held by them, provided that if immediately prior to giving effect to any
such payment in respect of any Syndicated Loans the outstanding principal amount
of the Syndicated Loans shall not be held by the Banks pro rata in accordance
with their respective Commitments in effect at the time such Loans were made (by
reason of a failure of a Bank to make a Loan hereunder in the circumstances
described in the last paragraph of Section 11.04 hereof), then such payment
shall be applied to the Syndicated Loans in such manner as shall result, as
nearly as is practicable, in the outstanding principal amount of the Syndicated
Loans being held by the Banks pro rata in accordance with their respective
Commitments; and (d) each payment of interest on Syndicated Loans by the Company
shall be made for account of the Banks pro rata in accordance with the amounts
of interest on such Loans then due and payable to the respective Banks.
4.03 Computations. Interest on Money Market Loans and Eurodollar
Loans, and the facility fee payable under Section 2.05 hereof, shall be computed
on the basis of a year of 360 days and actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable and
interest on Base Rate Loans shall be computed on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each day that the Base Rate is calculated by
reference to the Federal Funds Rate, interest on Base Rate Loans shall be
computed on the basis of a year of 360 days and actual days elapsed.
4.04 Minimum Amounts. Each borrowing shall be in an aggregate amount
at least equal to $10,000,000, and each partial prepayment of principal of Loans
shall be in an aggregate amount at least equal to $5,000,000, or in each case a
larger multiple of $1,000,000 (borrowings or prepayments of Loans of different
24
<PAGE>
Types or, in the case of Eurodollar Loans, having different Interest Periods at
the same time hereunder to be deemed separate borrowings and prepayments for
purposes of the foregoing, one for each Type or Interest Period), provided that
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $10,000,000 or a larger multiple
of $1,000,000 and, if any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during such
period.
4.05 Certain Notices. Except as otherwise provided in Section 2.03
hereof with respect to Money Market Loans, notices by the Company to the Agent
of terminations or reductions of the Commitments and of borrowings and optional
prepayments of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the Agent not
later than 10:00 a.m. New York time on the number of Business Days prior to the
date of the relevant termination, reduction, borrowing or prepayment or the
first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
Termination or reduction
of Commitments 3
Borrowing or prepayment of
Base Rate Loans same day
Borrowing or prepayment of,
or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
optional prepayment shall specify the Loans to be borrowed or prepaid and the
amount (subject to Section 4.04 hereof) and Type of each Loan to be borrowed or
prepaid and the date of borrowing or optional prepayment (which shall be a
Business Day). The Agent shall promptly notify the Banks of the contents of
each such notice.
4.06 Non-Receipt of Funds by the Agent. Unless the Agent shall have
been notified by a Bank or the Company (the "Payor") prior to the date on which
the Payor is to make payment to the Agent of (in the case of a Bank) the
proceeds of a Loan to be made by such Bank hereunder or (in the case of the
Company) a payment to the Agent for account of one or more of the Banks
hereunder (such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was so
made available by the Agent until the date the
25
<PAGE>
Agent recovers such amount at a rate per annum equal to the Federal Funds Rate
for such day and, if such recipient(s) shall fail promptly to make such payment,
the Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Agent within three
Business Days of the Advance Date, then, retroactively to the Advance Date, the
Payor and the recipient(s) shall each be obligated to pay interest on the
Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Banks, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Agent, without
limiting the obligation of the Company under Section 3.02 hereof to pay
interest to such recipient(s) at the Post-Default Rate in respect of the
Required Payment) and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Banks to the Company, the Payor and the Company shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).
4.07 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, upon the occurrence of any Event of Default
and so long as the same shall be continuing, at its option, to offset balances
held by it for account of the Company at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Bank's
Loans or any other amount payable to such Bank hereunder, that is not paid when
due (regardless of whether such balances are then due to the Company), in which
case it shall promptly notify the Company and the Agent thereof, provided that
such Bank's failure to give such notice shall not affect the validity thereof.
(b) If any Bank shall obtain from the Company payment of any
principal of or interest on any Loan of any Class owing to it or payment of any
other amount under this Agreement through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise (other than from the
Agent as provided herein), and, as a result of such payment, such Bank shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or such other amounts then due hereunder by the Company to such
Bank than the percentage received by any other Bank, it shall promptly purchase
from such other Banks participations in (or, if and to the extent specified by
such Bank, direct interests in) the Loans of such Class or such other amounts,
respectively, owing to such other Banks (or in interest due thereon, as the case
may be) in such amounts, and
26
<PAGE>
make such other adjustments from time to time as shall be equitable, to the end
that all the Banks shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Bank in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal of and/or
interest on the Loans of such Class or such other amounts, respectively, owing
to each of the Banks, provided that if at the time of such payment the
outstanding principal amount of the Syndicated Loans shall not be held by the
Banks pro rata in accordance with their respective Commitments in effect at the
time such Loans were made (by reason of a failure of a Bank to make a Loan
hereunder in the circumstances described in the last paragraph of Section 11.04
hereof), then such purchases of participations and/or direct interests shall be
made in such manner as will result, as nearly as is practicable, in the
outstanding principal amount of the Syndicated Loans being held by the Banks pro
rata according to the amounts of such Commitments. To such end all the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) The Company agrees that any Bank so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct holder of Loans or other amounts (as the case may
be) owing to such Bank in the amount of such participation.
(d) Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy, insolvency or
other similar law, any Bank receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Banks entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate such Bank
for any costs that such Bank determines are attributable to its making or
maintaining of any Fixed Rate Loans or its Commitment, or any reduction in any
amount receivable by such Bank hereunder in respect of any of such Loans or its
Commitment (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any Regulatory Change that:
(i) shall subject any Bank (or its Applicable Lending Office for any
of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Notes in respect of
any of such Loans (excluding changes in the rate of tax on the
overall net income of such Bank or of such Applicable Lending Office
by
27
<PAGE>
the jurisdiction under whose laws such Bank is organized or
incorporated or in which such Bank has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate or LIBO Rate, as the case may
be, for such Loan) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank or
its Commitment; or
(iii) imposes any other condition affecting this Agreement or its
Notes or its Commitment.
If any Bank requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Bank (with a copy to the Agent), suspend the
obligation of such Bank thereafter to make Eurodollar Loans until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable), provided that such
suspension shall not affect the right of such Bank to receive the compensation
so requested.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of such Bank that includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank that includes Eurodollar Loans
or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets that it may hold, then, if such Bank so elects by notice
to the Company (with a copy to the Agent), the obligation of such Bank to make
Eurodollar Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section 5.04 hereof
shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Bank from time to time on request such amounts as such Bank may determine to be
necessary to compensate such Bank (or, without duplication, the bank holding
company of which such Bank is a subsidiary) for any costs that it determines are
attributable to the maintenance by such Bank (or any Applicable Lending Office
or such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not having the force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord
(including, without limitation, the Final Risk-Based Capital Guidelines of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 208, Appendix
A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital
28
<PAGE>
Guidelines of the Office of the Comptroller of the Currency (12 C.F.R. Part 3,
Appendix A)), of capital in respect of its Commitment or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Bank (or any Applicable Lending
Office or such bank holding company) to a level below that which such Bank (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c), "Basle Accord" shall mean the proposals for
risk-based capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement thereof.
(d) Each Bank shall notify the Company of any event occurring after
the date of this Agreement entitling such Bank to compensation under paragraph
(a) or (c) of this Section 5.01 as promptly as practicable, but in any event
within 45 days, after such Bank obtains actual knowledge thereof; provided that
(i) if any Bank fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Bank shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Bank does
give such notice and (ii) each Bank will designate a different Applicable
Lending Office for the Loans of such Bank affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Bank, be disadvantageous to such Bank,
except that such Bank shall have no obligation to designate an Applicable
Lending Office located in the United States of America. Each Bank will furnish
to the Company a certificate setting forth the basis and amount of each request
by such Bank for compensation under paragraph (a) or (c) of this Section 5.01.
Determinations and allocations by any Bank for purposes of this Section 5.01 of
the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this
Section 5.01, or of the effect of capital maintained pursuant to paragraph (c)
of this Section 5.01, on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Bank under this Section 5.01,
shall be conclusive, provided that such determinations and allocations are made
on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Fixed Base Rate for
any Interest Period:
(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred
to in the definition of "Fixed Base Rate" in Section 1.01 hereof are
not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for either
Type of Fixed Rate Loans as provided herein; or
(b) the Majority Banks determine (or any Bank that has
29
<PAGE>
outstanding a Money Market Quote with respect to a LIBOR Market Loan
determines), which determination shall be conclusive, and notify (or
notifies, as the case may be) the Agent that the relevant rates of
interest referred to in the definition of "Fixed Base Rate" in Section
1.01 hereof upon the basis of which the rate of interest for
Eurodollar Loans (or LIBOR Market Loans, as the case may be) for such
Interest Period is to be determined are not likely adequately to cover
the cost to such Banks (or to such quoting Bank) of making or
maintaining Eurodollar Loans for such Interest Period;
then the Agent shall give the Company and each Bank prompt notice thereof and,
so long as such condition remains in effect, the Banks (or such quoting Bank)
shall be under no obligation to make additional Eurodollar Loans.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans or
LIBOR Market Loans hereunder, then such Bank shall promptly notify the Company
thereof (with a copy to the Agent) and such Bank's obligation to make Eurodollar
Loans shall be suspended until such time as such Bank may again make and
maintain Eurodollar Loans (in which case the provisions of Section 5.04 hereof
shall be applicable), and such Bank shall no longer be obligated to make any
LIBOR Market Loan that it has offered to make.
5.04 Treatment of Affected Loans. If the obligation of any Bank to
make a particular Type of Fixed Rate Loans shall be suspended pursuant to
Section 5.01 or 5.03 hereof, and, unless and until such Bank gives notice as
provided below that the circumstances specified in Section 5.01 or 5.03 hereof
that gave rise to such conversion no longer exist, all Loans that would
otherwise be made by such Bank as Eurodollar Loans shall be made instead as Base
Rate Loans.
5.05 Compensation. The Company shall pay to the Agent for account of
each Bank, upon the request of such Bank through the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost or expense that such Bank determines is
attributable to:
(a) any payment, mandatory or optional prepayment of a Fixed Rate
Loan or a Set Rate Loan made by such Bank for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section 9
hereof) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Fixed Rate Loan or a Set Rate
Loan (with respect to which, in the case of a Money Market Loan, the
Company has accepted a Money Market Quote) from such Bank on the date for
such borrowing specified in the relevant notice of borrowing given pursuant
to Section 2.02 or 2.03(b) hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any,
30
<PAGE>
of (i) the amount of interest that otherwise would have accrued on the principal
amount so paid, prepaid or not borrowed for the period from the date of such
payment, prepayment or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Bank would have bid in the London interbank market (if such Loan is
a Eurodollar Loan or a LIBOR Market Loan) or the United States secondary
certificate of deposit market (if such Loan is a Set Rate Loan) for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Bank), plus, in each case, the Applicable Margin reflected in the rate of
interest referred to in the foregoing clause (i).
5.06 U.S. Taxes.
(a) The Company agrees to pay to each Bank that is not a U.S. Person
such additional amounts as are necessary in order that the net payment of any
amount due to such non-U.S. Person hereunder after deduction for or withholding
in respect of any U.S. Taxes imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less
than the amount stated herein to be then due and payable, provided that the
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Bank hereunder unless such Bank is, on the
date hereof (or on the date it becomes a Bank as provided in Section
11.06(b) hereof) and on the date of any change in the Applicable Lending
Office of such Bank, either entitled to submit a Form 1001 (relating to
such Bank and entitling it to a complete exemption from withholding on all
interest to be received by it hereunder in respect of the Loans) or Form
4224 (relating to all interest to be received by such Bank hereunder in
respect of the Loans), or
(ii) to any U.S. Tax imposed solely by reason of the failure by such
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
resident of the United States of America, a
31
<PAGE>
corporation, partnership or other entity created or organized in or under any
laws of the United States of America, or any estate or trust that is subject to
Federal income taxation regardless of the source of its income and (z) "U.S.
Taxes" shall mean any present or future tax, assessment or other charge or levy
imposed by or on behalf of the United States of America or any taxing authority
thereof or therein.
(b) Within 30 days after paying any amount to the Agent or any Bank
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Company shall deliver
to the Agent for delivery to such non-U.S. Person evidence satisfactory to such
Person of such deduction, withholding or payment (as the case may be).
Section 6. Conditions Precedent.
6.01 Initial Loan. The obligation of any Bank to make its initial
Loan hereunder is subject to prior or simultaneous satisfaction of the condition
precedent that the Agent shall have received the following documents (with
sufficient copies for each Bank), each of which shall be satisfactory to the
Agent (and to the extent specified below, to each Bank) in form and substance:
(a) Corporate Documents. The following documents, each certified as
indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company certified as of a recent date by the Secretary of State of the
State of Delaware, and a certificate from such Secretary of State
dated as of a recent date as to the good standing of and charter
documents filed by the Company;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company (A) that attached thereto is a true and complete copy of
the by-laws of the Company as amended and in effect at all times from
the date on which the resolutions referred to in clause (B) were
adopted to and including the date of such certificate, (B) that
attached thereto is a true and complete copy of resolutions duly
adopted by the board of directors of the Company authorizing the
execution, delivery and performance of this Agreement and the Notes
and the Loans hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C)
that the charter of the Company has not been amended since the date of
the certification thereto furnished pursuant to clause (i) above and
(D) as to the incumbency and specimen signature of each officer of the
Company executing this Agreement and the Notes and each other document
to be delivered by the Company from time to time in connection
therewith (and the Agent and each Bank may conclusively rely on such
certificate until it receives notice in writing from the Company to
the contrary); and
(iii) a certificate of another officer of the
32
<PAGE>
Company as to the incumbency and specimen signature of the Secretary
or Assistant Secretary, as the case may be, of the Company.
(b) Opinion of Counsel to the Company. Opinions of Heller, Ehrman,
White & McAuliffe and of the Vice President, Legal of the Company
substantially in the forms of Exhibits B-1 and B-2 hereto, respectively,
and covering such other matters as the Agent or any Bank may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinions to the Banks and the Agent).
(c) Opinion of Special New York Counsel to the Agent. An opinion of
Milbank, Tweed, Hadley & McCloy, special New York counsel to the Agent,
substantially in the form of Exhibit C hereto (and the Agent hereby
instructs such counsel to deliver such opinion to the Banks).
(d) Notes. The Notes, duly completed and executed.
(e) Commercial Paper Program. Copies of the dealer agreement(s)
relating to the Company's commercial paper program and evidence that
Moody's and Standard & Poor's have issued ratings for the Company's
commercial paper.
The Agent shall promptly notify the Company and the Banks when the conditions
precedent set forth in this Section 6.01 have been satisfied.
6.02 Initial and Subsequent Loans. The obligation of any Bank to make
any Loan (including any Money Market Loan and such Bank's initial Syndicated
Loan) to the Company upon the occasion of each borrowing hereunder is subject to
the further conditions precedent that, both immediately prior to the making of
such Loan and also after giving effect thereto and to the intended use thereof:
(a) no Event of Default (and, if such borrowing will increase the outstanding
aggregate principal amount of the Loans of any Bank hereunder, no Default) shall
have occurred and be continuing; and (b) the representations and warranties made
by the Company in Section 7 hereof (other than, if such borrowing will not
increase the outstanding aggregate principal amount of the Loans of any Bank
hereunder, the last sentence of Section 7.02 hereof and Section 7.03 hereof)
shall be true and complete in all material respects on and as of the date of the
making of such Loan with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date). Each notice of
borrowing by the Company hereunder shall constitute a certification by the
Company to the effect set forth in the preceding sentence (both as of the date
of such notice and, unless the Company otherwise notifies the Agent prior to the
date of such borrowing, as of the date of such borrowing).
Section 7. Representations and Warranties. The Company represents
and warrants to the Agent and the Banks that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all
33
<PAGE>
requisite corporate or other power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (c) is qualified
to do business and is in good standing in all jurisdictions in which the nature
of the business conducted by it makes such qualification necessary and where
failure so to qualify could (either individually or in the aggregate) have a
Material Adverse Effect.
7.02 Financial Condition. The Company has heretofore furnished to each
of the Banks the consolidated balance sheet of the Company and its Subsidiaries
as of December 31, 1992 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of Ernst & Young, and
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of June 30, 1993 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
six-month period ended on such date. All such financial statements are complete
and correct and present fairly, in all material respects, the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of operations and cash flows for the fiscal year and
six-month period ended on said dates (subject, in the case of such financial
statements as of June 30, 1993, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles and practices applied
on a consistent basis. None of the Company nor any of its Subsidiaries has on
the date hereof any material contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in said balance sheets as at said dates. Since June 30, 1993, there has been
no material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Company and its Subsidiaries from
that set forth in said financial statements as at said date.
7.03 Litigation. Except as disclosed to the Banks in writing prior to
the date hereof, there are no legal or arbitral proceedings, or any proceedings
by or before any governmental or regulatory authority or agency, now pending or
(to the knowledge of the Company) threatened against the Company or any of its
Subsidiaries that, if adversely determined could (either individually or in the
aggregate) have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
and the Notes, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency applicable to the
Company, or any agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument.
7.05 Action. The Company has all necessary corporate
34
<PAGE>
power, authority and legal right to execute, deliver and perform its obligations
under this Agreement and the Notes; the execution, delivery and performance by
the Company of this Agreement and the Notes have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes
when executed and delivered for value will constitute, its legal, valid and
binding obligation, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of this Agreement or the Notes or for the legality,
validity or enforceability hereof.
7.07 Use of Credit. None of the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of the Loans
hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Banks under Section 8.01(g)
hereof.
7.09 Taxes. The Company and its Subsidiaries are members of an
affiliated group of corporations filing consolidated returns for Federal income
tax purposes, of which the Company is the "common parent" (within the meaning of
Section 1504 of the Code) of such group. The Company and its Subsidiaries have
filed all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested to
give a waiver of the statute of limitations relating to the payment of Federal,
state, local and foreign taxes or other impositions.
7.10 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the
35
<PAGE>
Company nor any of its Subsidiaries is a "holding company", or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list, as of
the date of this Agreement, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness of, or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries the principal or face amount of which equals or exceeds (or
may equal or exceed) $20,000,000, and the principal or face amount outstanding
or that may become outstanding under each such arrangement is correctly
described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as of
the date of this Agreement, of each Lien securing Indebtedness of any Person the
principal or face amount of which equals or exceeds (or may equal or exceed)
$20,000,000 and covering any Property of the Company or any of its Subsidiaries,
and the aggregate Indebtedness secured (or that may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in Part B
of said Schedule I.
7.13 Environmental Matters. Each of the Company and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect.
Each of such permits, licenses and authorizations is in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not (either individually or in the aggregate)
have a Material Adverse Effect.
In addition, except as disclosed to the Banks in writing prior to the
date hereof:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and to the Company's knowledge no investigation
or review is pending or threatened by any governmental or other entity with
respect to any alleged failure by the Company or any of its Subsidiaries to
have any environmental, health or safety permit, license or other
authorization required under any Environmental Law in connection with the
conduct of the business of the Company or any of its Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any
36
<PAGE>
Hazardous Materials generated by the Company or any of its Subsidiaries,
the impact of which, individually or in the aggregate, would have a
Material Adverse Effect.
(b) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or for, or that are in the possession of,
the Company or any of its Subsidiaries in relation to facts, circumstances
or conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in a Material Adverse Effect have been made available to the Banks.
7.14 Subsidiaries. Set forth in Schedule II hereto is a complete and
correct list, as of the date hereof, of all of the Subsidiaries of the Company,
together with, for each such Subsidiary, (i) the jurisdiction of organization of
such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary
and (iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Schedule II hereto, (x) each of the Company
and its Subsidiaries owns, free and clear of Liens, and has the unencumbered
right to vote, all outstanding ownership interests in each Person shown to be
held by it in Schedule II hereto, (y) all of the issued and outstanding capital
stock of each such Person organized as a corporation is validly issued, fully
paid and nonassessable and (z) there are no outstanding Equity Rights with
respect to such Person.
7.15 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Agent or any Bank in connection with the
negotiation, preparation or delivery of this Agreement or included herein or
delivered pursuant hereto, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by the Company and its Subsidiaries to the Agent and the Banks in
connection with this Agreement and the transactions contemplated hereby will be
true, complete and accurate in every material respect on the date as of which
such information is stated or certified. There is no fact known to the Company
that could have a Material Adverse Effect that has not been disclosed herein or
in a report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Banks for use in connection with the transactions
contemplated hereby.
7.16 Subordinated Debentures. The Company has given notice of
redemption for all of the Subordinated Debentures effective for redemption on
November 15, 1993.
Section 8. Covenants of the Company. The Company covenants and
agrees with the Banks and the Agent that, so long as any Commitment or Loan is
outstanding and until payment in full of all amounts payable by the Company
hereunder:
8.01 Financial Statements, Etc. The Company shall
deliver to each of the Banks:
37
<PAGE>
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such period,
setting forth in each case in comparative form the corresponding
consolidated figures for the corresponding periods in the preceding fiscal
year, and the related consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period, setting forth in comparative
form the corresponding consolidated figures for the last day of the
immediately preceding fiscal year, accompanied by a certificate of a senior
financial officer of the Company, which certificate shall state that said
consolidated financial statements present fairly, in all material respects,
the consolidated financial condition and results of operations and cash
flows of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Company, consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for such fiscal year and the related consolidated balance
sheet of the Company and its Subsidiaries as at the end of such fiscal
year, setting forth in each case in comparative form the corresponding
consolidated figures for the preceding fiscal year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that said consolidated
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations and cash flows
of the Company and its Subsidiaries as at the end of, and for, such fiscal
year in accordance with generally accepted accounting principles, and a
certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default, insofar as it involves accounting
matters;
(c) promptly upon their becoming publicly available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally or to holders of Subordinated Indebtedness generally,
copies of all financial statements, reports and proxy statements so mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a senior financial officer of the Company
setting forth details respecting such event or
38
<PAGE>
condition and the action, if any, that the Company or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by the Company or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(f) promptly after the Company knows or has reason to believe
that any Default has occurred, a notice of such Default describing the
same in reasonable detail and,
39
<PAGE>
together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken or proposes to take
with respect thereto; and
(g) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Bank or the Agent may reasonably request.
The Company will furnish to each Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken or proposes to take with respect thereto) and (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 8.08, 8.09 and 8.10 hereof as of the end
of the respective quarterly fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to each Bank notice
of all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency (other than normal course
proceedings before the Food and Drug Administration) affecting the Company or
any of its Subsidiaries, except proceedings that, if adversely determined, would
not (either individually or in the aggregate) have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company will give to each
Bank notice of the assertion of any Environmental Claim by any Person against,
or with respect to the activities of, the Company or any of its Subsidiaries and
notice of any alleged violation of or non-compliance with any Environmental Laws
or any permits, licenses or authorizations, other than any Environmental Claim
or alleged violation that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.
8.03 Existence, Etc. The Company will, and will cause each of its
Material Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and
40
<PAGE>
against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Bank or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by such
Bank or the Agent (as the case may be), for the sole purpose of monitoring
the Company's compliance with its obligations hereunder.
8.04 Insurance. The Company will, and will cause each of its
Material Subsidiaries to, maintain insurance with financially sound and
reputable insurance companies, and with respect to Property and risks of a
character usually maintained by corporations of similar size engaged in the same
or similar business similarly situated, against loss, damage and liability of
the kinds and in the amounts customarily maintained by such corporations,
subject to reasonable deductibles and other self insurance as the Company may
from time to time maintain as a part of its overall insurance program.
8.05 Prohibition of Fundamental Changes. The Company will not, nor
will it permit any of its Material Subsidiaries to, enter into any transaction
of merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). The Company will not, nor
will it permit any of its Material Subsidiaries to, Dispose of, in one
transaction or a series of transactions, any Property that represents any
substantial part of the Property of the Company and its Subsidiaries taken as a
whole (for which purpose, the Disposition of any part of the stock of any such
Subsidiary shall be deemed to be the Disposition of a corresponding part of the
Property of such Subsidiary), whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests, but
excluding (i) obsolete or worn out Property no longer used or useful in its
business and (ii) Property Disposed of in the ordinary course of business and on
ordinary business terms). Notwithstanding the foregoing provisions of this
Section 8.05:
(a) any Subsidiary of Company may be merged or consolidated with or
into: (i) the Company if the Company shall be the continuing or surviving
corporation or (ii) any other such Subsidiary; provided that (x) if any
such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation;
(b) the Company or any Subsidiary of the Company may merge or
consolidate with any other Person if (i) in the case of a merger or
consolidation of the Company, the Company is the surviving corporation
and, in any other case,
41
<PAGE>
the surviving corporation is a Wholly Owned Subsidiary of the Company and
(ii) after giving effect thereto no Default would exist hereunder; and
(c) any Subsidiary of the Company may Dispose of any or all of its
Property (upon voluntary liquidation or otherwise) to the Company or a
Wholly Owned Subsidiary of the Company.
8.06 Limitation on Liens. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;
(b) Liens imposed by any governmental authority for taxes,
assessments or other charges or claims not yet due or that are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in
good faith and by appropriate proceedings and Liens securing judgments but
only to the extent for an amount and for a period not resulting in an Event
of Default under Section 9(h) hereof;
(d) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(g) Liens on Property of any corporation that becomes a Subsidiary of
the Company after the date of this Agreement, provided that such Liens are
in existence at the time such corporation becomes a Subsidiary of the
Company and were not created in anticipation thereof;
(h) Liens upon real and/or tangible personal Property acquired after
the date hereof (by purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each
42
<PAGE>
of which Liens either (A) existed on such Property before the time of its
acquisition and was not created in anticipation thereof or (B) was created
solely for the purpose of securing Indebtedness representing, or incurred
within six months of such acquisition (by purchase, construction or
otherwise) to finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that (i) no such Lien shall extend
to or cover any Property of the Company or such Subsidiary other than the
Property so acquired and improvements thereon and (ii) the principal amount
of Indebtedness secured by any such Lien shall at no time exceed 80% of the
fair market value (as determined in good faith by a senior financial
officer of the Company) of such Property at the time it was acquired (by
purchase, construction or otherwise);
(i) Liens under leases (including, without limitation, leases
creating Capital Lease Obligations) on the leased Property in favor of the
lessor;
(j) additional Liens upon real and/or personal Property created after
the date hereof, provided that the aggregate Indebtedness secured thereby
and incurred on and after the date hereof shall not exceed $20,000,000 in
the aggregate at any one time outstanding; and
(k) to the extent not included above, any extension, renewal,
refinancing or replacement of any Lien permitted above that does not
increase (x) the Indebtedness secured thereby or (y) the Property
encumbered thereby.
8.07 Indebtedness. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Banks hereunder and under the Long-Term
Credit Agreement and Indebtedness evidenced by the Company's commercial
paper, provided that the aggregate amount of the Indebtedness permitted by
this clause (a) shall not exceed $250,000,000 at any one time outstanding;
(b) Indebtedness outstanding on the date hereof and listed in Part A
of Schedule I hereto (and any extension, renewal, refinancing or
replacement that does not increase the amount thereof);
(c) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company;
(d) the Company may create, incur or issue Subordinated Indebtedness
so long as, if such Subordinated Indebtedness had been outstanding during
the period of four consecutive fiscal quarters of the Company ending on or
most recently ended prior to the date of such creation, incurrence or
issuance, the Company would have been in compliance with Section 8.09
hereof; and
(e) additional Indebtedness of the Company and its Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Sections 8.06(h), 8.06(j) or
8.06(k) hereof) up to but not exceeding $50,000,000 at any one time
43
<PAGE>
outstanding.
8.08 Consolidated Tangible Net Worth. The Company will not permit
its Consolidated Tangible Net Worth at any time to be less than $200,000,000
plus the sum of 50% of the consolidated net income of the Company and its
Subsidiaries for each fiscal quarter of the Company starting with the fiscal
quarter ending on September 30, 1993 to and including the fiscal quarter ending
on or most recently ended prior to such time (for which purpose, a consolidated
net loss shall be deemed to be consolidated net income of zero) plus 50% of the
Net Available Proceeds of Equity Issuances after the date hereof.
8.09 Interest Coverage Ratio. The Company will not permit its
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Company ending on or before September 30, 1994 to be less than 3.75 to 1 and
ending at any time thereafter to be less than 4.0 to 1.
8.10 Leverage Ratio. The Company will not permit its Leverage Ratio
at any time on or before September 30, 1994 to exceed 0.55 to 1, and at any time
thereafter to exceed 0.50 to 1.
8.11 Lines of Business. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than the business of researching, developing, marketing
and manufacturing pharmaceutical products.
8.12 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate in excess of
$5,000,000 at any one time outstanding; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate
with or purchase or acquire Property from an Affiliate; or (d) enter into any
other transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, Guarantees and assumptions of obligations of an
Affiliate); provided that (x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and (y)
the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an Affiliate)
providing for the leasing of Property, the rendering or receipt of services or
the purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable transaction
with a Person not an Affiliate.
8.13 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely for working capital purposes, including (without limitation)
commercial paper back-up (in compliance with all applicable legal and regulatory
requirements); provided that neither the Agent nor any Bank shall have any
responsibility as to the use of any of such proceeds.
44
<PAGE>
Section 9. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment when due of any interest
on any Loan, any fee or any other amount (other than principal of any Loan)
payable by it hereunder and such default shall continue for three Business
Days; or the Company shall default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal
of any Loan; or
(b) The Company or any of its Subsidiaries shall default beyond any
applicable grace period in the payment when due of any principal of or
interest on any of its other Indebtedness aggregating $20,000,000 or more,
or in the payment when due of any amount under any Interest Rate Protection
Agreement if the effect of such default would entitle the counterparty or
counterparties to termination payments exceeding $20,000,000; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness or any event specified in any such
Interest Rate Protection Agreement shall occur if the effect of such event
is to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to
become due, or to be prepaid in full (whether by redemption, purchase,
offer to purchase or otherwise), prior to its stated maturity or to have
the interest rate thereon reset to a level so that securities evidencing
such Indebtedness trade at a level specified in relation to the par value
thereof or, in the case of an Interest Rate Protection Agreement, to permit
the payments owing under such Interest Rate Protection Agreement to be
liquidated; or
(c) Any representation, warranty or certification made or deemed made
herein (or in any modification or supplement hereto) by the Company, or any
certificate furnished to any Bank or the Agent pursuant to the provisions
hereof, shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(f) or 8.05 through 8.13 (inclusive)
hereof; or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of thirty or more days after notice thereof to the Company by
the Agent or any Bank (through the Agent); or
(e) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case
45
<PAGE>
under the Bankruptcy Code, (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, custodian, trustee,
examiner, liquidator or the like of the Company or such Subsidiary or of
all or any substantial part of its Property, or (iii) similar relief in
respect of the Company or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against the Company or
such Subsidiary shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $20,000,000 in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company or any of its Subsidiaries and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 30 days from the date of entry
thereof and the Company or the relevant Subsidiary shall not, within said
period of 30 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the
opinion of the Majority Banks shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) that, in the determination of the Majority Banks, would
(either individually or in the aggregate) have a Material Adverse Effect;
or
(j) There shall have been asserted against the Company or any of its
Subsidiaries an Environmental Claim that, in the judgment of the Majority
Banks is reasonably likely to be determined adversely to the Company or any
of its Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar
as such amount is payable by the Company or any of its Subsidiaries but
after deducting any
46
<PAGE>
portion thereof that is reasonably expected to be paid by or recoverable
from other creditworthy Persons jointly and severally liable therefor or
from insurers); or
(k) During any period of 25 consecutive calendar months, a majority
of the Board of Directors of the Company shall no longer be composed of
individuals (i) who were members of said Board on the first day of such
period, (ii) whose election or nomination to said Board was approved by
individuals referred to in clause (i) above constituting at the time of
such election or nomination at least a majority of said Board or (iii)
whose election or nomination to said Board was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of said Board; or
(l) Any Person or two or more Persons acting in concert shall have
acquired, in one transaction or in a series of related transactions,
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Company (or other securities
convertible into such securities) representing 30% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
in the election of directors (other than securities having such power only
by reason of the happening of a contingency);
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, (A) the Agent
may and, upon request of the Majority Banks, will, by notice to the Company,
terminate the Commitments and they shall thereupon terminate, and (B) the Agent
may and, upon request of Banks holding more than 50% of the aggregate unpaid
principal amount of the Loans shall, by notice to the Company declare the
principal amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Company hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
to be forthwith due and payable, whereupon such amounts shall be immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Company; and (2) in the
case of the occurrence of an Event of Default referred to in clause (f) or (g)
of this Section 9 with respect to the Company, the Commitments shall
automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the Company
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 hereof) shall automatically become immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Company.
