<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 1996
--------------
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 1-6247
ALZA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 77-0142070
- -------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 Page Mill Road, P.O. Box 10950, Palo Alto, California 94303-0802
- --------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 494-5000
--------------
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
---- ----
Number of shares outstanding of each of the registrant's classes of common stock
as of April 30, 1996:
Common Stock, $.01 par value - 84,185,892 shares
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ALZA CORPORATION
Condensed Consolidated Statement of Income (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
--------- ---------
<S> <C> <C>
Revenues:
Royalties and fees $ 37,683 $ 33,962
Research and development 30,280 21,700
Net sales 20,695 18,826
Interest and other 8,144 5,752
--------- ---------
Total revenues 96,802 80,240
Costs and expenses:
Research and development 31,260 22,242
Costs of products shipped 15,987 16,422
General, administrative and marketing 10,206 8,502
Interest and other 6,451 5,595
--------- ---------
Total costs and expenses 63,904 52,761
--------- ---------
Income before income taxes 32,898 27,479
Provision for income taxes 12,515 10,442
--------- ---------
Net income $ 20,383 $ 17,037
--------- ---------
--------- ---------
Net income per common and
common equivalent share $ .24 $ .21
--------- ---------
--------- ---------
Weighted average common and
common equivalent shares 84,615 82,389
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
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ALZA CORPORATION
Condensed Consolidated Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 113,503 $ 87,987
Short-term investments 342,872 331,037
Receivables, net 108,795 108,020
Inventories, at cost:
Raw materials 14,389 15,786
Work in process 18,962 15,251
Finished goods 4,169 3,460
------------ -----------
Total inventories 37,520 34,497
Prepaid expenses and other current assets 24,204 16,527
------------ -----------
Total current assets 626,894 578,068
Property, plant and equipment 366,754 359,495
Less accumulated depreciation and amortization (86,348) (82,511)
------------ -----------
Net property, plant and equipment 280,406 276,984
Other assets 92,937 82,163
------------ -----------
Total assets $ 1,000,237 $ 937,215
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,160 $ 20,043
Accrued income taxes 8,711 2,146
Accrued compensation 11,475 13,404
Other current liabilities 24,945 32,355
------------ -----------
Total current liabilities 65,291 67,948
5 1/4% zero coupon convertible subordinated debentures 367,726 362,944
Other long-term liabilities 54,333 51,770
Stockholders' equity:
Common stock and additional paid-in capital 351,550 311,276
Net unrealized (losses) gains on available-for-sale
securities, net of tax effect (437) 1,886
Retained earnings 161,774 141,391
------------ -----------
Total stockholders' equity 512,887 454,553
------------ -----------
Total liabilities and stockholders' equity $ 1,000,237 $ 937,215
------------ -----------
------------ -----------
</TABLE>
See accompanying notes.
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ALZA CORPORATION
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 20,383 $ 17,037
Non-cash adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,955 3,836
Interest on 5 1/4% zero coupon convertible
subordinated debentures 4,782 4,307
Increase in assets:
Receivables (775) (6,869)
Inventories (3,023) (39)
Prepaid expenses and other current assets (6,060) (750)
Increase (decrease) in liabilities:
Accounts payable 117 (10,081)
Accrued income taxes 6,565 8,302
Accrued compensation (1,929) (2,644)
Other current and long-term liabilities (4,847) 1,843
---------- ----------
Total adjustments (1,215) (2,095)
---------- ----------
Net cash provided by operating activities 19,168 14,942
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,259) (8,624)
Purchases of available-for-sale securities (90,381) (23,111)
Sales of available-for-sale securities 54,545 13,313
Maturities of available-for-sale securities 20,061 -
Increase in cash surrender value-life
insurance and prepaid premiums (93) (1,051)
(Increase) decrease in other assets (10,799) 787
---------- ----------
Net cash used in investing activities (33,926) (18,686)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances of common stock 40,274 655
---------- ----------
Net cash provided by financing activities 40,274 655
---------- ----------
Net increase (decrease) in cash and cash
equivalents 25,516 (3,089)
Cash and cash equivalents at beginning
of period 87,987 88,844
---------- ----------
Cash and cash equivalents at end
of period $ 113,503 $ 85,755
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
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<PAGE>
ALZA CORPORATION
March 31, 1996
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The information at March 31, 1996 and for the three months ended
March 31, 1996 and 1995 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) which the management of ALZA Corporation
("ALZA") believes necessary for fair presentation of the results for the periods
presented. Interim results are not necessarily indicative of results for the
full year. The condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1995 included in ALZA's 1995 Annual Report to Stockholders.
2. SUBSEQUENT EVENT
At the end of April 1996, ALZA completed a $500 million public offering of
5% convertible subordinated debentures due 2006 (the "5% Debentures"). Interest
is payable semi-annually on May 1 and November 1 of each year, commencing
November 1, 1996. The offering resulted in approximately $488 million of net
proceeds to ALZA. The 5% Debentures are convertible, at the option of the
holder, at any time prior to maturity, unless previously redeemed or
repurchased, into shares of ALZA common stock at a conversion price of $38.19
per share, subject to certain anti-dilution adjustments. The proceeds of the
offering will be used for general corporate purposes.
3. LITIGATION
See Part II, Item 1 of this Quarterly Report on Form 10-Q.
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ALZA CORPORATION
March 31, 1996
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTICE CONCERNING FORWARD-LOOKING STATEMENTS
Some of the statements made in this Form 10-Q are forward-looking in
nature, including but not limited to ALZA Corporation's ("ALZA") product
development plans, plans concerning the commercialization of products, and other
statements that are not historical facts. Forward-looking statements in this
Form 10-Q include language in the form of one of the following words: "intend",
"believe", "will", "may", "anticipate" and "expect." The occurrence of the
events described, and the achievement of the intended results, are subject to
the future occurrence of many events, some or all of which are not predictable
or within ALZA's control; therefore, actual results may differ materially from
those anticipated in any forward-looking statements. Many risks and
uncertainties which could affect the possible results described in forward-
looking statements are inherent in the pharmaceutical industry; others are more
specific to ALZA's business. Risks related to ALZA's business are described in
ALZA's Form 10-K, including risks associated with technology and product
development, risks relating to clinical development and medical acceptance of
products, changes in the health care marketplace, patent and intellectual
property matters, regulatory and manufacturing issues, and risks associated with
competition from other companies.
ALZA CORPORATION
ALZA develops and commercializes innovative pharmaceutical products using
advanced drug delivery technologies to add medical and economic value to drug
therapies. ALZA's therapeutic systems can often increase efficacy, minimize
unpleasant or harmful side effects and/or provide greater patient compliance.
ALZA's development activities
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ALZA CORPORATION
March 31, 1996
currently are undertaken pursuant to joint development and commercialization
agreements with ALZA's client companies. ALZA's client companies generally
reimburse ALZA for its development costs associated with the products, the
clients market the products developed, and ALZA receives royalties on sales of
the products.
ALZA formed Therapeutic Discovery Corporation ("TDC"), which commenced
operations in mid-1993, for the purpose of selecting and developing new human
pharmaceutical products combining ALZA's proprietary drug delivery technologies
with various drug compounds, and commercializing such products, most likely
through licensing to ALZA. ALZA and TDC currently have more than 20 products in
the development pipeline, including a number in clinical evaluation. TDC
reimburses ALZA for ALZA's development costs associated with these products.
ALZA has the right to license any or all of the products from TDC and an option
to purchase all of the shares of TDC.
ALZA markets in the United States certain products it has developed,
including Testoderm-Registered Trademark- (testosterone transdermal system)
CIII, launched by ALZA Pharmaceuticals in 1994. ALZA Pharmaceuticals also
co-promotes in the United States Duragesic-Registered Trademark- (fentanyl)
CII with Janssen Pharmaceutica, Inc. ("Janssen"), a subsidiary of Johnson and
Johnson, and Glucotrol XL-Registered Trademark- (glipizide) with Pfizer Inc.
("Pfizer"). In April 1996, ALZA began promoting Ethyol-Registered Trademark-
(amifostine) and Mycelex-Registered Trademark- (clotrimazole) Troche.
Ethyol-Registered Trademark- is a unique agent developed by U.S. Bioscience,
Inc., indicated for the reduction of cumulative renal toxicity associated
with repeated administration of the chemotherapeutic drug cisplatin in
patients with advanced ovarian cancer or non-small cell lung cancer. ALZA
has exclusive rights to market the product for five years, with an option to
extend for one additional year; U.S. Bioscience co-promotes the product with
ALZA. Mycelex-Registered Trademark- Troche is an antifungal
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ALZA CORPORATION
March 31, 1996
agent for the treatment of oral thrush developed by Bayer Corporation. Under
the terms of the Mycelex-Registered Trademark- agreement, ALZA will promote
Mycelex-Registered Trademark- Troche in the United States for three years
and will receive payments based on net sales of the product above a specified
base level.
ALZA manufactures all or a portion of certain clients' requirements for
products developed by ALZA, and also manufactures products marketed by ALZA.
Net sales include sales to clients and sales of ALZA-marketed products.
RESULTS OF OPERATIONS
ALZA's net income was $20.4 million or $0.24 per common share for the
quarter ended March 31, 1996 compared to net income of $17.0 million or $0.21
per common share for the quarter ended March 31, 1995.
ALZA's net income currently results primarily from royalties and fees from
client companies. Royalties and fees, which are generally derived from sales by
client companies of products developed jointly with ALZA, will vary from quarter
to quarter as a result of changing levels of product sales by client companies
and, occasionally, the receipt by ALZA of certain one-time fees. Because ALZA's
clients generally take 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 are not
directly within ALZA's control. In addition, with increasing pressures for cost
containment in the U.S. health care system, it can be expected that
pharmaceutical product prices, including those of products developed by ALZA,
will not increase as quickly as they have in the past, and could decrease.
Within the next several years, ALZA intends to become less dependent on
royalties and fees as ALZA sales and marketing activities expand
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ALZA CORPORATION
March 31, 1996
and as ALZA markets directly more products (including products developed with
TDC); however, there can be no assurance that these expanded activities will be
successful, due to factors such as the risks of product development, the length
of the regulatory approval process, acceptance of products by the intended
markets, and the current health care cost containment environment.
Royalties and fees for the first quarter of 1996 increased to $37.7
million, compared to $34.0 million for the first quarter of 1995. The
increase in royalties and fees was primarily due to increased sales of Adalat
CR-Registered Trademark- by Bayer AG and increased sales of Glucotrol
XL-Registered Trademark- by Pfizer. Royalties and fees for the quarters ended
March 31, 1996 and 1995 were each reduced to reflect additions to a reserve
established for a potential adjustment in royalty revenue on U.S. sales of
Procardia XL-Registered Trademark- due to a U.S. patent issued to Bayer AG.
Until a further determination is made regarding this matter, ALZA intends to
maintain a reserve sufficient to cover the maximum potential reduction in
Procardia XL-Registered Trademark- royalties. Royalties from Procardia
XL-Registered Trademark- accounted for approximately 45% of ALZA's royalties
and fees for the quarter ended March 31, 1996, after taking into account the
reserve. ALZA expects that, in the near term, net income will continue to
result primarily from royalties on sales of currently marketed products and
additional products that have been recently cleared for marketing, or are now
awaiting marketing clearance, by the U.S. Food and Drug Administration and
regulatory agencies in other countries.
Research and development revenue of $30.3 million for the quarter ended
March 31, 1996 represents an increase of 40% over the same period in 1995 due to
increased product development activities undertaken on behalf of TDC. Research
and
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ALZA CORPORATION
March 31, 1996
development revenue from TDC was $22.9 million and $14.1 million for the
quarters ended March 31, 1996 and March 31, 1995, respectively.
Research and development expenses for the quarter ended March 31, 1996
increased approximately 41% as compared with the corresponding period in 1995,
primarily due to the increase in product development activities on behalf of
TDC. As TDC products reach later stages of development, higher levels of
expenditures generally will be required. It can therefore be expected that
ALZA's product development expense for TDC products (and, correspondingly,
ALZA's product development revenue from TDC) will remain at or slightly above
current levels, during the remainder of 1996.
Net sales of $20.7 million for the quarter ended March 31, 1996 increased
10% compared to the corresponding period in 1995, due largely to initial
shipments of Ethyol-Registered Trademark-. Costs of products shipped as a
percent of net sales decreased slightly for the quarter ended March 31, 1996
compared to the corresponding period in 1995 due primarily to proportionately
greater shipments of higher margin products. Because a significant portion of
ALZA's net sales are generated from manufacturing products ordered by client
companies, many factors affecting net sales are not within ALZA's control.
Revenues will fluctuate from period to period depending on the volume, mix and
timing of orders received from client companies. ALZA expects costs of products
shipped, as a percent of net sales, to decline over the longer term although
quarter-to-quarter fluctuations will continue to occur. Higher gross margins
may be achieved through increased utilization of capacity, greater operating
efficiencies and a proportionate increase in the sales of ALZA-marketed
products.
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<PAGE>
ALZA CORPORATION
March 31, 1996
General, administrative and marketing expenses of $10.2 million for the
quarter ended March 31, 1996 increased 20% compared to the corresponding period
in 1995. The increase was due primarily to the launch expenses related to
Ethyol-Registered Trademark-. General, administrative and marketing expenses
are expected to remain at approximately current levels during the remainder of
1996.
Interest and other revenue, which consists primarily of interest income,
increased 42% for the quarter ended March 31, 1996 compared to the same period
in 1995, due to gains realized on sales of securities and higher invested cash
balances. Interest expense for the first quarter of 1996 increased 15% as
compared to the corresponding quarter in 1995 reflecting the higher outstanding
balance on ALZA's 5 1/4% zero coupon convertible subordinated debentures due
2014. Both interest revenue and interest expense will increase significantly
for the remainder of the year as a result of the debt issuance described below.
ALZA's effective combined federal and state income tax rate for the year
ended 1995 and for the quarter ended March 31, 1996, was 38%.
LIQUIDITY AND CAPITAL RESOURCES
At the end of January, 1996, warrants to purchase 1.0 million shares of
ALZA common stock at an exercise price of $25 per share were exercised. Net
proceeds to ALZA totaled $25 million.
ALZA invested $7.3 million during the first quarter of 1996 in additions to
property, plant and equipment to support its research and development and
manufacturing activities.
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<PAGE>
ALZA CORPORATION
March 31, 1996
While ALZA believes its current facilities and equipment are sufficient to meet
its current operating requirements, ALZA intends to expand its facilities and
equipment to support its medium-term and long-term requirements.