Section 10. The Agent.
10.01 Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder with
such powers as are specifically delegated to the Agent by the terms of this
Agreement, together with such other powers as are reasonably incidental thereto.
The
47
<PAGE>
Agent (which term as used in this sentence and in Section 10.05 and the first
sentence of Section 10.06 hereof shall include reference to its affiliates and
its own and its affiliates' officers, directors, employees and agents): (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement, and shall not by reason of this Agreement be a trustee for any
Bank; (b) shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Company or any
other Person to perform any of its obligations hereunder or thereunder; (c)
shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith, except for its own
gross negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. The Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a notice of the assignment or transfer thereof shall
have been filed with the Agent, together with the consent of the Company to such
assignment or transfer (to the extent provided in Section 11.06(b) hereof).
10.02 Reliance by Agent. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without limitation,
any thereof by telephone, telecopy, telex, telegram or cable) believed by it in
good faith to be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Agent. As to
any matters not expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions given by the Majority Banks, and such instructions
of the Majority Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks.
10.03 Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice from
a Bank or the Company specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the
Banks. The Agent shall (subject to Section 10.07 hereof) take such action with
respect to such Default as shall be directed by the Majority Banks, provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem advisable in the best
interest of the Banks except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of the Majority Banks or all of the Banks.
48
<PAGE>
10.04 Rights as a Bank. With respect to its Commitment and the
Loans made by it, Chase (and any successor acting as Agent) in its capacity as a
Bank hereunder shall have the same rights and powers hereunder as any other Bank
and may exercise the same as though it were not acting as the Agent, and the
term "Bank" or "Banks" shall, unless the context otherwise indicates, include
the Agent in its individual capacity. Chase (and any successor acting as Agent)
and its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Agent, and Chase and
its affiliates may accept fees and other consideration from the Company for
services in connection with this Agreement or otherwise without having to
account for the same to the Banks.
10.05 Indemnification. The Banks agree to indemnify the Agent (to
the extent not reimbursed under Section 11.03 hereof, but without limiting the
obligations of the Company under said Section 11.03) ratably in accordance with
their respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including by any Bank) arising out of or by reason
of any investigation in any way relating to or arising out of this Agreement or
any other documents contemplated by or referred to herein or the transactions
contemplated hereby (including, without limitation, the costs and expenses that
the Company is obligated to pay under Section 11.03 hereof but excluding, unless
a Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Company and its Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Company or any of its Subsidiaries (or any of their affiliates)
that may come into the possession of the Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly
49
<PAGE>
required of the Agent hereunder, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall receive further
assurances to its reasonable satisfaction from the Banks of their
indemnification obligations under Section 10.05 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
10.08 Resignation or Removal of Agent. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Banks and the Company, and the Agent
may be removed at any time with or without cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks (after consultation with the
Company) shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent (after consultation with the Company) may, on behalf of the
Banks, appoint a successor Agent, that shall be a bank that has an office in New
York, New York. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section 10 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
The Company irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the Agent
or any Bank relating in any way to this Agreement should be dismissed or stayed
by reason, or pending the resolution, of any action or proceeding commenced by
the Company relating in any way to this Agreement whether or not commenced
earlier.
11.02 Notices. All notices, requests and other communications
provided for herein (including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telecopy), or, with respect to
notices given pursuant to Section 2.03 hereof, by telephone, confirmed in
writing by telecopier by the close of business on the day the notice is given,
delivered (or telephoned, as the case may be) to the intended recipient at the
"Address for
50
<PAGE>
Notices" specified below its name on the signature pages hereof); or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or reimburse: (a)
the Agent for all reasonable out-of-pocket costs and expenses of the Agent
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to the Agent) in connection
with (i) the negotiation, preparation, execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder and (ii) the negotiation or
preparation of any modification, supplement or waiver of any of the terms of
this Agreement or any of the Notes (whether or not consummated); (b) each of the
Banks and the Agent for all reasonable out-of-pocket costs and expenses
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
11.03; and (c) each of the Banks and the Agent for all transfer, stamp,
documentary or other similar taxes, assessments or charges imposed after the
date hereof by any governmental or revenue authority in respect of this
Agreement or any of the Notes or any other document referred to herein.
The Company hereby agrees to indemnify the Agent and each Bank and
their respective directors, officers, employees, attorneys and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them (including, without limitation, any
and all losses, liabilities, claims, damages or expenses incurred by the Agent
to any Bank, whether or not the Agent or any Bank is a party thereto) arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the Loans hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the Loans hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified). Without limiting the generality of the foregoing,
the Company will indemnify the Agent and each Bank from, and hold the Agent and
each Bank harmless against, any losses, liabilities, claims, damages or expenses
described in the preceding sentence (but excluding, as provided in the preceding
sentence, any loss, liability, claim, damage or expense incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified)
arising under any Environmental Law as a result of
51
<PAGE>
the past, present or future operations of the Company or any of its Subsidiaries
(or any predecessor in interest to the Company or any of its Subsidiaries), or
the past, present or future condition of any site or facility owned, operated or
leased at any time by the Company or any of its Subsidiaries (or any such
predecessor in interest), or any Release or threatened Release of any Hazardous
Materials at or from any such site or facility.
11.04 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Agent and the
Majority Banks, or by the Company and the Agent acting with the consent of the
Majority Banks, and any provision of this Agreement may be waived by the
Majority Banks or by the Agent acting with the consent of the Majority Banks;
provided that: (a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (i) increase, or extend the term of the Commitments, or
extend the time or waive any requirement for the reduction or termination of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan or any fee hereunder, (iii) reduce the amount of any such
payment of principal, (iv) reduce the rate at which interest is payable thereon
or any fee is payable hereunder, (v) alter the rights or obligations of the
Company to prepay Loans, (vi) alter the terms of this Section 11.04, (vii)
modify the definition of the term "Majority Banks" or modify in any other manner
the number or percentage of the Banks required to make any determinations or
waive any rights hereunder or to modify any provision hereof, or (viii) waive
any of the conditions precedent set forth in Section 6.01 hereof; and (b) any
modification or supplement of Section 10 hereof shall require the consent of the
Agent.
Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Section 6 hereof to any
Syndicated Loan hereunder are, in the opinion of the Majority Banks, satisfied,
any Bank shall fail to fulfill its obligations to make such Loan then, for so
long as such failure shall continue, such Bank shall (unless the Majority Banks,
determined as if such Bank were not a "Bank" hereunder, shall otherwise consent
in writing) be deemed for all purposes relating to amendments, modifications,
waivers or consents under this Agreement or the Notes (including, without
limitation, under this Section 11.04) to have no Loans or Commitments, shall not
be treated as a "Bank" hereunder when performing the computation of Majority
Banks, and shall have no rights under the preceding paragraph of this Section
11.04; provided that any action taken by the other Banks with respect to the
matters referred to in clause (a) of the preceding paragraph shall not be
effective as against such Bank.
11.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Banks and
the Agent.
52
<PAGE>
(b) Each Bank may assign any of its Loans, its Notes, and its
Commitment (but only with the consent of, in the case of its outstanding
Commitment, the Company and the Agent, which consent shall not be unreasonably
withheld); provided that (i) no such consent by the Company or the Agent shall
be required in the case of any assignment to another Bank or any of its
affiliates; (ii) any such partial assignment shall be in an amount at least
equal to $10,000,000 and the Bank making any such partial assignment shall
continue to hold an amount at least equal to $10,000,000; and (iii) each such
assignment by a Bank of its Loans, Note or Commitment shall be made in such
manner so that the same portion of its Loans, Note and Commitment is assigned to
the respective assignee. Upon execution and delivery by the assignee to the
Company and the Agent of an instrument in writing pursuant to which such
assignee agrees to become a "Bank" hereunder (if not already a Bank) having the
Commitment and Loans specified in such instrument, and upon consent thereto by
the Company and the Agent, to the extent required above, the assignee shall
have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of the Company and the Agent), the obligations,
rights and benefits of a Bank hereunder holding the Commitment and Loans (or
portions thereof) assumed by and assigned to it (in addition to the Commitment
and Loans, if any, theretofore held by such assignee) and the assigning Bank
shall, to the extent of such assumption and assignment, be released from the
Commitment (or portion thereof) so assigned. Upon each such assignment the
assigning Bank shall pay the Agent an assignment fee of $3,000.
(c) A Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans held by it, or in its Commitment,
in which event each purchaser of a participation (a "Participant") shall be
entitled to the rights and benefits of the provisions of Section 8.01(g) hereof
with respect to its participation in such Loans and Commitment as if (and the
Company shall be directly obligated to such Participant under such provisions as
if) such Participant were a "Bank" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note (the Participant's rights against such
Bank in respect of such participation to be those set forth in the agreements
executed by such Bank in favor of the Participant). All amounts payable by the
Company to any Bank under Section 5 hereof in respect of Loans held by it, and
its Commitment, shall be determined as if such Bank had not sold or agreed to
sell any participations in such Loans and Commitment, and as if such Bank were
funding each of such Loan and Commitment in the same way that it is funding the
portion of such Loan and Commitment in which no participations have been sold.
In no event shall a Bank that sells a participation agree with the Participant
to take or refrain from taking any action hereunder except that such Bank may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of such Bank's
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to
53
<PAGE>
receive such interest or fee, (v) alter the rights or obligations of the Company
to prepay the related Loans or (vi) consent to any modification, supplement or
waiver hereof to the extent that the same, under Section 11.04 hereof, requires
the consent of each Bank.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Bank may (without notice to,
or consent of, the Company, the Agent or any other Bank and without payment of
any fee) (i) assign and pledge all or any portion of its Loans and its Notes to
any Federal Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank and (ii) assign all or
any portion of its rights under this Agreement and its Loans and its Notes to an
affiliate.
No such assignment shall release the assigning Bank from its obligations
hereunder.
(e) A Bank may furnish any information concerning the Company or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Bank may assign or participate to the Company or any of its Affiliates or
Subsidiaries any interest in any Loan held by such Bank hereunder without the
prior consent of each Bank.
11.07 Survival. The obligations of the Company under Sections
5.01, 5.05, 5.06 and 11.03 hereof, and the obligations of the Banks under
Section 10.05 hereof, shall survive the repayment of the Loans and the
termination of the Commitments. In addition, each representation and warranty
made, or deemed to be made by a notice of any Loan, herein or pursuant hereto
shall survive the making of such representation and warranty, and no Bank shall
be deemed to have waived, by reason of making any Loan, any Default that may
arise by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that such Bank or the Agent may have had notice or
knowledge or reason to believe that such representation or warranty was false or
misleading at the time such Loan was made.
11.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement
and the Notes shall be governed by, and construed in accordance with, the law of
the State of New York. The Company hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to
54
<PAGE>
this Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND
THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Bank or by one or more subsidiaries or affiliates
of such Bank and, if the Company has requested such services or otherwise if the
Company expressly agrees, the Company hereby authorizes each Bank to share,
subject to the foregoing, any information delivered to such Bank by the Company
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Bank to enter into this Agreement, to any such subsidiary or
affiliate, it being understood that any such subsidiary or affiliate receiving
such information shall be bound by the provisions of clause (b) below as if it
were a Bank hereunder. Such authorization shall survive the repayment of the
Loans and the termination of the Commitments.
(b) Each Bank and the Agent agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Company pursuant to this Agreement that is identified by
the Company as being confidential at the time the same is delivered to the Banks
or the Agent, provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to
bank examiners, auditors or accountants, (iv) to the Agent or any other Bank (or
to Chase Securities, Inc.), (v) in connection with any litigation to which any
one or more of the Banks or the Agent is a party, (vi) to a subsidiary or
affiliate of such Bank as provided in clause (a) above or (vii) to any assignee
or participant (or prospective assignee or participant) so long as such assignee
or participant (or prospective assignee or participant) first executes and
delivers to the respective Bank a Confidentiality Agreement substantially in the
form of Exhibit F hereto, provided, further, that in no event shall any Bank or
the Agent be obligated or required to return any materials furnished by the
Company. The obligations of each Bank under this Section 11.12 shall supersede
and replace the obligations of such Bank under the confidentiality letter in
respect of this financing signed and delivered by such Bank to the Company prior
to the date hereof; in addition, the obligations of any assignee that has
executed a
55
<PAGE>
Confidentiality Agreement in the form of Exhibit F hereto shall be superseded by
this Section 11.12 upon the date upon which such assignee becomes a Bank
hereunder pursuant to Section 11.06 hereof.
11.13 Existing Credit Agreements. The Company and the Bank(s)
party to the Existing Credit Agreements agree that the commitments under the
Existing Credit Agreements are hereby terminated and that the facility fees
payable under the Existing Credit Agreements accrued to the date hereof are due
and payable.
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
ALZA CORPORATION
By_________________________
Title:
Address for Notices:
950 Page Mill Road
Palo Alto, California 94303-0802
Attention: Vice President, Legal
Telecopier No.: (415) 494-5121
Telephone No.: (415) 494-5000
57
<PAGE>
BANKS
Commitment THE CHASE MANHATTAN BANK
$15,000,000 (NATIONAL ASSOCIATION)
By_________________________
Title:
Lending Office for all Loans:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Robert W. Cook
Managing Director
Telecopier No.: (212) 552-6731
Telephone No.: (212) 552-7794
58
<PAGE>
Commitment FIRST INTERSTATE BANK OF
CALIFORNIA
$12,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for All Loans:
First Interstate Bank of California
177 Park Center Plaza
San Jose, CA 95113
Address for Notices:
First Interstate Bank of California
177 Park Center Plaza
San Jose, CA 95113
Attention: M. Kathryn Dienz
San Jose Corporate
Center
Telecopier: (408) 971-5888
Telephone: (408) 971-5848
59
<PAGE>
Commitment THE TORONTO-DOMINION BANK
$12,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, TX 77010
Address for Notices:
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, TX 77010
Attention: Lisa Allison
Manager, Credit
Administration
Telecopier No.: (713) 951-9921
Telephone No.: (713) 653-8247
<PAGE>
Commitment ABN AMRO BANK N.V.
$10,000,000
By________________________________
Title:
By________________________________
Title:
Lending Office for All Loans:
ABN AMRO Bank N.V.
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Address for Notices:
ABN AMRO Bank N.V.
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Attention: Gloria Lee
Telecopier No.: (415) 362-3524
Telephone No.: (415) 984-3720
61
<PAGE>
Commitment THE BANK OF NOVA SCOTIA
$10,000,000
By________________________________
Title:
Lending Office for All Loans:
The Bank of Nova Scotia
101 California Street, 48th Floor
P.O. Box 3716
San Francisco, CA 94119
Address for Notices:
The Bank of Nova Scotia
101 California Street, 48th Floor
P.O. Box 3716
San Francisco, CA 94119
Attention: Norman O. Campbell
Telecopier No.: (415) 397-0791
Telephone No.: (415) 986-1100
62
<PAGE>
Commitment BANQUE NATIONALE DE PARIS
$10,000,000
By________________________________
Title:
By________________________________
Title:
Lending Office for All Loans:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Address for Notices:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Attention: Angel M. Solorio
Vice President
Telecopier No.: (415) 296-8954
Telephone No.: (415) 956-0707
63
<PAGE>
Commitment COMMERZBANK AG, GRAND CAYMAN
BRANCH
$10,000,000
By________________________________
Title:
By________________________________
Title:
Lending Office for All Loans:
Commerzbank AG, Grand Cayman Branch
660 South Figueroa Street
Suite 1450
Los Angeles, CA 90017
Address for Notices:
Commerzbank AG, Grand Cayman Branch
660 South Figueroa Street
Suite 1450
Los Angeles, CA 90017
Attention: Werner Schmidbauer
Corporate Banking
Telecopier No.: (213) 623-0039
Telephone No.: (213) 623-8223
64
<PAGE>
Commitment UNITED STATES NATIONAL BANK OF
OREGON
$10,000,000
By________________________________
Title:
Lending Office for All Loans:
United States National Bank of
Oregon
Note Department
555 S.W. Oak Street, PL-7
Portland, OR 97204
Address for Notices:
United States National Bank of
Oregon
309 S.W. Sixth Avenue
BB-10
Portland, OR 97204
Attention: Scott J. Bell
Telecopier No.: (503) 275-4346
Telephone No.: (503) 275-6738
65
<PAGE>
Commitment THE BANK OF CALIFORNIA, N.A.
$6,000,000
By________________________________
Title:
Lending Office for All Loans:
The Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Address for Notices:
The Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Attention: Alison Amonette
Telecopier No.: (415) 765-2634
Telephone No.: (415) 765-3696
66
<PAGE>
Commitment THE NIPPON CREDIT BANK LTD.,
LOS ANGELES AGENCY
$6,000,000
By________________________________
Title:
Lending Office for All Loans:
The Nippon Credit Bank Ltd.,
Los Angeles Agency
550 South Hope Street
Suite 2500
Los Angeles, CA 90071
Address for Notices:
The Nippon Credit Bank Ltd.,
Los Angeles Agency
550 South Hope Street
Suite 2500
Los Angeles, CA 90071
Attention: Bernardo E. Correa-Henschke
Telecopier No.: (213) 892-0111
Telephone No.: (213) 243-5720
67
<PAGE>
Commitment PNC BANK, NATIONAL ASSOCIATION
$6,000,000
By________________________________
Title:
Lending Office for All Loans:
PNC Bank, National Association
55 South Lake Avenue, Suite 650
Pasadena, CA 91101
Address for Notices:
PNC Bank, National Association
55 South Lake Avenue, Suite 650
Pasadena, CA 91101
Attention: Pam Fox
Telecopier No.: (818) 568-0653
Telephone No.: (818) 568-8950
68
<PAGE>
Commitment THE SUMITOMO BANK, LIMITED,
SAN FRANCISCO BRANCH
$6,000,000
By________________________________
Title:
Lending Office for All Loans:
The Sumitomo Bank, Limited,
San Francisco Branch
555 California Street, Suite 3350
San Francisco, CA 94104
Address for Notices:
The Sumitomo Bank, Limited,
San Francisco Branch
555 California Street, Suite 3350
San Francisco, CA 94104
Attention: Herman White, Jr.
Telecopier No.: (415) 397-1475
Telephone No.: (415) 616-3009
69
<PAGE>
Commitment UNION BANK
$6,000,000
By________________________________
Title:
Lending Office for All Loans:
Union Bank
1980 Saturn Street
P.O. Box 30770
Monterey Park, CA 90030-0866
Address for Notices:
Union Bank
350 California Street
(#H-1040)
San Francisco, CA 94104-1402
Attention: Wade Schlueter
Vice President
Telecopier No.: (415) 705-7127
Telephone No.: (415) 705-7022
70
<PAGE>
Commitment WESTDEUTSCHE LANDESBANK
GIROZENTRALE
$6,000,000
By________________________________
Title:
By________________________________
Title:
Lending Office for Base Rate Loans:
Westdeutsche Landesbank
Girozentrale
New York Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Lending Office for Loans other than
Base Rate Loans:
Westdeutsche Landesbank
Girozentrale
Cayman Islands Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Address for Notices:
Westdeutsche Landesbank
Girozentrale
New York Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Attention: Cheryl Wilson
Loan Administrator
Telecopier No.: (212) 302-7946
Telephone No.: (212) 852-6152
71
<PAGE>
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By________________________________
Title:
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
(National Association)
4 Metrotech Center -- 13th Floor
Brooklyn, New York 11245
Attention: New York Agency
Telecopier No.: (718) 242-6910
Telephone No.: (718) 242-7979
72
<PAGE>
SCHEDULE I
Material Agreements and Liens
[See Sections 7.12 and 8.07(b)]
Part A - Material Agreements
(i) Indenture between ALZA Corporation and The Chase Manhattan Bank
(National Association) as trustee, dated December 21, 1990 relating to ALZA's
Liquid Yield Option Notes due 2010, (Zero Coupon-Subordinated).
(ii) Promissory Note in the principal amount of $11,386,000 payable to
ALZA Corporation by a joint venture between ALZA and ON-SITE Therapeutics, Inc.,
issued pursuant to Section 4.4(a) of the Restated Joint Venture Agreement
between the parties dated February 13, 1991.
(iii) Loan Agreement between ALZA and Plymouth Street L.P. ("Plymouth")
pursuant to which ALZA will loan to Plymouth up to $17,500,000 in periodic
installments over a seven year period.
ALZA may offset the principal and interest owed by Plymouth on the loan against
amounts payable by ALZA to Plymouth upon exercise of a purchase option to
acquire certain real property located at 1500/1550 Plymouth Street, Mountain
View, California pursuant to a certain Option and Put Agreement between ALZA and
Plymouth dated December 31, 1992.
(iv) Agreement of Merger dated November 11, 1991 between ALZA and
Bio-Electro Systems, Inc.
(v) The principal amount of $2,550,000 is payable by ALZA to Boston
Financial in three equal annual installments of $850,000 each in 1994, 1995 and
1996. This represents the remaining balance due on an interest-free obligation
to invest $5,000,000 for five units of limited partnership interest in a low
income housing project.
Part B - Liens
None.
73
<PAGE>
SCHEDULE II
Subsidiaries
[See Section 7.14]
Ownership
Nature of
Each Person Ownership % of
Name of Jurisdiction of Holding Interest Ownership
Subsidiary Incorporation Ownership Held Interest
ALZA Development California ALZA Wholly 100%
Corporation Corporation Owned
ALZA International Delaware ALZA Wholly 100%
Inc. Corporation Owned
ALZA Limited England ALZA Wholly 100%
Corporation Owned
74
<PAGE>
EXHIBIT A-1
[Form of Syndicated Note]
PROMISSORY NOTE
$__________________ ____________, 1993
New York, New York
FOR VALUE RECEIVED, ALZA CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the 364-Day
Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza, New York, New
York 10081, the principal sum of _______________ Dollars (or such lesser amount
as shall equal the aggregate unpaid principal amount of the Syndicated Loans
made by the Bank to the Company under the 364-Day Credit Agreement), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the 364-Day Credit Agreement, and
to pay interest on the unpaid principal amount of each such Syndicated Loan, at
such office, in like money and funds, for the period commencing on the date of
such Syndicated Loan until such Syndicated Loan shall be paid in full, at the
rates per annum and on the dates provided in the 364-Day Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
of each Syndicated Loan made by the Bank to the Company, and each payment made
on account of the principal thereof, shall be recorded by the Bank on its books
and, prior to any transfer of this Note, endorsed by the Bank on the schedule
attached hereto or any continuation thereof, provided that the failure of the
Bank to make any such recordation or endorsement shall not affect the
obligations of the Company to make a payment when due of any amount owing under
the 364-Day Credit Agreement or hereunder in respect of the Syndicated Loans
made by the Bank.
This Note is one of the Syndicated Notes referred to in the 364-Day
Credit Agreement dated as of November 4, 1993 (as modified and supplemented and
in effect from time to time, the "364-Day Credit Agreement") between the
Company, the lenders named therein and The Chase Manhattan Bank (National
Association), as Agent, and evidences Syndicated Loans made by the Bank
thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the 364-Day Credit Agreement.
The 364-Day Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06(b) of the 364-Day Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
The Company hereby expressly waives presentment, demand, protest,
notice of intention to accelerate, dishonor or
75
<PAGE>
any other notice in connection with this Note.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
ALZA CORPORATION
By___________________________
Title:
76
<PAGE>
SCHEDULE OF SYNDICATED LOANS
This Note evidences Syndicated Loans made under the within-described
364-Day Credit Agreement to the Company, on the dates, in the principal amounts,
of the Types, bearing interest at the rates and having Interest Periods of the
durations set forth below, subject to the payments and prepayments of principal
set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal Notation
Loan Loan Loan Rate Loan Prepaid Amount Made by
77
<PAGE>
EXHIBIT A-2
[Form of Money Market Note]
PROMISSORY NOTE
____________, 1993
New York, New York
FOR VALUE RECEIVED, ALZA CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the 364-Day
Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza, New York, New
York 10081, the aggregate unpaid principal amount of the Money Market Loans made
by the Bank to the Company under the 364-Day Credit Agreement, in lawful money
of the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the 364-Day Credit Agreement, and to
pay interest on the unpaid principal amount of each such Money Market Loan, at
such office, in like money and funds, for the period commencing on the date of
such Money Market Loan until such Money Market Loan shall be paid in full, at
the rates per annum and on the dates provided in the 364-Day Credit Agreement.
The date, amount, Type, interest rate and maturity date of each Money
Market Loan made by the Bank to the Company, and each payment made on account of
the principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof, provided that the failure of the Bank to make any
such recordation or endorsement shall not affect the obligations of the Company
to make a payment when due of any amount owing under the 364-Day Credit
Agreement or hereunder in respect of the Money Market Loans made by the Bank.
This Note is one of the Money Market Notes referred to in the 364-Day
Credit Agreement dated as of November 4, 1993 (as modified and supplemented and
in effect from time to time, the "364-Day Credit Agreement") between the
Company, the lenders named therein (including the Bank) and The Chase Manhattan
Bank (National Association), as Agent, and evidences Money Market Loans made by
the Bank thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the 364-Day Credit Agreement.
The 364-Day Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Money Market Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06(b) of the 364-Day Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
The Company hereby expressly waives presentment, demand, protest,
notice of intention to accelerate, dishonor or any other notice in connection
with this Note.
78
<PAGE>
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
ALZA CORPORATION
By____________________________
Title:
79
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within- described 364-Day
Credit Agreement to the Company, on the dates, in the principal amounts, of the
Types, bearing interest at the rates and maturing on the dates set forth below,
subject to the payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal Notation
Loan Loan Loan Rate Loan Prepaid Amount Made by
80
<PAGE>
EXHIBIT B-1
[Form of Opinion of Counsel to the Company]
__________, 1993
To the Banks party to the Credit Agreement
referred to below and
The Chase Manhattan Bank
(National Association), as Agent
ALZA Corporation
Ladies and Gentlemen:
We have acted as counsel to ALZA Corporation, a Delaware corporation
(the "Company"), in connection with the Credit Agreement relating to the
$125,000,000 364-day revolving credit facility (the "Credit Agreement") dated as
of November 4, 1993, among the Company, the lenders named therein and The Chase
Manhattan Bank (National Association), as Agent. This opinion is being delivered
pursuant to Section 6.01(b) of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used in this
opinion have the meanings given to them in the Credit Agreement.
I.
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to us as copies. We have based our
opinion upon our review of the following records, documents, instruments and
certificates and such additional certificates as we have deemed necessary or
appropriate for our opinion:
(a) The Credit Agreement; and
(b) The Notes (in the form appended to the Credit Agreement).
The Credit Agreement and the Notes are collectively referred to in this opinion
as the "Loan Documents."
II.
In rendering this opinion, we have also assumed the following, with
your consent and without independent investigation:
A. Each Bank (i) is a bank incorporated or organized under the laws
of the United States of America or any state of the United States
of America, or (ii) is a foreign bank licensed to conduct banking
81
<PAGE>
business through a branch or agency located in the United States
of America pursuant to the laws of the United States of America
or any state of the United States of America within the meaning
of Section 1716 of the California Financial Code, or (iii)
otherwise qualifies for an exemption from the otherwise
applicable interest rate limitations of California law for loans
or forbearances provided by, California Constitution, Article XV,
Section 1 or statutory provisions adopted pursuant thereto; all
loans under the Credit Agreement will be made by the Banks for
their own accounts or for the account of another person or entity
that is such a bank or foreign bank or otherwise so qualifies for
an exemption from the interest rate limitations of California
law; and there is no present agreement or plan, express or
implied, on the part of the Banks to sell participations or any
other interest in the loans to be made under the Credit Agreement
to any person or entity that is not such a bank or foreign bank
or does not otherwise qualify for an exemption from the interest
rate limitations of California law for the purpose of evading
such limitations.
B. The opinions contained in the letter dated as of the date of this
opinion being delivered to you by Edward L. Mandell, Esq., Vice
President, Legal of the Company, are accurate and correct with
respect to all matters that may have a bearing on this opinion or
the assumptions herein.
C. The Banks (i) have duly authorized, executed and delivered each
Loan Document to which they are parties, and (ii) have all
requisite power and authority under laws, rules and regulations
applicable to them to execute, deliver and enforce each Loan
Document to which they are parties.
III.
We express no opinion as to:
A. The applicable choice of law rules that may affect the
interpretation or enforcement of any of the Loan Documents;
B. Any securities, anti-trust, tax, land use, safety, environmental,
hazardous materials, or insurance company laws, rules or
regulations;
C. The effect of the laws of any jurisdiction in which any Bank is
located (other than the State of California) that limit the
interest, fees or other charges such Bank may impose;
D. Section 4.07(c) of the Credit Agreement;
E. The second paragraph of Section 11.01 of the Credit Agreement;
F. The second sentence of Section 11.10 of the Credit
82
<PAGE>
Agreement, insofar as such sentence relates to the subject matter
jurisdiction of the United States District Court of the Southern
District of New York to adjudicate any controversy related to the
Loan Documents; and
G. The waiver of inconvenient forum set forth in Section 11.10 of
the Credit Agreement with respect to proceedings in the United
States District Court for the Southern District of New York.
This opinion is limited to the federal laws of the United States of
America and the laws of the State of California.
In connection with the opinions below, we note that the Loan Documents expressly
provide that they are to be governed by and construed in accordance with the
laws of the State of New York. Accordingly, our opinion is rendered as if the
Loan Documents were governed by and construed in accordance with the laws of the
State of California. We expressly disclaim any opinion as to the laws of any
other jurisdiction. We further disclaim any opinion as to any statute, rule,
regulation, ordinance, or other promulgation of any regional or local
governmental body or as to any related judicial or administrative opinion.
IV.
Based upon (and subject to) the foregoing and our examination of such
questions of law as we have deemed necessary or appropriate for the purpose of
our opinion, and subject to the limitations and qualifications expressed below,
it is our opinion that, each of the Loan Documents is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject as to enforcement (a) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability relating to or
affecting creditors' rights and (b) to general principles of equity, whether
such enforceability is considered in a proceeding in equity or at law.
V.
We further advise you that:
A. As noted, the enforceability of the Loan Documents is subject to
the effect of general principles of equity. These principles
include, without limitation, concepts of commercial
reasonableness, materiality and good faith and fair dealing. As
applied to the Loan Documents, these principles will require you
to act reasonably, in good faith and in a manner that is not
arbitrary or capricious in the administration and enforcement of
the Loan Documents and will preclude you from invoking penalties
for defaults that bear no reasonable relation to the damage
suffered or that would otherwise work a forfeiture.
B. The effectiveness of indemnities, exculpatory provisions and
waivers of the benefits of statutory provisions may be limited on
public policy grounds.
83
<PAGE>
C. Section 1717 of the California Civil Code provides that, in any
action on a contract where the contract specifically provides
that attorneys' fees and costs incurred to enforce that contract
shall be awarded either to one of the parties or to the
prevailing party, then the party who is determined to be the
party prevailing in the action, whether that party is the party
specified in the contract or not, shall be entitled to reasonable
attorneys' fees in addition to other costs.
D. Provisions of the Loan Documents requiring that modifications or
waivers must be in writing may not be binding or enforceable if a
non-executory oral agreement has been created modifying any such
provision or an implied agreement by trade practice or course of
conduct has given rise to a modification or waiver.
E. Any bank which is not incorporated under the laws of the State of
California, which is deemed to be transacting intrastate business
within the meaning of Section 191 of the California Corporations
Code and which is not duly qualified to do business in the State
of California may be precluded, under Section 2203(c) of the
California Corporations Code, from maintaining an action or
proceeding upon any intrastate business so transacted in the
courts of the State of California.
This opinion is rendered to you in connection with the Credit
Agreement and is solely for your benefit. This opinion may not be relied upon by
any other person, firm, corporation or other entity without our prior written
consent. We disclaim any obligation to advise you of any change of law that
occurs, or any facts of which we become aware, after the date of this opinion.
Very truly yours,
84
<PAGE>
EXHIBIT B-2
[Form of Opinion of Vice President, Legal of the Company]
__________, 1993
To the Banks party to the Credit Agreement
referred to below and
The Chase Manhattan Bank
(National Association), as Agent
Credit Agreement
Ladies and Gentlemen:
I am Vice President, Legal of ALZA Corporation, a Delaware Corporation
(the "Company"), and have acted in such capacity in connection with the Credit
Agreement (the "Credit Agreement") dated as of November 4, 1993, among the
Company, the lenders named therein (collectively, the "Banks") and The Chase
Manhattan Bank (National Association), as agent, relating to a 364-day $125
million revolving credit facility. This opinion is being delivered pursuant to
Section 6.01(b) of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used in this
opinion have the meanings given to them in the Credit Agreement.