At the end of April 1996, ALZA completed a $500 million public offering of
5% convertible subordinated debentures due 2006 (the "5% Debentures"). Interest
is payable semi-annually on May 1 and November 1 of each year, commencing
November 1, 1996. The offering resulted in approximately $488 million of net
proceeds to ALZA. The 5% Debentures are convertible, at the option of the
holder, at any time prior to maturity, unless previously redeemed or
repurchased, into shares of ALZA common stock at a conversion price of $38.19
per share, subject to certain anti-dilution adjustments. The proceeds of the
offering will be used for general corporate purposes.
ALZA believes that its existing cash balances and investments, including
the proceeds from the sale of the 5% Debentures, are adequate to fund its
current cash needs. In addition, should the need arise, ALZA believes it would
be able to raise additional capital. ALZA may consider using its capital to
make strategic investments or to acquire or license technology or products.
ALZA may also enter into strategic alliances with third parties which could
provide additional funding for research and development, support for marketing
and sales or the development of new products.
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ALZA CORPORATION
March 31, 1996
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In December 1991, a patent infringement suit was filed by Ciba-Geigy
("Ciba") against Marion Merrell Dow Inc., now Hoechst Marion Roussel Inc.
("HMR"), and ALZA in connection with the commercialization of
Nicoderm-Registered Trademark-. In October 1994, the District Court granted
a motion for summary judgment brought by ALZA and HMR, ruling the Ciba patent
invalid. During October 1995, the Court of Appeals for the Federal Circuit
upheld the most significant portions of the summary judgment decision, and
sent back to the District Court the issue of validity of certain other more
limited claims. ALZA believes that these narrower claims are invalid and do
not cover the Nicoderm-Registered Trademark- product. During January 1995,
ALZA and HMR filed a separate suit against Ciba and LTS Lohmann Therapy
Systems Corporation for infringement of two U.S. patents issued to ALZA in
1994 relating to the transdermal administration of nicotine.
During January 1994, a suit was filed against ALZA by Cygnus Therapeutic
Systems ("Cygnus") seeking a declaration of unenforceability and invalidity of
an ALZA patent relating to the transdermal administration of fentanyl and
alleging violation of antitrust laws. In April 1995, the Court granted ALZA's
motion to dismiss the lawsuit. Cygnus has appealed that ruling.
Pharmaceutical companies are subject to product liability claims from time
to time. Product liability suits have been filed against Janssen and ALZA from
time to time relating to the Duragesic-Registered Trademark- product. Janssen
is managing the defense of the Duragesic-Registered Trademark- suits in
consultation with ALZA under an agreement between the parties.
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ALZA CORPORATION
March 31, 1996
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 the suits mentioned
above, the resolution of which would have a material adverse impact on the
operations or financial position of ALZA.
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ALZA CORPORATION
March 31, 1996
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.1 Indenture of ALZA Corporation to The Chase Manhattan Bank, N.A.
Trustee dated as of April 23, 1996 related to $500,000,000 of 5%
Convertible Subordinated Debentures due 2006
4.2 Form of 5% Convertible Subordinated Debentures due 2006 (included
in exhibit 4.1)
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
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ALZA CORPORATION
March 31, 1996
SIGNATURES
Pursuant to the requirements 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
Date: May 14, 1996 By: /s/ Ernest Mario
------------------------
Dr. Ernest Mario
Co-Chairman and
Chief Executive Officer
Date: May 14, 1996 By: /s/ Bruce C. Cozadd
-------------------------------
Bruce C. Cozadd
Vice President and Chief
Financial Officer
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ALZA CORPORATION
March 31, 1996
EXHIBIT INDEX
Exhibit
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4.1 Indenture of ALZA Corporation to The Chase Manhattan Bank, N.A.
Trustee dated as of April 23, 1996 related to $500,000,000 of 5%
Convertible Subordinated Debentures due 2006
4.2 Form of 5% Convertible Subordinated Debentures due 2006 (included in
exhibit 4.1)
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
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- --------------------------------------------------------------------------------
EXHIBIT 4.1
ALZA CORPORATION
TO
THE CHASE MANHATTAN BANK, N.A.
Trustee
INDENTURE
Dated as of April 23, 1996
$500,000,000
5% Convertible Subordinated Debentures due 2006
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<PAGE>
TABLE OF CONTENTS
ARTICLE I
PAGE
DEFINITIONS
Section 1.1 DEFINITIONS................................................... 1
Affiliate..................................................... 1
Board of Directors............................................ 1
Business Day.................................................. 1
CASH or CASH.................................................. 2
Commission.................................................... 2
Common Stock.................................................. 2
Company....................................................... 2
Company Order................................................. 2
Corporate Trust Office........................................ 2
Debenture or DEBENTURES....................................... 2
Debentureholder or HOLDER..................................... 2
Default....................................................... 2
Exchange Act.................................................. 2
Event of Default.............................................. 3
Indenture..................................................... 3
Officer....................................................... 3
Officers' Certificate......................................... 3
Opinion of Counsel............................................ 3
Over-Allotment Option......................................... 3
Person........................................................ 3
Predecessor Debenture......................................... 3
Redemption Date............................................... 4
Redemption Price.............................................. 4
Responsible Officer........................................... 4
Securities Act................................................ 4
Senior Indebtedness........................................... 4
Subsidiary.................................................... 5
Trust Indenture Act........................................... 5
Trustee....................................................... 5
Underwriter................................................... 5
Section 1.2 OTHER DEFINITIONS............................................. 5
Section 1.3 INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT................................................. 6
Section 1.4 RULES OF CONSTRUCTION......................................... 6
ARTICLE II
THE DEBENTURES
Section 2.1 FORM AND DATING............................................... 7
Section 2.2 EXECUTION AND AUTHENTICATION.................................. 7
Section 2.3 REGISTRAR, PAYING AGENT AND CONVERSION
AGENT......................................................... 8
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PAGE
Section 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.......................... 8
Section 2.5 DEBENTUREHOLDER LISTS......................................... 9
Section 2.6 TRANSFER AND EXCHANGE......................................... 9
Section 2.7 REPLACEMENT DEBENTURES........................................ 10
Section 2.8 OUTSTANDING DEBENTURES; DETERMINATIONS OF
HOLDERS' ACTION............................................... 11
Section 2.9 TEMPORARY DEBENTURES.......................................... 12
Section 2.10 CANCELLATION.................................................. 12
ARTICLE III
REDEMPTION
Section 3.1 RIGHT TO REDEEM; NOTICES TO TRUSTEE........................... 13
Section 3.2 SELECTION OF DEBENTURES TO BE REDEEMED........................ 13
Section 3.3 NOTICE OF REDEMPTION.......................................... 14
Section 3.4 EFFECT OF NOTICE OF REDEMPTION................................ 15
Section 3.5 DEPOSIT OF REDEMPTION PRICE................................... 15
Section 3.6 DEBENTURES REDEEMED IN PART................................... 15
Section 3.7 CONVERSION ARRANGEMENT ON CALL FOR
REDEMPTION.................................................... 15
ARTICLE IV
SUBORDINATION OF DEBENTURES
Section 4.1 DEBENTURES SUBORDINATE TO SENIOR
INDEBTEDNESS.................................................. 16
Section 4.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION..................... 16
Section 4.3 PRIOR PAYMENT OF SENIOR INDEBTEDNESS UPON
ACCELERATION OF DEBENTURES.................................... 18
Section 4.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN
DEFAULT....................................................... 18
Section 4.5 PAYMENT PERMITTED IF NO DEFAULT............................... 19
Section 4.6 SUBROGATION TO RIGHTS OF HOLDERS OF
SENIOR INDEBTEDNESS........................................... 20
Section 4.7 PROVISIONS SOLELY TO DEFINE RELATIVE
RIGHTS........................................................ 20
Section 4.8 TRUSTEE TO EFFECTUATE SUBORDINATION........................... 21
Section 4.9 NO WAIVER OF SUBORDINATION PROVISIONS......................... 21
Section 4.10 NOTICE TO TRUSTEE............................................. 21
Section 4.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE
OF LIQUIDATING AGENT.......................................... 22
Section 4.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
SENIOR INDEBTEDNESS........................................... 22
Section 4.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR
INDEBTEDNESS; PRESERVATION OF TRUSTEE'S
RIGHTS........................................................ 23
ii
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PAGE
Section 4.14 ARTICLE APPLICABLE TO PAYING AGENTS........................... 23
Section 4.15 CERTAIN CONVERSIONS DEEMED PAYMENT............................ 23
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND
INTEREST...................................................... 24
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY............................... 24
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN
TRUSTEE'S OFFICE.............................................. 24
Section 5.4 CORPORATE EXISTENCE........................................... 25
Section 5.5 STAY, EXTENSION AND USURY LAWS................................ 25
Section 5.6 COMPLIANCE CERTIFICATE........................................ 25
Section 5.7 SEC REPORTS................................................... 25
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 EVENTS OF DEFAULT............................................. 26
Section 6.2 PAYMENTS OF DEBENTURES ON DEFAULT; SUIT
THEREFOR...................................................... 28
Section 6.3 APPLICATION OF MONIES COLLECTED BY TRUSTEE.................... 30
Section 6.4 PROCEEDINGS BY DEBENTUREHOLDER................................ 31
Section 6.5 PROCEEDINGS BY TRUSTEE........................................ 32
Section 6.6 REMEDIES CUMULATIVE AND CONTINUING............................ 32
Section 6.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DE-
FAULTS BY MAJORITY OF DEBENTUREHOLDERS........................ 32
Section 6.8 UNDERTAKING TO PAY COSTS...................................... 33
ARTICLE VII
TRUSTEE
Section 7.1 DUTIES OF TRUSTEE............................................. 34
Section 7.2 RIGHTS OF TRUSTEE............................................. 35
Section 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.................................. 36
Section 7.4 TRUSTEE'S DISCLAIMER.......................................... 36
Section 7.5 NOTICE OF DEFAULTS............................................ 37
Section 7.6 REPORTS BY TRUSTEE TO HOLDERS................................. 37
Section 7.7 COMPENSATION AND INDEMNITY.................................... 37
Section 7.8 REPLACEMENT OF TRUSTEE........................................ 38
Section 7.9 SUCCESSOR TRUSTEE BY MERGER................................... 39
Section 7.10 ELIGIBILITY; DISQUALIFICATION................................. 39
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PAGE
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY....................................................... 39
ARTICLE VIII
CONCERNING THE DEBENTUREHOLDERS
Section 8.1 ACTION BY DEBENTUREHOLDERS.................................... 40
Section 8.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS........................ 40
Section 8.3 WHO ARE DEEMED ABSOLUTE OWNERS................................ 40
Section 8.4 REVOCATION OF CONSENTS; FUTURE HOLDERS
BOUND......................................................... 41
ARTICLE IX
DEBENTUREHOLDERS' MEETINGS
Section 9.1 PURPOSE OF MEETINGS........................................... 41
Section 9.2 CALL OF MEETINGS BY TRUSTEE................................... 42
Section 9.3 CALL OF MEETINGS BY COMPANY OR
DEBENTUREHOLDERS.............................................. 42
Section 9.4 QUALIFICATIONS FOR VOTING..................................... 42
Section 9.5 REGULATIONS................................................... 43
Section 9.6 VOTING........................................................ 43
Section 9.7 NO DELAY OF RIGHTS BY MEETING................................. 44
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF DEBENTUREHOLDERS........................................... 44
Section 10.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBENTUREHOLDERS.............................................. 45
Section 10.3 EFFECT OF SUPPLEMENTAL INDENTURE.............................. 46
Section 10.4 NOTATION ON DEBENTURES........................................ 47
Section 10.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL
INDENTURE TO BE FURNISHED TRUSTEE............................. 47
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.1 COMPANY MAY CONSOLIDATE ETC. ON CERTAIN
TERMS......................................................... 47
Section 11.2 SUCCESSOR CORPORATION TO BE SUBSTITUTED....................... 48
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PAGE
Section 11.3 OPINION OF COUNSEL TO BE GIVEN TRUSTEE........................ 48
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 12.1 DISCHARGE OF INDENTURE........................................ 49
Section 12.2 DEPOSITED MONIES TO BE HELD IN TRUST BY
TRUSTEE....................................................... 49
Section 12.3 PAYING AGENT TO REPAY MONIES HELD............................. 50
Section 12.4 RETURN OF UNCLAIMED MONIES.................................... 50
Section 12.5 REINSTATEMENT................................................. 50
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 INDENTURE AND DEBENTURES SOLELY CORPORATE
OBLIGATIONS................................................... 51
ARTICLE XIV
CONVERSION OF DEBENTURES
Section 14.1 RIGHT TO CONVERT.............................................. 51
Section 14.2 EXERCISE OF CONVERSION PRIVILEGE; ISSU-
ANCE OF COMMON STOCK ON CONVERSION; NO
ADJUSTMENT FOR INTEREST OR DIVIDENDS.......................... 52
Section 14.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.................... 53
Section 14.4 CONVERSION PRICE.............................................. 53
Section 14.5 ADJUSTMENT OF CONVERSION PRICE................................ 54
Section 14.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE................................................ 64
Section 14.7 TAXES ON SHARES ISSUED........................................ 65
Section 14.8 RESERVATION OF SHARES; SHARES TO BE FULLY
PAID; COMPLIANCE WITH GOVERNMENTAL REQUIRE-
MENTS; LISTING OF COMMON STOCK................................ 65
Section 14.9 RESPONSIBILITY OF TRUSTEE..................................... 66
Section 14.10 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS.................... 67
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ARTICLE XV
PAGE
REPURCHASE OF DEBENTURES AT THE
OPTION OF THE HOLDER UPON CHANGE IN CONTROL
Section 15.1 RIGHT TO REQUIRE REPURCHASE................................... 68
Section 15.2 NOTICES; METHOD OF EXERCISING REPURCHASE
RIGHT, ETC.................................................... 68
Section 15.3 CERTAIN DEFINITIONS........................................... 70
Section 15.4 CHANGE IN CONTROL............................................. 71
Section 15.5 CONSOLIDATION, MERGER, ETC.................................... 71
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 SUCCESSORS.................................................... 72
Section 16.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION........................ 72
Section 16.3 NOTICES....................................................... 72
Section 16.4 GOVERNING LAW................................................. 73
Section 16.5 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT..................................................... 73
Section 16.6 STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION....................................................... 73
Section 16.7 LEGAL HOLIDAYS................................................ 74
Section 16.8 TRUST INDENTURE ACT CONTROLS.................................. 74
Section 16.9 NO SECURITY INTEREST CREATED.................................. 74
Section 16.10 BENEFITS OF INDENTURE......................................... 74
Section 16.11 TABLE OF CONTENTS, HEADINGS, ETC.............................. 74
Section 16.12 AUTHENTICATING AGENT.......................................... 75
Section 16.13 SEPARABILITY CLAUSE........................................... 76
Section 16.14 RULES BY TRUSTEE, PAYING AGENT, CONVERSION
AGENT AND REGISTRAR........................................... 76
Section 16.15 NO RECOURSE AGAINST OTHERS.................................... 76
Section 16.16 EXECUTION IN COUNTERPARTS..................................... 76
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INDENTURE, dated as of April 23, 1996, between ALZA Corporation, a
Delaware corporation (the "Company," as more fully set forth in Section 1.1),
and The Chase Manhattan Bank, N.A., a national banking association duly
organized and existing under the laws of the United States, not in its
individual capacity but solely as trustee (the "TRUSTEE," as more fully set
forth in Section 1.1).