I
I have assumed the authenticity of all records, documents and
instruments submitted to me as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to me as copies. I have based my
opinion upon my review of the following records, documents, instruments and
certificates and such additional certificates as I have deemed necessary or
appropriate for my opinion:
(a) The Credit Agreement;
(b) The Notes (in the form appended to the Credit Agreement);
(c) The Certificate of Incorporation of the Company certified by the
Secretary of State of the State of Delaware as of October 5,
1993;
(d) The Bylaws of the Company, as amended to date;
(e) Records of the Company constituting all records of proceedings
and actions of the Board of Directors of the Company relating to
the transactions contemplated by the Credit Agreement; and
(f) Certificate of Good Standing relating to the Company issued by
the Secretary of State of the
85
<PAGE>
State of Delaware, dated October 5, 1993.
The agreements and instruments referred to in the foregoing clauses
(a) and (b) are collectively referred to herein as the "Credit Documents."
The opinion expressed in Paragraph 1 of Part II as to the good
standing of the Company under the laws of the State of Delaware is based solely
upon the Certificate of Good Standing described in paragraph (f) of Part I
above. I have made no additional investigation after the date of that
Certificate in expressing my opinion in Paragraph 1 of Part II.
Where my opinion relates to my "knowledge", such knowledge is based
upon my examination of the records, documents, instruments and certificates
enumerated or described above and my actual contemporaneous knowledge or that of
any other attorney employed by the Company who is currently involved in legal
representation of the Company in connection with the Credit Documents.
This opinion is limited to the federal laws of the United States of
America, the General Corporation law of the State of Delaware and the laws of
the State of California. In connection with the opinions below, I note that the
Credit Documents expressly provide that they are to be governed by and construed
in accordance with the laws of the State of New York. Accordingly, my opinion is
rendered as if the Credit Documents were governed by and construed in accordance
with the laws of the State of California. I expressly disclaim any opinion as to
the laws of any other jurisdiction. I further disclaim any opinion as to
statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental body or as to any related judicial or
administrative opinion.
II.
Based upon and subject to the foregoing and my examination of such
questions of law as I have deemed necessary or appropriate for the purpose of my
opinion, it is my opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware.
2. The Company has all requisite corporate power and corporate
authority to enter into and perform its obligations under each of
the Credit Documents. The Company has all requisite corporate
power to borrow under the Credit Agreement.
3. The execution, delivery and performance by the Company of each
Credit Document, and the borrowings by the Company under the
Credit Agreement, have been duly authorized by all necessary
corporate action on the part of the Company.
4. Each of the Credit Documents has been duly executed and delivered
by the Company.
86
<PAGE>
5. Neither the execution and delivery of the Credit Documents on
behalf of the Company nor the performance of the Credit Documents
by the Company (i) conflicts with any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii)
violates any order, writ, injunction or decree of any court or
governmental authority or agency or any arbitral award applicable
to the Company or any of its Subsidiaries of which I have
knowledge (after due inquiry) or any law or regulation applicable
to the Company or any of its Subsidiaries, or (iii) results in a
breach or violation of or constitutes a default under, or
requires any consent under, or results in the acceleration or
required prepayment of any debt pursuant to the terms of, any
agreement or instrument creating or evidencing any Indebtedness
or any Lien or any material agreement or instrument of which I
have knowledge (after due inquiry) to which the Company or any of
its Subsidiaries is a party or by which any of them are bound or
to which any of them is subject, or results in the creation or
imposition of any Lien upon any Property of the Company pursuant
to, the terms of any such agreement or instrument.
6. No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the
execution, delivery or performance by the Company of the Credit
Documents or for the legality, validity or enforceability
thereof.
7. I have no knowledge (after due inquiry) of any legal or arbitral
proceedings, or any proceedings by or before any governmental or
regulatory authority or agency, pending, or threatened against or
affecting the Company or any of its Subsidiaries or any of their
respective Properties that, if adversely determined, could have a
Material Adverse Effect.
This opinion is rendered to you in connection with the Credit
Agreement and is solely for your benefit. This opinion may not be relied upon by
any other person, firm, corporation or other entity without my prior written
consent. I disclaim any obligation to advise you of any change of law that
occurs, or any facts of which I become aware, after the date of this opinion.
Very truly yours,
Vice President, Legal
87
<PAGE>
EXHIBIT C
[Form of Opinion of Special New York Counsel to the Agent]
__________, 1993
To the Banks party to the
364-Day Credit Agreement referred to
below and The Chase
Manhattan Bank (National Association), as Agent
Ladies and Gentlemen:
We have acted as special New York counsel to the Agent in connection
with (i) the 364-Day Credit Agreement dated as of November 4, 1993 (the "364-Day
Credit Agreement") between ALZA Corporation (the "Company"), the lenders named
therein and The Chase Manhattan Bank (National Association), as Agent, providing
for loans to be made by said lenders to the Company in an aggregate principal
amount not exceeding $125,000,000 and (ii) the various other agreements and
instruments referred to in the next following paragraph. Terms defined in the
364-Day Credit Agreement are used herein as defined therein. This opinion is
being delivered pursuant to Section 6.01(c) of the 364-Day Credit Agreement.
In rendering the opinion expressed below, we have examined the
following agreements, instruments and other documents:
(a) the 364-Day Credit Agreement;
(b) the Notes; and
(c) such corporate records of the Company and such other documents as
we have deemed necessary as a basis for the opinions expressed
below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clause (c) above) are collectively referred to as
the "Credit Documents".
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon statements of governmental officials and upon representations made in or
pursuant to the Credit Documents and certificates of appropriate representatives
of the Company.
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in
the opinions below as to the Company) constitute legal, valid,
binding and enforceable obligations of, all of the parties
88
<PAGE>
to such documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate or
other) to execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that each of the Credit Documents
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and except as the
enforceability of the Credit Documents is subject to the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law), including, without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the 364-Day Credit
Agreement may be limited by laws rendering unenforceable (i)
indemnification contrary to Federal or state securities laws and the public
policy underlying such laws and (ii) the release of a party from, or the
indemnification of a party against, liability for its own wrongful or
negligent acts under certain circumstances.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
(C) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Bank is located (other than the State of New
York) that limit the interest, fees or other charges such Bank may impose,
(ii) Section 4.07(c) of the 364-Day Credit Agreement, (iii) the second
paragraph of Section 11.01 of the 364-Day Credit Agreement, (iv) the second
sentence of Section 11.10 of the 364-Day Credit Agreement, insofar as such
sentence relates to the subject matter jurisdiction of the United States
District Court for the Southern District of New York to adjudicate any
controversy related to the Credit Documents, and (v) the waiver of
inconvenient forum set forth in Section 11.10 of the 364-Day Credit
Agreement with respect to proceedings in the United States District Court
for the Southern District of New York.
The foregoing opinions are limited to matters involving the Federal
laws of the United States and the law of the State of New York, and we do not
express any opinion as to the laws of any
89
<PAGE>
other jurisdiction.
This opinion letter is, pursuant to Section 6.01(c) of the 364-Day
Credit Agreement, provided to you by us in our capacity as special New York
counsel to the Agent and may not be relied upon by any Person for any purpose
other than in connection with the transactions contemplated by the 364-Day
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
90
<PAGE>
EXHIBIT D
[Form of Money Market Quote Request]
[Date]
To: The Chase Manhattan Bank (National Association), as
Agent
From: ALZA Corporation
Re: Money Market Quote Request
Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of
November 4, 1993 (the "364-Day Credit Agreement") between ALZA Corporation, the
lenders named therein and The Chase Manhattan Bank (National Association), as
Agent, we hereby give notice that we request Money Market Quotes for the
following proposed Money Market Borrowing(s):
Borrowing Quotation Interest
Date Date[*1] Amount[*2] Type[*3] Period[*4]
Terms used herein have the meanings assigned to them in the 364-Day
Credit Agreement.
ALZA CORPORATION
By___________________________________
Title:
__________________________
* All numbered footnotes appear on the last page of this Exhibit.
91
<PAGE>
- --------------------------------
[1] For use if a Set Rate in a Set Rate Auction is requested to be submitted
before the Borrowing Date.
[2] Each amount must be $10,000,000 or a larger multiple of $1,000,000.
[3] Insert either "LIBO Margin" (in the case of LIBOR Market Loans) or "Set
Rate" (in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or,in the
case of a Set Rate Loan, a period of up to 180 days after the making of
such Set Rate Loan and ending on a Business Day.
92
<PAGE>
EXHIBIT E
[Form of Money Market Quote]
To: The Chase Manhattan Bank (National Association), as Agent
Attention:
Re: Money Market Quote to
ALZA Corporation (the "Borrower")
This Money Market Quote is given in accordance with Section 2.03(c) of the
364-Day Credit Agreement dated as of November 4, 1993 (the "364-Day Credit
Agreement") between ALZA Corporation, the lenders named therein and The Chase
Manhattan Bank (National Association), as Agent. Terms defined in the 364- Day
Credit Agreement are used herein as defined therein.
In response to the Borrower's invitation dated __________, 199_, we hereby
make the following Money Market Quote(s) on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. We hereby offer to make Money Market Loan(s) in the following
principal amount[s], for the following Interest Period(s) and at
the following rate(s):
Borrowing Quotation Interest
Date Date[*1] Amount[*2] Type[*3] Period[*4] Rate[*5]
provided that the Company may not accept offers that would result in the
undersigned making Money Market Loans pursuant hereto in excess of $___________
in the aggregate (the "Money Market Loan Limit").
- --------------------------
* All numbered footnotes appear on the last page of this Exhibit.
93
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the 364-Day Credit
Agreement, irrevocably obligate[s] us to make the Money Market Loan(s) for which
any offer(s) (is/are) accepted, in whole or in part (subject to the third
sentence of Section 2.03(e) of the 364-Day Credit Agreement and any Money Market
Loan Limit specified above).
Very truly yours,
[NAME OF BANK]
By____________________________
Authorized Officer
Dated: __________, ____
- --------------------------
[1] As specified in the related Money Market Quote Request.
[2] The principal amount bid for each Interest period may not exceed the
principal amount requested. Bids must be made for at least $5,000,000 (or a
larger multiple of $1,000,000).
[3] Indicate "LIBO Margin" (in the case of LIBOR Market Loans) or "Set Rate"
(in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or, in
the case of a Set Rate Loan, a period of up to 180 days after the making of
such Set Rate Loan and ending on a Business Day, as specified in the
related Money Market Quote Request.
[5] For a LIBOR Market Loan, specify margin over or under the London interbank
offered rate determined for the applicable Interest Period. Specify
percentage (rounded to the nearest 1/10,000 of 1%) and specify whether
"PLUS" or "MINUS". For a Set Rate Loan, specify rate of interest per annum
(rounded to the nearest 1/10,000 of 1%).
94
<PAGE>
EXHIBIT F
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: 364-Day Credit Agreement dated as of November 4, 1993 (the
"364-Day Credit Agreement"), between ALZA Corporation (the
"Company"), the lenders named therein and The Chase Manhattan
Bank (National Association), as Agent.
Dear Ladies and Gentlemen:
As a Bank party to the 364-Day Credit Agreement, we have agreed with
the Company pursuant to Section 11.12 of the 364-Day Credit Agreement to use
reasonable precautions to keep confidential, except as otherwise provided
therein, all non-public information identified by the Company as being
confidential at the time the same is delivered to us pursuant to the 364-Day
Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the 364-Day
Credit Agreement)] [assignee Bank], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives and for the benefit of us and the Company) that (A) such
information will not be used by you except in connection with the proposed
[participation] [assignment] mentioned above and (B) you shall use reasonable
precautions, in accordance with your customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep such information confidential, provided that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to your counsel or to
counsel for any of the Banks or the Agent, (iii) to bank examiners, auditors or
accountants, (iv) to the Agent or any other Bank (or to Chase Securities, Inc.),
(v) in connection with any litigation to which you or any one or more of the
Banks or the Agent are a party, (vi) to a subsidiary or affiliate of yours as
provided in Section 11.12(a) of the 364- Day Credit Agreement or (vii) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to you a Confidentiality Agreement
95
<PAGE>
substantially in the form hereof; provided, further, that in no event shall you
be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the 364-Day
Credit Agreement on the date upon which you become a Bank under the 364-Day
Credit Agreement pursuant to Section 11.06 thereof.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF BANK]
By___________________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________
96
<PAGE>
EXHIBIT 10.6
EXECUTION COUNTERPART
************************************************************
ALZA CORPORATION
_____________________________
3-YEAR CREDIT AGREEMENT
Dated as of November 4, 1993
______________________________
$125,000,000
______________________________
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Section 1. Definitions and Accounting Matters. . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . 14
1.03 Classes and Types of Loans. . . . . . . . . . . . . 14
Section 2. Commitments, Loans, Notes and Prepayments . . . . . 15
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . 15
2.02 Borrowings of Syndicated Loans. . . . . . . . . . . 15
2.03 Money Market Loans. . . . . . . . . . . . . . . . . 15
2.04 Changes of Commitments. . . . . . . . . . . . . . . 19
2.05 Facility Fee. . . . . . . . . . . . . . . . . . . . 20
2.06 Lending Offices . . . . . . . . . . . . . . . . . . 20
2.07 Several Obligations; Remedies Independent . . . . . 20
2.08 Notes . . . . . . . . . . . . . . . . . . . . . . . 20
2.09 Optional Prepayments. . . . . . . . . . . . . . . . 21
Section 3. Payments of Principal and Interest. . . . . . . . . 21
3.01 Repayment of Loans. . . . . . . . . . . . . . . . . 21
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . 21
Section 4. Payments; Pro Rata Treatment; Computations; Etc.. . 22
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . 22
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . 22
4.03 Computations. . . . . . . . . . . . . . . . . . . . 23
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . 23
4.05 Certain Notices . . . . . . . . . . . . . . . . . . 23
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . 24
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . 25
Section 5. Yield Protection, Etc.. . . . . . . . . . . . . . . 26
5.01 Additional Costs. . . . . . . . . . . . . . . . . . 26
5.02 Limitation on Types of Loans. . . . . . . . . . . . 28
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . 29
5.04 Treatment of Affected Loans . . . . . . . . . . . . 29
5.05 Compensation. . . . . . . . . . . . . . . . . . . . 29
5.06 U.S. Taxes. . . . . . . . . . . . . . . . . . . . . 30
Section 6. Conditions Precedent. . . . . . . . . . . . . . . . 31
6.01 Initial Loan. . . . . . . . . . . . . . . . . . . . 31
6.02 Initial and Subsequent Loans. . . . . . . . . . . . 32
Section 7. Representations and Warranties. . . . . . . . . . . 32
7.01 Corporate Existence . . . . . . . . . . . . . . . . 32
7.02 Financial Condition . . . . . . . . . . . . . . . . 32
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . 33
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . 33
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . 33
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . 34
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . 34
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . 34
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Investment Company Act. . . . . . . . . . . . . . . 34
7.11 Public Utility Holding Company Act. . . . . . . . . 34
7.12 Material Agreements and Liens . . . . . . . . . . . 34
i
<PAGE>
7.13 Environmental Matters . . . . . . . . . . . . . . . 35
7.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . 35
7.15 True and Complete Disclosure. . . . . . . . . . . . 36
7.16 Subordinated Debentures . . . . . . . . . . . . . . 36
Section 8. Covenants of the Company. . . . . . . . . . . . . . 36
8.01 Financial Statements, Etc.. . . . . . . . . . . . . 36
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . 39
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . 39
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . 40
8.05 Prohibition of Fundamental Changes. . . . . . . . . 40
8.06 Limitation on Liens . . . . . . . . . . . . . . . . 40
8.07 Indebtedness. . . . . . . . . . . . . . . . . . . . 42
8.08 Consolidated Tangible Net Worth . . . . . . . . . . 42
8.09 Interest Coverage Ratio . . . . . . . . . . . . . . 42
8.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . 43
8.11 Lines of Business . . . . . . . . . . . . . . . . . 43
8.12 Transactions with Affiliates. . . . . . . . . . . . 43
8.13 Use of Proceeds . . . . . . . . . . . . . . . . . . 43
Section 9. Events of Default. . . . . . . . . . . . . . . . . 43
Section 10. The Agent. . . . . . . . . . . . . . . . . . . . . 46
10.01 Appointment, Powers and Immunities . . . . . . . . 46
10.02 Reliance by Agent. . . . . . . . . . . . . . . . . 47
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . 47
10.04 Rights as a Bank . . . . . . . . . . . . . . . . . 47
10.05 Indemnification. . . . . . . . . . . . . . . . . . 48
10.06 Non-Reliance on Agent and Other Banks. . . . . . . 48
10.07 Failure to Act . . . . . . . . . . . . . . . . . . 48
10.08 Resignation or Removal of Agent. . . . . . . . . . 48
Section 11. Miscellaneous. . . . . . . . . . . . . . . . . . . 49
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . 49
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . 49
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . 49
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . 50
11.05 Successors and Assigns . . . . . . . . . . . . . . 51
11.06 Assignments and Participations . . . . . . . . . . 51
11.07 Survival . . . . . . . . . . . . . . . . . . . . . 53
11.08 Captions . . . . . . . . . . . . . . . . . . . . . 53
11.09 Counterparts . . . . . . . . . . . . . . . . . . . 53
11.10 Governing Law; Submission to Jurisdiction. . . . . 53
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . 53
11.12 Treatment of Certain Information;
Confidentiality . . . . . . . . . . . . . . . . . 54
11.13 Existing Credit Agreements . . . . . . . . . . . . 54
SCHEDULE I - Material Agreements and Liens . . . . . . . . . 71
SCHEDULE II - Subsidiaries. . . . . . . . . . . . . . . . . . 72
EXHIBIT A-1 - Form of Syndicated Note . . . . . . . . . . . . 73
EXHIBIT A-2 - Form of Money Market Note . . . . . . . . . . . 76
EXHIBIT B-1 - Form of Opinion of Counsel to the Company . . . 79
EXHIBIT B-2 - Form of Opinion of the Vice President, Legal
of the Company. . . . . . . . . . . . . . . . 83
EXHIBIT C - Form of Opinion of Special New York
Counsel to the Agent. . . . . . . . . . . . . 86
EXHIBIT D - Form of Money Market Quote Request. . . . . . . 89
EXHIBIT E - Form of Money Market Quote. . . . . . . . . . . 91
EXHIBIT F - Form of Confidentiality Agreement . . . . . . . 93
ii
<PAGE>
3-YEAR CREDIT AGREEMENT dated as of November 4, 1993, between:
ALZA CORPORATION, a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Company"); each of the lenders that is a
signatory hereto identified under the caption "BANKS" on the signature pages
hereto or that, pursuant to Section 11.06(b) hereof, shall become a "Bank"
hereunder (individually, a "Bank" and, collectively, the "Banks"); and THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, as agent
for the Banks (in such capacity, together with its successors in such capacity,
the "Agent").
The Company has requested that the Banks make loans to it in an
aggregate principal amount not exceeding $125,000,000 at any one time
outstanding and the Banks are prepared to make such loans upon the terms and
conditions hereof. Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Affiliate" shall mean any Person that directly or
indirectly controls, or is under common control with, or is controlled by, the
Company and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly securities having 15% or more
of the voting power for the election of directors or other governing body of a
corporation or 15% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries, (b) none of the Subsidiaries of the Company shall be Affiliates
and (c) Affiliate shall not include (i) any pharmaceutical company clients of
the Company or of any of its Subsidiaries or (ii) any Person in which the
Company or any of its Subsidiaries owns an interest, direct or indirect, for the
purpose of undertaking research, development, manufacturing and/or distribution
of pharmaceutical products or technologies with any Person(s) actively engaged
in any of the foregoing.
1
<PAGE>
"Applicable Lending Office" shall mean, for each Bank and for each
Type of Loan, the "Lending Office" of such Bank (or of an affiliate of such
Bank) designated for such Type of Loan on the signature pages hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Agent and the Company as the office by which
its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean, with respect to each Type of Loan
during each period set forth in the schedule below, the percentage per annum set
forth opposite such period under such Type of Loan in such schedule:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
Rating Base Rate Loans Eurodollar Loans
<S> <C> <C>
Level I Period 0.00% 0.2500%
Level II Period 0.00% 0.3750%
Level III Period 0.00% 0.7500%
</TABLE>
Notwithstanding the foregoing, for any day on which the
unpaid principal amount of Loans hereunder exceeds 33-1/3% of the aggregate
amount of the Commitments, the Applicable Margins shall be increased by 0.1250%
over what it otherwise would have been under the foregoing provisions of this
definition.
Any change in the Applicable Margin for any Type of Loan by reason of
a change in the Standard & Poor's Rating or the Moody's Rating shall become
effective on the date of announcement or publication by the respective rating
agencies of a change in such rating or, in the absence of such announcement or
publication, on the effective date of such changed rating.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Syndicated Loans that bear interest at
rates based upon the Base Rate.
"Business Day" shall mean (a) any day on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to the giving of notices or quotes in connection with a LIBOR Auction or to a
borrowing of, a payment or prepayment of principal of or interest on, or the
Interest Period for, a Eurodollar Loan or a LIBOR Market Loan or a notice by the
Company with respect to any such borrowing, payment, prepayment or Interest
Period, any day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be
2
<PAGE>
classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Chase" shall mean The Chase Manhattan Bank (National Association).
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean, as to each Bank, the obligation of such Bank
to make Syndicated Loans pursuant to Section 2.01 hereof in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set opposite such Bank's name on the signature pages hereof under the caption
"Commitment" (as the same may be reduced at any time or from time to time
pursuant to Section 2.04 hereof). The original aggregate principal amount of the
Commitments is $125,000,000.
"Commitment Termination Date" shall mean the date three years after
the date hereof; provided that, if such date is not a Business Day, the
Commitment Termination Date shall be the next preceding Business Day.
"Consolidated Net Worth" shall mean, as at any date, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, plus
(b) the amount of additional paid-in capital, plus
(c) the amount of retained earnings (or in the case of an
accumulated deficit, minus the amount of such deficit),
minus
(d) the cost of treasury stock.
"Consolidated Tangible Net Worth" shall mean, at any date, the sum of (a)
Consolidated Net Worth minus (b) the book value of all assets which should be
classified as intangibles (without duplication of deductions in respect of items
already deducted in arriving at retained earnings) but in any event including
goodwill, minority interests, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt discount and
expense, all reserves and any write-up in the book value of assets resulting
from a revaluation thereof subsequent to June 30, 1993, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), plus (c) the aggregate amount of in-process research and
development expenses up to but not exceeding $100,000,000 in the aggregate, less
50% of the aggregate increase in the amount of capital stock issued (plus any
related additional paid-in capital), in connection with the acquisition of any
Person(s) or Property.
"Default" shall mean an Event of Default or an event
3
<PAGE>
that with notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms. The terms
"Dispose" and "Disposed" used as a verb shall have a correlative meaning.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBIT" shall mean, for any period, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), the sum of (i) consolidated income (calculated before
interest expense, taxes, minority interests and extraordinary and unusual items)
for such period plus (ii) prepayment and make-whole premiums and cost and
expenses associated with the redemption of the Subordinated Debentures during
such period.
"Environmental Claim" shall mean, with respect to any Person, any
written notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, Releases or threatened Releases of pollutants, contaminants,
chemicals, toxic or hazardous substances or wastes or other Hazardous Materials
into the indoor or outdoor environment, including, without limitation, ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or toxic or hazardous substances, wastes or other Hazardous Materials.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries of (i) any capital stock, (ii) any warrants or
options exercisable in respect of
4
<PAGE>
capital stock (other than any warrants or options issued to directors,
officers, employees or consultants of the Company or any of its Subsidiaries
pursuant to employee benefit plans established in the ordinary course of
business and any capital stock of the Company issued upon the exercise of such
warrants or options) or (iii) any other security or instrument representing an
equity interest (or the right to obtain any equity interest) in the Company or
any of its Subsidiaries or (b) the receipt by the Company or any of its
Subsidiaries after the date hereof of any capital contribution (whether or not
evidenced by any equity security issued by the recipient of such contribution);
provided that Equity Issuance shall not include (x) any such issuance or sale
by any Subsidiary of the Company to the Company or any Wholly Owned Subsidiary
of the Company or (y) any capital contribution by the Company or any Wholly
Owned Subsidiary of the Company to any Subsidiary of the Company.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.
"Eurodollar Loans" shall mean Syndicated Loans that bear interest at
rates based on rates referred to in the definition of "Fixed Base Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for the Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the Fixed Base Rate for such
Loan for such Interest Period divided by 1 minus the Reserve Requirement (if
any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 9 hereof.
"Existing Credit Agreements" shall mean the 364-Day Credit Agreement
and the 3-Year Credit Agreement, each dated as of October 14, 1993, between the
Company, the banks party thereto and Chase, as agent for such banks.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal
5
<PAGE>
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to Chase on such Business Day on such transactions as determined by
the Agent.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate Loan for
the Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Agent, of the rates
per annum quoted by the respective Reference Banks at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) on the date two Business Days
prior to the first day of such Interest Period for the offering by the
respective Reference Banks to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of such Eurodollar Loan or LIBOR
Market Loan to be made by the respective Reference Banks. If any Reference Bank
is not participating in any Fixed Rate Loans during the Interest Period
therefor, the Fixed Base Rate for such Loans for such Interest Period shall be
determined by reference to the amount of such Loans that such Reference Bank
would have made or had outstanding had it been participating in such Loan;
provided that in the case of any LIBOR Market Loan, the Fixed Base Rate for such
Loan shall be determined with reference to deposits of $10,000,000. If any
Reference Bank does not timely furnish such information for determination of any
Fixed Base Rate, the Agent shall determine such Fixed Base Rate on the basis of
the information timely furnished by the remaining Reference Banks.
"Fixed Rate Loans" shall mean Eurodollar Loans and, for
the purposes of the definition of "Fixed Base Rate" in this Section 1.01 and in
Section 5 hereof, LIBOR Market Loans.
"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used
6
<PAGE>
as a verb shall have a correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person:
(a) obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property to another Person subject to an understanding or agreement, contingent
or otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than (i) trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered and (ii)
deferred compensation owing to employees and former employees, directors and
former directors; (c) Indebtedness of others secured by a Lien on the Property
of such Person, whether or not the respective indebtedness so secured has been
assumed by such Person; (d) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
EBIT for such period to (b) Interest Expense for such period.
"Interest Expense" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations) accrued or capitalized
during such period (whether or not actually paid during such period) plus (b)
the net amount payable (or minus the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period).
"Interest Period" shall mean:
(a) with respect to any Eurodollar Loan, each period commencing on the
date such Eurodollar Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 4.05 hereof,
7
<PAGE>
except that each Interest Period that commences on the last Business Day of
a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last Business Day of the appropriate subsequent calendar month;
(b) With respect to any Set Rate Loan, the period commencing on the
date such Set Rate Loan is made and ending on any Business Day up to 180
days thereafter, as the Company may select as provided in Section 2.03(b)
hereof;
(c) With respect to any LIBOR Market Loan, the period commencing on
the date such LIBOR Market Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 2.03(b)
hereof, except that each Interest Period that commences on the last
Business Day of a calendar month (or any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month; and
(d) with respect to any Base Rate Loan, the period commencing on the
date such Base Rate Loan is made and ending on the earlier of the first
Quarterly Date thereafter or the Commitment Termination Date.
Notwithstanding the foregoing: (i) if any Interest Period for any Loan would
otherwise end after the Commitment Termination Date in effect at the date of
such Loan, such Interest Period shall not be available hereunder; (ii) each
Interest Period that would otherwise end on a day that is not a Business Day
shall end on the next succeeding Business Day (or, in the case of an Interest
Period for a Eurodollar Loan or a LIBOR Market Loan, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iii) no Interest Period for any Loan (other than a Base Rate
Loan or a Set Rate Loan) shall have a duration of less than one month and, if
the Interest Period for any Eurodollar or LIBOR Market Loan would otherwise be a
shorter period, such Loan shall not be available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"Investment" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days representing the
purchase price of inventory or
8
<PAGE>
supplies sold by such Person in the ordinary course of business; (c) the
entering into of any Guarantee of, or other contingent obligation with respect
to, Indebtedness or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person; or (d) the entering into of any Interest Rate Protection Agreement.
"Level I Period" shall mean any period during which (a) no Event of
Default shall have occurred and be continuing, (b) the Standard & Poor's Rating
is at or above A1 (or any successor rating) and (c) the Moody's Rating is at or
above P1 (or any successor rating).
"Level II Period" shall mean any period, other than a Level I Period,
during which (a) no Event of Default shall have occurred and be continuing, (b)
the Standard & Poor's Rating is at or above A2 (or any successor rating) and (c)
the Moody's Rating is at or above P2 (or any successor rating).
"Level III Period" shall mean any period that is not a Level I Period
or a Level II Period.
"Leverage Ratio" shall mean, at any time, the ratio of Total Debt to
Total Capital at such time.
"LIBO Margin" shall have the meaning assigned to such term in Section
2.03(c)(ii)(C) hereof.
"LIBO Rate" shall mean, for any LIBOR Market Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Agent to be equal to the rate of interest specified in the definition of "Fixed
Base Rate" in this Section 1.01 for the Interest Period for such Loan divided by
1 minus the Reserve Requirement (if any) for such Loan for such Interest Period.
"LIBOR Auction" shall mean a solicitation of Money Market Quotes
setting forth LIBO Margins based on the LIBO Rate pursuant to Section 2.03
hereof.
"LIBOR Market Loans" shall mean Money Market Loans interest rates on
which are determined on the basis of LIBO Rates pursuant to a LIBOR Auction.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loans" shall mean Syndicated Loans and Money Market Loans.
"Majority Banks" shall mean, subject to the last paragraph of Section
11.04 hereof, Banks having more than 50% of the aggregate amount of the
Commitments or, if the Commitments shall have terminated, Banks holding more
than 50% of the aggregate unpaid principal amount of the Loans.
9
<PAGE>
"Margin Stock" shall mean "margin stock" within the meaning of
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the Property, business, operations or financial condition of the Company and its
Subsidiaries taken as a whole, (b) the ability of the Company to perform its
obligations hereunder or under the Notes, (c) the validity or enforceability of
this Agreement or of the Notes, (d) the rights and remedies of the Banks and the
Agent hereunder and under the Notes or (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith.
"Material Subsidiary" shall mean, at any time, a Subsidiary of the
Company that as of such time meets the definition of a "significant subsidiary"
contained as of the date hereof in Regulation S-X of the Securities and Exchange
Commission.
"Money Market Borrowing" shall have the meaning assigned to such term
in Section 2.03(b) hereof.
"Money Market Loan Limit" shall have the meaning assigned to such term
in Section 2.03(c)(ii) hereof.
"Money Market Loans" shall mean the loans provided for by Section 2.03
hereof.
"Money Market Notes" shall mean the promissory notes provided for by
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Money Market Quote" shall mean an offer in accordance with Section
2.03(c) hereof by a Bank to make a Money Market Loan with one single specified
interest rate.
"Money Market Quote Request" shall have the meaning assigned to such
term in Section 2.03(b) hereof.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
corporation thereto.
"Moody's Rating" shall mean, at any time, the then current rating
(including the failure to rate) by Moody's of the Company's commercial paper.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean the aggregate amount of all cash
received by the Company and its Subsidiaries in respect of any Equity Issuance
net of reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith.
"Notes" shall mean the Syndicated Notes and the Money Market Notes.
10
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount under this Agreement or any Note that is not paid when
due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 2% plus the Base Rate as in effect from time to time plus the
Applicable Margin for Base Rate Loans; provided that, if the amount so in
default is principal of a Eurodollar Loan or a Money Market Loan and the due
date thereof is a day other than the last day of the Interest Period therefor,
the "Post-Default Rate" for such principal shall be, for the period from and
including such due date to but excluding the last day of such Interest Period,
2% plus the interest rate for such Loan as provided in Section 3.02 hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
"Principal Office" shall mean the principal office of Chase, located
on the date hereof at 1 Chase Manhattan Plaza, New York, New York 10081.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date of this Agreement.
"Reference Banks" shall mean Chase, First Interstate Bank of
California and The Toronto-Dominion Bank (or their respective Applicable Lending
Offices, as the case may be).