WITNESSETH:
WHEREAS, the Company has duly authorized the issue of its 5%
Convertible Subordinated Debentures due 2006 (the "DEBENTURES"), in an aggregate
principal amount specified herein and has duly authorized the execution and
delivery of this Indenture.
NOW, THEREFORE:
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the respective holders from time to time of
the Debentures:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. The terms defined in this Section 1.1
(except as otherwise expressly provided herein or in any indenture supplemental
hereto) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings set forth in this Section 1.1.
AFFILIATE: The term "Affiliate" of any specified Person shall mean
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the purpose
of this definition, "control," when used with respect to any specified Person
means the power to direct or cause the direction of the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
BOARD OF DIRECTORS: The term "Board of Directors" or "Board" shall
mean, with respect to any matter, the Board of Directors of the Company or a
committee of such Board duly authorized, with respect to such matter, to
exercise the power of such Board.
BUSINESS DAY: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday on which banking institutions in The City of New
York are not authorized or obligated by law or executive order to close.
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CASH or CASH: The term "cash" means such coin or currency of The
United States of America as at any time of payment is legal tender for the
payment of public and private debts.
COMMISSION: The term "Commission" shall mean the Securities and
Exchange Commission.
COMMON STOCK: The term "Common Stock" means the Common Stock, par
value $.01 per share, of the Company as it exists on the date of this Indenture
or any other shares of capital stock of the Company into which such common stock
shall be reclassified or changed.
COMPANY: The term "Company" shall mean ALZA Corporation, a Delaware
corporation, until a successor replaces it pursuant to the provisions of Article
XI and, thereafter, shall mean such successors. The foregoing sentence shall
likewise apply to any subsequent successor or successors.
COMPANY ORDER: The term "Company Order" shall mean a written order
signed in the name of the Company by (a) either of its Co-Chairmen of the Board,
its Chief Executive Officer, President or any Vice President, and (b) by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
CORPORATE TRUST OFFICE: The term "Corporate Trust Office" shall mean
the principal office of the Trustee at which at any particular time its
corporate trust business shall be principally administered, which office is, at
the date as of which this Indenture is dated, located at 4 Chase MetroTech
Center, 3rd Floor, Brooklyn, New York, 11245, Attention: Institutional Trust
Group.
DEBENTURE or DEBENTURES: The terms "Debenture" or "Debentures" shall
mean any Debenture or Debentures, as the case may be, authenticated and
delivered under this Indenture.
DEBENTUREHOLDER or HOLDER: The terms "Debentureholder" or "Holder" as
applied to any Debenture, shall mean any person in whose name such Debenture is
registered on the Registrar's books.
DEFAULT: The term "Default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.
EXCHANGE ACT: The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended and the rules and regulations of the Commission
promulgated thereunder, as in effect from time to time.
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EVENT OF DEFAULT: The term "Event of Default": shall mean any event
specified in Section 6.1(a), (b), (c), (d), (e), (f) or (g).
INDENTURE: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented in accordance with the terms
hereof, as so amended or supplemented.
OFFICER: The term "Officer" means either Co-Chairman of the Board,
the Chief Executive Officer, President, any Vice President, the Treasurer, the
Secretary, any Assistant Treasurer or Assistant Secretary of the Company.
OFFICERS' CERTIFICATE: The term "Officers' Certificate," when used
with respect to the Company, shall mean a written certificate containing the
information specified in Section 11.3, 16.5 or 16.6 signed by both (a) the
President, the Chief Executive Officer, Executive or Senior Vice President or
any Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) by the Treasurer
or any Assistant Treasurer or Secretary or any Assistant Secretary of the
Company.
OPINION OF COUNSEL: The term "Opinion of Counsel" shall mean a
written opinion containing the information specified in Section 11.3, 16.5 or
16.6, of counsel who is an employee of or counsel to the Company.
OVER-ALLOTMENT OPTION: The term "Over-Allotment Option" shall mean
the option of the Underwriter to purchase additional Debentures in the aggregate
principal amount of up to $65,250,000 as provided in the Purchase Agreement
referred to in Section 2.2 hereof.
PERSON: The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
PREDECESSOR DEBENTURE: The term "Predecessor Debenture" of any
particular Debenture shall mean every previous Debenture evidencing all or a
portion of the same debt as that evidenced by such particular Debentures; and,
for the purposes of this definition, any Debenture authenticated and delivered
under Section 2.7 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen Debenture that
it replaces.
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REDEMPTION DATE: The term "Redemption Date" means the date specified
for redemption of any of the Debentures in accordance with the terms of the
Debentures and this Indenture.
REDEMPTION PRICE: The term "Redemption Price" shall have the meaning
set forth in the Debentures.
RESPONSIBLE OFFICER: The term "Responsible Officer" shall mean, with
respect to the Trustee, any officer within the Corporate Trust Office, including
any Vice President, Managing Director, Assistant Vice President, Secretary,
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
SECURITIES ACT: The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations of the Commission
promulgated thereunder.
SENIOR INDEBTEDNESS: The term "Senior Indebtedness" means the
principal of, and premium, if any, and unpaid interest on, all present and
future (i) indebtedness of the Company for borrowed money, (ii) obligations of
the Company evidenced by bonds, debentures, notes or similar instruments,
(iii) indebtedness incurred, assumed or guaranteed by the Company in connection
with the acquisition by it or a Subsidiary of any business, properties or assets
(except purchase-money indebtedness classified as accounts payable under
generally accepted accounting principles), (iv) obligations of the Company as
lessee under (A) leases required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles and (B) leases of property
or assets made as part of any sale and leaseback transaction to which the
Company is a party, (v) reimbursement obligations of the Company in respect of
letters of credit relating to indebtedness or other obligations of the Company
that qualify as indebtedness or obligations of the kind referred to in clauses
(i) through (iv) above, and (vi) obligations of the Company under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
clauses (i) through (v) above, in each case unless in the instrument creating or
evidencing the indebtedness or obligation or pursuant to which the same is
outstanding it is provided that such indebtedness or obligation is not superior
in right of payment to the Debentures. Notwithstanding the foregoing, the term
Senior Indebtedness shall not include any Indebtedness of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company or any indebtedness or
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obligations under the Company's Liquid Yield Option Notes due 2014 (Zero Coupon-
Subordinated) offered pursuant to the prospectus dated July 7, 1994 as filed in
Form S-3 Registration Statement (File No. 33-53671).
SUBSIDIARY: The term "Subsidiary" means (i) a corporation, a majority
of whose capital stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly owned by the
Company, by one or more Subsidiaries of the Company, or by the Company and one
or more Subsidiaries of the Company, or (ii) a partnership in which the Company
or a Subsidiary of the Company, at the date of determination holds in excess of
50% of the profits or voting interests, or (iii) any other person (other than a
corporation or a partnership) in which the Company, a Subsidiary of the Company
or the Company and one or more Subsidiaries of the Company, directly or
indirectly, at the date of determination, has (x) at least a majority ownership
interest or (y) the power to elect or direct the election of a majority of the
directors or other governing body of such person.
TRUST INDENTURE ACT: The term "Trust Indenture Act" shall mean the
Trust Indenture Act of 1939, as amended as it was in force at the date of
execution of this Indenture.
TRUSTEE: The term "Trustee" shall mean The Chase Manhattan Bank, N.A.
and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
UNDERWRITER: The term "Underwriter" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
Section 1.2 OTHER DEFINITIONS:
Defined in
TERM SECTION
----------
"Beneficial Owner" 15.3(1)
"Change in Control" 15.4
"Closing Price" 14.5(g)(1)
"Company Notice" 15.2(a)
"Conversion Agent" 2.3
"Conversion Price" 14.4
"Current Market Price" 14.5(g)(2)
"Legal Holiday" 16.7
"Paying Agent" 2.3
"Purchase Agreement" 2.2
"Registrar" 2.3
"Repurchase Date" 15.1
"Repurchase Price" 15.1
5
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"Senior Indebtedness Default" 4.4
"Trading Day" 14.5(g)(5)
"Trigger Event" 14.5(d)
Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act, such
provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Debentures.
"indenture security holder" means a Debentureholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other Trust Indenture Act terms used in this Indenture that are
defined by the Trust Indenture Act or defined by Trust Indenture Act reference
to another statute or regulation have the meanings assigned to them by such
definitions.
Section 1.4 RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time in The United States of America;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural, and words in the
plural include the singular; and
(6) the words "herein," "hereof," "hereunder," and words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other Subdivision.
6
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THE DEBENTURES
Section 2.1 FORM AND DATING. The Debentures and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is a part of this Indenture. The Debentures may have notations, legends
or endorsements required by law, stock exchange rule or usage (provided that any
such notation, legend or endorsement required by usage is in a form acceptable
to the Company and the Trustee). Each Debenture shall be dated the date of its
authentication.
Section 2.2 EXECUTION AND AUTHENTICATION. The Debentures shall be
executed by the Company by either of its Co-Chairmen of the Board, its President
or one of its Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the time of issuance of such Debentures.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Debenture shall be conclusive evidence, and the only
evidence, that such Debenture has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and make available for delivery
Debentures for original issue in an aggregate principal amount of up to
$435,000,000 upon a Company Order without any further action by the Company;
PROVIDED, HOWEVER, that in the event that the Company sells any Debentures
pursuant to the Over-Allotment Option granted pursuant to Section 2(b) of the
Purchase Agreement, dated April 23, 1996, between the Company and the
Underwriter (the "PURCHASE AGREEMENT"), then the Trustee shall authenticate and
deliver Debentures for original issue in an aggregate principal amount of up to
$435,000,000 plus up to $65,250,000 aggregate principal amount of the Debentures
sold pursuant to the Over-Allotment Option upon a Company Order without any
further action by the Company. The aggregate principal amount of the Debentures
outstanding at any time may not
7
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exceed the amount set forth in the foregoing sentence, subject to the proviso
set forth therein, except as provided in Section 2.7.
Section 2.3 REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The
Company shall maintain an office or agency where the Debentures may be presented
for registration of transfer or for exchange ("REGISTRAR"), an office or agency
where the Debentures may be presented for repurchase or payment ("PAYING AGENT")
and an office or agency where the Debentures may be presented for conversion
("CONVERSION AGENT"). The Registrar shall keep a register of the Debentures and
of their transfer and exchange. The Company may have one or more co-registrars,
one or more additional paying agents and one or more additional conversion
agents. The term Paying Agent includes any additional paying agents. The term
Conversion Agent includes any additional conversion agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (with the consent of
the Trustee) other than the Trustee. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee and the Holders of the name and address of any such agent and
of any change in the office or agency referred to in Section 5.2. If the
Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.7. The Company or any Subsidiary or an Affiliate
of either of them may act as Paying Agent, Registrar, Conversion Agent or co-
registrar.
The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Debentures.
Section 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST. Except as
otherwise provided herein, prior to or on each due date of payments in respect
of any Debenture, the Company shall deposit with the Paying Agent cash or, if
permitted by the terms hereof, securities sufficient to make such payments when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Debentureholders or the Trustee all assets held by the Paying Agent
for the making of payments in respect of the Debentures and shall notify the
Trustee, in writing, of any default by the Company in making any such payment.
At any time during the continuance of any such default, the Paying Agent shall,
upon the written request of the Trustee, forthwith pay to the Trustee all assets
so held in trust. If the Company, a Subsidiary or an affiliate of either of
them acts as Paying Agent, it shall segregate the assets held by it as Paying
Agent and hold it as a separate trust fund. The Company at any
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time may require a Paying Agent to pay all assets held by it to the Trustee and
to account for any assets disbursed by it. Upon doing so, the Paying Agent
shall have no further liability for the money and securities.
Section 2.5 DEBENTUREHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Debentureholders. If the Trustee is not the
Registrar, the Company shall furnish or cause to be furnished to the Trustee (i)
at least semiannually on January 1 and July 1 a list of the names and addresses
of Debentureholders dated within 15 days of the date on which the list is
furnished and (ii) at such other times as the Trustee may request in writing a
list, in such form and as of such date as the Trustee may reasonable require, of
the names and addresses of Debentureholders.
Section 2.6 TRANSFER AND EXCHANGE. Upon surrender for registration
of transfer of any Debenture, together with a written instrument of transfer
satisfactory to the Registrar duly executed by the Debentureholder or such
Debentureholder's attorney duly authorized in writing, at the office or agency
of the Company designated as Registrar or co-registrar pursuant to Section 2.3
or at the office or agency referred to in Section 5.2, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Debentures of any
authorized denomination or denominations, of a like aggregate principal amount.
The Company shall not charge a service charge for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange of the Debentures from the
Debentureholder requesting such transfer or exchange (other than any exchange of
a temporary Debenture for a definitive Debenture not involving any change in
ownership).
Transfers of Debentures may be effected only by surrender of the
Debentures to the Company for registration and the issuance by the Company of
one or more new Debentures. As provided in Section 9.3, until such surrender
and registration, the Company may treat the holders of Debentures appearing on
the Debenture register as the absolute owners of such Debentures.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Debentures to be exchanged, together
with a written instrument of transfer satisfactory to the Registrar duly
executed by the Debentureholder or such Debentureholder's attorney duly
authorized in writing, at such office or agency. Whenever any Debentures are so
surrendered for exchange, the Company shall
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execute, and the Trustee shall authenticate and deliver, the Debentures which
the Holder making the exchange is entitled to receive.
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) Debentures selected for redemption
(except, in the case of Debentures to be redeemed in part, the portion thereof
not to be redeemed), (b) any Debentures in respect of which a repurchase notice
has been given and not withdrawn by the Holder thereof in accordance with
Section 15.2 (except, in the case of Debentures to be purchased in part, the
portion thereof not to be purchased) or (c) any Debentures for a period of 15
days before a selection of the Debentures to be redeemed.
Section 2.7 REPLACEMENT DEBENTURES. If (a) any mutilated Debenture
is surrendered to the Company or the Trustee, or (b) the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Debenture, and there is delivered to the Company and the Trustee such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Company or the Trustee that such Debenture has been
acquired by a BONA FIDE purchaser, the Company shall execute, and upon its
written request the Trustee shall authenticate and deliver, in exchange for any
such mutilated Debenture or in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, or is about to be redeemed by the
Company pursuant to Article III hereof, the Company in its discretion may,
instead of issuing a new Debenture, pay or redeem such Debenture, as the case
may be.
Upon the issuance of any new Debentures under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Debenture issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Debenture shall be at any time enforceable by anyone, and shall
be entitled to all benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies
10
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with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Debentures.
Section 2.8 OUTSTANDING DEBENTURES; DETERMINATIONS OF HOLDERS'
ACTION. Debentures outstanding at any time are all the Debentures authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation, mutilated, destroyed, lost or stolen Debentures for which the
Trustee has authenticated and made available for delivery a new Debenture in
lieu therefor pursuant to Section 2.7 and those described in this Section 2.8 as
not outstanding. A Debenture does not cease to be outstanding because the
Company or an Affiliate thereof holds the Debenture; PROVIDED, HOWEVER, that in
determining whether the Holders of the requisite principal amount of Debentures
have given or concurred in any request, demand, authorization, direction,
notice, consent or waiver hereunder, Debentures owned by the Company or any
other obligor upon the Debentures or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Debentures which a Responsible Officer of the Trustee knows to be so owned shall
be so disregarded. Subject to the foregoing, only Debentures outstanding at the
time of such determination shall be considered in any such determination
(including, without limitation, determinations pursuant to Articles VI and X).
If a Debenture is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a BONA FIDE purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date or on a Repurchase Date, or on the stated maturity date, cash
or, if permitted by the terms hereof, securities sufficient to pay the
Debentures payable on that date, then on and after that date such Debentures
shall cease to be outstanding and interest, if any, on such Debentures shall
cease to accrue and all other rights of the Holder shall terminate (other than
the right to receive the applicable Redemption Price or Repurchase Price, upon
delivery of the Debenture in accordance with the terms of this Indenture);
PROVIDED, that if such Debentures are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made.
If a Debenture is converted in accordance with Article XIV then from
and after such conversion the Debenture shall cease to be outstanding and
interest, if any, shall cease to accrue on such Debenture.
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Section 2.9 TEMPORARY DEBENTURES. Pending the preparation of
definitive Debentures, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Debentures which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Debentures in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the Officers executing such Debentures may
determine, as conclusively evidenced by their execution of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures upon surrender of the temporary Debentures at the office
or agency of the Company designated for such purpose pursuant to Section 2.3 or
5.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Debentures the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Debentures of authorized denominations. Until so exchanged the
temporary Debentures shall in all respects be entitled to the same benefits
under this Indenture as definitive Debentures.
Section 2.10 CANCELLATION. All Debentures surrendered for payment,
redemption by the Company pursuant to Article III, conversion pursuant to
Article XIV, repurchase by the Company pursuant to Article XV, registration of
transfer or exchange shall, if surrendered to any person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Debentures
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Debentures so delivered shall be
promptly cancelled by the Trustee. The Company may not issue new Debentures to
replace Debentures it has paid or delivered to the Trustee for cancellation or
that any Holder has converted pursuant to Article XIV. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Debentures held by the Trustee shall be disposed of by the Trustee in accordance
with its normal procedures and evidence of such disposition shall be delivered
to the Company unless the Company timely directs by Company Order that the
Trustee deliver cancelled Debentures to the Company.
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ARTICLE III
REDEMPTION
Section 3.1 RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at its
option, may redeem the Debentures for cash in accordance with the provisions set
forth in the Debentures. If the Company elects to redeem Debentures pursuant to
such provisions, it shall notify the Trustee in writing of the Redemption Date,
the principal amount of Debentures to be redeemed, the Redemption Price and the
Conversion Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.1 at least 60 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee or in connection with a redemption prior to
May 1, 2000, in which case the Company shall give such notice to the Trustee at
least 30 days before the Redemption Date). If fewer than all the Debentures are
to be redeemed, the record date relating to such redemption shall be selected by
the Company and provided to the Trustee in writing, which record date shall not
be less than ten days after the date of notice to the Trustee (unless a shorter
notice shall be satisfactory to the Trustee).
Section 3.2 SELECTION OF DEBENTURES TO BE REDEEMED. If less than all
the Debentures are to be redeemed, the Trustee shall select the Debentures to be
redeemed PRO RATA or by lot, or by any other method the Trustee considers fair
and appropriate (so long as such method is not prohibited by the rules of any
stock exchange on which the Debentures are then listed). The Trustee shall make
the selection at least 35 but not more than 60 days before the Redemption Date
from outstanding Debentures not previously called for redemption. The Trustee
may select for redemption portions of the principal amounts of Debentures that
have denominations larger than $1,000. Debentures and portions of them the
Trustee selects shall be in principal amounts of $1,000 or an integral multiple
of $1,000. Provisions of this Indenture that apply to Debentures called for
redemption also apply to portions of Debentures called for redemption. The
Trustee shall notify the Company promptly, but not less than 35 days before the
Redemption Date, of the Debentures or portions of Debentures to be redeemed.
If any Debenture selected for partial redemption is thereafter
surrendered for conversion in part before termination of the conversion right
with respect to the portion of the Debenture so selected, the converted portion
of such Debenture shall be deemed (so far as may be), solely for purposes of
determining the aggregate principal amount of Debentures to be redeemed by the
Company, to be the portion selected for redemption. Debentures that have been
converted during a selection of Debentures to be redeemed may be treated by the
Trustee as
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outstanding for the purpose of such selection. Nothing in this Section 3.2
shall affect the right of any Holder to convert any Debenture pursuant to
Article XIV before the termination of the conversion right with respect thereto.
Section 3.3 NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a Redemption Date, the Company shall mail a notice of redemption
by first-class mail to each Holder of Debentures to be redeemed in the manner
provided in Section 16.3.
The notice shall identify the Debentures to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
(4) the name and address of the Paying Agent and Conversion Agent and
of the office or agency referred to in Section 5.2;
(5) that Debentures called for redemption may be converted at any
time before the close of business on the Redemption Date;
(6) that Holders who want to convert Debentures must satisfy the
requirements set forth in the Debentures;
(7) that Debentures called for redemption must be surrendered to the
Paying Agent or at the office or agency referred to in Section 5.2 to collect
the Redemption Price;
(8) the CUSIP number of the Debentures;
(9) if fewer than all the outstanding Debentures are to be redeemed,
the certificate numbers and principal amounts of the particular Debentures to be
redeemed; and
(10) that, unless the Company defaults in payment of the Redemption
Price, interest, if any, on Debentures selected for redemption, will cease to
accrue on and after the Redemption Date.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
If the Redemption Date is prior to May 1, 2000, prior to the Trustee
mailing the foregoing notice, the Company shall
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deliver to the Trustee an Officers' Certificate stating that the average of
the Closing Prices of the Common Stock, for all of the Trading Days during a
period of 30 consecutive calendar days ending not more than 10 days prior to
ALZA's notice to the Trustee of such redemption, has equalled or exceeded
150% of the Conversion Price.
Section 3.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is given, Debentures called for redemption become due and payable on
the Redemption Date stated in the notice and at the Redemption Price therefor
except for Debentures that are converted in accordance with the terms of this
Indenture. Upon the later of the Redemption Date and the date such Debentures
are surrendered to the Paying Agent or at the office or agency referred to in
Section 5.2, such Debentures called for redemption shall be paid at the
Redemption Price therefor.
Section 3.5 DEPOSIT OF REDEMPTION PRICE. Prior to or on the
Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is the Paying Agent,
shall segregate and hold in trust) cash sufficient to pay the Redemption Price
of all Debentures to be redeemed on that date other than Debentures or portions
of Debentures called for redemption which prior thereto have been delivered by
the Company to the Trustee for cancellation. The Paying Agent shall as promptly
as practicable return to the Company any cash, with interest, if any, thereon,
not required for that purpose because of conversion of Debentures pursuant to
Article XIV. If such cash is then held by the Company or a Subsidiary or an
Affiliate of the Company in trust and is not required for such purpose it shall
be discharged from such trust.
Section 3.6 DEBENTURES REDEEMED IN PART. Upon surrender of a
Debenture that is redeemed in part, the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder, a new Debenture in an authorized
denomination equal in principal amount to the unredeemed portion of the
Debenture surrendered.
Section 3.7 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Debentures, the Company may arrange for the
purchase and conversion of any Debentures called for redemption by an agreement
with one or more investment bankers or other purchasers to purchase all or a
portion of such Debentures by paying to the Trustee in trust for the
Debentureholders whose Debentures are to be so purchased, on or before the close
of business on the Redemption Date, an amount that, together with any amounts
deposited with the Trustee by the Company for redemption of such Debentures is
not less than the Redemption Price, together with interest, if any, accrued to
the Redemption Date, of such Debentures. Notwithstanding anything to
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the contrary contained in this Article III, the obligation of the Company to pay
the Redemption Price of such Debentures, including all accrued interest, if any,
shall be deemed to be satisfied and discharged to the extent such amount is so
paid by such purchasers but no such agreement shall relieve the Company of its
obligation to pay such Redemption Price and interest, if any. If such an
agreement is entered into, any Debentures not duly surrendered for conversion by
the Holders thereof may, at the option of the Company be deemed, to the fullest
extent permitted (notwithstanding anything to the contrary contained in Article
XIV), surrendered by such purchasers for conversion, all as of immediately prior
to the close of business on the Redemption Date, subject to payment of the above
amount as aforesaid. The Trustee shall hold and pay to the Holders whose
Debentures are selected for redemption any such amount paid to it for purchase
and conversion in the same manner as it would moneys deposited with it by the
Company for the redemption of Debentures. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Debentures shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee (and its
directors, officers, employees and agents) from, and hold it harmless against,
any loss, liability or expense arising out of or in connection with any such
arrangement for the purchase and conversion of any Debentures between the
Company and such purchasers, including the costs and expenses incurred by the
Trustee in the defense of any claim or liability arising out of or in connection
with the exercise or performance of any of its powers, duties, responsibilities
or obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF DEBENTURES
Section 4.1 DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS. The
Company covenants and agrees, and each Holder of a Debenture, by such Holder's
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article IV, the indebtedness
represented by the Debentures and the payment of the principal, Redemption
Price, Repurchase Price and interest, if any, in respect of each and all of the
Debentures are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.
No provision of this Article IV shall prevent the occurrence of any
Default or Event of Default hereunder.
Section 4.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION. Upon any
distribution of assets of the Company in the event of
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(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such event
the Holders of Senior Indebtedness shall be entitled to receive payment in full
of all amounts due or to become due on or in respect of all Senior Indebtedness,
or provision shall be made for such payment in money or money's worth, before
the holders of the Debentures are entitled to receive any payment of the
principal of, premium, if any, and interest on all Debentures (including, but
not limited to, the Redemption Price with respect to Debentures called for
redemption in accordance with Section 3.2 or the Repurchase Price of Debentures
submitted for repurchase in accordance with Section 15.2) and to that end the
holders of Senior Indebtedness shall be entitled to receive, for application to
the payment thereof, any payment or distribution of any kind or character,
whether in cash, property or securities, which may be payable or deliverable in
respect of the Debentures in any such case, proceeding, dissolution, liquidation
or other winding up or event, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other indebtedness
of the Company being subordinated to the payment of the Debentures.
In the event that, notwithstanding the foregoing provisions of this
Section 4.2, the Trustee or the holder of any Debenture shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Debentures, before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
holder, then in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another person or the liquidation or dissolution of the Company following
the conveyance or transfer of its
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properties and assets substantially as an entirety to another person upon the
terms and conditions set forth in Article XI shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of creditors
or marshalling of assets and liabilities of the Company for the purposes of this
Section 4.2 if the person formed by such consolidation or into which the Company
is merged or the person which acquires by conveyance or transfer such properties
and assets substantially as an entirety, as the case may be, shall as part of
such consolidation, merger, conveyance or transfer, comply with the conditions
set forth in Article XI.
Section 4.3 PRIOR PAYMENT OF SENIOR INDEBTEDNESS UPON ACCELERATION OF
DEBENTURES. In the event that any Debentures are declared due and payable
before their stated maturity, then and in such event the holders of Senior
Indebtedness outstanding at the time such Debentures so become due and payable
shall be entitled to receive payment in full of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holders of the Debentures are
entitled to receive any payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Debentures) by the Company of the principal
of, premium, if any, and interest on all Debentures (including, but not limited
to, the Redemption Price with respect to the Debentures called for redemption in
accordance with Section 3.2 or the Repurchase Price of any Debentures submitted
for repurchase in accordance with Section 15.2 or on account of the purchase or
other acquisition of Debentures).
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the holder of any Debenture prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 4.2 would be applicable.
Section 4.4 NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. In the
event and during the continuation of any default in the payment of principal of
(or premium, if any) or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto, or in the event that any event of
default with respect to any Senior Indebtedness shall have occurred and be
continuing, permitting the holders of such Senior Indebtedness (or a trustee on
behalf of the holders thereof) to declare such Senior Indebtedness due and
payable prior to the date on which it
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would otherwise have become due and payable (a "SENIOR INDEBTEDNESS DEFAULT"),
unless and until such Senior Indebtedness Default shall have been cured or
waived or shall have ceased to exist and such acceleration shall have been
rescinded or annulled, or in the event any judicial proceeding shall be pending
with respect to any such Default, then no payment (including any payment which
may be payable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Debentures) of principal of, premium,
if any, and interest on all Debentures (including, but not limited to, the
Redemption Price with respect to the Debentures called for redemption in
accordance with Section 3.2 or the Repurchase Price of any Debentures submitted
for repurchase in accordance with Section 15.2) or on account of the purchase or
other acquisition of Debentures shall be made, nor may the Company pay cash with
respect to the purchase price or upon conversion of any Debentures (other than
cash in lieu of fractional shares).
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the holder of any Debentures prohibited by
the foregoing provisions of this Section 4.4, and if such fact shall then have
been made known to a Responsible Officer of the Trustee or, as the case may be,
such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 4.2 would be applicable.
Section 4.5 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in
this Article or elsewhere in this Indenture or in any of the Debentures shall
prevent (a) the Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshalling of assets and liabilities of the
Company referred to in Section 4.2 or under the conditions described in Section
4.3 or 4.4, from making payments at any time of principal of, premium, if any,
and interest on all Debentures (including, but not limited to, the Redemption
Price with respect to the Debentures called for redemption in accordance with
Section 3.2 or the Repurchase Price with respect to Debentures submitted for
repurchase in accordance with Section 15.2) or (b) the application by the
Trustee of any money deposited with it hereunder to the payment of or on account
of the principal of, premium, if any, and interest on all Debentures (including,
but not limited to, the Redemption Price with respect to the Debentures called
for redemption in accordance with Section 3.2 or the Repurchase Price with
respect to Debentures submitted for repurchase in accordance with Section 15.2),
or the retention of such payment by the Holders of the Debentures, if, at the
time of such application by the Trustee, the Trustee did not have actual
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knowledge that such payment would have been prohibited by the provisions of this
Article IV.