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a
11
<PAGE>
class of banks including such Bank of or under any Federal, state or foreign law
or regulations (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for the Interest Period for any
Eurodollar Loan or LIBOR Market Loan, the average maximum rate at which reserves
(including, without limitation, any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D by member banks of the Federal Reserve System in New York City with
deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves required to
be maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by reference
to which the Fixed Base Rate for Eurodollar Loans or LIBOR Market Loans (as the
case may be) is to be determined as provided in the definition of "Fixed Base
Rate" in this Section 1.01 or (ii) any category of extensions of credit or other
assets that includes Eurodollar Loans or LIBOR Market Loans.
"Set Rate" shall have the meaning assigned to such term
in Section 2.03(c)(ii)(D) hereof.
"Set Rate Auction" shall mean a solicitation of Money Market Quotes
setting forth Set Rates pursuant to Section 2.03 hereof.
"Set Rate Loans" shall mean Money Market Loans the interest rates on
which are determined on the basis of Set Rates pursuant to a Set Rate Auction.
"Short-Term Credit Agreement" shall mean the 364-Day Credit Agreement
dated the date hereof between the Company, the Banks and Chase, as agent for the
Banks, as the same may be modified and supplemented and in effect from time to
time.
"Standard & Poor's" shall mean Standard & Poor's Corporation or any
successor corporation thereto.
"Standard & Poor's Rating" shall mean, at any time, the then current
rating (including the failure to rate) by Standard & Poor's of the Company's
commercial paper.
"Subordinated Debentures" shall mean the 7 1/2% zero coupon
convertible subordinated debentures due 2010 issued by the Company.
"Subordinated Indebtedness" shall mean, collectively, (a) Indebtedness
of the Company in respect of the Subordinated Debentures and (b) other
Indebtedness (i) for which the Company
12
<PAGE>
is directly and primarily liable, (ii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated and (iii) that is
subordinated in right of payment to the obligations of the Company to pay
principal of and interest on the Loans and Notes and all other amounts payable
hereunder on the following terms: the maturity thereof shall not be prior to the
then Commitment Termination Date hereunder, nor shall any principal amortization
be required prior to such Commitment Termination Date; no payments of principal
thereof or interest thereon shall be made following the occurrence and during
the continuance of an Event of Default; and the covenants and events of default
provided therein shall not be more burdensome on the Company in any material
respect than the covenants and the Events of Default set forth herein, and (iv)
that is evidenced by documentation consistent with the foregoing and otherwise
in form and substance satisfactory to the Majority Banks in their reasonable
determination.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Syndicated Loans" shall mean the loans provided for by Section 2.01
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Syndicated Notes" shall mean the promissory notes provided for by
Section 2.08(a) hereof and all promissory notes delivered in substitution or
exchange thereof, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Total Capital" shall mean, at any time, Consolidated Net Worth plus
Total Debt.
"Total Debt" shall mean, at any time, the aggregate outstanding
principal amount of all Indebtedness of the Company and its Subsidiaries (other
than Subordinated Indebtedness) at such time that is, or would (if a
consolidated balance sheet of the Company and its Subsidiaries existed at such
time) be, reflected on a consolidated balance sheet of the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP).
"Type" shall have the meaning assigned to such term in Section 1.03
hereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or
13
<PAGE>
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Banks hereunder shall (unless otherwise disclosed to the Banks in writing at the
time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Banks hereunder (which, prior to the delivery of the
first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as of December 31, 1992 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Banks pursuant to Section 8.01 hereof (or,
prior to the delivery of the first financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as of
December 31, 1992 referred to in Section 7.02 hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Banks shall so
object in writing within 30 days after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the audited financial statements referred to in Section 7.02 hereof).
(b) The Company shall deliver to the Banks at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not change
the last day of its fiscal year from December 31 of each year, or the last days
of the first three fiscal quarters in each of its fiscal years from March 31,
June 30 and September 30 of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished by
"Class" and by "Type". The "Class" of a Loan refers to whether such Loan is a
Money Market Loan or a Syndicated Loan, each of which constitutes a Class. The
"Type"
14
<PAGE>
of a Loan refers to whether such Loan is a Base Rate Loan, a Eurodollar Loan,
a Set Rate Loan or a LIBOR Market Loan, each of which constitutes a Type.
Loans may be identified by both Class and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans. Each Bank severally agrees, on the terms and conditions of
this Agreement, to make loans to the Company in Dollars during the period from
and including the date hereof to but not including the Commitment Termination
Date in an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of the Commitment of such Bank as in effect from time to
time; provided that the aggregate unpaid principal amount of all Syndicated
Loans, together with the aggregate unpaid principal amount of all Money Market
Loans, at any one time outstanding shall not exceed the aggregate amount of the
Commitments at such time. Subject to the terms and conditions of this Agreement,
during such period the Company may borrow, repay and reborrow the amount of the
Commitments by means of Base Rate Loans and Eurodollar Loans; provided that
there may be no more than ten different Interest Periods for both Syndicated
Loans and Money Market Loans outstanding at the same time (for which purpose
Interest Periods described in different lettered clauses of the definition of
the term "Interest Period" shall be deemed to be different Interest Periods even
if they are coterminous).
2.02 Borrowings of Syndicated Loans. The Company shall give the Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing of
Syndicated Loans hereunder, each Bank shall make available the amount of the
Syndicated Loan or Loans to be made by it on such date to the Agent, at account
number NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal
Office, in immediately available funds, for account of the Company. The amount
so received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 Money Market Loans.
(a) In addition to borrowings of Syndicated Loans, at any time prior
to the Commitment Termination Date the Company may, as set forth in this Section
2.03, request the Banks to make offers to make Money Market Loans to the Company
in Dollars. The Banks may, but shall have no obligation to, make such offers and
the Company may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03. Money Market Loans may be LIBOR Market
Loans or Set Rate Loans (each a "Type" of Money Market Loan), provided that:
(i) there may be no more than ten different Interest Periods for both
Syndicated Loans and Money Market Loans outstanding at the same time (for which
purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous);
15
<PAGE>
(ii) the aggregate unpaid principal amount of all Money Market Loans,
together with the aggregate unpaid principal amount of all Syndicated
Loans, at any one time outstanding shall not exceed the aggregate amount of
the Commitments at such time.
(b) When the Company wishes to request offers to make Money Market
Loans, it shall give the Agent (which shall promptly notify the Banks) notice (a
"Money Market Quote Request") so as to be received no later than 11:00 a.m. New
York time on (x) the fourth Business Day prior to the date of borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Business Day next preceding
the date of borrowing proposed therein, in the case of a Set Rate Auction (or,
in any such case, such other time and date as the Company and the Agent, with
the consent of the Majority Banks, may agree). The Company may request offers to
make Money Market Loans for up to three different Interest Periods in a single
notice (for which purpose Interest Periods in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous); provided that the request for
each separate Interest Period shall be deemed to be a separate Money Market
Quote Request for a separate borrowing (a "Money Market Borrowing"). Each such
notice shall be substantially in the form of Exhibit D hereto and shall specify
as to each Money Market Borrowing:
(i) the proposed date of such borrowing, which shall be a Business
Day;
(ii) the aggregate amount of such Money Market Borrowing, which shall
be at least $10,000,000 (or a larger multiple of $1,000,000) but shall not
cause the limits specified in Section 2.03(a) hereof to be violated;
(iii) the duration of the Interest Period applicable thereto;
(iv) whether the Money Market Quotes requested for a particular
Interest Period are seeking quotes for LIBOR Market Loans or Set Rate
Loans; and
(v) if the Money Market Quotes requested are seeking quotes for Set
Rate Loans, the date (which may be no earlier than the Business Day
immediately following the date on which the Money Market Quote Request is
given) on which the Money Market Quotes are to be submitted if it is before
the proposed date of borrowing (the date on which such Money Market Quotes
are to be submitted is called the "Quotation Date").
Except as otherwise provided in this Section 2.03(b), no Money Market Quote
Request shall be given within five Business Days (or such other number of days
as the Company and the Agent, with the consent of the Majority Banks, may agree)
of any other Money Market Quote Request.
(c) (i) Each Bank may submit one or more Money Market Quotes, each
containing an offer to make a Money Market Loan in response to any Money
Market Quote Request; provided that, if the Company's request under Section
2.03(b) hereof specified more than one Interest Period, such Bank may make
16
<PAGE>
a single submission containing one or more Money Market Quotes for each
such Interest Period. Each Money Market Quote must be submitted to the
Agent not later than (x) 2:00 p.m. New York time on the fourth Business Day
prior to the proposed date of borrowing, in the case of a LIBOR Auction or
(y) 11:00 a.m. New York time on the Quotation Date, in the case of a Set
Rate Auction (or, in any such case, such other time and date as the Company
and the Agent, with the consent of the Majority Banks, may agree); provided
that any Money Market Quote may be submitted by Chase (or its Applicable
Lending Office) only if Chase (or such Applicable Lending Office) notifies
the Company of the terms of the offer contained therein not later than (x)
1:00 p.m. New York time on the fourth Business Day prior to the proposed
date of borrowing, in the case of a LIBOR Auction or (y) 10:45 a.m. New
York time on the Quotation Date, in the case of a Set Rate Auction. Subject
to Sections 5.02(b), 5.03, 6.02 and 9 hereof, any Money Market Quote so
made shall be irrevocable except with the consent of the Agent given on the
instructions of the Company.
(ii) Each Money Market Quote shall be substantially in the form of
Exhibit E hereto and shall specify:
(A) the proposed date of borrowing and the Interest Period
therefor;
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount shall be at least
$5,000,000 (or a larger multiple of $1,000,000); provided that the
aggregate principal amount of all Money Market Loans for which a Bank
submits Money Market Quotes (x) may be greater or less than the
Commitment of such Bank but (y) may not exceed the principal amount of
the Money Market Borrowing for a particular Interest Period for
which offers were requested;
(C) in the case of a LIBOR Auction, the margin above or below the
applicable LIBO Rate (the "LIBO Margin") offered for each such Money
Market Loan, expressed as a percentage (rounded upwards, if necessary,
to the nearest 1/10,000th of 1%) to be added to or subtracted from the
applicable LIBO Rate;
(D) in the case of a Set Rate Auction, the rate of interest per
annum (rounded upwards, if necessary, to the nearest 1/10,000th of 1%)
offered for each such Money Market Loan (the "Set Rate"); and
(E) the identity of the quoting Bank.
Unless otherwise agreed by the Agent and the Company, no Money Market Quote
shall contain qualifying, conditional or similar language or propose terms
other than or in addition to those set forth in the applicable Money Market
Quote Request and, in particular, no Money Market Quote may be conditioned
upon acceptance by the Company of all (or some specified minimum) of the
principal amount of the Money Market Loan for which such Money Market Quote
is being made, provided that the submission by any Bank containing more
17
<PAGE>
than one Money Market Quote may be conditioned on the Company not accepting
offers contained in such submission that would result in such Bank making
Money Market Loans pursuant thereto in excess of a specified aggregate
amount (the "Money Market Loan Limit").
(d) The Agent shall (x) in the case of a Set Rate Auction, as promptly
as practicable after the Money Market Quote is submitted (but in any event not
later than 11:15 a.m. New York time on the Quotation Date) or (y) in the case of
a LIBOR Auction, by 4:00 p.m. New York time on the day a Money Market Quote is
submitted, notify the Company of the terms (i) of any Money Market Quote
submitted by a Bank that is in accordance with Section 2.03(c) hereof and (ii)
of any Money Market Quote that amends, modifies or is otherwise inconsistent
with a previous Money Market Quote submitted by such Bank with respect to the
same Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Company shall specify (A) the aggregate principal amount
of the Money Market Borrowing for which offers have been received and (B) the
respective principal amounts and LIBO Margins or Set Rates, as the case may be,
so offered by each Bank (identifying the Bank that made each Money Market
Quote).
(e) Not later than noon New York time on (x) the third
Business Day prior to the proposed date of borrowing, in the case of a LIBOR
Auction or (y) the Quotation Date, in the case of a Set Rate Auction (or, in any
such case, such other time and date as the Company and the Agent, with the
consent of the Majority Banks, may agree), the Company shall notify the Agent of
its acceptance or nonacceptance of the offers so notified to it pursuant to
Section 2.03(d) hereof (which notice shall specify the aggregate principal
amount of offers from each Bank for each Interest Period that are accepted, it
being understood that the failure of the Company to give such notice by such
time shall constitute nonacceptance) and the Agent shall promptly notify each
affected Bank. The notice from the Agent shall also specify the aggregate
principal amount of offers for each Interest Period that were accepted and the
lowest and highest LIBO Margins and Set Rates that were accepted for each
Interest Period. The Company may accept any Money Market Quote in whole or in
part (provided that any Money Market Quote accepted in part shall be at least
$5,000,000 or a larger multiple of $1,000,000); provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the aggregate principal amount of each Money Market Borrowing
shall be at least $10,000,000 (or a larger multiple of $1,000,000) but
shall not cause the limits specified in Section 2.03(a) hereof to be
violated;
(iii) acceptance of offers may, subject to clause (v) below, be made
only in ascending order of LIBO Margins or Set Rates, as the case may be,
in each case beginning with the lowest rate so offered;
(iv) the Company may not accept any offer where the
18
<PAGE>
Agent has advised the Company that such offer fails to comply with Section
2.03(c)(ii) hereof or otherwise fails to comply with the requirements of
this Agreement (including, without limitation, Section 2.03(a) hereof);
(v) the aggregate principal amount of each Money Market Borrowing from
any Bank may not exceed any applicable Money Market Loan Limit of such
Bank.
If offers are made by two or more Banks with the same LIBO Margins or Set Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Company among such Banks as nearly as
possible (in amounts of at least $5,000,000 or larger multiples of $1,000,000)
in proportion to the aggregate principal amount of such offers. Determinations
by the Company of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Bank whose offer to make any Money Market Loan has been
accepted in accordance with the terms and conditions of this Section 2.03 shall,
not later than 1:00 p.m. New York time on the date specified for the making of
such Loan, make the amount of such Loan available to the Agent at account number
NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal Office
in immediately available funds, for account of the Company. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company on such date by depositing the same,
in immediately available funds, in an account of the Company maintained with
Chase at the Principal Office designated by the Company.
(g) The amount of any Money Market Loan made by any Bank shall not
constitute a utilization of such Bank's Commitment.
(h) The Company shall pay to the Agent a fee of $3,000 each time the
Company gives a Money Market Quote Request to the Agent.
2.04 Changes of Commitments.
(a) The Commitments shall automatically terminate on the Commitment
Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) so long as no Syndicated Loans or Money Market Loans are outstanding, to
terminate the Commitments and (ii) to reduce the aggregate unused amount of the
Commitments (for which purpose use of the Commitments shall be deemed to include
the aggregate principal amount of all Money Market Loans); provided that (x) the
Company shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (y) each partial reduction shall be in an aggregate
amount at least equal to $10,000,000 (or a larger multiple of $1,000,000).
(c) The Commitments once terminated or reduced may not be reinstated.
19
<PAGE>
2.05 Facility Fee. The Company shall pay to the Agent for account of
each Bank a facility fee on the amount of such Bank's Commitment as then in
effect (whether or not utilized), for the period from and including the date of
this Agreement to but not including the earlier of the date such Commitment is
terminated and the Commitment Termination Date, at a rate per annum equal to (a)
0.1875% during any Level I Period, (b) 0.2500% during any Level II Period and
(c) 0.3750% during any Level III Period. Accrued facility fee shall be payable
on each Quarterly Date and on the earlier of the date the Commitments are
terminated and the Commitment Termination Date. Any change in a facility fee by
reason of a change in the Standard & Poor's Rating or the Moody's Rating shall
become effective on the date of announcement or publication by the respective
rating agencies of a change in such rating or, in the absence of such
announcement or publication, on the effective date of such changed rating.
2.06 Lending Offices. The Loans of each Type made by each Bank shall
be made and maintained at such Bank's Applicable Lending Office for Loans of
such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor the Agent shall be responsible for the failure of any other
Bank to make a Loan to be made by such other Bank, and no Bank shall have any
obligation to the Agent or any other Bank for the failure by such Bank to make
any Loan required to be made by such Bank. The amounts payable by the Company at
any time hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank or the Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.
2.08 Notes.
(a) The Syndicated Loans made by each Bank shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-1
hereto, dated the date hereof, payable to such Bank in a principal amount equal
to the amount of its Commitment as originally in effect and otherwise duly
completed.
(b) The Money Market Loans made by any Bank shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-2
hereto, dated the date hereof, payable to such Bank and otherwise duly
completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period of each Loan of each Class made by each Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, prior to any transfer of the Note evidencing the Loans of such
Class held by it, endorsed by such Bank on the schedule attached to such Note or
any continuation thereof; provided that the failure of such Bank to make any
such recordation or endorsement shall not affect the obligations of the Company
to make a payment when due of any amount owing hereunder or under such Note in
respect
20
<PAGE>
of the Loans to be evidenced by such Note.
(d) No Bank shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Bank's
Commitment, Loans and Notes pursuant to Section 11.06 hereof.
2.09 Optional Prepayments. Subject to Sections 4.04 and 5.05 hereof,
the Company shall have the right to prepay Loans at any time or from time to
time, provided that the Company shall give the Agent notice of each such
prepayment as provided in Section 4.05 hereof (and, upon the date specified in
any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder).
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Company hereby promises to pay to the
Agent for account of each Bank the principal of each Loan made by such Bank, and
each Loan shall mature, on the last day of the Interest Period therefor.
3.02 Interest. The Company hereby promises to pay to the Agent for
account of each Bank interest on the unpaid principal amount of each Loan made
by such Bank for the period from and including the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) if such Loan is a Base Rate Loan, the Base Rate (as in effect
from time to time) plus the Applicable Margin;
(b) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such
Loan for the Interest Period therefor plus the Applicable Margin;
(c) if such Loan is a LIBOR Market Loan, the LIBO Rate for such Loan
for the Interest Period therefor plus (or minus) the LIBO Margin quoted by
the Bank making such Loan in accordance with Section 2.03 hereof; and
(d) if such Loan is a Set Rate Loan, the Set Rate for such Loan for
the Interest Period therefor quoted by the Bank making such Loan in
accordance with Section 2.03 hereof.
Notwithstanding the foregoing, the Company hereby promises to pay to the Agent
for account of each Bank interest at the applicable Post-Default Rate on any
principal of any Loan made by such Bank and on any other amount payable by the
Company hereunder or under the Notes held by such Bank to or for account of such
Bank, that shall not be paid in full when due (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Accrued interest on each Loan shall be payable (i) on the last day of the
Interest Period therefor and, if such Interest Period is longer than 90 days (in
the case of a Set Rate Loan) or three months (in the case of a Eurodollar Loan
or a LIBOR Market Loan), at 90-day or three-month intervals, respectively,
following the first day of such Interest
21
<PAGE>
Period, and (ii) in the case of any Loan, upon the payment or prepayment thereof
(but only on the principal amount so paid or prepaid), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand
and interest on any Fixed Rate Loan that is converted into a Base Rate Loan
pursuant to Section 5.04 hereof shall be payable on the date of conversion (but
only on the principal amount so converted). Promptly after the determination of
any interest rate provided for herein or any change therein, the Agent shall
give notice thereof to the Banks to which such interest is payable and to the
Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Company under this
Agreement and the Notes shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Agent at account
number NYAO-DI-900-9-000002 maintained by the Agent with Chase at the Principal
Office, not later than 1:00 p.m. New York time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day), provided that if
a new Loan is to be made by any Bank on a date the Company is to repay any
principal of an outstanding Loan of such Bank, such Bank shall apply the
proceeds of such new Loan to the payment of the principal to be repaid and only
an amount equal to the difference between the principal to be borrowed and the
principal to be repaid shall be made available by such Bank to the Agent as
provided in Section 2.02 hereof or paid by the Company to the Agent pursuant to
this Section 4.01, as the case may be.
(b) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Bank, specify to the Agent (which shall
so notify the intended recipient(s) thereof) the Loans or other amounts payable
by the Company hereunder to which such payment is to be applied (and in
the event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Agent shall distribute such payment to the Banks
for application in such manner as the Majority Banks, subject to Section 4.02
hereof, may determine to be appropriate).
(c) Each payment received by the Agent under this Agreement or any
Note for account of any Bank shall be paid by the Agent promptly to such Bank,
in immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan or other obligation in respect of which such payment is
made.
(d) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Syndicated Loans of a particular Type from the
Banks under Section 2.01
22
<PAGE>
hereof shall be made from the Banks, and each termination or reduction of the
amount of the Commitments under Section 2.04 hereof shall be applied to the
respective Commitments of the Banks, pro rata according to the amounts of their
respective Commitments; (b) the making of Loans of a particular Type (other than
conversions provided for by Section 5.04 hereof) shall be made pro rata among
the Banks according to the amounts of their respective Commitments and the then
current Interest Period for each Eurodollar Loan shall be coterminous; (c) each
payment or prepayment of principal of Syndicated Loans by the Company shall be
made for account of the Banks pro rata in accordance with the respective unpaid
principal amounts of the Syndicated Loans held by them, provided that if
immediately prior to giving effect to any such payment in respect of any
Syndicated Loans the outstanding principal amount of the Syndicated Loans shall
not be held by the Banks pro rata in accordance with their respective
Commitments in effect at the time such Loans were made (by reason of a failure
of a Bank to make a Loan hereunder in the circumstances described in the last
paragraph of Section 11.04 hereof), then such payment shall be applied to the
Syndicated Loans in such manner as shall result, as nearly as is practicable, in
the outstanding principal amount of the Syndicated Loans being held by the Banks
pro rata in accordance with their respective Commitments; and (d) each payment
of interest on Syndicated Loans by the Company shall be made for account of the
Banks pro rata in accordance with the amounts of interest on such Loans then due
and payable to the respective Banks.
4.03 Computations. Interest on Money Market Loans and Eurodollar
Loans, and the facility fee payable under Section 2.05
hereof, shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable and interest on Base Rate Loans shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable. Notwithstanding the foregoing, for each day that the
Base Rate is calculated by reference to the Federal Funds Rate, interest on Base
Rate Loans shall be computed on the basis of a year of 360 days and actual days
elapsed.
4.04 Minimum Amounts. Each borrowing shall be in an aggregate amount
at least equal to $10,000,000, and each partial prepayment of principal of Loans
shall be in an aggregate amount at least equal to $5,000,000, or in each case a
larger multiple of $1,000,000 (borrowings or prepayments of Loans of different
Types or, in the case of Eurodollar Loans, having different Interest Periods at
the same time hereunder to be deemed separate borrowings and prepayments for
purposes of the foregoing, one for each Type or Interest Period), provided that
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $10,000,000 or a larger multiple
of $1,000,000 and, if any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during such
period.
4.05 Certain Notices. Except as otherwise provided in Section 2.03
hereof with respect to Money Market Loans, notices by the Company to the Agent
of terminations or reductions of the Commitments and of borrowings and optional
prepayments of Loans, of Types of Loans and of the duration of Interest Periods
shall
23
<PAGE>
be irrevocable and shall be effective only if received by the Agent not later
than 10:00 a.m. New York time on the number of Business Days prior to the date
of the relevant termination, reduction, borrowing or prepayment or the first day
of such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment of
Base Rate Loans same day
Borrowing or prepayment of,
or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
optional prepayment shall specify the Loans to be borrowed or prepaid and the
amount (subject to Section 4.04 hereof) and Type of each Loan to be borrowed
or prepaid and the date of borrowing or optional prepayment (which shall be a
Business Day). The Agent shall promptly notify the Banks of the contents of
each such notice.
4.06 Non-Receipt of Funds by the Agent. Unless the Agent shall have
been notified by a Bank or the Company (the "Payor") prior to the date on which
the Payor is to make payment to the Agent of (in the case of a Bank) the
proceeds of a Loan to be made by such Bank hereunder or (in the case of the
Company) a payment to the Agent for account of one or more of the Banks
hereunder (such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid, provided that if neither the recipient(s) nor the Payor
shall return the Required Payment to the Agent within three Business Days of the
Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Banks, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required
24
<PAGE>
Payment at the Post-Default Rate (and, in case the recipient(s) shall
return the Required Payment to the Agent, without limiting the obligation
of the Company under Section 3.02 hereof to pay interest to such
recipient(s) at the Post-Default Rate in respect of the Required Payment)
and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Banks to the Company, the Payor and the Company shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).
4.07 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, upon the occurrence of any Event of Default
and so long as the same shall be continuing, at its option, to offset balances
held by it for account of the Company at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Bank's
Loans or any other amount payable to such Bank hereunder, that is not paid when
due (regardless of whether such balances are then due to the Company), in which
case it shall promptly notify the Company and the Agent thereof, provided that
such Bank's failure to give such notice shall not affect the validity thereof.
(b) If any Bank shall obtain from the Company payment of any
principal of or interest on any Loan of any Class owing to it or payment of any
other amount under this Agreement through the exercise of any right of set-off,
banker's lien or counterclaim or similar right or otherwise (other than from the
Agent as provided herein), and, as a result of such payment, such Bank shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or such other amounts then due hereunder by the Company to such
Bank than the percentage received by any other Bank, it shall promptly purchase
from such other Banks participations in (or, if and to the extent specified by
such Bank, direct interests in) the Loans of such Class or such other amounts,
respectively, owing to such other Banks (or in interest due thereon, as the case
may be) in such amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Banks shall share the benefit of
such excess payment (net of any expenses that may be incurred by such Bank in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or such other
amounts, respectively, owing to each of the Banks, provided that if at the time
of such payment the outstanding principal amount of the Syndicated Loans shall
not be held by the Banks pro rata in accordance with their respective
Commitments in effect at the time such Loans were made (by reason of a failure
of a Bank to make a Loan hereunder in the circumstances described in the last
paragraph of Section 11.04 hereof), then such purchases of participations and/or
direct interests shall be made in such manner as will result, as nearly as is
practicable, in the outstanding principal amount of the
25
<PAGE>
Syndicated Loans being held by the Banks pro rata according to
the amounts of such Commitments. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Bank so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct holder of Loans or other amounts (as the case may
be) owing to such Bank in the amount of such participation.
(d) Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy, insolvency or
other similar law, any Bank receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Banks entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate such Bank
for any costs that such Bank determines are attributable to its making or
maintaining of any Fixed Rate Loans or its Commitment, or any reduction in any
amount receivable by such Bank hereunder in respect of any of such Loans or its
Commitment (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any Regulatory Change that:
(i) shall subject any Bank (or its Applicable Lending Office for any
of such Loans) to any tax, duty or other charge in respect of such Loans or
its Notes or changes the basis of taxation of any amounts payable to such
Bank under this Agreement or its Notes in respect of any of such Loans
(excluding changes in the rate of tax on the overall net income of such
Bank or of such Applicable Lending Office by the jurisdiction under whose
laws such Bank is organized or incorporated or in which such Bank has its
principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate or LIBO Rate, as the case may be, for
such Loan) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Bank or its Commitment; or
(iii) imposes any other condition affecting this Agreement or its Notes
or its Commitment.
26
<PAGE>
If any Bank requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Bank (with a copy to the Agent), suspend the
obligation of such Bank thereafter to make Eurodollar Loans until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable), provided that such
suspension shall not affect the right of such Bank to receive the compensation
so requested.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of such Bank that includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank that includes Eurodollar Loans
or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets that it may hold, then, if such Bank so elects by notice
to the Company (with a copy to the Agent), the obligation of such Bank to make
Eurodollar Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section 5.04 hereof
shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Bank from time to time on request such amounts as such Bank may determine to be
necessary to compensate such Bank (or, without duplication, the bank holding
company of which such Bank is a subsidiary) for any costs that it determines are
attributable to the maintenance by such Bank (or any Applicable Lending Office
or such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not having the force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord
(including, without limitation, the Final Risk-Based Capital Guidelines of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 208,
Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital
Guidelines of the Office of the Comptroller of the Currency (12 C.F.R. Part 3,
Appendix A)), of capital in respect of its Commitment or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Bank (or any Applicable Lending
Office or such bank holding company) to a level below that which such Bank (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c), "Basle Accord" shall mean the proposals for
risk-based capital framework described by the Basle Committee on Banking
Regulations and Supervisory Practices in its paper entitled "International
Convergence of Capital Measurement and Capital Standards" dated July 1988, as
amended, modified and supplemented and in effect from time to time or any
replacement
27
<PAGE>
thereof.
(d) Each Bank shall notify the Company of any event occurring after
the date of this Agreement entitling such Bank to compensation under paragraph
(a) or (c) of this Section 5.01 as promptly as practicable, but in any event
within 45 days, after such Bank obtains actual knowledge thereof; provided that
(i) if any Bank fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Bank shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Bank does
give such notice and (ii) each Bank will designate a different Applicable
Lending Office for the Loans of such Bank affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Bank, be disadvantageous to such Bank,
except that such Bank shall have no obligation to designate an Applicable
Lending Office located in the United States of America. Each Bank will furnish
to the Company a certificate setting forth the basis and amount of each request
by such Bank for compensation under paragraph (a) or (c) of this Section 5.01.
Determinations and allocations by any Bank for purposes of this Section 5.01 of
the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this
Section 5.01, or of the effect of capital maintained pursuant to paragraph (c)
of this Section 5.01, on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Bank under this Section 5.01,
shall be conclusive, provided that such determinations and allocations are made
on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Fixed Base Rate for
any Interest Period:
(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Fixed Base Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for either Type of Fixed Rate
Loans as provided herein; or
(b) the Majority Banks determine (or any Bank that has outstanding a
Money Market Quote with respect to a LIBOR Market Loan determines), which
determination shall be conclusive, and notify (or notifies, as the case may
be) the Agent that the relevant rates of interest referred to in the
definition of "Fixed Base Rate" in Section 1.01 hereof upon the basis of
which the rate of interest for Eurodollar Loans (or LIBOR Market Loans, as
the case may be) for such Interest Period is to be determined are not
likely adequately to cover the cost to such Banks (or to such quoting Bank)
of making or maintaining Eurodollar Loans for such Interest Period;
then the Agent shall give the Company and each Bank prompt notice thereof and,
so long as such condition remains in effect, the Banks (or such quoting Bank)
shall be under no obligation to make
28
<PAGE>
additional Eurodollar Loans.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans or
LIBOR Market Loans hereunder, then such Bank shall promptly notify the Company
thereof (with a copy to the Agent) and such Bank's obligation to make Eurodollar
Loans shall be suspended until such time as such Bank may again make and
maintain Eurodollar Loans (in which case the provisions of Section 5.04 hereof
shall be applicable), and such Bank shall no longer be obligated to make any
LIBOR Market Loan that it has offered to make.
5.04 Treatment of Affected Loans. If the obligation of any Bank to
make a particular Type of Fixed Rate Loans shall be suspended pursuant to
Section 5.01 or 5.03 hereof, and, unless and until such Bank gives notice as
provided below that the circumstances specified in Section 5.01 or 5.03 hereof
that gave rise to such conversion no longer exist, all Loans that would
otherwise be made by such Bank as Eurodollar Loans shall be made instead as Base
Rate Loans.
5.05 Compensation. The Company shall pay to the Agent
for account of each Bank, upon the request of such Bank through the Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost or expense that such Bank determines
is attributable to:
(a) any payment, mandatory or optional prepayment of a Fixed Rate
Loan or a Set Rate Loan made by such Bank for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section 9
hereof) on a date other than the last day of the Interest Period for such
Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Fixed Rate Loan or a Set Rate
Loan (with respect to which, in the case of a Money Market Loan, the
Company has accepted a Money Market Quote) from such Bank on the date for
such borrowing specified in the relevant notice of borrowing given pursuant
to Section 2.02 or 2.03(b) hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
not borrowed for the period from the date of such payment, prepayment or failure
to borrow to the last day of the then current Interest Period for such Loan (or,
in the case of a failure to borrow, the Interest Period for such Loan that would
have commenced on the date specified for such borrowing) at the applicable rate
of interest for such Loan provided for herein over (ii) the amount of interest
that otherwise would have accrued on such principal amount at a rate per annum
equal to the interest component of the amount such Bank would have bid in the
London interbank market (if such Loan is a Eurodollar Loan or a LIBOR Market
Loan) or the United States secondary certificate of deposit market (if such Loan
is a Set Rate Loan) for Dollar deposits of leading banks in amounts comparable
to such principal amount and with maturities
29
<PAGE>
comparable to such period (as reasonably determined by such Bank), plus, in each
case, the Applicable Margin reflected in the rate of interest referred to in the
foregoing clause (i).