Section 4.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to payment in full of all Senior Indebtedness, the holders of the
Debentures shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the provisions of
this Article IV (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to indebtedness of the
Company to substantially the same extent as the Debentures are subordinated and
is entitled to like rights of subrogation) to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on all Debentures (including, but not limited to,
the Redemption Price with respect to the Debentures called for redemption in
accordance with Section 3.2 or the Repurchase Price with respect to Debentures
submitted for repurchase in accordance with Section 15.2), shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by holders of the Debentures
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Debentures, be deemed to be a payment
or distribution by the Company to or of the Senior Indebtedness.
Section 4.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the holders of the Debentures, on the one hand,
and the holders of Senior Indebtedness, on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Debentures is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Debentures, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
holders of the Debentures the principal of, premium, if any, and interest on all
Debentures (including, but not limited to, the Redemption Price with respect to
the Debentures called for redemption in accordance with Section 3.2 or the
Repurchase Price with respect to Debentures submitted for repurchase in
accordance with Section 15.2) as and when the same shall become due and payable
in accordance with the terms of the Debentures and this Indenture; or (b) affect
the relative rights against the Company of the holders of the Debentures and
credi-
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tors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon Default under this Indenture, subject
to the rights, if any, under this Article of the holders of Senior Indebtedness
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such holder.
Section 4.8 TRUSTEE TO EFFECTUATE SUBORDINATION. Each holder of a
Debenture by such holder's acceptance thereof authorizes and directs the Trustee
on such holder's behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.
Section 4.9 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any non-compliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the holders of the
Debentures, without incurring responsibility to the holders of the Debentures
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the holders of the Debentures to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
Section 4.10 NOTICE TO TRUSTEE. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the
Debentures. Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Debentures, unless
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and until the Trustee shall have received written notice therefor from the
Company or a holder of Senior Indebtedness or from any trustee thereof; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist.
Subject to the provisions of Section 7.1, the Trustee shall be
entitled to rely conclusively on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
Section 4.11 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 7.1, and the
holders of the Debentures shall be entitled to rely conclusively upon any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the holders of Debentures, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
Section 4.12 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to holders of Debentures
or to the Company or to any other person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
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Section 4.13 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
Section 4.14 ARTICLE APPLICABLE TO PAYING AGENTS. In case at any
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; PROVIDED, HOWEVER, that Sections 4.10
and 4.12 shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
Section 4.15 CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of
this Article only, (1) the issuance and delivery of junior securities upon
conversion of Debentures in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of, premium, if
any, and interest on all Debentures (including, but not limited to, the
redemption price with respect to the Debentures called for redemption in
accordance with Section 3.2 or submitted for repurchase in accordance with
Section 15.2) or on account of the purchase or other acquisition of Debentures,
and (2) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion of a Debenture shall be deemed to
constitute payment on account of principal of such Debenture. For the purposes
of this Section, the term "JUNIOR SECURITIES" means (a) shares of any stock of
any class of the Company and (b) securities of the Company which are
subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to the same
extent as, or to a greater extent than, the Debentures are so subordinated as
provided in this Article. Nothing contained in this Article or elsewhere in
this Indenture or in the Debentures is intended to or shall impair, as among the
Company, its creditors other than holders of Senior Indebtedness and the holders
of the Debentures, the right, which is absolute and unconditional, of the holder
of any Debenture to convert such Debenture in accordance with Article XV.
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ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Debentures at
the places, at the respective times and in the manner provided herein and in the
Debentures. Each installment of interest on the Debentures due on any semi-
annual interest payment date may be paid by mailing checks for the interest
payable to or upon the written order of the holders of Debentures entitled
thereto as they shall appear on the Debenture register.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in The City of New York, an office or agency where the Debentures may
be surrendered for registration of transfer or exchange or for presentation for
payment or for conversion or redemption and where notices and deeds to or upon
the Company in respect of the Debentures and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations surrenders, notices and demands may be made or
served at the Corporate Trust Office or the office or agency of the Trustee in
The City of New York.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in The City of New
York, for such purposes. The Company will give prompt written notice to the
holders of any such designation or rescission and of any change in the location
of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office of
the Trustee and the office or agency of the Trustee in The City of New York
(which shall initially be The Chase Manhattan Bank, N.A. located at 4 Chase
MetroTech Center, 3rd Floor, Brooklyn, New York 11245), as an office or agency
of the Company for each of the aforesaid purposes.
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 7.8, a successor Trustee, so
that
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there shall at all times be a Trustee qualified and acting hereunder.
Section 5.4 CORPORATE EXISTENCE. Subject to Article XI, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
Section 5.5 STAY, EXTENSION AND USURY LAWS. The Company covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Debentures as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law has been enacted.
Section 5.6 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending closest to December 31, 1996) an
Officers' Certificate stating whether or not the signers know of any Default
that occurred during such period. If they do, such Officers' Certificate shall
describe the Default and its status.
Section 5.7 SEC REPORTS. The Company shall file with the Trustee,
within 15 days after it files such annual and quarterly reports, information,
documents and other reports with the Commission, copies of its annual and
quarterly reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act (or any such successor
provisions thereto). In the event the Company is at any time no longer subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act (or any
such successor provisions), it shall continue to provide the Trustee with
reports containing substantially the same information as would have been
required to be filed with the Commission had the Company continued to have been
subject to such reporting requirements, and the Trustee shall make any such
reports available to Debentureholders upon request. In such event, such reports
shall be provided at the times the Company would have been required to provide
reports had it continued to have been subject to such reporting requirements.
The Company also shall
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comply with the other provisions of Trust Indenture Act Section 314(a).
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 EVENTS OF DEFAULT. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest upon
any of the Debentures as and when the same shall become due and
payable, and continuance of such default for a period of thirty (30)
days, whether or not such payment is permitted under Article IV
hereof; or
(b) default in the payment of the principal of or premium, if
any, on any of the Debentures as and when the same shall become due
and payable either at maturity or in connection with any redemption
pursuant to Article III or repurchase pursuant to Article XV, by
acceleration or otherwise, whether or not such payment is permitted
under Article IV hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Debentures or in this Indenture (other than a covenant
or agreement a default in whose performance or whose breach is
elsewhere in this Section 6.1 specifically dealt with) continued for a
period of sixty (60) days after the date on which written notice of
such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or to the Company and the
Trustee by the holders of at least 25 percent in aggregate principal
amount of the Debentures at the time outstanding; or
(d) failure on the part of the Company to make any payment at
maturity, including any applicable grace period, in respect of
indebtedness for borrowed money of the Company, which payment is in an
amount in excess of $30 million, and continuance of such failure for a
period of thirty (30) days after the date on which the written notice
of such failure shall have been given to the Company by the Trustee,
or to the Company and the
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Trustee by the holders of at least 25 percent in aggregate principal
amount of the Debentures at the time outstanding; or
(e) default by the Company with respect to any indebtedness for
borrowed money of the Company, which default results in acceleration
of any such indebtedness which is in an amount of in excess of $30
million without such indebtedness having been discharged, or there
having been deposited in trust a sum of money sufficient to discharge
in full such indebtedness or such acceleration having been rescinded
or annulled within a period of thirty (30) days after the date on
which the written notice of such default shall have been given to the
Company by the Trustee, or to the Company and the Trustee by the
holders of at least 25 percent in aggregate principal amount of the
Debentures at the time outstanding; or
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due; or
(g) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 6.1(f) or (g)), unless the principal of all of the Debentures shall
have already become due and payable, either the Trustee or the holders of not
less than 25 percent in aggregate principal amount of the Debentures then
outstanding hereunder, by notice in writing to the Company (and to the Trustee
if given by Debentureholders), may declare the principal of all the Debentures
and the interest accrued thereon
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to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or
in the Debentures contained to the contrary notwithstanding. If an Event of
Default specified in Section 6.1(f) or (g) occurs, the principal of all the
Debentures and the interest accrued thereon shall be immediately and
automatically due and payable without any further action on the part of the
Company, the Trustee or the holders of the Debentures. This provision, however,
is subject to the condition that if, at any time after the principal of the
Debentures shall have been so declared due and payable, and before any judgment
or decree for the payment of the monies due shall have been obtained or entered
as hereinafter provided, the Company shall pay or shall deposit with the Trustee
a sum sufficient to pay all matured installments of interest upon all Debentures
and the principal of and premium, if any, on any and all Debentures which shall
have become due otherwise than by acceleration (with interest on overdue
installments of interest (to the extent that payments of such interest is
enforceable under applicable law) and on such principal and premium, if any, at
the rate borne by the Debentures, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 7.7, and if any and all Defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on Debentures which shall have become due by
acceleration, shall have been cured or waived pursuant to Section 6.7, then the
holders of a majority in aggregate principal amount of the Debentures then
outstanding, by written notice to the Company and to the Trustee, may waive all
Defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent Default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify the Trustee in writing
promptly upon becoming aware of any Default or Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then the Company, the
holders of Debentures, and the Trustee shall continue as though no such
proceeding had been taken.
Section 6.2 PAYMENTS OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The
Company covenants that (a) if the Company defaults in the payment of any
installment of interest upon any of the Debentures as and when the same shall
become due and payable, and such Default shall have continued for a period of
thirty (30) days, or (b) the Company Defaults pursuant to Section 6.1(b) then,
upon demand of the Trustee, the Company will pay to the Trustee, for the benefit
of the holders of the Debentures, the whole amount that then shall have become
due and payable on all
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such Debentures for principal and premium, if any, or interest, or both, as the
case may be, with interest upon the overdue principal and premium, if any, and
(to the extent that payment of such interest is enforceable under applicable
law) upon the overdue installments of interest at the rate borne by the
Debentures; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including reasonable compensation
to the Trustee, its agents, attorneys and counsel, and any expenses or
liabilities incurred by the Trustee hereunder other than through its negligence
or bad faith. Until such demand by the Trustee, the Company may pay the
principal of and premium, if any, and interest on the Debentures to the
registered holders, whether or not the Debentures are overdue.
If the Company fails promptly to pay such amounts upon such demand,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Debentures and collect in the manner provided by law out of the property of the
Company or any other obligor on the Debentures wherever situated the monies
adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Debentures under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Debentures, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 6.2, shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Debentures, and, in case of
any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the Debentureholders allowed in such judicial proceedings
relative to the Company or any other obligor on the Debentures, its or their
creditors, or its or their property, and to collect and receive any monies or
other property payable or
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deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 7.7.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof at any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the holders of the
Debentures.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debentures, and it shall not be necessary to make any holders of the
Debentures parties to any such proceedings.
Section 6.3 APPLICATION OF MONIES COLLECTED BY TRUSTEE. Any monies
collected by the Trustee pursuant to this Article VI shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Debentures, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee under
Section 7.7;
Second: Subject to the provisions of Article IV, if the
principal of the outstanding Debentures shall not have become due and
be unpaid, to the payment of interest on the Debentures in default in
the order of the maturity of the installments of such interest, with
interest (to the extent that such interest has been collected by the
Trustee) upon the overdue installments of interest at the rate borne
by the Debentures, such payments to be made ratably to the persons
entitled thereto;
Third: Subject to the provisions of Article IV, if the principal
of the outstanding Debentures shall have become due, by declaration or
otherwise, and be unpaid to the payment of the whole amount then owing
and unpaid upon the Debentures for principal and premium, if any, and
interest, with interest on the overdue principal and premium, if any,
and (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate borne by
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the Debentures; and PROVIDED, that if such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon
the Debentures, then to the payment of such principal and premium, if
any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and
premium, if any, or of any installment of interest over any other
installment of interest, or of any Debenture over any other Debenture,
ratably to the aggregate of such principal and premium, if any, and
accrued and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment
of the remainder, if any, to the Company or any other person lawfully
entitled thereto.
Section 6.4 PROCEEDINGS BY DEBENTUREHOLDER. No holder of any
Debenture shall have any right to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture, or for the
appointment of a receiver, trustee, liquidator, custodian or other similar
official, or for any other remedy hereunder, unless such holder previously shall
have given to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless the holders of not
less than 25 percent in aggregate principal amount of the Debentures then
outstanding shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for sixty (60) days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to Section 6.7; no one or more holders of
Debentures shall have any right in any manner whatever to affect, disturb or
prejudice the rights of any other holder of Debentures, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Debentures (except as
otherwise provided herein). For the protection and enforcement of this Section
6.4, each and every Debentureholder and the Trustee shall be entitled to such
relief as can be given at law or in equity.
Notwithstanding any other provision of this Indenture and the
Debentures, the right of the holder of any Debenture to receive payment of the
principal of and premium, if any, and interest on such Debenture, on or after
the respective due dates expressed in such Debenture, or to institute suit for
the enforcement of any such payment on or after such respective dates
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against the Company shall not be impaired or affected without the consent of
such holder.
Anything in this Indenture or the Debentures to the contrary
notwithstanding, the holder of any Debenture, without the consent of either the
Trustee or the holder of any other Debenture, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 6.5 PROCEEDINGS BY TRUSTEE. In case of an Event of Default
the Trustee may in its discretion proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of such rights,
either by suit in equity or by action at law or by proceeding in bankruptcy or
otherwise, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted in
this Indenture, or to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law.
Section 6.6 REMEDIES CUMULATIVE AND CONTINUING. Except as provided
in Section 2.7, all powers and remedies given by this Article VI to the Trustee
or to the Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Debentures, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of the Debentures to exercise any right or power
accruing upon any Default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and subject to the
provisions of Section 6.4, every power and remedy given by this Article VI or by
law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 6.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY
MAJORITY OF DEBENTUREHOLDERS. The holders of a majority in aggregate principal
amount of the Debentures at the time outstanding shall have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; PROVIDED, HOWEVER, that (a) such direction shall not be in conflict
with any rule of law or with this Indenture, and (b) the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. The holders of a majority in aggregate principal amount of the
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Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive any past Default or Event of Default hereunder and its
consequences except (i) a Default in the payment of interest or premium, if any,
on, or the principal of, the Debentures, (ii) a failure by the Company to
convert any Debentures into Common Stock, (iii) a Default in the payment of
Redemption Price pursuant to Article III or Repurchase Price pursuant to Article
XV or (iv) a Default in respect of a covenant or provisions hereof which under
Article X cannot be modified or amended without the consent of the holders of
all Debentures then outstanding. Upon any such waiver the Company, the Trustee
and the holders of the Debentures shall be restored to their former positions
and rights hereunder; but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon. Whenever
any Default or Event of Default hereunder shall have been waived as permitted by
this Section 6.7, said Default or Event of Default shall for all purposes of the
Debentures and this Indenture be deemed to have been cured and to be not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
Section 6.8 UNDERTAKING TO PAY COSTS. All parties to this Indenture
agree, and each holder of any Debenture by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may, in its discretion, require,
in any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; PROVIDED that the provisions of
this Section 6.8 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Debentureholder, or
group of Debentureholders, holding in the aggregate more than ten percent in
principal amount of the Debentures at the time outstanding determined in
accordance with Section 8.4, or to any suit instituted by any Debentureholder
for the enforcement of the payment of the principal of or premium, if any, or
interest on any Debenture on or after the due date expressed in such Debenture
or to any suit for the enforcement of the right to convert any Debenture in
accordance with the provisions of Article XIV or to require the Company to
repurchase any Debenture in accordance with Article XV.
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ARTICLE VII
TRUSTEE
Section 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as
a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, in the
case of any such certificate or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall examine
the certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph (b)
of this Section 7.1;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.7.
(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c) and (e) of this
Section 7.1.
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(e) The Trustee (and its directors, officers, employees and
agents) may refuse to perform any duty or exercise any right or power
hereunder or extend or risk its own funds or otherwise incur any
financial liability unless the Trustee (and its directors, officers,
employees and agents) receives indemnity satisfactory to it against
any loss, liability or expense.
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The
Trustee (acting in any capacity hereunder) shall be under no liability
for interest on any money received by it hereunder except as the
Trustee may otherwise have agreed in writing with the Company.
(g) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights
or powers, if there is reasonable ground for believing that the
repayment of such funds or indemnity satisfactory to it against such
risk or liability is not reasonably assured to it.
Section 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent, attorneys,
custodians or nominees, appointed with due care.
(d) Subject to the provisions of Section 7.1(c), the Trustee
shall not be liable for any action it takes or omits to take in good
faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of
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the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee (and its directors, officers, employees and
agents) security or such reasonable indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
(f) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(g) The Trustee may consult with counsel (at the expense of the
Company) and any Opinion of Counsel or any advice of such Counsel
shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(h) In the event that the Trustee is also acting as Paying
Agent, Conversion Agent or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VII shall
also be afforded to such Paying Agent, Conversion Agent or Registrar.
Section 7.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of the
Debentures and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any Paying Agent, Registrar,
Conversion Agent or co-registrar may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
Section 7.4 TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Debentures, it shall not be accountable for the Company's use of the proceeds
from the Debentures, it shall not be responsible for any statement in the
registration statement for the Debentures under the Securities Act or in the
Indenture or the Debentures (other than its certificate of authentication), or
the determination as to the Persons entitled to receive any notices hereunder.
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Section 7.5 NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Trustee, the
Trustee shall give to each Debentureholder notice of the Default within 90 days
after it occurs. Except in the case of a Default described in Section 6.1(a)
or (b), the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interest of Debentureholders.
Section 7.6 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
June 15 beginning with the June 15 following the date of this Indenture, the
Trustee shall mail to each Debentureholder a brief report dated as of such June
15 that complies with Trust Indenture Act Section 313(a). The Trustee also
shall comply with Trust Indenture Act Section 313(b).
A copy of each report at the time of its mailing to Debentureholders
shall be provided to the Company and shall be filed with the Commission and each
stock exchange on which the Debentures are listed. The Company agrees promptly
to notify the Trustee whenever the Debentures become listed on any stock
exchange and of any delisting thereof.
Section 7.7 COMPENSATION AND INDEMNITY. The Company agrees:
(a) to pay to the Trustee and to the extent the Trustee acts as
Registrar, Paying Agent or Authenticating Agent, from time to time
such compensation as shall have been agreed to in writing between the
Company and the Trustee for all services rendered by it hereunder in
its capacity as Trustee, Registrar, Paying Agent or Authenticating
Agent (which compensation shall not (to the extent permitted by law)
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) to reimburse the Trustee upon its written request, for all
reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses, advances and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
bad faith; and
(c) to indemnify each of the Trustee or any predecessor Trustee
(and its directors, officers, employees and agents) for, and to hold
it harmless against, any and all loss, liability, damage, claim or
expense, including taxes (other than taxes based upon, measured or
determined by the income of the Trustee),
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incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust,
including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The Trustee shall give the Company prompt notice of any claim or
liability for which the Trustee might be entitled to indemnification under
subparagraph (c) of this Section 7.7. To secure the Company's payment
obligations in this Section 7.7, the Trustee shall have a lien prior to the
Debentures on all money or property held or collected by the Trustee or the
earlier resignation or removal of the Trustee.
The Company's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 7.1(f) or (g), the expenses are
intended to constitute expenses of administration under Federal or State
bankruptcy laws. The provisions of this Section shall survive the termination
of this Indenture.
Section 7.8 REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Company; PROVIDED, HOWEVER, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this
Section 7.8. The Holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee (subject to the consent of the
Company, such consent not to be unreasonably withheld). The Company shall
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company.
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Thereupon the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Debentureholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Debentureholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Upon the appointment and acceptance of a successor Trustee, and the
presentment of reasonable documentation by the resigning or removed Trustee to
the Company, all fees, charges and expenses of the resigning or removed Trustee
shall become immediately due and payable. The resigning or removed Trustee
shall have no liability for the acts or omissions of any successor Trustee
hereunder.
Section 7.9 SUCCESSOR TRUSTEE BY MERGER. Except as otherwise
provided in Section 7.8(1) or 7.8(4), if the Trustee consolidates with, merges
or converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
Section 7.10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of Trust Indenture Act Section 310(a)(1). The
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Trustee
shall comply with Trust Indenture Act Section 310(b), including the optional
provision permitted by the second sentence of Trust Indenture Act
Section 310(b)(9). In determining whether the Trustee has conflicting interests
as defined in Trust Indenture Act Section 310(b)(1), the provisions contained in
the proviso to Trust Indenture Act Section 310(b)(1) shall be deemed
incorporated herein.
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with Trust Indenture Act Section 311(a), excluding any
creditor relationship listed in Trust
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Indenture Act Section 311(b). A trustee who has resigned or been removed shall
be subject to Trust Indenture Act Section 311(a) to the extent indicated
therein.
ARTICLE VIII
CONCERNING THE DEBENTUREHOLDERS
Section 8.1 ACTION BY DEBENTUREHOLDERS. Whenever in this Indenture
it is provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action), the fact that at the time of taking any such action, the holders
of such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
Debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article IX, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders. Whenever the Company or the
Trustee solicits the taking of any action by the holders of the Debentures, the
Company or the Trustee shall fix in advance of such solicitation, a date as the
record date for determining holders entitled to take such action. The record
date shall be not more than fifteen (15) days prior to the date of commencement
of solicitation of such action.
Section 8.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS. Subject to the
provisions of Sections 7.1, 7.2 and 9.6, proof of the execution of any
instrument by a Debentureholder or his agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Debentures shall be proved by the registry of such
Debentures or by a certificate of the Debenture registrar.
The record of any Debentureholders' meeting shall be proved in the
manner provided in Section 9.6.
Section 8.3 WHO ARE DEEMED ABSOLUTE OWNERS. The Company, the
Trustee, any authenticating agent, any Paying Agent, any Conversion Agent and
any Registrar may deem the Person in whose name such Debenture shall be
registered upon the Debenture register to be, and may treat such person as, the
absolute owner of such Debenture (whether or not such Debenture shall be overdue
and notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Deben-
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ture, for conversion of such Debenture and for all other purposes; and neither
the Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor
any authenticating agent nor any Registrar shall be affected by any notice to
the contrary. All such payments so made to any holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Debenture.
Section 8.4 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 8.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action, any holder of a Debenture which is shown by the
evidence to be included in the Debentures the holders of which have consented to
such action may, by filing written notice with the Company or with the Trustee
at its Corporate Trust Office and upon proof of holding as provided in Section
8.2, revoke such action so far as it concerns such Debenture. Except as
aforesaid, any such action taken by the holder of any Debenture shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Debenture and of any Debentures issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Debenture or any Debenture issued in exchange or substitution therefor.
ARTICLE IX
DEBENTUREHOLDERS' MEETINGS
Section 9.1 PURPOSE OF MEETINGS. A meeting of Debentureholders may
be called at any time and from time to time pursuant to the provisions of this
Article IX for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any Default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Debentureholders pursuant to any of the provisions of Article
VI;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VII;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.2; or
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(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Debentures under any other provision of this Indenture or under
applicable law.
Section 9.2 CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time
call a meeting of Debentureholders to take any action specified in Section 9.1,
to be held at such time and at such place as the Trustee shall determine.
Notice of every meeting of the Debentureholders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting and the establishment of any record date pursuant to Section 8.1,
shall be mailed to holders of Debentures at their addresses as they shall appear
on the Debenture register. Such notice shall also be mailed to the Company.
Such notices shall be mailed not less than twenty (20) nor more than ninety (90)
days prior to the date fixed for the meeting.
Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 9.3 CALL OF MEETINGS BY COMPANY OR DEBENTUREHOLDERS. In case
at any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least ten percent in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Debentureholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or such Debentureholders may determine the time and
the place at any location for such meeting and may call such meeting to take any
action authorized in Section 9.1, by mailing notice thereof as provided in
Section 9.2.
Section 9.4 QUALIFICATIONS FOR VOTING. To be entitled to vote at any
meeting of Debentureholders a Person shall (a) be a holder of one or more
Debentures on the record date pertaining to such meeting or (b) be appointed by
an instrument in writing as proxy by a holder of one or more Debentures. The
only Persons who shall be entitled to be present or to speak at any meeting of
Debentureholders shall be the Persons entitled to vote at such meeting and their
counsel and any representative of the Trustee and its counsel and any
representatives of the Company and its counsel.
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Section 9.5 REGULATIONS. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Debentureholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 9.3, in which case the
Company or the Debentureholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote at the meeting.
Subject to the provisions of Section 8.4, at any meeting each
Debentureholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Debentures held or represented by such Debentureholder;
PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in
respect of any Debenture challenged as not outstanding and ruled by the chairman
of the meeting to be not outstanding. The chairman of the meeting shall have no
right to vote other than by virtue of Debentures held by such chairman or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Debentureholders. Any meeting of Debentureholders duly called
pursuant to the provisions of Section 9.2 or 9.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of
Debentures represented at the meeting, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.
Section 9.6 VOTING. The vote upon any resolution submitted to any
meeting of Debentureholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Debentures or of their
representatives by proxy and the principal amount of the Debentures held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record in duplicate of the proceedings of each meeting of Debentureholders shall
be prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one
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or more persons having knowledge of the facts setting forth a copy of the notice
of the meeting and showing that said notice was mailed as provided in Section
9.2. The record shall show the principal amount of the Debentures voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 9.7 NO DELAY OF RIGHTS BY MEETING. Nothing in this Article
IX contained shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
DEBENTUREHOLDERS. The Company, when authorized by the resolutions of the Board
of Directors, and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto for one or more of the following
purposes:
(a) to make provision with respect to the conversion rights of
the holders of Debentures pursuant to the requirements of Section 14.6
or the repurchase obligations of the Company pursuant to the
requirements of Section 15.5;
(b) subject to Article IV, to convey, transfer, assign, mortgage
or pledge to the Trustee as security for the Debentures, any property
or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of
the Company pursuant to Article XI;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Company and the Trustee
shall consider to be for the
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benefit of the holders of Debentures, and to make the occurrence, or
the occurrence and continuance, of a Default in any such additional
covenants, restrictions or conditions a Default or an Event of Default
permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; PROVIDED, HOWEVER,
that in respect of any such additional covenant, restriction or
condition such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;
(e) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture which
shall not adversely affect the interest of any holder of the
Debentures; or
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debentures.
The Trustee shall join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provision of this Section
10.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 10.2.
Section 10.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBENTUREHOLDERS. With the consent (evidenced as provided in Article VIII) of
the holders of not less than a majority in aggregate principal amount of the
Debentures at the time outstanding, the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture
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or any supplemental indenture or of modifying in any manner the rights of the
holders of the Debentures; PROVIDED, HOWEVER, that no such supplemental
indenture shall (A) (i) extend the fixed maturity of any Debenture, (ii) reduce
the rate or extend the time of payment of interest thereon, (iii) reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption thereof, (iv) impair the right of any Debentureholder to
institute suit for the payment thereof, (v) make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
cash, (vi) modify the provisions of this Indenture with respect to the
subordination of the Debentures in a manner adverse to the Debentureholders in
any material respect, (vii) change the obligation of the Company to repurchase
any Debenture upon the occurrence of a Change in Control in a manner adverse to
the holder of Debentures, (viii) impair the right to convert the Debentures into
Common Stock subject to the terms set forth herein, including Section 14.6,
without the consent of the holder of each Debenture so affected, or (B) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Debentures then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or an Assistant
Secretary authorizing the execution or any such supplemental indenture, and upon
the filing with the Trustee of written evidence of the consent of
Debentureholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to enter into such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders
under this Section 10.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Section 46 EFFECT OF SUPPLEMENTAL INDENTURE. Any supplemental
indenture executed pursuant to the provisions of this Article X shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article X, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be
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and be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
Section 10.4 NOTATION ON DEBENTURES. Debentures authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article X may bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the Company or
the Trustee shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may, at the Company's
expense, be prepared and executed by the Company, authenticated by the Trustee
(or an authenticating agent duly appointed by the Trustee pursuant to Section
16.11) and delivered in exchange for the Debentures then outstanding, upon
surrender of such Debentures then outstanding.
Section 10.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
FURNISHED TRUSTEE. The Trustee, subject to the provisions of Sections 7.1 and
7.2 shall be entitled to an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article X.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.1 COMPANY MAY CONSOLIDATE ETC. ON CERTAIN TERMS. Subject
to the provisions of Section 11.2, nothing contained in this Indenture or in any
of the Debentures shall prevent any consolidation or merger of the Company with
or into any other corporation or corporations (whether or not affiliated with
the Company), or successive consolidations or mergers in which the Company or
its successor or successors shall be a party or parties, or shall prevent any
sale, conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), authorized to acquire and operate
the same and which, in each case, shall be organized under the laws of the
United States of America, any state thereof or the District of Columbia;
PROVIDED, that upon any such consolidation, merger, sale, conveyance or lease,
the due and punctual payment of the principal of and premium, if any, and
interest on all of the Debentures, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture reasonably satisfactory in form to the Trustee, executed
and delivered to the Trustee by the corporation (if other than the Company)
formed by such consolidation, or into which the Company
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shall have been merged, or by the corporation which shall have acquired or
leased such property, and such supplemental indenture shall provide for the
applicable conversion rights set forth in Section 14.6.