5.06 U.S. Taxes.
(a) The Company agrees to pay to each Bank that is not a U.S. Person
such additional amounts as are necessary in order that the net payment of any
amount due to such non-U.S. Person hereunder after deduction for or withholding
in respect of any U.S. Taxes imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less
than the amount stated herein to be then due and payable, provided that the
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Bank hereunder unless such Bank is, on the
date hereof (or on the date it becomes a Bank as provided in Section
11.06(b) hereof) and on the date of any change in the Applicable Lending
Office of such Bank, either entitled to submit a Form 1001 (relating to
such Bank and entitling it to a complete exemption from withholding on all
interest to be received by it hereunder in respect of the Loans) or Form
4224 (relating to all interest to be received by such Bank hereunder in
respect of the Loans), or
(ii) to any U.S. Tax imposed solely by reason of the failure by such
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the Agent or any Bank
from which it is required by law to make any deduction or withholding, and
within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Company shall deliver
to the Agent for delivery to such non-U.S. Person evidence satisfactory to such
Person of such deduction, withholding or payment (as the
30
<PAGE>
case may be).
Section 6. Conditions Precedent.
6.01 Initial Loan. The obligation of any Bank to make its initial
Loan hereunder is subject to prior or simultaneous satisfaction of the condition
precedent that the Agent shall have received the following documents (with
sufficient copies for each Bank), each of which shall be satisfactory to the
Agent (and to the extent specified below, to each Bank) in form and substance:
(a) Corporate Documents. The following documents, each certified as
indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company certified as of a recent date by the Secretary of State of the
State of Delaware, and a certificate from such Secretary of State
dated as of a recent date as to the good standing of and charter
documents filed by the Company;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company (A) that attached thereto is a true and complete copy of
the by-laws of the Company as amended and in effect at all times from
the date on which the resolutions referred to in clause (B) were
adopted to and including the date of such certificate, (B) that
attached thereto is a true and complete copy of resolutions duly
adopted by the board of directors of the Company authorizing the
execution, delivery and performance of this Agreement and the Notes
and the Loans hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C)
that the charter of the Company has not been amended since the date of
the certification thereto furnished pursuant to clause (i) above and
(D) as to the incumbency and specimen signature of each officer of the
Company executing this Agreement and the Notes and each other document
to be delivered by the Company from time to time in connection
therewith (and the Agent and each Bank may conclusively rely on such
certificate until it receives notice in writing from the Company to
the contrary); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Company.
(b) Opinion of Counsel to the Company. Opinions of Heller, Ehrman,
White & McAuliffe and of the Vice President, Legal of the Company
substantially in the forms of Exhibits B-1 and B-2 hereto, respectively,
and covering such other matters as the Agent or any Bank may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinions to the Banks and the Agent).
(c) Opinion of Special New York Counsel to the Agent. An opinion of
Milbank, Tweed, Hadley & McCloy, special New York counsel to the Agent,
substantially in the form of
31
<PAGE>
Exhibit C hereto (and the Agent hereby instructs such counsel to deliver
such opinion to the Banks).
(d) Notes. The Notes, duly completed and executed.
(e) Commercial Paper Program. Copies of the dealer agreement(s)
relating to the Company's commercial paper program and evidence that
Moody's and Standard & Poor's have issued ratings for the Company's
commercial paper.
The Agent shall promptly notify the Company and the Banks when the conditions
precedent set forth in this Section 6.01 have been satisfied.
6.02 Initial and Subsequent Loans. The obligation of any Bank to
make any Loan (including any Money Market Loan and such Bank's initial
Syndicated Loan) to the Company upon the occasion of each borrowing hereunder is
subject to the further conditions precedent that, both immediately prior to the
making of such Loan and also after giving effect thereto and to the intended use
thereof: (a) no Event of Default (and, if such borrowing will increase the
outstanding aggregate principal amount of the Loans of any Bank hereunder, no
Default) shall have occurred and be continuing; and (b) the representations and
warranties made by the Company in Section 7 hereof (other than, if such
borrowing will not increase the outstanding aggregate principal amount of the
Loans of any Bank hereunder, the last sentence of Section 7.02 hereof and
Section 7.03 hereof) shall be true and complete in all material respects on and
as of the date of the making of such Loan with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date). Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Company otherwise notifies
the Agent prior to the date of such borrowing, as of the date of such
borrowing).
Section 7. Representations and Warranties. The Company represents
and warrants to the Agent and the Banks that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
7.02 Financial Condition. The Company has heretofore furnished to
each of the Banks the consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1992 and the related consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the
32
<PAGE>
fiscal year ended on said date, with the opinion thereon of Ernst & Young, and
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of June 30, 1993 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
six-month period ended on such date. All such financial statements are complete
and correct and present fairly, in all material respects, the consolidated
financial condition of the Company and its Subsidiaries as at said dates and the
consolidated results of operations and cash flows for the fiscal year and
six-month period ended on said dates (subject, in the case of such financial
statements as of June 30, 1993, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles and practices applied
on a consistent basis. None of the Company nor any of its Subsidiaries has on
the date hereof any material contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in said balance sheets as at said dates. Since June 30, 1993, there has
been no material adverse change in the consolidated financial condition,
operations, business or prospects taken as a whole of the Company and its
Subsidiaries from that set forth in said financial statements as at said date.
7.03 Litigation. Except as disclosed to the Banks in writing prior
to the date hereof, there are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Company) threatened against the Company or
any of its Subsidiaries that, if adversely determined could (either individually
or in the aggregate) have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
and the Notes, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency applicable
to the Company, or any agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument.
7.05 Action. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
this Agreement and the Notes; the execution, delivery and performance by the
Company of this Agreement and the Notes have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes
when executed and delivered for value will constitute, its legal, valid and
binding obligation, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
33
<PAGE>
considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of this Agreement or the Notes or for the legality,
validity or enforceability hereof.
7.07 Use of Credit. None of the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of the Loans
hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Banks under Section 8.01(g)
hereof.
7.09 Taxes. The Company and its Subsidiaries are members of an
affiliated group of corporations filing consolidated returns for Federal income
tax purposes, of which the Company is the "common parent" (within the meaning of
Section 1504 of the Code) of such group. The Company and its Subsidiaries have
filed all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of the Company, adequate. The Company has not given or been
requested to give a waiver of the statute of limitations relating to the payment
of Federal, state, local and foreign taxes or other impositions.
7.10 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list, as of
the date of this Agreement, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness of, or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries the principal or face amount of which equals or exceeds (or
may equal
34
<PAGE>
or exceed) $20,000,000, and the principal or face amount outstanding or that may
become outstanding under each such arrangement is correctly described in Part A
of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as of
the date of this Agreement, of each Lien securing Indebtedness of any Person the
principal or face amount of which equals or exceeds (or may equal or exceed)
$20,000,000 and covering any Property of the Company or any of its Subsidiaries,
and the aggregate Indebtedness secured (or that may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in Part B
of said Schedule I.
7.13 Environmental Matters. Each of the Company and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect.
Each of such permits, licenses and authorizations is in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not (either individually or in the aggregate)
have a Material Adverse Effect.
In addition, except as disclosed to the Banks in writing prior to the
date hereof:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and to the Company's knowledge no investigation
or review is pending or threatened by any governmental or other entity with
respect to any alleged failure by the Company or any of its Subsidiaries to
have any environmental, health or safety permit, license or other
authorization required under any Environmental Law in connection with the
conduct of the business of the Company or any of its Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated
by the Company or any of its Subsidiaries, the impact of which,
individually or in the aggregate, would have a Material Adverse Effect.
(b) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or for, or that are in the possession of,
the Company or any of its Subsidiaries in relation to facts, circumstances
or conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in a Material Adverse Effect have been made available to the Banks.
7.14 Subsidiaries. Set forth in Schedule II hereto is a complete and
correct list, as of the date hereof, of all of the
35
<PAGE>
Subsidiaries of the Company, together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
ownership interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in
Schedule II hereto, (x) each of the Company and its Subsidiaries owns, free
and clear of Liens, and has the unencumbered right to vote, all outstanding
ownership interests in each Person shown to be held by it in Schedule II
hereto, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
7.15 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Company to the Agent or any Bank in connection with the negotiation, preparation
or delivery of this Agreement or included herein or delivered pursuant hereto,
when taken as a whole do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Company and its Subsidiaries to the Agent and the Banks in connection with this
Agreement and the transactions contemplated hereby will be true, complete and
accurate in every material respect on the date as of which such information is
stated or certified. There is no fact known to the Company that could have a
Material Adverse Effect that has not been disclosed herein or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Banks for use in connection with the transactions contemplated
hereby.
7.16 Subordinated Debentures. The Company has given notice of
redemption for all of the Subordinated Debentures effective for redemption on
November 15, 1993.
Section 8. Covenants of the Company. The Company covenants and agrees
with the Banks and the Agent that, so long as any Commitment or Loan is
outstanding and until payment in full of all amounts payable by the Company
hereunder:
8.01 Financial Statements, Etc. The Company shall deliver to each of
the Banks:
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Subsidiaries for such period and for the period
from the beginning of the respective fiscal year to the end of such
period, setting forth in each case in comparative form the corresponding
consolidated figures for the corresponding periods in the preceding fiscal
year, and the related consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period, setting forth in comparative
form the corresponding consolidated figures for the last day of the
immediately preceding fiscal year, accompanied by a certificate of a senior
financial officer
36
<PAGE>
of the Company, which certificate shall state that said consolidated
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations and cash flows
of the Company and its Subsidiaries in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Company, consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for such fiscal year and the related consolidated balance
sheet of the Company and its Subsidiaries as at the end of such fiscal
year, setting forth in each case in comparative form the corresponding
consolidated figures for the preceding fiscal year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that said consolidated
financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations and cash flows
of the Company and its Subsidiaries as at the end of, and for, such fiscal
year in accordance with generally accepted accounting principles, and a
certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default, insofar as it involves accounting
matters;
(c) promptly upon their becoming publicly available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally or to holders of Subordinated Indebtedness generally,
copies of all financial statements, reports and proxy statements so mailed;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a senior financial officer of the Company
setting forth details respecting such event or condition and the action, if
any, that the Company or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Company or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA,
37
<PAGE>
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(f) promptly after the Company knows or has reason to believe
that any Default has occurred, a notice of such Default describing the same
in reasonable detail and, together with such notice or as soon thereafter
as possible, a description of the action that the Company has taken or
proposes to take with respect thereto; and
(g) from time to time such other information regarding the
financial condition, operations, business or prospects of the Company or
any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as any Bank or the Agent may reasonably request.
The Company will furnish to each Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company
38
<PAGE>
(i) to the effect that no Default has occurred and is continuing (or, if any
Default has occurred and is continuing, describing the same in reasonable detail
and describing the action that the Company has taken or proposes to take with
respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Sections 8.08, 8.09 and 8.10 hereof as
of the end of the respective quarterly fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to each Bank notice of
all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency (other than normal course
proceedings before the Food and Drug Administration) affecting the Company or
any of its Subsidiaries, except proceedings that, if adversely determined, would
not (either individually or in the aggregate) have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company will give to each
Bank notice of the assertion of any Environmental Claim by any Person against,
or with respect to the activities of, the Company or any of its Subsidiaries and
notice of any alleged violation of or non-compliance with any Environmental Laws
or any permits, licenses or authorizations, other than any Environmental Claim
or alleged violation that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.
8.03 Existence, Etc. The Company will, and will cause each of its
Material Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Bank or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its
39
<PAGE>
Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by such Bank or the Agent (as the case
may be), for the sole purpose of monitoring the Company's compliance with
its obligations hereunder.
8.04 Insurance. The Company will, and will cause each of its Material
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations of similar size engaged in the same or
similar business similarly situated, against loss, damage and liability of the
kinds and in the amounts customarily maintained by such corporations, subject to
reasonable deductibles and other self insurance as the Company may from time to
time maintain as a part of its overall insurance program.
8.05 Prohibition of Fundamental Changes. The Company will not, nor
will it permit any of its Material Subsidiaries to, enter into any transaction
of merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). The Company will not, nor
will it permit any of its Material Subsidiaries to, Dispose of, in one
transaction or a series of transactions, any Property that represents any
substantial part of the Property of the Company and its Subsidiaries taken as a
whole (for which purpose, the Disposition of any part of the stock of any such
Subsidiary shall be deemed to be the Disposition of a corresponding part of the
Property of such Subsidiary), whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests, but
excluding (i) obsolete or worn out Property no longer used or useful in its
business and (ii) Property Disposed of in the ordinary course of business and
on ordinary business terms). Notwithstanding the foregoing provisions of this
Section 8.05:
(a) any Subsidiary of Company may be merged or consolidated with or
into: (i) the Company if the Company shall be the continuing or surviving
corporation or (ii) any other such Subsidiary; provided that (x) if any
such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation;
(b) the Company or any Subsidiary of the Company may merge or
consolidate with any other Person if (i) in the case of a merger or
consolidation of the Company, the Company is the surviving corporation and,
in any other case, the surviving corporation is a Wholly Owned Subsidiary
of the Company and (ii) after giving effect thereto no Default would exist
hereunder; and
(c) any Subsidiary of the Company may Dispose of any or all
of its Property (upon voluntary liquidation or otherwise) to the Company or
a Wholly Owned Subsidiary of the Company.
8.06 Limitation on Liens. The Company will not, nor will it permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except:
40
<PAGE>
(a) Liens in existence on the date hereof and listed in Part B
of Schedule I hereto;
(b) Liens imposed by any governmental authority for taxes,
assessments or other charges or claims not yet due or that are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the Company or the
affected Subsidiaries, as the case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in
good faith and by appropriate proceedings and Liens securing judgments but
only to the extent for an amount and for a period not resulting in an
Event of Default under Section 9(h) hereof;
(d) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(g) Liens on Property of any corporation that becomes a Subsidiary of
the Company after the date of this Agreement, provided that such Liens are
in existence at the time such corporation becomes a Subsidiary of the
Company and were not created in anticipation thereof;
(h) Liens upon real and/or tangible personal Property acquired
after the date hereof (by purchase, construction or otherwise) by the
Company or any of its Subsidiaries, each of which Liens either (A) existed
on such Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred within six months of such
acquisition (by purchase, construction or otherwise) to finance, refinance
or refund, the cost (including the cost of construction) of such Property;
provided that (i) no such Lien shall extend to or cover any Property of the
Company or such Subsidiary other than the Property so acquired and
improvements thereon and (ii) the principal amount of Indebtedness secured
by any such Lien shall at no time exceed 80% of the fair market value (as
determined in good faith by a senior financial officer of the Company) of
such Property at the time it was
41
<PAGE>
acquired (by purchase, construction or otherwise);
(i) Liens under leases (including, without limitation, leases
creating Capital Lease Obligations) on the leased Property in favor of the
lessor;
(j) additional Liens upon real and/or personal Property created
after the date hereof, provided that the aggregate Indebtedness secured
thereby and incurred on and after the date hereof shall not exceed
$20,000,000 in the aggregate at any one time outstanding; and
(k) to the extent not included above, any extension, renewal,
refinancing or replacement of any Lien permitted above that does not
increase (x) the Indebtedness secured thereby or (y) the Property
encumbered thereby.
8.07 Indebtedness. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Banks hereunder and under the Short-Term
Credit Agreement and Indebtedness evidenced by the Company's commercial
paper, provided that the aggregate amount of the Indebtedness permitted by
this clause (a) shall not exceed $250,000,000 at any one time outstanding;
(b) Indebtedness outstanding on the date hereof and listed in
Part A of Schedule I hereto (and any extension, renewal, refinancing or
replacement that does not increase the amount thereof);
(c) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company;
(d) the Company may create, incur or issue Subordinated Indebtedness
so long as, if such Subordinated Indebtedness had been outstanding during
the period of four consecutive fiscal quarters of the Company ending on or
most recently ended prior to the date of such creation, incurrence or
issuance, the Company would have been in compliance with Section 8.09
hereof; and
(e) additional Indebtedness of the Company and its Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Sections 8.06(h), 8.06(j) or
8.06(k) hereof) up to but not exceeding $50,000,000 at any one time
outstanding.
8.08 Consolidated Tangible Net Worth. The Company will not permit its
Consolidated Tangible Net Worth at any time to be less than $200,000,000 plus
the sum of 50% of the consolidated net income of the Company and its
Subsidiaries for each fiscal quarter of the Company starting with the fiscal
quarter ending on September 30, 1993 to and including the fiscal quarter ending
on or most recently ended prior to such time (for which purpose, a consolidated
net loss shall be deemed to be consolidated net income of zero) plus 50% of the
Net Available Proceeds of Equity Issuances after the date hereof.
8.09 Interest Coverage Ratio. The Company will not
42
<PAGE>
permit its Interest Coverage Ratio for any period of four consecutive fiscal
quarters of the Company ending on or before September 30, 1994 to be less than
3.75 to 1 and ending at any time thereafter to be less than 4.0 to 1.
8.10 Leverage Ratio. The Company will not permit its Leverage Ratio at
any time on or before September 30, 1994 to exceed 0.55 to 1, and at any time
thereafter to exceed 0.50 to 1.
8.11 Lines of Business. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than the business of researching, developing, marketing
and manufacturing pharmaceutical products.
8.12 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate in excess of
$5,000,000 at any one time outstanding; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate
with or purchase or acquire Property from an Affiliate; or (d) enter into any
other transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, Guarantees and assumptions of obligations of an
Affiliate); provided that (x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and (y)
the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an Affiliate)
providing for the leasing of Property, the rendering or receipt of services or
the purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable transaction
with a Person not an Affiliate.
8.13 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely for working capital purposes, including (without limitation)
commercial paper back-up (in compliance with all applicable legal and regulatory
requirements); provided that neither the Agent nor any Bank shall have any
responsibility as to the use of any of such proceeds.
Section 9. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment when due of any interest
on any Loan, any fee or any other amount (other than principal of any Loan)
payable by it hereunder and such default shall continue for three Business
Days; or the Company shall default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal
of any Loan; or
(b) The Company or any of its Subsidiaries shall default beyond any
applicable grace period in the payment
43
<PAGE>
when due of any principal of or interest on any of its other Indebtedness
aggregating $20,000,000 or more, or in the payment when due of any amount
under any Interest Rate Protection Agreement if the effect of such default
would entitle the counterparty or counterparties to termination payments
exceeding $20,000,000; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
or any event specified in any such Interest Rate Protection Agreement shall
occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity or to have the interest rate thereon reset to a level so that
securities evidencing such Indebtedness trade at a level specified in
relation to the par value thereof or, in the case of an Interest Rate
Protection Agreement, to permit the payments owing under such Interest Rate
Protection Agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed made
herein (or in any modification or supplement hereto) by the Company, or any
certificate furnished to any Bank or the Agent pursuant to the provisions
hereof, shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(f) or 8.05 through 8.13 (inclusive)
hereof; or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of thirty or more days after notice thereof to the Company by
the Agent or any Bank (through the Agent); or
(e) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application or
consent of the Company or any of its Subsidiaries, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
44
<PAGE>
arrangement or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a receiver, custodian, trustee, examiner, liquidator
or the like of the Company or such Subsidiary or of all or any substantial
part of its Property, or (iii) similar relief in respect of the Company or
such Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against the Company or such Subsidiary shall be entered in
an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess of
$20,000,000 in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company or any of its Subsidiaries and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 30 days from the date of entry thereof
and the Company or the relevant Subsidiary shall not, within said period of
30 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the opinion
of the Majority Banks shall be reasonably likely to incur a liability to a
Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing)
that, in the determination of the Majority Banks, would (either individually
or in the aggregate) have a Material Adverse Effect; or
(j) There shall have been asserted against the Company or any of its
Subsidiaries an Environmental Claim that, in the judgment of the Majority
Banks is reasonably likely to be determined adversely to the Company or any
of its Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar
as such amount is payable by the Company or any of its Subsidiaries but
after deducting any portion thereof that is reasonably expected to be paid
by or recoverable from other creditworthy Persons jointly and severally
liable therefor or from insurers); or
(k) During any period of 25 consecutive calendar months, a majority of
the Board of Directors of the Company shall no longer be composed of
individuals (i) who were members of said Board on the first day of such
period, (ii) whose election or nomination to said Board was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of said Board or (iii) whose
election or nomination to said Board was approved by individuals referred to
in clauses (i) and (ii) above constituting at the time of such
45
<PAGE>
election or nomination at least a majority of said Board; or
(l) Any Person or two or more Persons acting in concert shall have
acquired, in one transaction or in a series of related transactions,
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company (or other securities convertible
into such securities) representing 30% or more of the combined voting power
of the company's then outstanding securities entitled to vote in the
election of directors (other than securities having such power only by
reason of the happening of a contingency);
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, (A) the Agent
may and, upon request of the Majority Banks, will, by notice to the Company,
terminate the Commitments and they shall thereupon terminate, and (B) the Agent
may and, upon request of Banks holding more than 50% of the aggregate unpaid
principal amount of the Loans shall, by notice to the Company declare the
principal amount then outstanding of,
and the accrued interest on, the Loans and all other amounts payable by the
Company hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 hereof) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Company; and (2) in the case of the occurrence of an
Event of Default referred to in clause (f) or (g) of this Section 9 with respect
to the Company, the Commitments shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Company hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by the Company.
Section 10. The Agent.
10.01 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder with such powers
as are specifically delegated to the Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto. The Agent
(which term as used in this sentence and in Section 10.05 and the first sentence
of Section 10.06 hereof shall include reference to its affiliates and its own
and its affiliates' officers, directors, employees and agents): (a) shall have
no duties or responsibilities except those expressly set forth in this
Agreement, and shall not by reason of this Agreement be a trustee for any Bank;
(b) shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Company or any
other Person
46
<PAGE>
to perform any of its obligation hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (d) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and attorneys-
in-fact and shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it in good faith. The Agent may
deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a notice of the assignment or transfer thereof shall
have been filed with the Agent, together with the consent of the Company
to such assignment or transfer (to the extent provided in Section 11.06(b)
hereof).
10.02 Reliance by Agent. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without limitation,
any thereof by telephone, telecopy, telex, telegram or cable) believed by it in
good faith to be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Agent. As to
any matters not expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions given by the Majority Banks, and such instructions
of the Majority Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks.
10.03 Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice from
a Bank or the Company specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the
Banks. The Agent shall (subject to Section 10.07 hereof) take such action with
respect to such Default as shall be directed by the Majority Banks, provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem advisable in the best
interest of the Banks except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of the Majority Banks or all of the Banks.
10.04 Rights as a Bank. With respect to its Commitment and the Loans
made by it, Chase (and any successor acting as Agent) in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include the
Agent in its individual capacity. Chase (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Agent, and Chase and
its affiliates may accept fees and other consideration from the Company for
services in
47
<PAGE>
connection with this Agreement or otherwise without having to account for the
same to the Banks.
10.05 Indemnification. The Banks agree to indemnify the Agent (to
the extent not reimbursed under Section 11.03 hereof, but without limiting the
obligations of the Company under said Section 11.03) ratably in accordance with
their respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including by any Bank) arising out of or by reason
of any investigation in any way relating to or arising out of this Agreement or
any other documents contemplated by or referred to herein or the transactions
contemplated hereby (including, without limitation, the costs and expenses that
the Company is obligated to pay under Section 11.03 hereof but excluding, unless
a Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Agent and Other Banks. Each Bank agrees that
it has, independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Company and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of this Agreement or any other document referred to or provided for
herein or to inspect the Properties or books of the Company or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial condition or
business of the Company or any of its Subsidiaries (or any of their affiliates)
that may come into the possession of the Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
Agent hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall receive further assurances to its
reasonable satisfaction from the Banks of their indemnification obligations
under Section 10.05 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.
10.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Banks and the Company, and
the Agent may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks (after
consultation
48
<PAGE>
with the Company) shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Banks and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation or the Majority Banks' removal of the retiring Agent,
then the retiring Agent (after consultation with the Company) may, on behalf of
the Banks, appoint a successor Agent, that shall be a bank that has an office in
New York, New York. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Section 10 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Agent or any Bank to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
The Company irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the Agent
or any Bank relating in any way to this Agreement should be dismissed or stayed
by reason, or pending the resolution, of any action or proceeding commenced by
the Company relating in any way to this Agreement whether or not commenced
earlier.
11.02 Notices. All notices, requests and other communications
provided for herein (including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telecopy), or, with respect to
notices given pursuant to Section 2.03 hereof, by telephone, confirmed in
writing by telecopier by the close of business on the day the notice is given,
delivered (or telephoned, as the case may be) to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof);
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given
when transmitted by telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or reimburse: (a)
the Agent for all reasonable out-of-pocket costs and expenses of the Agent
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to the Agent) in connection
with (i) the
49
<PAGE>
negotiation, preparation, execution and delivery of this Agreement and the Notes
and the making of the Loans hereunder and (ii) the negotiation or preparation of
any modification, supplement or waiver of any of the terms of this Agreement or
any of the Notes (whether or not consummated); (b) each of the Banks and the
Agent for all reasonable out-of-pocket costs and expenses (including, without
limitation, the reasonable fees and expenses of legal counsel) in connection
with (i) any Default and any enforcement or collection proceedings resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (y) judicial or regulatory proceedings
and (z) workout, restructuring or other negotiations or proceedings (whether or
not the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 11.03; and (c) each of the
Banks and the Agent for all transfer, stamp, documentary or other similar taxes,
assessments or charges imposed after the date hereof by any governmental or
revenue authority in respect of this Agreement or any of the Notes or any other
document referred to herein.
The Company hereby agrees to indemnify the Agent and each Bank and
their respective directors, officers, employees, attorneys and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them (including, without limitation, any
and all losses, liabilities, claims, damages or expenses incurred by the Agent
to any Bank, whether or not the Agent or any Bank is a party thereto) arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the Loans hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the Loans hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified). Without limiting the generality of the foregoing,
the Company will indemnify the Agent and each Bank from, and hold the Agent and
each Bank harmless against, any losses, liabilities, claims, damages or expenses
described in the preceding sentence (but excluding, as provided in the preceding
sentence, any loss, liability, claim, damage or expense incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified)
arising under any Environmental Law as a result of the past, present or future
operations of the Company or any of its Subsidiaries (or any predecessor in
interest to the Company or any of its Subsidiaries), or the past, present or
future condition of any site or facility owned, operated or leased at any time
by the Company or any of its Subsidiaries (or any such predecessor in interest),
or any Release or threatened Release of any Hazardous Materials at or from any
such site or facility.
11.04 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Agent and the
Majority Banks, or by the Company and the Agent acting with the consent of the
Majority Banks, and any provision of this Agreement may be waived by the
50
<PAGE>
Majority Banks or by the Agent acting with the consent of the Majority Banks;
provided that: (a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (i) increase, or extend the term of the Commitments, or
extend the time or waive any requirement for the reduction or termination of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan or any fee hereunder, (iii) reduce the amount of any such
payment of principal, (iv) reduce the rate at which interest is payable thereon
or any fee is payable hereunder, (v) alter the rights or obligations of the
Company to prepay Loans, (vi) alter the terms of this Section 11.04, (vii)
modify the definition of the term "Majority Banks" or modify in any other manner
the number or percentage of the Banks required to make any determinations or
waive any rights hereunder or to modify any provision hereof, or (viii) waive
any of the conditions precedent set forth in Section 6.01 hereof; and (b) any
modification or supplement of Section 10 hereof shall require the consent of the
Agent.
Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Section 6 hereof to any
Syndicated Loan hereunder are, in the opinion of the Majority Banks, satisfied,
any Bank shall fail to fulfill its obligations to make such Loan then, for so
long as such failure shall continue, such Bank shall (unless the Majority Banks,
determined as if such Bank were not a "Bank" hereunder, shall otherwise
consent in writing) be deemed for all purposes relating to amendments,
modifications, waivers or consents under this Agreement or the Notes
(including, without limitation, under this Section 11.04) to have no Loans or
Commitments, shall not be treated as a "Bank" hereunder when performing the
computation of Majority Banks, and shall have no rights under the preceding
paragraph of this Section 11.04; provided that any action taken by the other
Banks with respect to the matters referred to in clause (a) of the preceding
paragraph shall not be effective as against such Bank.
11.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Banks and
the Agent.
(b) Each Bank may assign any of its Loans, its Notes, and its
Commitment (but only with the consent of, in the case of its outstanding
Commitment, the Company and the Agent, which consent shall not be unreasonably
withheld); provided that (i) no such consent by the Company or the Agent shall
be required in the case of any assignment to another Bank or any of its
affiliates; (ii) any such partial assignment shall be in an amount at least
equal to $10,000,000 and the Bank making any such partial assignment shall
continue to hold an amount at least equal to $10,000,000; and (iii) each such
assignment by a Bank of its Loans, Note or Commitment shall be made in such
manner so that the same portion of its Loans, Note and Commitment is assigned to
the respective assignee. Upon execution and delivery by the assignee to the
Company and the Agent of an instrument in writing
51
<PAGE>
pursuant to which such assignee agrees to become a "Bank" hereunder (if not
already a Bank) having the Commitment and Loans specified in such instrument,
and upon consent thereto by the Company and the Agent, to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise provided in such assignment with the consent of the Company and the
Agent), the obligations, rights and benefits of a Bank hereunder holding the
Commitment and Loans (or portions thereof) assumed by and assigned to it (in
addition to the Commitment and Loans, if any, theretofore held by such assignee)
and the assigning Bank shall, to the extent of such assumption and assignment,
be released from the Commitment (or portion thereof) so assigned. Upon each
such assignment the assigning Bank shall pay the Agent an assignment fee of
$3,000.
(c) A Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans held by it, or in its Commitment,
in which event each purchaser of a participation (a "Participant") shall be
entitled to the rights and benefits of the provisions of Section 8.01(g) hereof
with respect to its participation in such Loans and Commitment as if (and the
Company shall be directly obligated to such Participant under such provisions as
if) such Participant were a "Bank" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note (the Participant's rights against such
Bank in respect of such participation to be those set forth in the agreements
executed by such Bank in favor of the Participant). All amounts payable by the
Company to any Bank under Section 5 hereof in respect of Loans held by it, and
its Commitment, shall be determined as if such Bank had not sold or agreed to
sell any participations in such Loans and Commitment, and as if such Bank were
funding each of such Loan and Commitment in the same way that it is funding the
portion of such Loan and Commitment in which no participations have been sold.
In no event shall a Bank that sells a participation agree with the Participant
to take or refrain from taking any action hereunder except that such Bank may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of such Bank's
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any
fee hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee, (v) alter the rights or
obligations of the Company to prepay the related Loans or (vi) consent to any
modification, supplement or waiver hereof to the extent that the same, under
Section 11.04 hereof, requires the consent of each Bank.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Bank may (without notice to,
or consent of, the Company, the Agent or any other Bank and without payment of
any fee) (i) assign and pledge all or any portion of its Loans and its Notes to
any Federal Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank and (ii) assign all or
any portion of its rights
52
<PAGE>
under this Agreement and its Loans and its Notes to an affiliate.
No such assignment shall release the assigning Bank from its obligations
hereunder.
(e) A Bank may furnish any information concerning the Company or any
of its Subsidiaries in the possession of such Bank
from time to time to assignees and participants (including prospective assignees
and participants), subject, however, to the provisions of Section 11.12(b)
hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Bank may assign or participate to the Company or any of its Affiliates or
Subsidiaries any interest in any Loan held by such Bank hereunder without the
prior consent of each Bank.
11.07 Survival. The obligations of the Company under Sections 5.01,
5.05, 5.06 and 11.03 hereof, and the obligations of the Banks under Section
10.05 hereof, shall survive the repayment of the Loans and the termination of
the Commitments. In addition, each representation and warranty made, or deemed
to be made by a notice of any Loan, herein or pursuant hereto shall survive the
making of such representation and warranty, and no Bank shall be deemed to have
waived, by reason of making any Loan, any Default that may arise by reason of
such representation or warranty proving to have been false or misleading,
notwithstanding that such Bank or the Agent may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such Loan was made.
11.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any New York state court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Company irrevocably waives, to the fullest extent
permitted by applicable law, any objection that it may now or hereafter have to
the laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND THE
BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
53
<PAGE>
11.12 Treatment of Certain Information;
Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Bank or by one or more subsidiaries or affiliates
of such Bank and, if the Company has requested such services or otherwise if the
Company expressly agrees, the Company hereby authorizes each Bank to share,
subject to the foregoing, any information delivered to such Bank by the Company
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Bank to enter into this Agreement, to any such subsidiary or
affiliate, it being understood that any such subsidiary or affiliate receiving
such information shall be bound by the provisions of clause (b) below as if it
were a Bank hereunder. Such authorization shall survive the repayment of the
Loans and the termination of the Commitments.
(b) Each Bank and the Agent agrees (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Company pursuant to this Agreement that is identified by
the Company as being confidential at the time the same is delivered to the Banks
or the Agent, provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to
bank examiners, auditors or accountants, (iv) to the Agent or any other Bank (or
to Chase Securities, Inc.), (v) in connection with any litigation to which any
one or more of the Banks or the Agent is a party, (vi) to a subsidiary or
affiliate of such Bank as provided in clause (a) above or (vii) to any assignee
or participant (or prospective assignee or participant) so long as such assignee
or participant (or prospective assignee or participant) first executes and
delivers to the respective Bank a Confidentiality Agreement substantially in the
form of Exhibit F hereto, provided, further, that in no event shall any Bank or
the Agent be obligated or required to return any materials furnished by the
Company. The obligations of each Bank under this Section 11.12 shall supersede
and replace the obligations of such Bank under the confidentiality letter in
respect of this financing signed and delivered by such Bank to the Company prior
to the date hereof; in addition, the obligations of any assignee that has
executed a Confidentiality Agreement in the form of Exhibit F hereto shall be
superseded by this Section 11.12 upon the date upon which such
assignee becomes a Bank hereunder pursuant to Section 11.06 hereof.
11.13 Existing Credit Agreements. The Company and the Bank(s) party
to the Existing Credit Agreements agree that the commitments under the Existing
Credit Agreements are hereby terminated and that the facility fees payable under
the Existing Credit Agreements accrued to the date hereof are due and payable.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
ALZA CORPORATION
By_________________________
Title:
Address for Notices:
950 Page Mill Road
Palo Alto, California 94303-0802
Attention: Vice President, Legal
Telecopier No.: (415) 494-5121
Telephone No.: (415) 494-5000
55
<PAGE>
BANKS
Commitment THE CHASE MANHATTAN BANK
$15,000,000 (NATIONAL ASSOCIATION)
By_________________________
Title:
Lending Office for all Loans:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Robert W. Cook
Managing Director
Telecopier No.: (212) 552-6731
Telephone No.: (212) 552-7794
56
<PAGE>
Commitment FIRST INTERSTATE BANK OF
CALIFORNIA
$12,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for All Loans:
First Interstate Bank of California
177 Park Center Plaza
San Jose, CA 95113
Address for Notices:
First Interstate Bank of California
177 Park Center Plaza
San Jose, CA 95113
Attention: M. Kathryn Dienz
San Jose Corporate
Center
Telecopier: (408) 971-5888
Telephone: (408) 971-5848
57
<PAGE>
Commitment THE TORONTO-DOMINION BANK
$12,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, TX 77010
Address for Notices:
The Toronto-Dominion Bank
909 Fannin Street, 17th Floor
Houston, TX 77010
Attention: Lisa Allison
Manager, Credit
Administration
Telecopier No.: (713) 951-9921
Telephone No.: (713) 653-8247
58
<PAGE>
Commitment ABN AMRO BANK N.V.
$10,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for All Loans:
ABN AMRO Bank N.V.
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Address for Notices:
ABN AMRO Bank N.V.
555 California Street
Suite 2750
San Francisco, CA 94104-1603
Attention: Gloria Lee
Telecopier No.: (415) 362-3524
Telephone No.: (415) 984-3720
59
<PAGE>
Commitment THE BANK OF NOVA SCOTIA
$10,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Bank of Nova Scotia
101 California Street, 48th Floor
P.O. Box 3716
San Francisco, CA 94119
Address for Notices:
The Bank of Nova Scotia
101 California Street, 48th Floor
P.O. Box 3716
San Francisco, CA 94119
Attention: Norman O. Campbell
Telecopier No.: (415) 397-0791
Telephone No.: (415) 986-1100
60
<PAGE>
Commitment BANQUE NATIONALE DE PARIS
$10,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for All Loans:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Address for Notices:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Attention : Angel M. Solorio
Vice President
Telecopier No.: (415) 296-8954
Telephone No.: (415) 956-0707
61
<PAGE>
Commitment COMMERZBANK AG, GRAND CAYMAN
BRANCH
$10,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for All Loans:
Commerzbank AG, Grand Cayman Branch
660 South Figueroa Street
Suite 1450
Los Angeles, CA 90017
Address for Notices:
Commerzbank AG, Grand Cayman Branch
660 South Figueroa Street
Suite 1450
Los Angeles, CA 90017
Attention: Werner Schmidbauer
Corporate Banking
Telecopier No.: (213) 623-0039
Telephone No.: (213) 623-8223
62
<PAGE>
Commitment UNITED STATES NATIONAL BANK OF
OREGON
$10,000,000
By_____________________________
Title:
Lending Office for All Loans:
United States National Bank of
Oregon
Note Department
555 S.W. Oak Street, PL-7
Portland, OR 97204
Address for Notices:
United States National Bank of
Oregon
309 S.W. Sixth Avenue
BB-10
Portland, OR 97204
Attention: Scott J. Bell
Telecopier No.: (503) 275-4346
Telephone No.: (503) 275-6738
63
<PAGE>
Commitment THE BANK OF CALIFORNIA, N.A.
$6,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Address for Notices:
The Bank of California, N.A.
400 California Street, 17th Floor
San Francisco, CA 94104
Attention: Alison Amonette
Telecopier No.: (415) 765-2634
Telephone No.: (415) 765-3696
64
<PAGE>
Commitment THE NIPPON CREDIT BANK LTD.,
LOS ANGELES AGENCY
$6,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Nippon Credit Bank Ltd.,
Los Angeles Agency
550 South Hope Street
Suite 2500
Los Angeles, CA 90071
Address for Notices:
The Nippon Credit Bank Ltd.,
Los Angeles Agency
550 South Hope Street
Suite 2500
Los Angeles, CA 90071
Attention: Bernardo E.
Correa-Henschke
Telecopier No.: (213) 892-0111
Telephone No.: (213) 243-5720
65
<PAGE>
Commitment PNC BANK, NATIONAL ASSOCIATION
$6,000,000
By_____________________________
Title:
Lending Office for All Loans:
PNC Bank, National Association
55 South Lake Avenue, Suite 650
Pasadena, CA 91101
Address for Notices:
PNC Bank, National Association
55 South Lake Avenue, Suite 650
Pasadena, CA 91101
Attention: Pam Fox
Telecopier No.: (818) 568-0653
Telephone No.: (818) 568-8950
66
<PAGE>
Commitment THE SUMITOMO BANK, LIMITED,
SAN FRANCISCO BRANCH
$6,000,000
By_____________________________
Title:
Lending Office for All Loans:
The Sumitomo Bank, Limited,
San Francisco Branch
555 California Street, Suite 3350
San Francisco, CA 94104
Address for Notices:
The Sumitomo Bank, Limited,
San Francisco Branch
555 California Street, Suite 3350
San Francisco, CA 94104
Attention: Herman White, Jr.
Telecopier No.: (415) 397-1475
Telephone No.: (415) 616-3009
67
<PAGE>
Commitment UNION BANK
$6,000,000
By_____________________________
Title:
Lending Office for All Loans:
Union Bank
1980 Saturn Street
P.O. Box 30770
Monterey Park, CA 90030-0866
Address for Notices:
Union Bank
350 California Street
(#H-1040)
San Francisco, CA 94104-1402
Attention: Wade Schlueter
Vice President
Telecopier No.: (415) 705-7127
Telephone No.: (415) 705-7022
68
<PAGE>
Commitment WESTDEUTSCHE LANDESBANK
GIROZENTRALE
$6,000,000
By_____________________________
Title:
By_____________________________
Title:
Lending Office for Base Rate Loans:
Westdeutsche Landesbank
Girozentrale
New York Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Lending Office for Loans other than
Base Rate Loans:
Westdeutsche Landesbank
Girozentrale
Cayman Islands Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Address for Notices:
Westdeutsche Landesbank
Girozentrale
New York Branch Office
1211 Avenue of the Americas
23rd Floor
New York, NY 10036
Attention: Cheryl Wilson
Loan Administrator
Telecopier No.: (212) 302-7946
Telephone No.: (212) 852-6152
69
<PAGE>
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By_________________________
Title:
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
(National Association)
4 Metrotech Center -- 13th Floor
Brooklyn, New York 11245
Attention: New York Agency
Telecopier No.: (718) 242-6910
Telephone No.: (718) 242-7979
70
<PAGE>
SCHEDULE I
MATERIAL AGREEMENTS AND LIENS
[See Sections 7.12 and 8.07(b)]
Part A - Material Agreements
(i) Indenture between ALZA Corporation and The Chase Manhattan Bank
(National Association) as trustee, dated December 21, 1990 relating to ALZA's
Liquid Yield Option Notes due 2010, (Zero Coupon-Subordinated).
(ii) Promissory Note in the principal amount of $11,386,000 payable to
ALZA Corporation by a joint venture between ALZA and ON-SITE Therapeutics, Inc.,
issued pursuant to Section 4.4(a) of the Restated Joint Venture Agreement
between the parties dated February 13, 1991.
(iii) Loan Agreement between ALZA and Plymouth Street L.P. ("Plymouth")
pursuant to which ALZA will loan to Plymouth up to $17,500,000 in periodic
installments over a seven year period.
ALZA may offset the principal and interest owed by Plymouth on the loan against
amounts payable by ALZA to Plymouth upon exercise of a purchase option to
acquire certain real property located at 1500/1550 Plymouth Street, Mountain
View, California pursuant to a certain Option and Put Agreement between ALZA and
Plymouth dated December 31, 1992.
(iv) Agreement of Merger dated November 11, 1991 between ALZA and
Bio-Electro Systems, Inc.
(v) The principal amount of $2,550,000 is payable by ALZA to Boston
Financial in three equal annual installments of $850,000 each in 1994, 1995 and
1996. This represents the remaining balance due on an interest-free obligation
to invest $5,000,000 for five units of limited partnership interest in a low
income housing project.
Part B - Liens
None.
71
<PAGE>
SCHEDULE II
Subsidiaries
[See Section 7.14]
Ownership
Nature of
Each Person Ownership
% of
Name of Jurisdiction of Holding Interest
Ownership
Subsidiary Incorporation Ownership Held
Interest
ALZA Development California ALZA Wholly 100%
Corporation Corporation Owned
ALZA International Delaware ALZA Wholly 100%
Inc. Corporation Owned
ALZA Limited England ALZA Wholly 100%
Corporation Owned
72
<PAGE>
EXHIBIT A-1
[Form of Syndicated Note]
PROMISSORY NOTE
$_______________ ____________, 1993
New York, New York
FOR VALUE RECEIVED, ALZA CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the 3-Year
Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza, New York, New
York 10081, the principal sum of _______________ Dollars (or such lesser amount
as shall equal the aggregate unpaid principal amount of the Syndicated Loans
made by the Bank to the Company under the 3-Year Credit Agreement), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the 3-Year Credit Agreement, and
to pay interest on the unpaid principal amount of each such Syndicated Loan, at
such office, in like money and funds, for the period commencing on the date of
such Syndicated Loan until such Syndicated Loan shall be paid in full, at the
rates per annum and on the dates provided in the 3-Year Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
of each Syndicated Loan made by the Bank to the Company, and each payment made
on account of the principal thereof, shall be recorded by the Bank on its books
and, prior to any transfer of this Note, endorsed by the Bank on the schedule
attached hereto or any continuation thereof, provided that the failure of the
Bank to make any such recordation or endorsement shall not affect the
obligations of the Company to make a payment when due of any amount owing under
the 3-Year Credit Agreement or hereunder in respect of the Syndicated Loans made
by the Bank.
This Note is one of the Syndicated Notes referred to in the 3-Year
Credit Agreement dated as of November 4, 1993 (as modified and supplemented and
in effect from time to time, the "3-Year Credit Agreement") between the Company,
the lenders named therein and The Chase Manhattan Bank (National Association),
as Agent, and evidences Syndicated Loans made by the Bank thereunder. Terms
used but not defined in this Note have the respective meanings assigned to them
in the 3-Year Credit Agreement.
The 3-Year Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06(b) of the 3-Year Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
The Company hereby expressly waives presentment, demand, protest,
notice of intention to accelerate, dishonor or
73
<PAGE>
any other notice in connection with this Note.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
ALZA CORPORATION
By_________________________
Title:
74
<PAGE>
SCHEDULE OF SYNDICATED LOANS
This Note evidences Syndicated Loans made under the
within-described 3-Year Credit Agreement to the Company, on the
dates, in the principal amounts, of the Types, bearing interest at the rates and
having Interest Periods of the durations set forth below, subject to the
payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal
Notation
Loan Loan Loan Rate Loan Prepaid Amount Made
by
75
<PAGE>
EXHIBIT A-2
[Form of Money Market Note]
PROMISSORY NOTE
____________, 1993
New York, New York
FOR VALUE RECEIVED, ALZA CORPORATION, a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Bank"), for
account of its respective Applicable Lending Offices provided for by the 3-Year
Credit Agreement referred to below, at the principal office of The Chase
Manhattan Bank (National Association) at 1 Chase Manhattan Plaza, New York, New
York 10081, the aggregate unpaid principal amount of the Money Market Loans made
by the Bank to the Company under the 3-Year Credit Agreement, in lawful money of
the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the 3-Year Credit Agreement, and to pay
interest on the unpaid principal amount of each such Money Market Loan, at such
office, in like money and funds, for the period commencing on the date of such
Money Market Loan until such Money Market Loan shall be paid in full, at the
rates per annum and on the dates provided in the 3-Year Credit Agreement.
The date, amount, Type, interest rate and maturity date of each Money
Market Loan made by the Bank to the Company, and each payment made on account of
the principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof, provided that the failure of the Bank to make any
such recordation or endorsement shall not affect the obligations of the Company
to make a payment when due of any amount owing under the 3-Year Credit Agreement
or hereunder in respect of the Money Market Loans made by the Bank.
This Note is one of the Money Market Notes referred to in the 3-Year
Credit Agreement dated as of November 4, 1993 (as modified and supplemented and
in effect from time to time, the "3-Year Credit Agreement") between the Company,
the lenders named therein (including the Bank) and The Chase Manhattan Bank
(National Association), as Agent, and evidences Money Market Loans made by the
Bank thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the 3-Year Credit Agreement.
The 3-Year Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Money Market Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06(b) of the 3-Year Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
The Company hereby expressly waives presentment, demand, protest,
notice of intention to accelerate, dishonor or any other notice in connection
with this Note.
76
<PAGE>
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
ALZA CORPORATION
By_________________________
Title:
77
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made under the within- described 3-Year
Credit Agreement to the Company, on the dates, in the principal amounts, of the
Types, bearing interest at the rates and maturing on the dates set forth below,
subject to the payments and prepayments of principal set forth below:
Principal
Date Amount Type Maturity Amount Unpaid
of of of Interest Date of Paid or Principal
Notation
Loan Loan Loan Rate Loan Prepaid Amount Made
by
78
<PAGE>
EXHIBIT B-1
[Form of Opinion of Counsel to the Company]
__________, 1993
To the Banks party to the Credit Agreement
referred to below and
The Chase Manhattan Bank
(National Association), as Agent
ALZA Corporation
Ladies and Gentlemen:
We have acted as counsel to ALZA Corporation, a Delaware corporation
(the "Company"), in connection with the Credit Agreement relating to the
$125,000,000 3-Year revolving credit facility (the "Credit Agreement") dated as
of November 4, 1993, among the Company, the lenders named therein and The Chase
Manhattan Bank (National Association), as Agent. This opinion is being
delivered pursuant to Section 6.01(b) of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used in this
opinion have the meanings given to them in the Credit Agreement.
I.
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to us as copies. We have based our
opinion upon our review of the following records, documents, instruments and
certificates and such additional certificates as we have deemed necessary or
appropriate for our opinion:
(a) The Credit Agreement; and
(b) The Notes (in the form appended to the Credit
Agreement).
The Credit Agreement and the Notes are collectively referred to in this opinion
as the "Loan Documents."
II.
In rendering this opinion, we have also assumed the following, with
your consent and without independent investigation:
A. Each Bank (i) is a bank incorporated or organized
under the laws of the United States of America or
79
<PAGE>
any state of the United States of America, or
(ii) is a foreign bank licensed to conduct banking
business through a branch or agency located in the
United States of America pursuant to the laws of
the United States of America or any state of the
United States of America within the meaning of
Section 1716 of the California Financial Code, or
(iii) otherwise qualifies for an exemption from
the otherwise applicable interest rate limitations
of California law for loans or forbearances
provided by, California Constitution, Article XV,
Section 1 or statutory provisions adopted pursuant
thereto; all loans under the Credit Agreement will
be made by the Banks for their own accounts or for
the account of another person or entity that is
such a bank or foreign bank or otherwise so
qualifies for an exemption from the interest rate
limitations of California law; and there is no
present agreement or plan, express or implied, on
the part of the Banks to sell participations or
any other interest in the loans to be made under
the Credit Agreement to any person or entity that
is not such a bank or foreign bank or does not
otherwise qualify for an exemption from the
interest rate limitations of California law for
the purpose of evading such limitations.
B. The opinions contained in the letter dated as of
the date of this opinion being delivered to you by
Edward L. Mandell, Esq., Vice President, Legal of
the Company, are accurate and correct with respect
to all matters that may have a bearing on this
opinion or the assumptions herein.
C. The Banks (i) have duly authorized, executed and
delivered each Loan Document to which they are
parties, and (ii) have all requisite power and
authority under laws, rules and regulations
applicable to them to execute, deliver and enforce
each Loan Document to which they are parties.
III.
We express no opinion as to:
A. The applicable choice of law rules that may affect
the interpretation or enforcement of any of the
Loan Documents;
B. Any securities, anti-trust, tax, land use, safety,
environmental, hazardous materials, or insurance
company laws, rules or regulations;
C. The effect of the laws of any jurisdiction in
which any Bank is located (other than the State of
California) that limit the interest, fees or other
charges such Bank may impose;
D. Section 4.07(c) of the Credit Agreement;
E. The second paragraph of Section 11.01 of the
Credit Agreement;
80
<PAGE>
F. The second sentence of Section 11.10 of the Credit Agreement,
insofar as such sentence relates to the subject matter
jurisdiction of the United States District Court of the Southern
District of New York to adjudicate any controversy related to the
Loan Documents; and
G. The waiver of inconvenient forum set forth in Section 11.10 of
the Credit Agreement with respect to proceedings in the United
States District Court for the Southern District of New York.
This opinion is limited to the federal laws of the United States of
America and the laws of the State of California.
In connection with the opinions below, we note that the Loan Documents expressly
provide that they are to be governed by and construed in accordance with the
laws of the State of New York. Accordingly, our opinion is rendered as if the
Loan Documents were governed by and construed in accordance with the laws of the
State of California. We expressly disclaim any opinion as to the laws of any
other jurisdiction. We further disclaim any opinion as to any statute, rule,
regulation, ordinance, or other promulgation of any regional or local
governmental body or as to any related judicial or administrative opinion.
IV.
Based upon (and subject to) the foregoing and our examination of such
questions of law as we have deemed necessary or appropriate for the purpose of
our opinion, and subject to the limitations and qualifications expressed below,
it is our opinion that, each of the Loan Documents is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject as to enforcement (a) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability relating to or
affecting creditors' rights and (b) to general principles of equity, whether
such enforceability is considered in a proceeding in equity or at law.
V.
We further advise you that:
A. As noted, the enforceability of the Loan Documents is subject to
the effect of general principles of equity. These principles
include, without limitation, concepts of commercial
reasonableness, materiality and good faith and fair dealing. As
applied to the Loan Documents, these principles will require you
to act reasonably, in good faith
and in a manner that is not arbitrary or capricious in the
administration and enforcement of the Loan Documents and will
preclude you from invoking penalties for defaults that bear no
reasonable relation to the damage suffered or that would
otherwise work a forfeiture.
B. The effectiveness of indemnities, exculpatory provisions and
waivers of the benefits of statutory provisions may be limited on
public
81
<PAGE>
policy grounds.
C. Section 1717 of the California Civil Code provides that, in any
action on a contract where the contract specifically provides
that attorneys' fees and costs incurred to enforce that contract
shall be awarded either to one of the parties or to the
prevailing party, then the party who is determined to be the
party prevailing in the action, whether that party is the party
specified in the contract or not, shall be entitled to reasonable
attorneys' fees in addition to other costs.
D. Provisions of the Loan Documents requiring that modifications or
waivers must be in writing may not be binding or enforceable if
an oral agreement has been created modifying any such provision
or an implied agreement by trade practice or course of conduct
has given rise to a modification or waiver.
E. Any bank which is not incorporated under the laws of the State of
California, which is deemed to be transacting intrastate business
within the meaning of Section 191 of the California Corporations
Code and which is not duly qualified to do business in the State
of California may be precluded, under Section 2203(c) of the
California Corporations Code, from maintaining an action or
proceeding upon any intrastate business so transacted in the
courts of the State of California.
This opinion is rendered to you in connection with the Credit
Agreement and is solely for your benefit. This opinion may not be relied upon
by any other person, firm, corporation or other entity without our prior written
consent. We disclaim any obligation to advise you of any change of law that
occurs, or any facts of which we become aware, after the date of this opinion.
Very truly yours,
82
<PAGE>
EXHIBIT B-2
[Form of Opinion of Vice President, Legal of the Company]
__________, 1993
To the Banks party to the Credit Agreement
referred to below and
The Chase Manhattan Bank
(National Association), as Agent
Credit Agreement
Ladies and Gentlemen:
I am Vice President, Legal of ALZA Corporation, a Delaware Corporation
(the "Company"), and have acted in such capacity in connection with the Credit
Agreement (the "Credit Agreement") dated as of November 4, 1993, among the
Company, the lenders named therein (collectively, the "Banks") and The Chase
Manhattan Bank (National Association), as agent, relating to a 3-Year $125
million revolving credit facility. This opinion is being delivered pursuant to
Section 6.01(b) of the Credit Agreement.
Unless otherwise defined herein, capitalized terms used in this
opinion have the meanings given to them in the Credit Agreement.
I
I have assumed the authenticity of all records, documents and
instruments submitted to me as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to me as copies. I have based my
opinion upon my review of the following records, documents, instruments and
certificates and such additional certificates as I have deemed necessary or
appropriate for my opinion:
(a) The Credit Agreement;
(b) The Notes (in the form appended to the Credit Agreement);
(c) The Certificate of Incorporation of the Company certified by the
Secretary of State of the State of Delaware as of October 5,
1993;
(d) The Bylaws of the Company, as amended to date;
(e) Records of the Company constituting all records of proceedings
and actions of the Board of Directors of the Company relating to
the transactions contemplated by the Credit Agreement; and
(f) Certificate of Good Standing relating to the
83
<PAGE>
Company issued by the Secretary of State of the State of
Delaware, dated October 5, 1993.
The agreements and instruments referred to in the foregoing clauses
(a) and (b) are collectively referred to herein as the "Credit Documents."
The opinion expressed in Paragraph 1 of Part II as to the good
standing of the Company under the laws of the State of Delaware is based solely
upon the Certificate of Good Standing described in paragraph (f) of Part I
above. I have made no additional investigation after the date of that
Certificate in expressing my opinion in Paragraph 1 of Part II.
Where my opinion relates to my "knowledge", such knowledge is based
upon my examination of the records, documents, instruments and certificates
enumerated or described above and my actual contemporaneous knowledge or that of
any other attorney employed by the Company who is currently involved in legal
representation of the Company in connection with the Credit Documents.
This opinion is limited to the federal laws of the
United States of America, the General Corporation law of the State of Delaware
and the laws of the State of California. In connection with the opinions below,
I note that the Credit Documents expressly provide that they are to be governed
by and construed in accordance with the laws of the State of New York.
Accordingly, my opinion is rendered as if the Credit Documents were governed by
and construed in accordance with the laws of the State of California. I
expressly disclaim any opinion as to the laws of any other jurisdiction. I
further disclaim any opinion as to statute, rule, regulation, ordinance, order
or other promulgation of any regional or local governmental body or as to any
related judicial or administrative opinion.
II.
Based upon and subject to the foregoing and my examination of such
questions of law as I have deemed necessary or appropriate for the purpose of my
opinion, it is my opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware.
2. The Company has all requisite corporate power and corporate
authority to enter into and perform its obligations under each of
the Credit Documents. The Company has all requisite corporate
power to borrow under the Credit Agreement.
3. The execution, delivery and performance by the Company of each
Credit Document, and the borrowings by the Company under the
Credit Agreement, have been duly authorized by all necessary
corporate action on the part of the Company.
4. Each of the Credit Documents has been duly executed and delivered
by the Company.
84
<PAGE>
5. Neither the execution and delivery of the Credit Documents on
behalf of the Company nor the performance of the Credit Documents
by the Company (i) conflicts with any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii)
violates any order, writ, injunction or decree of any court or
governmental authority or agency or any arbitral award applicable
to the Company or any of its Subsidiaries of which I have
knowledge (after due inquiry) or any law or regulation applicable
to the Company or any of its Subsidiaries, or (iii) results in a
breach or violation of or constitutes a default under, or
requires any consent under, or results in the acceleration or
required prepayment of any debt pursuant to the terms of, any
agreement or instrument creating or evidencing any Indebtedness
or any Lien or any material agreement or instrument of which I
have knowledge (after due inquiry) to which the Company or any of
its Subsidiaries is a party or by which any of them are bound or
to which any of them is subject, or results in the creation or
imposition of any Lien upon any Property of the Company pursuant
to, the terms of any such agreement or instrument.
6. No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the
execution, delivery or performance by the Company of the Credit
Documents or for the legality, validity or enforceability
thereof.
7. I have no knowledge (after due inquiry) of any legal or arbitral
proceedings, or any proceedings by or before any governmental or
regulatory authority or agency, pending, or threatened against or
affecting the Company or any of its Subsidiaries or any of their
respective Properties that, if adversely determined, could have a
Material Adverse Effect.
This opinion is rendered to you in connection with the Credit
Agreement and is solely for your benefit. This opinion may not be relied upon
by any other person, firm, corporation or other entity without my prior written
consent. I disclaim any obligation to advise you of any change of law that
occurs, or any facts of which I become aware, after the date of this opinion.
Very truly yours,
Vice President, Legal
85
<PAGE>
EXHIBIT C
[Form of Opinion of Special New York Counsel to the Agent]
____________, 1993
To the Banks party to the
3-Year Credit Agreement referred to
below and The Chase
Manhattan Bank (National Association), as Agent
Ladies and Gentlemen:
We have acted as special New York counsel to the Agent in connection
with (i) the 3-Year Credit Agreement dated as of November 4, 1993 (the "3-Year
Credit Agreement") between ALZA Corporation (the "Company"), the lenders named
therein and The Chase Manhattan Bank (National Association), as Agent, providing
for loans to be made by said lenders to the Company in an aggregate principal
amount not exceeding $125,000,000 and (ii) the various other agreements and
instruments referred to in the next following paragraph. Terms defined in the
3-Year Credit Agreement are used herein as defined therein. This opinion is
being delivered pursuant to Section 6.01(c) of the 3-Year Credit Agreement.
In rendering the opinion expressed below, we have examined the
following agreements, instruments and other documents:
(a) the 3-Year Credit Agreement;
(b) the Notes; and
(c) such corporate records of the Company and such other documents as
we have deemed necessary as a basis for the opinions expressed
below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clause (c) above) are collectively referred to as
the "Credit Documents".
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon statements of governmental officials and upon representations made in or
pursuant to the Credit Documents and certificates of appropriate representatives
of the Company.
In rendering the opinions expressed below, we have assumed, with
respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in
the opinions below as to the Company) constitute legal, valid,
binding and enforceable obligations of, all of the parties
86
<PAGE>
to such documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate or
other) to execute, deliver and perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that each of the Credit Documents
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and except as the
enforceability of the Credit Documents is subject to the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law), including, without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the 3-Year Credit
Agreement may be limited by laws rendering unenforceable (i)
indemnification contrary to Federal or state securities laws and
the public policy underlying such laws and (ii) the release of a
party from, or the indemnification of a party against, liability
for its own wrongful or negligent acts under certain
circumstances.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing
may be limited under certain circumstances.
(C) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Bank is located (other than the State
of New York) that limit the interest, fees or other charges such
Bank may impose, (ii) Section 4.07(c) of
the 3-Year Credit Agreement, (iii) the second paragraph of
Section 11.01 of the 3-Year Credit Agreement, (iv) the second
sentence of Section 11.10 of the 3-Year Credit Agreement, insofar
as such sentence relates to the subject matter jurisdiction of
the United States District Court for the Southern District of New
York to adjudicate any controversy related to the Credit
Documents, and (v) the waiver of inconvenient forum set forth in
Section 11.10 of the 3-Year Credit Agreement with respect to
proceedings in the United States District Court for the Southern
District of New York.
The foregoing opinions are limited to matters involving the Federal laws of
the United States and the law of the State of New York, and we do not express
any opinion as to the laws of any
87
<PAGE>
other jurisdiction.
This opinion letter is, pursuant to Section 6.01(c) of the 3-Year
Credit Agreement, provided to you by us in our capacity as special New York
counsel to the Agent and may not be relied upon by any Person for any purpose
other than in connection with the transactions contemplated by the 3-Year Credit
Agreement without, in each instance, our prior written consent.
Very truly yours,
88
<PAGE>
EXHIBIT D
[Form of Money Market Quote Request]
[Date]
To: The Chase Manhattan Bank (National Association), as
Agent
From: ALZA Corporation
Re: Money Market Quote Request
Pursuant to Section 2.03 of the 3-Year Credit Agreement dated as of
November 4, 1993 (the "3-Year Credit Agreement") between ALZA Corporation, the
lenders named therein and The Chase Manhattan Bank (National Association), as
Agent, we hereby give notice that we request Money Market Quotes for the
following proposed Money Market Borrowing(s):
Borrowing Quotation Interest
Date Date[*1] Amount[*2] Type[*3] Period[*4]
Terms used herein have the meanings assigned to them in the 3-Year
Credit Agreement.
ALZA CORPORATION
By_________________________
Title:
__________________________
* All numbered footnotes appear on the last page of this
Exhibit.
89
<PAGE>
__________________________
[1] For use if a Set Rate in a Set Rate Auction is requested to be submitted
before the Borrowing Date.
[2] Each amount must be $10,000,000 or a larger multiple of $1,000,000.
[3] Insert either "LIBO Margin" (in the case of LIBOR Market Loans) or "Set
Rate" (in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or, in
the case of a Set Rate Loan, a period of up to 180 days after the making of
such Set Rate Loan and ending on a Business Day.
90
<PAGE>
EXHIBIT E
[Form of Money Market Quote]
To: The Chase Manhattan Bank (National Association), as Agent Attention:
Re: Money Market Quote to
ALZA Corporation (the "Borrower")
This Money Market Quote is given in accordance with Section 2.03(c) of the
3-Year Credit Agreement dated as of November 4, 1993 (the "3-Year Credit
Agreement") between ALZA Corporation, the lenders named therein and The Chase
Manhattan Bank (National Association), as Agent. Terms defined in the 3- Year
Credit Agreement are used herein as defined therein.
In response to the Borrower's invitation dated __________, 199_, we hereby
make the following Money Market Quote(s) on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. We hereby offer to make Money Market Loan(s) in the following
principal amount[s], for the following Interest Period(s) and at the
following rate(s):
Borrowing Quotation Interest
Date Date[*1] Amount[*2] Type[*3] Period[*4] Rate[*5]
provided that the Company may not accept offers that would result in the
undersigned making Money Market Loans pursuant hereto in excess of $___________
in the aggregate (the "Money Market Loan Limit").
__________________________
* All numbered footnotes appear on the last page of this Exhibit.
91
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the 3-Year Credit
Agreement, irrevocably obligate[s] us to make the Money Market Loan(s) for which
any offer(s) (is/are) accepted, in whole or in part (subject to the third
sentence of Section 2.03(e) of the 3-Year Credit Agreement and any Money Market
Loan Limit specified above).
Very truly yours,
[NAME OF BANK]
By_________________________
Authorized Officer
Dated: __________, ____
__________________________
[1] As specified in the related Money Market Quote Request.
[2] The principal amount bid for each Interest period may not exceed the
principal amount requested. Bids must be made for at least $5,000,000 (or a
larger multiple of $1,000,000).
[3] Indicate "LIBO Margin" (in the case of LIBOR Market Loans) or "Set Rate"
(in the case of Set Rate Loans).