Section 11.2 SUCCESSOR CORPORATION TO BE SUBSTITUTED. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Debentures and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of ALZA Corporation any or all of the Debentures
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the Company Order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver, or cause to be authenticated and delivered, any Debentures which
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication, and any Debentures which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Debentures so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debentures theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Debentures had been issued at the date of the execution hereof. In the
event of any such consolidation, merger, sale or conveyance (but not in the
event of any such lease), the person named as the "Company" in the first
paragraph of this Indenture or any successor which shall thereafter have become
such in the manner prescribed in this Article XI may be dissolved, wound up and
liquidated at any time thereafter and such person shall be released from its
liabilities as obligor and maker of the Debentures and from its obligations
under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
Section 11.3 OPINION OF COUNSEL TO BE GIVEN TRUSTEE. The Trustee,
subject to Sections 7.1 and 7.2, shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale,
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conveyance or lease and any such assumption complies with the provisions of this
Article XI.
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 12.1 DISCHARGE OF INDENTURE. When (a) the Company shall
deliver to the Trustee for cancellation all Debentures theretofore authenticated
(other than any Debentures which have been destroyed, lost or stolen and in lieu
of or in substitution for which other Debentures shall have been authenticated
and delivered) and not theretofore cancelled, or (b) all the Debentures not
theretofore cancelled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, funds sufficient to pay at
maturity or upon redemption of all of the Debentures (other than any Debentures
which shall have been mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Debentures shall have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest due or to
become due to such date of maturity or redemption date, as the case may be, and
if in either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of transfer,
substitution and exchange and conversion of Debentures, (ii) rights hereunder of
Debentureholders to receive payments of principal of and premium, if any, and
interest on, the Debentures and the other rights, duties and obligations of
Debentureholders, as beneficiaries hereof with respect to the amounts, if any,
so deposited with the Trustee and (iii) the rights, obligations and immunities
of the Trustee hereunder), and the Trustee, on demand of the Company accompanied
by an Officers' Certificate and an Opinion of Counsel as required by Section
16.5 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Debentures.
Section 12.2 DEPOSITED MONIES TO BE HELD IN TRUST BY TRUSTEE.
Subject to Section 12.4, all monies deposited with the Trustee pursuant to
Section 12.1 and not in violation of Article IV shall be held in trust for the
sole benefit of the
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Debentureholders and not to be subject to the subordination provisions of
Article IV, and such monies shall be applied by the Trustee to the payment,
either directly or through any Paying Agent (including the Company if acting as
its own Paying Agent), to the holders of the particular Debentures for the
payment or redemption of which such monies have been deposited with the Trustee,
of all sums due and to become due thereon for principal and interest and
premium, if any.
Section 12.3 PAYING AGENT TO REPAY MONIES HELD. Upon the
satisfaction and discharge of this Indenture, all monies then held by any Paying
Agent (other than the Trustee) shall, upon written request of the Company, be
repaid to the Company or paid to the Trustee, and thereupon such Paying Agent
shall be released from all further liability with respect to such monies.
Section 12.4 RETURN OF UNCLAIMED MONIES. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Debentures and not applied
but remaining unclaimed by the holders of Debentures for two years after the
date upon which the principal of, premium, if any, or interest on such
Debentures, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on demand and all liability of the Trustee
shall thereupon cease with respect to such monies; and the holder of any of the
Debentures shall thereafter look only to the Company for any payment which such
holder may be entitled to collect unless an applicable abandoned property law
designates another Person.
Section 12.5 REINSTATEMENT. If the Trustee or the Paying Agent is
unable to apply any money in accordance with Section 12.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.1 until such time as the Trustee or
the Paying Agent is permitted to apply all such money in accordance with Section
12.2; PROVIDED, HOWEVER, that if the Company makes any payment of interest on or
principal of any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Debentures to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS.
No recourse for the payment of the principal of or premium, if any, or interest
on any Debenture, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any
Debenture, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee, agent, officer, or
director or subsidiary, as such, past, present or future, of the Company or of
any successor corporation, either directly or through the Company or any
successor corporations, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Debentures.
CONVERSION OF DEBENTURES
Section 14.1 RIGHT TO CONVERT. Subject to and upon compliance with
the provisions of this Indenture, the holder of any Debenture shall have the
right, at such Holder's option, at any time prior to the close of business on
May 1, 2006 (except that, with respect to any Debenture or portion of a
Debenture which shall be called for redemption, such right shall terminate,
except as provided in Section 14.2 or Section 3.4, at the close of business on
the Business Day next preceding the date fixed for redemption of such Debenture
or portion of a Debenture unless the Company shall default in payment due upon
redemption thereof) to convert the principal amount of any such Debenture, or
any portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and nonassessable shares of Common Stock
(as such shares shall then be constituted) obtained by dividing the principal
amount of the Debenture or portion thereof surrendered for conversion by the
Conversion Price in effect at such time, by surrender of the Debenture so to be
converted in whole or in part, together with any required funds, in the manner
provided in Section 14.2. A holder of Debentures is not entitled to any rights
of a holder of Common Stock until such holder has converted such holder's
Debentures to Common Stock, and only to the extent such Debentures are deemed to
have been converted to Common Stock under this Article XIV.
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Section 14.2 EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON
STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to
exercise the conversion privilege with respect to any Debenture, the holder of
such Debenture shall surrender such Debenture, duly endorsed, at an office or
agency maintained by the Company pursuant to Section 5.2, accompanied by the
funds, if any, required by the penultimate paragraph of this Section 14.2, and
shall give written notice of conversion in the form provided on the Debentures
(or such other notice which is acceptable to the Company) to the office or
agency that the holder elects to convert such Debenture or the portion thereof
specified in said notice. Such notice shall also state the name or names (with
address or addresses) in which the certificate or certificates for shares of
Common Stock which shall be issuable on such conversion shall be issued, and
shall be accompanied by transfer taxes, if required pursuant to Section 14.7.
Each such Debenture surrendered for conversion shall, unless the shares issuable
on conversion are to be issued in the same name as the registration of such
Debenture, be duly endorsed by, or be accompanied by instruments of transfer in
form satisfactory to the Company duly executed by, the holder or his duly
authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Debentureholder (as if such transfer were a transfer of the
Debenture or Debentures (or portion thereof) so converted), the Company shall
issue and shall deliver to such holder at the office or agency maintained by the
Company for such purpose pursuant to Section 5.2, a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Debenture or portion thereof in accordance with the provisions of this
Article XIV and a check or cash in respect of any fractional interest in respect
of a share of Common Stock arising upon such conversion, as provided in Section
14.3. In case any Debenture of a denomination greater than $1,000 shall be
surrendered for partial conversion, and subject to Section 2.3, the Company
shall execute and the Trustee shall authenticate and deliver to the holder of
the Debenture so surrendered, without charge to him, a new Debenture or
Debentures in authorized denominations in an aggregated principal amount equal
to the unconverted portion of the surrendered Debenture.
Each conversion shall be deemed to have been effected as to any such
Debenture (or portion thereof) on the date on which the requirements set forth
above in this Section 14.2 have been satisfied as to such Debenture (or portion
thereof), and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the
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shares represented thereby; PROVIDED, HOWEVER, that any such surrender on any
date when the stock transfer books of the Company shall be closed shall
constitute the person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such Debenture shall be surrendered.
Any Debenture or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date to the close of business on the Business Day next preceding the following
interest payment date shall (unless such Debenture or portion thereof being
converted shall have been called for redemption during the period from the close
of business on such record date to the close of business on the Business Day
next preceding the following interest payment date) be accompanied by payment,
in New York Clearing House funds or other funds acceptable to the Company, of an
amount equal to the interest payable on such interest payment date on the
principal amount being converted; PROVIDED, HOWEVER, that no such payment need
be made if there shall exist at the time of conversion a default in the payment
of interest on the Debentures. Except as provided above in this Section 14.2,
no adjustment shall be made for interest accrued on any Debenture converted or
for dividends on any shares issued upon the conversion of such Debenture as
provided in this Article XIV.
Section 14.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Debentures. If more than one Debenture shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion shall be computed on the basis of
the aggregate principal amount of the Debentures (or specified portions thereof
to the extent permitted hereby) so surrendered. If any fractional share of
stock would be issuable upon the conversion of any Debenture or Debentures, the
Company shall make an adjustment and payment therefor in cash at the current
market value thereof to the holder of Debentures. The current market value of a
share of Common Stock shall be the Closing Price on the first Trading Day
immediately preceding the day on which the Debentures (or specified portions
thereof) are deemed to have been converted.
Section 14.4 CONVERSION PRICE. The conversion price shall be as
specified in the form of Debenture (herein called the "CONVERSION PRICE")
attached as Exhibit A hereto, subject to adjustment as provided in this Article
XIV.
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Section 14.5 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company. If any dividend or distribution of the type described in
this Section 14.5(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for
a period expiring within 45 days after the date fixed for
determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price (as defined below)
on the date fixed for determination of stockholders entitled to
receive such rights or warrants, no adjustment need be made to the
Conversion Price if the holders of the Debentures are to participate
in such issuance of rights or warrants on a basis and with notice that
the Board of Directors determines to be fair and appropriate in light
of the basis and notice on which holders of Common Stock participate
in such issuance of rights or warrants; PROVIDED that no Holder shall
be required to convert such Holder's Debenture. In the event that
such Board of Directors determination is not made, the Conversion
Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior to the date fixed for determination of stockholders entitled to
receive such rights or warrants by a fraction of which the numerator
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shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for determination of stockholders
entitled to receive such rights and warrants plus the number of shares
which the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding
on the date fixed for determination of stockholders entitled to
receive such rights and warrants plus the total number of additional
shares of Common Stock offered for subscription or purchase. Such
adjustments shall be successively made whenever any such rights and
warrants are issued, and shall become effective immediately after the
opening of business on the day following the date fixed for
determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered
after the expiration of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. In the event that such
rights or warrants are not so issued, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect
if such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares
of Common Stock, there shall be taken into account any consideration
received by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after
the opening of
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business on the day following the day upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or
distributions to which Section 14.5(a) applies) or evidences of its
indebtedness or assets (including securities, but excluding any rights
or warrants referred to in Section 14.5(b), and excluding any dividend
or distribution paid exclusively in cash (any of the foregoing
hereinafter in this Section 14.5(d) called the "SECURITIES")), then,
in each such case (unless (i) the Company elects to reserve such
Securities for distribution to the Debentureholders upon the
conversion of the Debentures so that any such holder converting
Debentures will receive upon such conversion, in addition to the
shares of Common Stock to which such holder is entitled, the amount
and kind of such Securities which such holder would have received if
such holder had converted its Debentures into Common Stock immediately
prior to the Record Date (as defined in Section 14.5(g) for such
distribution of the Securities) or (ii) the Holders are entitled to
participate in such distribution on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in
such distribution), the Conversion Price shall be reduced so that the
same shall be equal to the price determined by multiplying the
Conversion Price in effect on the Record Date with respect to such
distribution by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on such Record Date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of
the Board of Directors) on the Record Date of the portion of the
Securities so distributed applicable to one share of Common Stock and
the denominator shall be the Current Market Price per share of the
Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following such Record Date;
PROVIDED, HOWEVER, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable
to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion the
amount of Securities such
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holder would have received had such holder converted each Debenture on
the Record Date. In the event that such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if such dividend
or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of
this Section 14.5(d) by reference to the actual or when issued trading
market for any securities, it must in doing so consider the prices in
such market over the same period used in computing the Current Market
Price of the Common Stock.
In the event the Company implements a stockholder rights plan, such
rights plan shall provide that upon conversion of the Debentures the Holders
will receive, in addition to the Common Stock issuable upon such conversion, the
rights issued under such rights plan (notwithstanding the occurrence of an event
causing such rights to separate from the Common Stock at or prior to the time of
conversion).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("TRIGGER EVENT"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 14.5 (and no adjustment to the Conversion Price under
this Section 14.5 will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Price shall be made under this Section 14.5(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 14.5 was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exer-
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cise by any holders thereof, the Conversion Price shall be readjusted upon such
final redemption or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal to the
per share redemption or repurchase price received by a holder or holders of
Common Stock with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 14.5(d) and Sections 14.5(a) and (b), any
dividend or distribution to which this Section 14.5(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both) referred to in Section 14.5(b), shall
be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets or shares of capital stock other than such shares of Common
Stock or rights or warrants (and any Conversion Price reduction required by this
Section 14.5(d) with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution of such shares of
Common Stock or such rights or warrants (and any further Conversion Price
reduction required by Sections 14.5(a) and (b) with respect to such dividend or
distribution shall then be made), except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution" and "the
date fixed for such determination" within the meaning of Sections 14.5(a) and
(b) and (B) any shares of Common Stock included in such dividend or distribution
shall not be deemed "outstanding at the close of business on the date fixed for
such determination" within the meaning of Section 14.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (x) any
cash dividend or other cash distribution on the Common Stock paid
during any 12-month period which when combined with (A) all such all-
cash distributions made within such 12-month period in respect of
which no adjustment has been made plus (B) any cash and the fair
market value of other consideration payable in respect of any tender
offers by the Company or any of its subsidiaries for Common Stock
concluded within such 12-month period in respect of which no
adjustment has been made, does not exceed 15% of the Company's market
capitalization (being the product of the Current Market Price of the
Common Stock times the number of shares of Common Stock then
outstanding) on the record date for such dividend or
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distribution, and (y) any dividend or distribution in connection with
the liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary), then, in such case, (unless the Company
elects to make adequate provision so that each Debentureholder shall
have the right to receive upon conversion the amount of cash such
holder would have received had such holder converted such Debenture on
the Record Date) the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the
Record Date for such distribution by a fraction of which the numerator
shall be the Current Market Price of the Common Stock on the Record
Date less the amount of cash so distributed (and not excluded as
provided above) applicable to one share of Common Stock and the
denominator shall be such Current Market Price of the Common Stock,
such reduction to be effective immediately prior to the opening of
business on the day following the Record Date; PROVIDED, HOWEVER, that
in the event the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market
Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each
Debentureholder shall have the right to receive upon conversion the
amount of cash such holder would have received had such holder
converted each Debenture on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be
in effect if such dividend or distribution had not been declared.