[4] One, two, three or six months, in the case of a LIBOR Market Loan or, in
the case of a Set Rate Loan, a period of up to 180 days after the making of
such Set Rate Loan and ending on a Business Day, as specified in the
related Money Market Quote Request.
[5] For a LIBOR Market Loan, specify margin over or under the London interbank
offered rate determined for the applicable Interest Period. Specify
percentage (rounded to the nearest 1/10,000 of 1%) and specify whether
"PLUS" or "MINUS". For a Set Rate Loan, specify rate of interest per annum
(rounded to the nearest 1/10,000 of 1%).
92
<PAGE>
EXHIBIT F
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: 3-Year Credit Agreement dated as of November 4, 1993 (the
"3-Year Credit Agreement"), between ALZA Corporation (the
"Company"), the lenders named therein and The Chase Manhattan
Bank (National Association), as Agent.
Dear Ladies and Gentlemen:
As a Bank party to the 3-Year Credit Agreement, we have agreed with
the Company pursuant to Section 11.12 of the 3-Year Credit Agreement to use
reasonable precautions to keep confidential, except as otherwise provided
therein, all non-public information identified by the Company as being
confidential at the time the same is delivered to us pursuant to the 3-Year
Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the 3-Year
Credit Agreement)] [assignee Bank], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of yourself
and each of your affiliates, directors, officers, employees and representatives
and for the benefit of us and the Company) that (A) such information will not be
used by you except in connection with the proposed [participation] [assignment]
mentioned above and (B) you shall use reasonable precautions, in accordance with
your customary procedures for handling confidential information and in
accordance with safe and sound banking practices, to keep such information
confidential, provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to your counsel or to counsel for any of the Banks or the
Agent, (iii) to bank examiners, auditors or accountants, (iv) to the Agent or
any other Bank (or to Chase Securities, Inc.), (v) in connection with any
litigation to which you or any one or more of the Banks or the Agent are a
party, (vi) to a subsidiary or affiliate of yours as provided in
Section 11.12(a) of the 3-Year Credit Agreement or (vii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to you a Confidentiality Agreement
93
<PAGE>
substantially in the form hereof; provided, further, that in no event shall you
be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the 3-Year
Credit Agreement on the date upon which you become a Bank under the 3-Year
Credit Agreement pursuant to Section 11.06 thereof.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF BANK]
By_________________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________
94
<PAGE>
Exhibit 10.7
ALZA CORPORATION
A PLAN FOR
PARTICIPATING IN ALZA's CORPORATE
EXCELLENCE (PACE)
1. PURPOSE:
The purpose of this plan, Participating in ALZA's Corporate Excellence
(PACE) (the "Plan"), is to motivate employees of ALZA to contribute to
ALZA's achievement of specified corporate objectives.
2. DEFINITIONS:
(A) AWARD: The cash payment to a participant for a Plan Year.
(B) BOARD: The Board of Directors of ALZA Corporation.
(C) CORPORATE OBJECTIVES: ALZA's specific corporate objectives for the
Plan Year, accepted and approved by the Board.
(D) ELIGIBLE EARNINGS: Salary and wages (including sales incentive bonus
payments to eligible employees paid under other ALZA plans) paid to a
participant during this Plan Year including overtime, shift premiums
or other differentials and amounts voluntarily deferred under ALZA's
salary reduction or deferral plans, but excluding moving allowances,
participation in clinical studies, bonus payments under this Plan,
imputed income due to fringe benefits such as group insurance plans
(including long-term disability), amounts realized from the exercise
of stock options or the disposition of stock acquired on exercise of
stock options, and other similar items. If a participant is subject to
written disciplinary
1
<PAGE>
action, his or her Eligible Earnings shall be reduced by an amount
calculated by multiplying the salary and wages paid to such
participant during the Plan Year by a fraction (a) the numerator of
which is the greater of (i) six pay periods or (ii) the actual number
of pay periods during which the participant is subject to the
disciplinary action, and (b) the denominator of which is the number of
pay periods during which such participant was an employee of ALZA in
the Plan Year. For purposes of calculating the numerator of the
fraction described in the foregoing sentence, the period for which
such salary and wages are excluded from Eligible Earnings shall
commence at the beginning of the pay period in which the disciplinary
action is first imposed.
(E) MISSION STATEMENT: ALZA's Mission, Purpose and Core Values as set
forth at the beginning of Corporate Objectives for the Plan Year and
as approved by the Board.
(F) PACE BONUS POOL: At its first meeting following the end of the Plan
Year, the Board will determine the total amount available for
compensation under this Plan for the Plan Year. Such determination
will be made based on the Board's judgment, in its absolute
discretion, as to the extent to which ALZA has achieved its Corporate
Objectives for the Plan Year and has operated in accordance with the
Mission Statement. If the Board determines that ALZA has not
satisfactorily met its Corporate Objectives or operated in accordance
with the Mission
2
<PAGE>
Statement for the Plan Year, it may decline to authorize any PACE
Bonus Pool.
(G) PLAN YEAR: The Plan Year shall be the calendar year.
3. PLAN MECHANICS:
(A) DURATION OF PLAN: This Plan will commence January 1, 1994 and will
remain in effect until terminated by the Board.
(B) ELIGIBILITY: Subject to Section 3(C)(4) below, all regular full and
part time employees of ALZA on December 1 of a Plan Year, excluding
sales personnel (other than the National Sales Director and Area
Business Managers) shall be eligible to receive Awards, if any,
distributed under the Plan with respect to such Plan Year.
(C) AWARDS:
(1) CALCULATION OF INDIVIDUAL AWARD: An individual's PACE Award for
the Plan Year, if any, will be calculated based on the participant's
Eligible Earnings for the Plan Year. A factor reflecting
responsibility level, and a second factor reflecting the eligible
participant's attainment of valuable results for ALZA during the Plan
Year will apply for exempt employees; scoring mechanisms, grouping of
responsibility levels, and other such features will be determined by
the Chief Executive Officer and Chief Operating Officer for each Plan
Year.
(2) PAYMENT OF AWARDS: Subject to Section 3(C)(5) below, the Award for
a participant will be in the form of a single cash payment and will be
3
<PAGE>
distributed as soon as practicable after the end of each Plan Year. No
interest shall be paid on any Awards. No distributions shall be made
following termination of this Plan in accordance with Section 5.
(3) WITHHOLDING TAXES: ALZA will withhold from each Award amounts
required by law to be withheld for federal and state withholding tax
purposes.
(4) ELIGIBILITY FOR DISTRIBUTIONS: In order to be eligible to receive
an Award for a Plan Year, a participant must be an employee of ALZA
continuously from the conclusion of such Plan Year through the date of
distribution of such Awards, unless the Board, in its sole discretion,
determines otherwise. An employee subject to disciplinary action shall
not receive an Award for which he or she otherwise would be eligible
until 30 days following the end of the period for which salary and
wages are excluded from Eligible Earnings under Section 2(c) above, if
and only if the employee is an employee in good standing at such time.
(5) RETIREMENT; DEATH: In the event of the termination of employment
with ALZA by a Plan participant after the attainment of (i) 65 years
of age or (ii) 55 years of age with 20 years of service to ALZA, or in
the event of the death of a participant, in each case after completion
of the Plan Year but prior to the distribution, if any, of awards
following such Plan Year, an Award otherwise payable to such
participant for the Plan Year immediately preceding such termination
or death will be paid to such
4
<PAGE>
participant or to the participant's beneficiary as indicated on the
participant's Group Insurance Enrollment Card, at the time Awards, if
any, are or otherwise would have been distributed to all participants
for that Plan Year.
(6) Termination of Participation: If a participant ceases to meet the
eligibility criteria set forth in Section 3(A), his or her
participation in this Plan shall terminate.
4. NO RIGHT TO EMPLOYMENT:
Nothing in this Plan shall give any participant the right to continued
employment by ALZA.
5. PLAN TERMINATION, MODIFICATION AND INTERPRETATION:
This Plan may be modified or terminated by the Board at any time in
its discretion. Nothing in this Plan shall create the right to receive
Awards hereunder. This Plan shall be administered by the Board or a
committee of the Board to which the Board delegates that
responsibility, and all determination and interpretations of the Board
(or such committee) shall be final and binding.
_______________________
Approved by the Compensation and Benefits Committee of the Board on
February 9, 1994.
Adopted by the Board of Directors on February 10, 1994.
5
<PAGE>
Exhibit 10.8
EXECUTIVE DEFERRAL PLAN AMENDMENTS
ALZA CORPORATION
Executive Deferral Plan II
Amendment Effective November 10, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALZA CORPORATION and its subsidiaries that participate in the ALZA Corporation
Executive Deferral Plan II (the "Plan"), pursuant to the power granted to them
by Section 10.2 of the Plan, hereby amend the Plan, effective as of November 10,
1993, by adding the following provisions to the Plan:
The definition of Section 1.21 "Retirement" and "Retire" shall be amended to
read as follows:
"Retirement" and "Retire" shall mean termination of employment or severance
of directorship with the Company (i) or after the attainment of age sixty-
five (65) or (ii) at a time when the sum of age at last birthday, plus
Years of Service, equal 70 or more ("Rule of 70").
A new definition Section 1.28 "Years of Service" will be added to Article 1 to
read as follows:
"Years of Service" shall mean the total number of years in which a
Participant has been employed by the Company and has completed in each
of those years 1,000 hours of service. For purposes of this
definition only, a year of employment shall be a 365 day period (or
366 day period in the case of a leap year) that, for the first year of
employment commences on the employee's date of hiring and that, for
any subsequent year, commences on an anniversary of that hiring date.
For a non-employee Director Participant, "Year of Service" shall mean
service as a Director during any part of a calendar year.
- 1 -
<PAGE>
ALZA CORPORATION
Amendment to Executive Deferral Plan
1987 through 1992 Benefit Units
Effective November 10, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALZA CORPORATION and its subsidiaries that participate in any or all of the
ALZA Corporation Executive Deferral Plans for the 1987 through 1992 Benefit
Units (the "Plans"), pursuant tot he power granted to them by Section 10.2 of
the Plans, hereby amend the Plans, effective as of November 10, 1993, by adding
the following provisions to the Plans:
The definition of Section 1.18 "Retirement" and "Retire" shall be amended to
read as follows:
"Retirement" and "Retire" shall mean termination of employment or
severance of directorship with the Company (i) on or after the
attainment of age sixty-five (65) or (ii) at a time when the sum of
age at last birthday, plus Years of Service, equal 70 or more ("Rule
of 70").
A new definition Section 1.25 "Years of Service" will be added to Article 1 to
read as follows:
"Years of Service" shall mean the total number of years in which a
Participant has been employed by the Company and has completed in each
of those years 1,000 hours of service. For purposes of this
definition only, a year of employment shall be a 365 day period (or
366 day period in the case of a leap year) that, for the first year of
employment commences on the employee's date of hiring and that , for
any subsequent year, commences on an anniversary of that hiring date.
For a non-employee Director Participant, "Year of Service" shall mean
service as a Director during any part of a calendar year.
Article 5 Retirement Benefit is to be replaced in its entirety to read as
follows:
Article 5
Retirement Benefit
5.1 RETIREMENT BENEFIT. A Participant who Retires shall become eligible to
receive, in accordance with this Article, his or her EDP Account (the
"Retirement Benefit").
5.2 RATE OF INTEREST FOR RETIREMENT BENEFIT; VESTING. Upon a Participant's
Retirement, the interest on his/her unpaid EDP Account will be based on the
- 2 -
<PAGE>
Preferred Distribution Rate. If it as not already done so, a Participant's
Secondary Account Balance shall be set upon his or her Retirement.
5.3 COMMENCEMENT OF RETIREMENT BENEFITS. Retirement Benefits shall be paid
over a fifteen (15) year period, payable annually. Other methods of
payment shall be at the sole discretion of the Committee. The initial
Retirement Benefit Payment (for a period from Retirement through December
31 of the year of Retirement) shall be made within thirty (30) days of
actual Retirement. All subsequent payments shall be made once in each
calendar year prior to February 28 until the Participant's EDP Account
balance is paid in full.
5.4 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS. If a retired Participant
dies before the applicable Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and be paid
to that Participant's Beneficiary.
- 3 -
<PAGE>
EXHIBIT 11
Statement Regarding Weighted Average Common and Common Equivalent Shares Used in
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Primary:
- --------
Common Stock 76,845,000 74,222,000 70,914,000
$15 warrants 2,216,000 4,276,000 -
$25 warrants 93,000 438,000 -
7 1/2% zero coupon convertible
debentures - - -
Other, principally stock options 705,000 1,409,000 -
---------- ---------- ----------
Weighted average common and,
in 1993 and 1992, common
equivalent shares 79,859,000 80,345,000 70,914,000
---------- ---------- ----------
---------- ---------- ----------
Fully Diluted:
- --------------
Common Stock 76,845,000 74,222,000 70,914,000
$15 warrants 2,249,000 4,364,000 -
$25 warrants 112,000 461,000 -
7 1/2% zero coupon convertible
debentures - - -
Other, principally stock options 738,000 1,449,000 -
---------- ---------- ----------
Weighted average common and,
in 1993 and 1992, common
equivalent shares 79,944,000 80,496,000 70,914,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Primary and fully diluted net loss per share for 1991 is based solely on
weighted average shares of Common Stock outstanding. Common equivalent shares
have not been considered in the computation since their inclusion would have an
antidilutive effect. Primary and fully diluted earnings per share for 1992
and 1993 are based on weighted average shares of Common Stock outstanding
plus common equivalent shares. The 7 1/2% zero coupon convertible debentures
(redeemed in November 1993) are not included in the calculation for 1992 and
1993 since in each case their inclusion for the respective stated periods would
have had an antidilutive effect. Fully diluted earnings per share are not
presented on the face of the Consolidated Statement of Operations since they
are not materially different from primary earnings per share.
EXHIBIT 13
PAGE 20 OF PAPER FORMAT ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
ALZA's total cash and cash equivalents, short-term investments and long-term
investments decreased from $338 million at December 31, 1992 to $257 million at
December 31, 1993. This decrease primarily reflects ALZA's $250 million
contribution to Therapeutic Discovery Corporation ("TDC") and the distribution
of TDC shares to ALZA stockholders in 1993 and capital expenditures during the
year, partially offset by $96 million in proceeds received from the exercise of
$15 warrants during 1993 and ALZA's positive cash flow from operations.
In June 1993, ALZA contributed $250 million of cash to TDC, and Units (each
consisting of a TDC share and a warrant to purchase one-eighth of one share of
ALZA Common Stock) were distributed as a special dividend to ALZA stockholders.
The arrangements with TDC are intended to result in a future pipeline of
products for marketing by ALZA Pharmaceuticals. Under the arrangements with
TDC, ALZA has an option to license each TDC product for worldwide
commercialization and has an option to purchase all of the shares of TDC (see
Note 5).
From 1986 to 1993, ALZA invested approximately $250 million in additions to
property, plant and equipment to support its expanding research and development
and manufacturing activities, including approximately $24 million (net of
amounts written-off, as described below) and $41 million in 1993 and 1992,
respectively. A significant portion of these expenditures has involved the
establishment of a second research and development campus in Mountain View,
California (approximately $96 million since 1988) and the establishment of a
220,000 square foot commercial manufacturing facility in Vacaville, California
(approximately $103 million since 1986).
In November 1993, ALZA redeemed its outstanding 7 1/2% zero coupon
convertible subordinated debentures for a total redemption price of
approximately $244 million. In connection with this redemption, ALZA incurred
1
<PAGE>
PAGE 20 OF PAPER FORMAT ANNUAL REPORT
a one-time, after tax charge of approximately $3.8 million related to
unamortized debenture issuance costs. ALZA replaced the debentures with a
$250 million, short-term U.S. commercial paper program. ALZA has unused bank
lines of credit totaling $250 million available to support the commercial paper
program.
In November 1991, ALZA exercised its option to acquire all outstanding
shares of Bio-Electro Systems, Inc. ("BES") Class A Common Stock for
approximately $75 million. The purchase price was paid in shares of ALZA Common
Stock. BES was merged into ALZA and each BES share was exchanged for .5772 ALZA
shares, resulting in the issuance of approximately 1.9 million ALZA shares in
February 1992.
While ALZA believes its facilities and equipment are sufficient to meet its
current operating requirements, ALZA expects to construct additional facilities
on its properties and to continue to purchase available facilities or properties
to support its long-term requirements, if and when they become available on
acceptable terms. ALZA believes that its existing cash balances and investments
are adequate to fund the current cash needs of its existing business and the
initial activities of ALZA Pharmaceuticals. Should the need arise, ALZA
believes it would be able to borrow additional funds or raise additional capital
in the marketplace.
RESULTS OF OPERATIONS
In 1993, ALZA reported net income of $45.6 million, compared to net income of
$72.2 million in 1992 and a net loss of $62.1 million in 1991. Included in
ALZA's 1993 results were fourth quarter pre-tax charges and allowances of $28.1
million primarily related to manufacturing activities, of which approximately
$22.0 million was reflected as an increase in costs of products shipped while
the remaining $6.1 million was charged against net sales (see
Note 2). Also affecting 1993 results were $6.6 million of benefits related to
the adoption of Statement of Financial Accounting Standards No. 109,
2
<PAGE>
PAGE 20-21 OF PAPER FORMAT ANNUAL REPORT
Accounting for Income Taxes ("SFAS 109"), and the $3.8 million extraordinary
charge related to the redemption of ALZA's 7 1/2% debentures. Without these
unusual items, ALZA would have reported net income of $61.1 million for 1993.
Reducing operating results in 1991 was a $101.3 million charge resulting
from the acquisition of BES (including associated costs of the acquisition and
BES liabilities assumed by ALZA), and the restructuring of ALZA's arrangements
with On-Site Therapeutics, Inc. ("On-Site") relating to the Actisite (registered
trademark) product jointly developed by ALZA and On-Site. Without this one-time
charge and related tax benefits, ALZA would have reported net income of $37.7
million for 1991.
Royalties were slightly lower in 1993 than in 1992 due to lower royalties
from Nicoderm (registered trademark), offset in part by an increase in royalties
from Procardia XL (registered trademark) and by the introduction of Efidac/24
(registered trademark) by Ciba during the second half of 1993. Approximately
one-half of the increase in royalties and fees in 1992 from the 1991 level was
due to an increase in royalties received from Pfizer for Procardia XL, resulting
both from increased sales of the product in the United States and an increase in
the royalty rate paid to ALZA compared to the rate paid in 1991. For 1993,
Procardia XL accounted for more than 60% of ALZA's royalties. ALZA expects
that, in the near term, net income will continue to result primarily from
royalty income on sales of both currently marketed products and additional
products recently approved or now awaiting approval by the U.S. Food and Drug
Administration ("FDA") and other regulatory agencies. Because ALZA's clients
generally assume responsibility for obtaining necessary regulatory approvals and
make all marketing and commercialization decisions regarding such products, most
of the variables that affect ALZA's royalties and fees, and therefore its net
income, are not directly within ALZA's control. With increasing pressures for
cost containment in the U.S. health care system, it can be expected that
pharmaceutical product prices, including those of ALZA's royalty-bearing
products, will not increase as quickly as they have in the past.
3
<PAGE>
PAGE 21 OF PAPER FORMAT ANNUAL REPORT
ALZA's net sales of $53.6 million for 1993 were 29% less than in 1992, as a
result of decreased shipments of transdermal products manufactured by ALZA for
its client companies, principally Nicoderm for Marion Merrell Dow and, to a
lesser extent, the effect of the manufacturing write-off discussed above. These
decreases were partially offset by increases in shipments of other products,
primarily OROS (registered trademark) products. ALZA's net sales of $75.5
million for 1992 increased 122% from the 1991 level as a result of increased
shipments of transdermal products manufactured by ALZA for its client companies,
principally Nicoderm for Marion Merrell Dow.
Costs of products shipped increased approximately 30% for 1993 from the
1992 level, primarily from the effect of the $22.0 million charge related to the
manufacturing write-off. ALZA's Vacaville manufacturing facility provides
substantial manufacturing capacity for ALZA-developed products, including those
utilizing ALZA's oral osmotic and transdermal technologies. The mix of products
manufactured by ALZA may change from time to time due to fluctuations in
clients' product requirements and, as a result, utilization of the Vacaville
facility and the costs of products shipped may fluctuate. Until the end of
1991, expenses associated with the operation of this facility generally exceeded
manufacturing revenues. During 1992, the facility was fully activated and
operated at a profit. The 1993 sales reductions resulted in lower utilization
of the transdermal manufacturing capacity of ALZA's Vacaville manufacturing
facility due to the significant decrease in Nicoderm production.
ALZA continues to manufacture and, in the United States directly market,
the Progestasert (registered trademark), Ocusert (registered trademark) and
Alzet (registered trademark) systems; in other countries these products are
marketed by other companies under distribution agreements. Net sales of the
three products were $6.7 million in 1993, compared to the $6.6 million in 1992
and $6.8 million in 1991. In late 1993, ALZA announced that ALZA
Pharmaceuticals will market the Testoderm (registered trademark) testosterone
4
<PAGE>
PAGE 21-22 OF PAPER FORMAT ANNUAL REPORT
transdermal system, which received FDA approval during 1993. ALZA
Pharmaceuticals will also co-promote the Duragesic (registered trademark)
fentanyl transdermal system with Janssen Pharmaceutica, Inc. in the U.S. As a
result of these activities, ALZA incurred significantly increased sales and
marketing expenses during the fourth quarter of 1993; this increase is expected
to continue in 1994. As ALZA moves forward with its Target 2000 goals,
commercialization of its own products will be increasingly emphasized. In the
early stages of marketing a product, it can be expected that sales and marketing
expenses may exceed net sales.
ALZA's research revenues generally represent client reimbursement to ALZA
under various product development arrangements for costs (including a portion of
general and administrative expenses), and therefore do not contribute
significantly to current net income. In general, ALZA's product development
arrangements with its client companies provide for ALZA to receive payments
based on future sales by clients of successfully developed products. ALZA's
research revenues increased approximately 20% from 1992 to 1993. The increase
was due in large part to initial research and development activities undertaken
on behalf of TDC. For the year ended December 31, 1993, ALZA had research
revenues of $4.9 million from TDC. As products are accepted by TDC for
development, and as development activities increase, ALZA's research revenues
from TDC (and, correspondingly, ALZA's research expenses related to those TDC
activities) are expected to increase substantially. Because products in early
stages of development generally require lower levels of expenditures, ALZA's
research revenues from TDC for any product can be expected to be lower during
the early stages of product development, but can be expected to increase as the
product enters later stages of development. From 1991 to 1992, research
revenues had decreased approximately 6%, as a result of the loss of BES revenues
($14.7 million in 1991) after its acquisition by ALZA, offset in part by an
increase in activiites with other clients both through expansion of agreements
with existing clients and the addition of new clients.
5
<PAGE>
PAGE 22 OF PAPER FORMAT ANNUAL REPORT
Research and product development expenses increased approximately 2% from
1992 to 1993, in part to support activities on behalf of TDC, and approximately
27% from 1991 to 1992, due to ALZA's expansion of its own research and product
development activities in addition to those undertaken on behalf of ALZA's
client companies. ALZA's total research and product development activities and
expenses are expected to increase over the next few years. To the extent these
expenses relate to client activities, research revenues will also increase.
Other revenue, which consists primarily of interest income, was $20.5
million in 1993, compared to $21.3 million and $22.6 million in 1992 and 1991,
respectively. The decrease in 1993 from 1992 resulted from lower invested cash
balances following the contribution of $250 million to TDC. The decrease in
1992 from 1991 resulted from lower interest earned on investments due to lower
prevailing interest rates. ALZA reported total interest expense of
$19.2 million in 1993 compared to $17.5 million and $16.2 million in 1992 and
1991, respectively. Most of the interest expense during these periods related
to interest accrued on ALZA's 7 1/2% debentures. With the replacement of the
7 1/2% debentures with the commercial paper program, interest expense is
expected to be lower than in prior years unless short-term market interest rates
increase substantially.
General, administrative and marketing expenses increased 17% from the 1992
level due primarily to an increase in ALZA's sales and marketing expenses and,
to a lesser extent, due to legal expenses associated with the securites class
action litigation (see Note 10). General, administrative and marketing expenses
increased 29% from 1991 to 1992 due primarily to continuing growth required to
support ALZA's expanding research and development and manufacturing activities.
For 1994, general, administrative and marketing expenses are expected to
increase due to ALZA's increased slaes and marketing activities.
6
<PAGE>
PAGE 22 OF PAPER FORMAT ANNUAL REPORT
ALZA's effective tax rate was 35% in 1993, compared to 32% in 1992 and 35%
in 1991 (excluding the $101.3 million one-time charge). A substantial portion
of the one-time charge in 1991 was not deductible for tax purposes. ALZA's
effective tax rate for 1992 was reduced from statutory levels primarily by
deductible amounts from the BES transaction that were recognized during the
year. In February 1992, the Financial Accounting Standards Board issued SFAS
No. 109 which ALZA adopted in the first quarter of 1993. As permitted by SFAS
109, prior year financial statements were not restated to reflect the change in
accounting method. The cumulative effect of adopting SFAS 109 increased ALZA's
net income by $6.6 million or $.08 per share for the year ended December 31,
1993, related primarily to the recognition of the remaining tax benefits from
the BES acquisition. ALZA expects its effective tax rate to be approximately
39% in 1994.
The health care industry has continued to change rapidly as the public,
government, medical practitioners and the pharmaceutical industry focus on ways
to expand medical coverage while controlling the growth in health care costs.
Congress is working on comprehensive legislative changes which, if enacted,
could significantly affect health care companies. The President of the United
States has made this reform a top priority. The changes are expected to put
pressures on the prices charged for pharmaceutical products. While ALZA
believes the changing health care environment may increase the value of ALZA's
drug delivery products over the long term, it is impossible to predict the
impact any such legislative changes may have on ALZA.
7
<PAGE>
PAGE 23 OF PAPER FORMAT ANNUAL REPORT
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended December 31,
(In thousands, except per share amounts) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Royalties and fees $ 113,318 $ 114,684 $ 64,142
Net sales 53,630 75,488 33,953
Research revenue, including amounts from
TDC(1993-$4,869) and BES (1991-$14,659) 46,783 39,081 41,653
Other revenue, primarily interest income 20,451 21,266 22,601
--------- --------- ---------
Total revenues 234,182 250,519 162,349
COSTS AND EXPENSES:
Costs of products shipped 74,450 57,196 30,958
Research and product development 53,153 52,089 41,163
General, administrative and marketing 21,422 18,241 14,162
Interest 19,204 17,538 16,156
Purchase of in-process technology - - 101,317
--------- --------- ---------
Total costs and expenses 168,229 145,064 203,756
--------- --------- ---------
Income (loss) before income taxes, extraordinary
item and cumulative effect of accounting change 65,953 105,455 (41,407)
Income taxes 23,084 33,285 20,669
--------- --------- ---------
Income (loss) before extraordinary item and
cumulative effect of accounting change 42,869 72,170 (62,076)
Extraordinary item-debt refinancing, net
of income taxes (3,830) - -
Cumulative effect of change in accounting
for income taxes 6,573 - -
--------- --------- ---------
Net income (loss) $ 45,612 $ 72,170 $ (62,076)
--------- --------- ---------
--------- --------- ---------
PER COMMON AND, IN 1993 AND 1992,
COMMON EQUIVALENT SHARE:
Income (loss) before extraordinary item and
cumulative effect of accounting change $ .54 $ .90 $ (.88)
Extraordinary item-debt refinancing (.05) - -
Cumulative effect of change in accounting for
income taxes .08 - -
--------- --------- ---------
Net income (loss) $ .57 $ .90 $ (.88)
--------- --------- ---------
--------- --------- ---------
Weighted average common and, in 1993
and 1992, common equivalent shares 79,859 80,345 70,914
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
8
<PAGE>
PAGE 24 OF PAPER FORMAT ANNUAL REPORT
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
December 31,
(Dollars in thousands, except share and per share amounts) 1993 1992
---- ----
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 53,683 $ 26,656
Short-term investments 40,399 103,966
Receivables, net of allowance for doubtful accounts
(1993-$211; 1992-$181) 56,563 53,212
Inventories 25,163 29,888
Prepaid expenses and other current assets 22,603 14,171
-------- --------
Total current assets 198,411 227,893
Investments in long-term government and
corporate notes and bonds 163,391 207,852
PROPERTY, PLANT AND EQUIPMENT:
Buildings and leasehold improvements 164,417 135,728
Equipment 90,662 77,187
Land and prepaid land leases 17,001 16,979
Construction in progress 6,403 24,805
-------- --------
278,483 254,699
Less accumulated depreciation and amortization (56,886) (44,631)
-------- --------
Net property, plant and equipment 221,597 210,068
Other assets 38,425 52,568
-------- --------
TOTAL ASSETS $621,824 $698,381
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Short-term debt $249,520 $ -
Accounts payable 11,678 11,538
Accrued liabilities 17,415 18,945
Deferred revenue 6,698 7,800
Current portion of long-term debt 867 866
-------- --------
Total current liabilities 286,178 39,149
7 1/2% zero coupon convertible subordinated debentures - 228,966
Other long-term liabilities 28,969 22,723
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value,
300,000,000 shares authorized; 81,613,725 and
74,855,414 shares issued and outstanding at
December 31, 1993 and 1992 816 749
Additional paid-in capital 294,998 404,947
Retained earnings 10,863 1,847
-------- --------
Total stockholders' equity 306,677 407,543
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $621,824 $698,381
-------- --------
-------- --------
</TABLE>
See accompanying notes.
9
<PAGE>
PAGE 25 OF PAPER FORMAT ANNUAL REPORT
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1993, 1992, and 1991
(In Thousands)
RETAINED TOTAL
CLASS B ADDITIONAL EARNINGS STOCK-
COMMON COMMON PAID-IN (ACCUMULATED HOLDERS'
STOCK STOCK CAPITAL DEFICIT) EQUITY
----- ----- ------- -------- ------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1990 $ 619 $ 15 $226,858 $ (7,887) $219,605
Conversion of 5 1/2% debentures,
including forfeited interest
and net of unamortized issuance
costs 36 - 76,598 - 76,634
Conversion of Class B Common Stock 58 (15) (43) - -
Common stock split/dividend - - 360 (360) -
Common stock issued 8 - 14,019 - 14,027
Common stock issuable for
in-process technology 19 - 74,645 - 74,664
Net loss - - - (62,076) (62,076)
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1991 740 - 392,437 (70,323) 322,854
Common stock issued 9 - 12,510 - 12,519
Net income - - - 72,170 72,170
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1992 749 - 404,947 1,847 407,543
Distribution of TDC Units - - (213,404) (36,596) (250,000)
Exercise of warrants 64 - 95,811 - 95,875
Common stock issued 3 - 7,644 - 7,647
Net income - - - 45,612 45,612
-------- -------- -------- --------- --------
BALANCE, DECEMBER 31, 1993 $ 816 $ - $294,998 $ 10,863 $306,677
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
</TABLE>
See accompanying notes.
10
<PAGE>
PAGE 26 OF PAPER FORMAT ANNUAL REPORT
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31,
(in thousands)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 45,612 $ 72,170 $ (62,076)
Non-cash adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 12,255 9,293 6,502
Interest on 7 1/2% zero coupon convertible
subordinated debentures 14,912 15,746 15,002
Purchase of in-process technology (common
stock portion) - - 74,664
Extraordinary item-debt refinancing 5,893 - -
Cumulative effect of change in accounting
for income taxes (6,573) - -
Decrease (increase) in assets:
Receivables (3,351) (6,693) (13,916)
Inventories 4,725 (10,473) (5,135)
Prepaid expenses and other current assets (1,859) (3,537) (5,944)
Increase (decrease) in liabilities:
Accounts payable 140 4,978 (307)
Accrued and other liabilities (1,530) 9,276 1,940
Deferred revenue (1,102) 4,158 3,642
Other long-term liabilities 7,113 1,647 5,219
--------- --------- ---------
Total adjustments 30,623 24,395 81,667
--------- --------- ---------
Net cash provided by operating
activities 76,235 96,565 19,591
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23,784) (41,398) (34,059)
Decrease (increase) in short-term
investments 63,567 (16,457) 8,869
Decrease (increase) in long-term investments 44,461 (83,456) (124,396)
Decrease (increase) in cash surrender
value-life insurance 4,285 (14,237) (4,747)
Decrease (increase) in other assets 3,965 (8,959) 224
--------- ---------- ---------
Net cash provided by (used in)
investing activities 92,494 (164,507) (154,109)
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of 7 1/2% zero coupon convertible
subordinated debentures (243,878) - -
Issuances of short-term debt 249,520 - -
Principal payments on long-term debt (866) (2,603) (832)
Contribution to TDC (250,000) - -
Other issuances of common stock 103,522 12,519 14,027
--------- --------- ---------
Net cash (used in) provided by
financing activities (141,702) 9,916 13,195
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 27,027 (58,026) (121,323)
Cash and cash equivalents at beginning
of year 26,656 84,682 206,005
--------- --------- ---------
Cash and cash equivalents at end
of year $ 53,683 $ 26,656 $ 84,682
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
11
<PAGE>
PAGE 27 OF PAPER FORMAT ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991
NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ALZA Corporation ("ALZA") develops, primarily under joint development and
commercialization agreements with pharmaceutical company clients, a broad range
of pharmaceutical products based on ALZA's proprietary therapeutic systems
technologies. ALZA's therapeutic systems can often improve the medical value as
well as the cost-effectiveness of drug compounds by increasing efficacy,
minimizing unpleasant or harmful side effects and/or providing greater patient
compliance. Revenues from these development activities with client companies
are reported as research revenue. ALZA's research revenues represent clients'
reimbursement to ALZA of costs incurred in product development and clinical
evaluation, including a portion of general and administrative expenses, and
therefore do not contribute significantly to net income. ALZA's policy is to
expense all costs of research and development related to costs incurred on
its own behalf, on behalf of its clients and for acquired in-process technology.
ALZA manufactures all or a portion of the product requirements for certain
of its client companies, including Nicoderm for Marion Merrell Dow, Duragesic
for Janssen, Procardia XL and Alpress LP (registered trademark) for Pfizer,
Catapres-TTS (registered trademark) for Boehringer Ingelheim and Transderm Scop
(registered trademark) and Efidac/24 for Ciba. ALZA also manufactures and
markets, directly in the United States and internationally through distributors,
its Progestasert system, Alzet osmotic pumps and Ocusert systems. Revenues from
all of these activities are reported as net sales. Export sales were $18.1
million during 1993 ($12.1 million and $2.9 million in 1992 and 1991,
respectively), principally to distributors and client companies in Europe.
Royalty income and other payments based on sales by ALZA's client companies
of products developed under development and commercialization agreements, and
certain one-time or infrequent fees or similar payments under such agreements,
are reported as royalties and fees.
12
<PAGE>
PAGE 27-28 OF PAPER FORMAT ANNUAL REPORT
Interest income, administrative service fees and rental income are reported
as other revenue. ALZA earned interest income of $19.6 million in 1993, $20.4
million in 1992 and $21.3 million in 1991.
One of ALZA's clients accounted for 35% of ALZA's total revenues in 1993,
29% in 1992 and 27% in 1991; a second client accounted for 13% of ALZA's total
revenues in 1993, 10% in 1992 and 14% in 1991; and a third client accounted for
10% of ALZA's total revenues in 1993, 26% in 1992 and 10% in 1991.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of ALZA and its wholly-owned subsidiaries, ALZA Development
Corporation, ALZA International, Inc. and ALZA Limited. All significant
intercompany accounts and transactions have been eliminated.
INVENTORIES Raw materials, work in process and finished goods inventories are
stated at the lower of standard cost (which approximates actual costs on a
first-in, first-out cost method) or market value.
<TABLE>
<CAPTION>
Inventories consist of the following:
(In thousands) 1993 1992
---- ----
<S> <C> <C>
Raw materials $ 14,635 $ 15,870
Work in process 9,241 12,867
Finished goods 1,287 1,151
-------- --------
Total inventories $ 25,163 $ 29,888
-------- --------
-------- --------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost,
including capitalized interest additions of $1.9 million in 1993, $1.3 million
in 1992 and $1.8 million in 1991. Additions and improvements are capitalized
while maintenance and repairs are expensed as incurred. Depreciation and
amortization are computed on the straight-line method, except for certain
manufacturing equipment that is depreciated on a per unit manufactured basis,
over estimated useful lives, as follows:
<TABLE>
<S> <C>
Buildings 30 to 50 years
Leasehold improvements Terms of the leases (1 to 5 years)
Equipment 3 to 9 years
Prepaid land leases Terms of the leases (38 to 82 years)
</TABLE>
13
<PAGE>
PAGE 28 OF PAPER FORMAT ANNUAL REPORT
Prepaid land leases represent ALZA's total cost, paid in advance, of
leasehold rights to land upon which certain of ALZA's buildings in Palo Alto are
situated. Included in construction in progress are payments made in connection
with the facilities being constructed or modified, and the installation of
related equipment in Mountain View (primarily research and development) and
Vacaville (primarily commercial manufacturing).
CASH INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS ALZA reports all
highly liquid debt instruments purchased with a maturity of three months or less
as cash equivalents. The carrying amount reported in the balance sheet for cash
and cash equivalents approximates their fair value. The fair value of
marketable debt and equity securities is based on quoted market prices. At
December 31, 1993 and 1992, the carrying amount of investments reported as
short-term (a maturity of one year or less) approximated their fair value.
Long-term investments (a maturity greater than one year), with a carrying amount
of $163 million at December 31, 1993 and $208 million at December 31, 1992, had
a fair value of approximately $165 million and $212 million at December 31, 1993
and December 31, 1992, respectively.
CREDIT AND INVESTMENT RISK Most of ALZA's revenues, comprised primarily of
royalties and fees, net sales and research revenues, are derived from agreements
with major pharmaceutical company clients with significant cash resources.
Therefore, ALZA considers its credit risk related to these transactions to be
minimal.
ALZA invests excess cash in securities of banks and companies from a
variety of industries, with strong credit ratings, and in U.S. government
obligations. These securities typically bear minimal risk and ALZA has not
experienced any losses on its investments due to institutional failure or
bankruptcy. ALZA's policy is designed to limit exposure with any one
institution.
14
<PAGE>
PAGE 28-29 OF PAPER FORMAT ANNUAL REPORT
PER SHARE INFORMATION Per share information for 1993 and 1992 is based on
weighted average common and dilutive common equivalent shares, including ALZA
Common Stock, warrants and options, for the period each was outstanding. Per
share information for 1991 is based solely on weighted average shares of Common
Stock outstanding. Common equivalent shares (which, if included, would have
brought the total to 76.2 million shares) have not been considered in the
computation for 1991 since their inclusion would have an antidilutive effect.
Fully diluted earnings per share are not presented for 1993 and 1992 since
dilution is less than 3% each year.
NOTE 2: MANUFACTURING WRITE-OFF
In December 1993, ALZA wrote off approximately $28.1 million related primarily
to ALZA's manufacturing activities. This write-off resulted from both non-
recurring expenses and allowances related to scale-up of the production of
certain products and to excess transdermal manufacturing capacity and equipment
resulting from ALZA's facilities expansion in Vacaville, California. The
facilities expansion was followed by lower than anticipated Nicoderm production
requirements, reflecting the decline in Nicoderm sales in 1993. The $28.1
million included $10.1 million of inventory write-downs, $6.8 million of
equipment write-offs, $4.6 million of allowances reducing sales and receivables
and $6.6 million of anticipated future cash outlays related to contractual
product supply issues. The effect of the write-off was to increase costs of
products shipped by approximately $22.0 million and reduce net sales by $6.1
million.
NOTE 3: DEBT OBLIGATIONS AND OTHER LIABILITIES
In November 1993, ALZA redeemed all of its outstanding 7 1/2% zero coupon
convertible subordinated debentures at a redemption price of $283.96 per $1,000
face amount. Debenture holders had the right, prior to redemption, to convert
each $1,000 face amount debenture into 8.841 shares of ALZA Common Stock. A
total of 940 debentures were converted into 8,307 shares of Common Stock. A
15
<PAGE>
PAGE 29 OF PAPER FORMAT ANNUAL REPORT
total of 858,845 debentures were redeemed, representing a total redemption value
of approximately $244 million. In connection with this redemption, ALZA incurred
a one-time charge of approximately $3.8 million, net of income taxes of
approximately $2.1 million, related to the write-off of unamortized issuance
costs. This charge has been reported as an extraordinary item.
ALZA replaced the debentures with a $250 million U.S. commercial paper
program. At December 31, 1993, approximately $249.5 million (including accrued
interest) in commercial paper was outstanding with an average interest rate of
3.6% and maturities of less than sixty days. The carrying amount reported in
the balance sheet for short-term debt approximates its fair value. In support
of the commercial paper program, ALZA has outstanding bank lines of credit
totaling $250 million. No borrowings have been made under the lines of credit
as of December 31, 1993.
In March 1991, ALZA called for redemption all of its $75 million in 15-
year, 5 1/2% convertible subordinated debentures at a redemption price of 102%
of the principal amount. Essentially all of the debentures were converted by
the holders into approximately 3.6 million shares at a conversion price of
$20.83 per share.
ALZA's other long-term liabilities are as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
---- ----
<S> <C> <C>
Long-term debt $ 1,797 $ 2,664
Deferred income taxes 9,906 6,783
Deferred compensation 17,266 13,276
------- -------
Total long-term liabilities $28,969 $22,723
------- -------
------- -------
</TABLE>
Included in ALZA's long-term debt is a $1.7 million note representing the
required future payments under a $5.0 million investment (included in other
assets) in a low income housing partnership. Installments under this obligation
will total $850,000 in each of 1995 and 1996.
During 1987, ALZA implemented deferred compensation arrangements under
which selected employees may defer a portion of their salaries. ALZA has
purchased life insurance policies that it intends to use to partially finance
16
<PAGE>
PAGE 29-30 OF PAPER FORMAT ANNUAL REPORT
amounts to be paid in the future to participants, based on their deferred salary
amounts and interest.
The details of ALZA's accrued liabilities are as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
---- ----
<S> <C> <C>
Accrued income taxes $ 375 $ 10,888
Accrued compensation 8,212 6,235
Manufacturing reserves
(in 1993) and other 8,828 1,822
-------- --------
Total accrued liabilities $ 17,415 $ 18,945
-------- --------
-------- --------
</TABLE>
NOTE 4: CAPITAL STOCK AND WARRANTS
At the Annual Meeting of Stockholders held in 1993, an amendment to ALZA's
Certificate of Incorporation was approved which eliminated Class B Common Stock
and changed the designation of Class A Common Stock to Common Stock.
In November 1991, ALZA exercised its option to acquire all of the
outstanding BES shares, and BES was subsequently merged into ALZA in
February 1992. Warrants issued in connection with the 1988 BES subscription
offering were exercisable until December 14, 1993 at $15 per share.
Approximately 6.4 million of these warrants were exercised during 1993,
with net proceeds to ALZA totaling approximately $96 million.
In addition, ALZA has outstanding privately held warrants to purchase
1.0 million shares of Common Stock at an exercise price of $25 per share. The
warrants will expire on January 31, 1996. In connection with the formation of
TDC, ALZA has outstanding warrants to purchase approximately 1.0 million shares
of Common Stock at an exercise price of $65 per share. These warrants will
expire on December 31, 1999.
ALZA is authorized to issue 100,000 shares of Preferred Stock, $.01 par
value, none of which was outstanding at December 31, 1993 or 1992. The Board of
Directors may determine the rights, preferences and privileges of any Preferred
Stock issued in the future.
17
<PAGE>
PAGE 30 OF PAPER FORMAT ANNUAL REPORT
NOTE 5: ARRANGEMENTS WITH THERAPEUTIC DISCOVERY CORPORATION
In June 1993, ALZA completed the distribution of a special dividend of "Units"
to ALZA stockholders. Each Unit consisted of one share of TDC Class A Common
Stock and one warrant to purchase one-eighth of one share of ALZA Common Stock.
Holders of record of ALZA Common Stock received one Unit for every 10 shares of
ALZA Common Stock owned on May 28, 1993 with cash distributed in lieu of
fractional Units. Approximately 7.7 million Units were distributed on June 11,
1993. The Units trade on the Nasdaq Stock Market (under the trading symbol
TDCAZ), and will trade only as Units until the earlier of June 11, 1996 or the
date on which ALZA exercises the Purchase Option (as defined below) (the
"Separation Date"), at which time the warrants and TDC Class A Common Stock will
trade separately. The warrants will be exercisable at a per-share exercise
price of $65 at any time after the Separation Date and will expire, if not
previously exercised, on December 31, 1999. In connection with the dividend,
ALZA contributed $250 million in cash to TDC. As a result of this contribution
and the dividend, ALZA's total assets and stockholders' equity were each reduced
by $250 million during the second quarter of 1993. Research revenue from TDC
during 1993 was approximately $4.9 million.
TDC was formed for the purpose of selecting and developing new
human pharmaceutical products combining ALZA's proprietary drug delivery
technology with various drug compounds, and commercializing such products, most
likely through licensing to ALZA. ALZA and TDC have entered into a development
agreement (the "Development Contract") pursuant to which ALZA conducts research
and development activities on behalf of TDC. ALZA has granted to TDC a royalty-
free, nonexclusive, perpetual license to use ALZA's proprietary drug delivery
technology to develop and commercialize specified TDC products.
ALZA has an option to license any products developed by TDC, on a product-
by-product basis, providing ALZA with access to a potential pipeline of products
for worldwide commercialization. If ALZA exercises its license option for any
18
<PAGE>
PAGE 30-31 OF PAPER FORMAT ANNUAL REPORT
product, ALZA will make royalty payments to TDC with respect to such product if
the product is sold by ALZA (up to a maximum of 5% of ALZA's net sales) or, if
the product is sold by a third party, sublicensing fees of up to 50% of ALZA's
sublicensing revenues with respect to the product. ALZA has an option,
exercisable on a product-by-product basis, to buy out its royalty obligation to
TDC by making a one-time payment that is a multiple of royalties and
sublicensing fees paid in specified periods.
ALZA also has an option, exercisable in ALZA's sole discretion, to
purchase, according to a predetermined formula, all (but not less than all) of
the outstanding shares of TDC Class A Common Stock (the "Purchase Option"). The
Purchase Option is exercisable at any time until December 31, 1999, or later
under certain circumstances. The Purchase Option will expire, in any event, on
the 60th day after TDC files a Form 10-K or Form 10-Q containing a balance sheet
showing less than an aggregate of $5 million in cash and cash equivalents,
short-term investments and long-term investments. If the Purchase Option is
exercised, the exercise price will be the greatest of: (a) 25 times the
worldwide royalties and sublicensing fees paid by ALZA to TDC during four
specified calendar quarters or 100 times such royalties and sublicensing fees
during a specified calendar quarter; in each case, less any amounts previously
paid by ALZA to exercise a buy-out option with respect to any product; (b) the
fair market value of one million shares of ALZA Common Stock; (c) $325 million
less all amounts paid by TDC under the Development Contract; or (d) $100
million. The purchase price may be paid in cash, in ALZA Common Stock, or any
combination of the two, at the option of ALZA.
ALZA performs certain administrative services for TDC under an
administrative services agreement (terminable at the option of TDC), for which
ALZA is reimbursed its direct costs, plus certain overhead expenses. For the
year ended December 31, 1993, administrative service revenue under this
agreement was approximately $0.1 million.
19
<PAGE>
PAGE 31-32 OF PAPER FORMAT ANNUAL REPORT
NOTE 6: CERTAIN OTHER ARRANGEMENTS
From December 1988 through November 1991, ALZA had a research and development
agreement with BES to further develop drug delivery systems utilizing ALZA's
proprietary electrotransport and bioerodible polymer drug delivery technologies
and to develop and commercialize, most likely through licensing, pharmaceutical
products based on these technologies. The net proceeds to BES of the December
1988 subscription offering were used primarily to make payments to ALZA under
the research and development agreement, including $14.7 million in 1991.
In November 1991, ALZA exercised its option to acquire all outstanding
shares of BES Class A Common Stock and restructured its arrangements with On-
Site. As a result of these transactions, ALZA incurred a one-time charge of
$101.3 million in the fourth quarter of 1991. The $101.3 million charge against
earnings included a $74.7 million non-cash charge for the purchase price of all
3.2 million outstanding BES shares. The purchase price paid by ALZA was $23 per
BES share and was paid in shares of ALZA Common Stock. In February 1992, BES
was merged into ALZA and each BES share was exchanged for .5772 ALZA shares,
resulting in the issuance of approximately 1.9 million ALZA shares. Also
included in the $101.3 million charge were BES liabilities assumed by ALZA,
costs of the BES acquisition and costs of the On-Site restructuring. After
related income tax credits, the one-time charge represented a loss of
approximately $1.38 per share in 1991.
NOTE 7: EMPLOYEE COMPENSATION AND BENEFIT PLANS
In 1993, ALZA adopted a company-wide bonus plan, the PACE plan, under which
substantially all employees were eligible to receive a bonus. The annual bonus,
if any, is to be determined by ALZA's Board of Directors, in its discretion,
based on the Company's performance during the year. For plan year 1993, the
PACE award totaled $1.8 million. Under ALZA's Executive Incentive Plan,
selected employees can receive additional cash awards. For plan year 1993 the
awards totaled $0.8 million to 86 participants (including $0.4 million under
the PACE plan); for
20
<PAGE>
PAGE 32 OF PAPER FORMAT ANNUAL REPORT
plan year 1992 the awards totaled $1.0 to 73 participants; and for the plan year
1991 the awards totaled $1.1 million to 66 participants. The amounts awarded
are expensed during the plan year to which they relate.
ALZA has an employee stock purchase plan under which essentially all ALZA
employees may participate and purchase stock at 85% of its fair market value at
certain specified dates. Employee contributions are limited to 15% of
compensation and no more than 300,000 shares may be purchased by all
participants in any plan year. In June 1993, 1992 and 1991, in aggregate
126,905, 107,970 and 90,922 shares, respectively, of ALZA Common Stock were
purchased by the participants under the terms of the plan. To date, 845,059
shares have been issued under the plan and 704,941 shares are available for
issuance.
In 1986, ALZA adopted a company-funded, defined contribution retirement
plan for its employees. The plan provides for an annual basic contribution and
allows for additional discretionary contributions on a year-by-year basis. Such
contributions are allocated to participants based on the participant's salary
and age. For 1993, 1992 and 1991, the total expense for such contributions to
this plan was $1.9 million, $1.6 million and $1.2 million, respectively.
ALZA has a stock option plan, adopted in 1992, whereby incentive stock
options to purchase shares of ALZA Common Stock at not less than the fair market
value of the stock at the date of the grant, and nonstatutory stock options to
purchase shares of ALZA Common Stock at not less than 85% of the fair market
value of the stock at the date of grant, have been and may be granted to certain
present and potential employees, directors and consultants. To date, all
options granted have had exercise prices equal to the fair market value of
Common Stock on the date of grant. In addition, options granted under previous
plans remain outstanding, but no additional options may be granted under such
plans. Options generally expire ten years after the date of grant.
During 1993, the Company offered non-officer employees the right to amend the
terms of their outstanding options to (i) reset the vesting schedule, (ii) lower
the exercise
21
<PAGE>
PAGE 32-33 OF PAPER FORMAT ANNUAL REPORT
price to the fair market value on the date of the amendment and (iii) reduce the
number of shares covered by the option under a formula related to the original
option exercise price. These amendments resulted in the cancellation of 81,095
previously outstanding options.
Information as to ALZA's stock options is as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
Number Exercise Number Exercise
of Shares Price of Shares Price
<S> <C> <C> <C> <C>
Options outstanding at
beginning of year 2,641,329 $ 2.50-49.25 3,315,006 $ .50-39.00
Option activity during
the year:
Granted 1,452,795 $19.75-42.25 287,680 $41.50-49.25
Exercised (248,974) $ 2.50-31.88 (889,157) $ .50-39.00
Canceled (207,940) $11.50-49.25 (72,200) $12.19-49.25
--------- ---------
Options outstanding
at end of year 3,637,210 $ 4.13-49.25 2,641,329 $ 2.50-49.25
--------- ---------
--------- ---------
Options exercisable
at end of year 1,075,305 $ 4.13-49.25 961,209 $ 2.50-39.00
--------- ---------
--------- ---------
Options available for
grant at end of year 1,569,635 2,929,600
--------- ---------
--------- ---------
</TABLE>
NOTE 8: COMMITMENTS AND CONTINGENCIES
ALZA leases certain buildings and equipment under operating leases. Rent
expense under these leases during the years ended December 31, 1993, 1992 and
1991 was $1.7 million, $1.6 million and $1.2 million, respectively. Aggregate
minimum rental commitments under noncancellable operating lease arrangements as
of December 31, 1993 were $4.6 million and are payable as follows: $1.4 million
in 1994, $1.3 million in 1995, $0.8 million in 1996, $0.6 million in 1997, $0.5
million in 1998 and $33,000 thereafter.
NOTE 9: INCOME TAXES
Effective January 1, 1993, ALZA changed its method of accounting for income
taxes to the liability method required by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). As
22
<PAGE>
PAGE 33 OF PAPER FORMAT ANNUAL REPORT
permitted under the new standard, prior years' financial statements have not
been restated. The cumulative effect of adopting SFAS 109 was approximately
$6.6 million. The information as disclosed for the years ended December 31,
1992 and 1991 is computed under the requirements of SFAS 96, the prior standard.
The provision for income taxes for each of the three years in the period
ended December 31, 1993 consists of:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $15,270 $33,299 $17,698
Deferred 2,782 (9,194) (2,084)
------- ------- -------
18,052 24,105 15,614
State:
Current 4,644 9,046 4,766
Deferred 388 134 289
------- ------- -------
5,032 9,180 5,055
------- ------- -------
Provision for income taxes $23,084 $33,285 $20,669
------- ------- -------
------- ------- -------
</TABLE>
Tax benefits associated with employee stock option transactions reduced
accrued income taxes by approximately $2.3 million in the year ended December
31, 1993.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The
sources and tax effects of the differences are as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Expected federal tax
at 35% (34% for 1992 and 1991) $23,084 $35,855 $(14,078)
State income taxes, net of
federal benefit 3,271 6,059 3,336
In-process technology,
net of tax benefit - (4,725) 32,948
Investment and research
tax credits (2,172) (3,763) (870)
Other (1,099) (141) (667)
------- ------- --------
Provision for income taxes $23,084 $33,285 $ 20,669
------- ------- --------
------- ------- --------
</TABLE>
23
<PAGE>
PAGE 34 OF PAPER FORMAT ANNUAL REPORT
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1993 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1993
----
<S> <C>
Deferred tax assets:
Inventories $ 7,018
Reserves 2,690
Deferred compensation 7,087
Capitalized research expenses 11,528
Deferred revenue 2,717
Other 6,642
------
Total deferred tax assets 37,682
Deferred tax liabilities:
Property, plant and equipment 25,814
Other 1,793
-------
Total deferred tax liabilities 27,607
-------
Net deferred tax assets $10,075
-------
-------
</TABLE>
During 1992 and 1991, deferred income taxes were provided for differences
in the timing of recording certain revenue and expense items for tax and
financial reporting purposes. The sources and tax effects of these differences
were as follows:
<TABLE>
<CAPTION>
(In thousands) 1992 1991
---- ----
<S> <C> <C>
State income taxes $(1,904) $ (873)
Tax over book depre-
ciation 5,079 4,616
Deferred compensation and
other accrued liabilities (2,965) (1,059)
Research and development
amortization (5,604) (3,047)
Research tax credits (2,038) -
Inventory valuation (1,573) (1,559)
Other (55) 127
------- -------
Increase in prepaid
income taxes $(9,060) $(1,795)
------- -------
------- -------
</TABLE>
The acquisition of BES in 1991 was treated as a tax-free reorganization for
income tax purposes. As a result, a substantial portion of the 1991 one-
time charge of $101.3 million for the purchase of in-process technology was not
deductible for income tax purposes. Tax benefits resulting from the amounts
24
<PAGE>
PAGE 34-35 OF PAPER FORMAT ANNUAL REPORT
which were deductible reduced the provision for income taxes by approximately
$7.5 million in 1992 and $1.5 million in 1991. For financial statement
purposes, approximately $9.3 million of unbenefited tax deductions remaining as
a result of the BES acquisition, was recognized in 1993 as part of the
cumulative effect of adopting SFAS 109.
NOTE 10: LITIGATION AND PRODUCT LIABILITY
Two patent infringement suits were filed in late 1991 against both Marion
Merrell Dow and ALZA in connection with the commercialization of Nicoderm.
In May 1992, one of the infringement suits was withdrawn and, under the
settlement, ALZA and Marion Merrell Dow agreed to withdraw their countersuit.
The settlement had no impact on the financial statements of any of the parties.
The remaining suit is in the discovery phase.
During the second quarter of 1993, two securities class action lawsuits were
filed against ALZA and certain of its officers and directors. The lawsuits have
since been consolidated into one suit. The consolidated lawsuit claims that
ALZA issued and allowed to be issued various public statements that were
materially false and misleading, primarily with respect to the Nicoderm product.
Under a recent court order, ALZA's outside directors are to be removed as
defendants in the suit. ALZA believes that the lawsuit is without merit and is
vigorously defending it.
During the third quarter of 1993, a derivative suit was filed against certain
officers and directors of ALZA. The lawsuit claims that some or all of the
named persons engaged in the mismanagement of the company and improperly
obtained profits from the sale of ALZA securities. This suit has been assigned
to the same judge as the consolidated case described above. Activities on the
derivative suit have been stayed pursuant to a stipulation and a court order.
ALZA believes that the lawsuit is without merit.
Subsequent to year end, ALZA was served with a suit seeking a declaration of
unenforceability and invalidity of an ALZA patent relating to
25
<PAGE>
PAGE 35 OF PAPER FORMAT ANNUAL REPORT
transdermal administration of fentanyl and alleging violation of antitrust laws.
ALZA believes the suit to be without merit and intends to aggressively pursue
its dismissal.
Historically, the cost of resolution of ALZA's liability (including product
liability) claims has not been significant, and ALZA is not aware of any
asserted or unasserted claims pending against it, including suits mentioned
above, the resolution of which would have a material impact on ALZA's financial
statements.
NOTE 11: STATEMENT OF CASH FLOWS
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ 27,866 $23,115 $14,700
Interest 48,756 1,402 -
</TABLE>
Cash paid for interest in 1993 includes $46.1 million of original issue discount
paid as part of the redemption price for the 7 1/2% zero coupon debentures.
Supplemental schedule of noncash investing and financing activities:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Conversion of 7 1/2% zero
coupon debentures $ 267 $ 530 $ -
Distribution of TDC units 250,000 - -
Conversion of 5 1/2%
debentures, net - - 76,634
</TABLE>
26
<PAGE>
PAGE 36 OF PAPER FORMAT ANNUAL REPORT
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ALZA Corporation
We have audited the accompanying consolidated balance sheets of ALZA Corporation
as of December 31, 1993 and 1992, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ALZA Corporation at December 31, 1993 and 1992, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note 9 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes.
Ernst & Young
Palo Alto, California
February 22, 1994
27
<PAGE>
PAGE 37 OF PAPER FORMAT ANNUAL REPORT
SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1993 1992
---------------------------------------- ------------------------------------------
(In thousands, except per share amounts) 4th 3rd 2nd 1st 4th 3rd 2nd 1st
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues(1) $46,603 $55,229 $52,734 $59,165 $62,689 $58,393 $59,045 $49,126
Gross profit (loss)(2) (1,234)(3) 29,423 27,010 30,929 32,917 31,685 29,117 26,249
Income (loss) before extraordinary
item and cumulative effect of
accounting change (6,117)(3) 14,127 14,090 20,769 19,822 19,433 16,816 16,099
Net income (loss) (9,947)(4) 14,127 14,090 27,342(5) 19,822 19,433 16,816 16,099
Income (loss) before extraordinary
item and cumulative effect of
accounting change per share (.08)(3) .18 .18 .26 .25 .24 .21 .20
Net income (loss) per share (.13)(4) .18 .18 .34(5) .25 .24 .21 .20
___________________________________________________________________________________________________________________________________
<FN>
(1) Comprising royalties and fees,net sales and research revenues.
(2) Comprising net revenues less costs of products shipped and research and
product development expenses.
(3) Includes pre-tax charges and allowances of $28.1 million ($.23 per share
on an after-tax basis) related primarily to manufacturing activites.
(4) Includes a $3.8 million ($.05 per share) extraordinary refinancing charge
related to the redemption of ALZA's 7 1/2 zero coupon convertible
subordinated debentures.
(5) Includes $6.6 million ($.08 per share) in one-time benefits resulting
from the adoption of Statement of Financial Accounting Standards No. 109.
</TABLE>
28
<PAGE>
PAGE 37 OF PAPER FORMAT ANNUAL REPORT
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $234,182 $250,519 $162,349 $109,425 $ 92,687 $ 84,189 $ 70,812 $ 57,799 $ 45,547 $30,484
Income (loss) before extra-
ordinary item and
cumulative effect of
accounting change 42,869(1) 72,170 (62,076)(2) 24,654 18,774 17,003 13,984 9,005 5,055 2,968
Extraordinary item (3,830)(3) - - - - - - 7,748(4) 4,652(4) 2,970(4)
Cumlative effect of change
in accounting for income
taxes 6,573(5) - - - - - - - - -
Net income (loss) 45,612 72,170 (62,076) 24,654 18,774 17,003 13,984 16,753 9,707 5,938
Income (loss) before extra-
ordinary item and
cumulative effect of
accounting change per share .54(1) .90 (.88)(2) .35 .27 .25 .21 .14 .09 .06
Extraordinary item per share (.05)(3) - - - - - - .12(4) .09(4) .06(4)
Cumulative effect of change
in accounting for income
taxes per share .08(5) - - - - - - - - -
Net income (loss) per share .57 .90 (.88) .35 .27 .25 .21 .26 .18 .12
Total assets 621,824 698,381 580,490 530,868 288,447 261,588 243,479 137,306 160,444 44,871
Commercial paper 249,520 - - - - - - - - -
Convertible debentures - 228,966 213,220 273,218 75,000 75,000 75,000 - 22,575 25,000
Other long-term liabilities 28,969 22,723 23,607 19,474 10,357 8,884 6,090 2,686 2,894 3,095
____________________________________________________________________________________________________________________________________
<FN>
(1) Includes pre-tax charges and allowances of $28.1 million ($.23 per share on
an after-tax basis) related primarily to manufacturing activities.
(2) Includes the effects of a one-time charge of $101.3 million ($1.38 per
share) related to the purchase of in-process technology.
(3) Debt refinancing, net of income taxes, related to the redemption of ALZA's
7 1/2% zero coupon convertible subordinated debentures.
(4) Related to the utilization of federal net operating loss carryforwards.
(5) One-time benefits resulting from the adoption of Statement of Financial
Accounting Standards No. 109.
</TABLE>
29
<PAGE>
PAGE 38 OF PAPER FORMAT ANNUAL REPORT
ALZA COMMON STOCK
ALZA Common Stock is listed for trading (symbol AZA) on the New York Stock
Exchange (since June 1, 1992). Prior to June 1, 1992, ALZA Common Stock was
listed for trading on the American Stock Exchange. ALZA Common Stock is quoted
in the WALL STREET JOURNAL and other newspapers. As of December 31, 1993, there
were 10,495 holders of record. ALZA has never paid cash dividends on its common
stock and has no plan to do so in the foreseeable future. The quarterly high
and low sales prices for the calendar years 1993 and 1992, as reported on the
composite tape for the applicable exchange are shown below:
<TABLE>
<CAPTION>
ALZA COMMON STOCK
------------------------
1993 1992
--------- --------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter $ 47 1/8 $ 25 1/4 $ 55 3/4 $ 40 5/8
Second Quarter 35 1/8 22 7/8 48 5/8 38 7/8
Third Quarter 26 3/4 19 1/4 50 3/8 40 3/8
Fourth Quarter 29 1/2 20 7/8 47 3/8 33 1/2
</TABLE>
30
<PAGE>
Exhibit 21
SUBSIDIARIES
ALZA Development Corporation (incorporated in California)
ALZA International, Inc. (incorporated in Delaware)
ALZA Limited (incorporated in the United Kingdom)
<PAGE>
Exhibit 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of ALZA Corporation of our report dated February 22, 1994, included in the 1993
Annual Report to Stockholders of ALZA Corporation.
Our audits also included the financial statement schedules of ALZA Corporation
listed in Item 14(a). These schedules are the responsibility of the company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth herein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 2-92629, No. 2-97422, No. 33-21810, No. 2-83419, No. 2-77785, No.
2-97421, No. 33-36141, No. 33-51890 and No. 33-51890) and in the related
Prospectuses, of our report dated February 22, 1994 with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedules included in this Annual Report (Form 10-K) of ALZA
Corporation.
Ernst & Young
Palo Alto, California
March 29, 1994