(f) In case a tender or exchange offer made by the Company or
any Subsidiary of the Company for all or any portion of the Common
Stock shall expire and such tender or exchange offer (as amended upon
the expiration thereof) shall require the payment to stockholders of
consideration per share of Common Stock having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "EXPIRATION TIME") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it may be
amended) that exceeds the Current Market Price of the Common Stock on
the Trading Day next succeeding the Expiration Time, the Conversion
Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior to the Expiration Time by a fraction of which the numerator
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shall be the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) on the Expiration Time multiplied by
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of
(x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to shareholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "PURCHASED SHARES") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) on the Expiration Time and the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration
Time, such reduction to become effective as of immediately prior to
the opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares pursuant to
any such tender or exchange offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if
such tender or exchange offer had not been made.
(g) For purposes of this Section 14.5, the following terms shall
have the meaning indicated:
(1) "CLOSING PRICE" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in the case no
such sale takes place on such day, the average of the reported closing bid and
asked prices, regular way, in each case on the New York Stock Exchange, or, if
such security is not listed or admitted to trading on such Exchange, on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
average of the closing bid and asked prices of such security on the over-the-
counter market on the day in question as reported by the National Quotation
Bureau Incorporated, or a similar generally accepted reporting service, or if
not so available, in such manner as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors for that
purpose, or a price determined in good faith by the Board of Directors or, to
the extent permitted by applicable law, a duly authorized committee thereof,
whose determination shall be conclusive.
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(2) "CURRENT MARKET PRICE" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question; PROVIDED, HOWEVER, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 14.5(a), (b), (c), (d), (e) or (f) occurs
during such ten consecutive Trading Days, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price is so
required to be adjusted as a result of such other event, (2) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 14.5(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for
the issuance or distribution requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and after the "ex" date for
such other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors or, to the extent
permitted by applicable law, a duly authorized committee thereof in a manner
consistent with any determination of such value for purposes of Section 14.5(d)
or (f), whose determination shall be conclusive and described in a resolution of
the Board of Directors or such duly authorized committee thereof, as the case
may be) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation
under Section 14.5(f), the Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing Prices per share of
Common Stock for such day and the next two succeeding Trading Days; PROVIDED,
HOWEVER, that if the "ex" date for any event (other than the tender or exchange
offer requiring such computation) that requires an adjustment to the Conversion
Price pursuant to Section 14.5(a), (b), (c), (d), (e) or (f) occurs on or after
the Expiration Time for the tender or exchange offer requiring such computation
and prior to the day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion Price is
so required to be adjusted as a result of such other event. For purposes of
this paragraph, the term "ex" date, (1) when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades regular
way on the relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or distribution,
(2) when used with respect to any subdivision or combination of shares of Common
Stock, means the
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first date on which the Common Stock trades regular way on such exchange or in
such market after the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or exchange offer means
the first date on which the Common Stock trades regular way on such exchange or
in such market after the Expiration Time of such offer.
(3) "FAIR MARKET VALUE" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "RECORD DATE" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "TRADING DAY" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange or
another national security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may be
made on thereon or (z) if the applicable security is not so listed, admitted for
trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
(h) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 14.5(a), (b), (c),
(d), (e) and (f), as the Board of Directors considers to be advisable
to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time
to time may reduce the Conversion Price by any amount for any period
of time if the period is at least twenty (20) business days, the
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reduction is irrevocable during the period and the Board of Directors
shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the
Debentures a notice of the reduction at least fifteen (15) days prior
to the date the reduced Conversion Price takes effect, and such notice
shall state the reduced Conversion Price and the period during which
it will be in effect.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; PROVIDED, HOWEVER, that any adjustments which
by reason of this Section 14.5(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article XIV shall be made by the Company
and shall be made to the nearest cent or to the nearest one thousandth
of a share, as the case may be. No adjustment need be made for rights
to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest. To the extent the Debentures become
convertible into cash, assets, property or securities (other than
capital stock of the Company), no adjustment need be made thereafter
as to the cash, assets, property or such securities. Interest will
not accrue on the cash.
(j) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Trustee and any Conversion
Agent other than the Trustee an Officers' Certificate setting forth
the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of
such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each Debenture at his last address
appearing on the Debenture register, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality
or validity of any such adjustment.
(k) In any case in which this Section 14.5 provides that an
adjustment shall become effective immediately after a record date for
an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Debenture converted after such record
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date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii)
paying to such holder any amount in cash in lieu of any fraction
pursuant to Section 14.3.
(l) For purposes of this Section 14.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
Section 14.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 14.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Debentures shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Debentures
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock available to convert all such Debentures) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or conveyance
assuming such holder of Common Stock did not exercise such holder's rights of
election, if any, as to the kind or amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
(provided that, if the kind or amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change,
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consolidation, merger, combination, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not have
been exercised ("nonelecting share"), then for the purposes of this Section 14.6
the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance for each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such supplemental indenture shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Debentures, at his address appearing on
the Debenture register provided for in Section 2.5 of this Indenture, within
twenty (20) days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 14.6 applies to any event or occurrence, Section 14.5
shall not apply.
Section 14.7 TAXES ON SHARES ISSUED. The issue of stock certificates
on conversions of Debentures shall be made without charge to the converting
Debentureholder for any tax in respect of the issue thereof. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Debenture converted, and, in such event, the Company shall
not be required to issue or deliver any such stock certificate unless and until
the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax had been paid.
Section 14.8 RESERVATION OF SHARES; SHARES TO BE FULLY PAID;
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS; LISTING OF COMMON STOCK. The Company
shall reserve, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Debentures from time to time as such Debentures are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Debentures, the Company will take all corporate
action which
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may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted
Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures will upon issue be fully paid and non-
assessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Debentures hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
The Company further covenants that if at any time the Common Stock
shall be listed on the New York Stock Exchange or any other national securities
exchange the Company will, if permitted by the rules of such exchange, list and
keep listed so long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Debentures.
Section 14.9 RESPONSIBILITY OF TRUSTEE. The Trustee and any other
Conversion Agent shall not at any time be under any duty or responsibility to
any holder of Debentures to determine whether any facts exist which may require
any adjustment of the Conversion Price, or with respect to the nature or extent
or calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other Conversion Agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Debenture; and the Trustee and
any other Conversion Agent make no representations with respect thereto.
Subject to the provisions of Section 7.1, neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Debenture for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of
the Company contained in this Article. Without limiting the generality of the
foregoing, neither the Trustee nor any Conversion Agent shall be under any
responsibility to calculate or determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 14.6
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Debentureholders upon the conversion of
their Debentures after any event referred to in such Section 14.6 or to
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any adjustment to be made with respect thereto, but, subject to the provisions
of Section 7.1, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.
Section 14.10 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In case:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Price pursuant to Section 14.5; or
(2) the Company shall authorize the granting to all or
substantially all the holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any other rights or
warrants; or
(3) of any reclassification or reorganization of the Common
Stock of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Debentures, as promptly as possible but in any event at least fifteen
(15) days prior to the applicable date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, or rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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ARTICLE XV
REPURCHASE OF DEBENTURES AT THE
OPTION OF THE HOLDER UPON CHANGE IN CONTROL
Section 15.1 RIGHT TO REQUIRE REPURCHASE. In the event that a Change
in Control (as hereinafter defined) shall occur, then each Holder shall have the
right, at the Holder's option, to require the Company to repurchase, and upon
the exercise of such right the Company shall repurchase, all of such holder's
Debentures, or any portion of the principal amount thereof that is an integral
multiple of $1,000 (provided that no single Debenture may be repurchased in part
unless the portion of the principal amount of such Debenture to be outstanding
after such repurchase is equal to $1,000 or an integral multiple of $1,000), on
the date (the "REPURCHASE DATE") that is 30 days after the date of the Company
Notice (as defined in Section 15.2) for cash at a purchase price equal to 100%
of the principal amount (the "REPURCHASE PRICE"), plus interest accrued and
unpaid to, but excluding, the Repurchase Date; PROVIDED that if the Repurchase
Date is May 1 or November 1, then the interest payable on such date shall be
paid to the holder of record of the Debenture on the next preceding April 15 or
October 15, respectively. Whenever in this Indenture there is a reference, in
any context, to the principal of any Debenture as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Debenture to the extent that such Repurchase Price is, was or would be
so payable at such time, and express mention of the Repurchase Price in any
provision of this Indenture shall not be construed as excluding the Repurchase
Price in those provisions of this Indenture when such express mention is not
made.
Section 15.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT, ETC.
(a) Unless the Company shall have theretofore called for
redemption all of the outstanding Debentures pursuant to Article III,
on or before the 30th day after the occurrence of a Change in Control,
the Company or, at the written request of the Company on or before the
15th day after such occurrence, the Trustee shall give to all holders
of Debentures notice (the "COMPANY NOTICE") of the occurrence of the
Change in Control and of the repurchase right set forth herein arising
as a result thereof. The Company shall also deliver a copy of such
notice of a repurchase right to the Trustee.
Each Company Notice shall state:
(i) the Repurchase Date,
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(ii) the date by which the repurchase right must be exercised,
(iii) the Repurchase Price,
(iv) a description of the procedure which a holder must follow
to exercise a repurchase right,
(v) that on the Repurchase Date the Repurchase Price will
become due and payable upon each such note designated by the holder to
be repurchased, and that interest thereon shall cease to accrue on and
after said date,
(vi) the Conversion Price, the date on which the right to
convert the Debentures to be repurchased will terminate and the places
where such Debentures may be surrendered for conversion, and
(vii) the place or places where such Debentures are to be
surrendered for payment of the Repurchase Price and accrued interest,
if any.
No failure of the Company to give the foregoing notices or defect
therein shall limit any holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Debentures.
If any of the foregoing provisions or other provisions of this Article
are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to
the Trustee or any Paying Agent on or before the 30th day after the
date of the Company Notice (i) written notice of the holder's exercise
of such right, which notice shall set forth the name of the holder,
the principal amount of the Debentures to be repurchased (and, if any
Debenture is to be repurchased in part, the serial number thereof, the
portion of the principal amount thereof to be repurchased and the name
of the Person in which the portion thereof to remain outstanding after
such repurchase is to be registered) and a statement that an election
to exercise the repurchase right is being made thereby, and (ii) the
Debentures with respect to which the repurchase is being exercised.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be
paid to the Trustee or
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the Paying Agent the Repurchase Price in cash, together with accrued
and unpaid interest to, but excluding, the Repurchase Date payable
with respect to the Debentures as to which the purchase right has been
exercised. On the Repurchase Date and upon deposit of the Repurchase
Price in cash with the Trustee or Paying Agent, the Trustee or Paying
Agent will make payment to the Debentureholder on the Repurchase Date
in the manner specified pursuant to Section 15.2.
(d) If any Debenture (or portion thereof) is surrendered for
repurchase to be paid on the Repurchase Date, the principal amount of
such Debenture (or portion thereof, as the case may be) shall, until
paid, bear interest from the Repurchase Date at the rate borne by the
Debentures, and each Debenture shall remain convertible into Common
Stock until the principal of such Debenture (or portion thereof, as
the case may be) shall have been paid or duly provided for.
(e) Any Debenture which is to be repurchased only in part shall
be surrendered to the Trustee (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the
holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee authenticate and deliver to the
holder of such Debenture without service charge, a new Debenture or
Debentures, containing identical terms and conditions, each in an
authorized denomination in aggregate principal amount equal to and in
exchange for the portion of the principal of the Debenture so
surrendered that was not repurchased.
(f) Any holder that has delivered to the Trustee its written
notice exercising its right to require the Company to repurchase its
Debentures upon a Change in Control shall have the right to withdraw
such notice at any time prior to the close of business on the
Repurchase Date by delivery of a written notice of withdrawal to the
Trustee prior to the close of business on such date. A Debenture in
respect of which a holder is exercising its option to require
repurchase upon a Change in Control may be converted into Common Stock
in accordance with Article XV only if such holder withdraws its notice
in accordance with the preceding sentence.
Section 15.3 CERTAIN DEFINITIONS. For purposes of this Article XV
only,
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(1) the term "BENEFICIAL OWNER" shall be determined in
accordance with Rule 13d-3 promulgated by the Commission pursuant to the
Exchange Act; and
(2) the term "PERSON" shall include any syndicate or group which
would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
Section 15.4 CHANGE IN CONTROL. A "CHANGE IN CONTROL" shall be
deemed to have occurred at such time after the original issuance of the
Debentures as:
(1) there is a report filed by any Person, other than the
Company, any Subsidiary of the Company, or any employee benefit plan of the
Company or any such Subsidiary, on Schedule 13D or 14D-1 pursuant to the
Exchange Act, disclosing that such Person has become the Beneficial Owner,
directly or indirectly, through a purchase or other acquisition transaction or
series of transactions (other than a merger or consolidation involving the
Company), of shares of capital stock of the Company which entitle such Person to
exercise in excess of 50% of the total voting power of all shares of capital
stock of the Company entitled to vote generally in the election of directors; or
(2) there occurs any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company, or any sale or transfer of all or substantially all of the assets
of the Company to another Person (other than (i) any such transaction pursuant
to which the holders of the Common Stock immediately prior to such transaction
have, directly or indirectly, shares of capital stock of the continuing or
surviving corporation immediately after such transaction which entitle such
holders to exercise in excess of 50% of the total voting power of all shares of
capital stock of the continuing or surviving corporation entitled to vote
generally in the election of directors and (ii) any merger (1) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or (2) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of common stock).
Section 15.5 CONSOLIDATION, MERGER, ETC. In the case of any
reclassification, change, consolidation, merger, combination, sale or conveyance
to which Section 14.6 applies, in which the Common Stock of the Company is
changed or exchanged as a result into the right to receive shares of stock and
other securities or property or assets (including cash) which includes shares of
Common Stock of the Company or common stock of another Person that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an
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established automated over-the-counter trading market in the United States and
such shares constitute at the time such change or exchange becomes effective in
excess of 50% of the aggregate fair market value of such shares of stock and
other securities, property and assets (including cash) (as determined by the
Company, which determination shall be conclusive and binding), then the Person
formed by such consolidation or resulting from such merger or combination or
which acquires the properties or assets (including cash) of the Company, as the
case may be, shall execute and deliver to the Trustee a supplemental indenture
(which shall comply with the Trust Indenture Act as in force at the date of
execution of such supplemental indenture) modifying the provisions of this
Indenture relating to the right of holders of the Debentures to cause the
company to repurchase the Debentures following a Change in Control, including
without limitation the applicable provisions of this Article XV and the
definitions of the Common Stock and Change in Control, as appropriate, and such
other related definitions set forth herein as determined in good faith by the
Company (which determination shall be conclusive and binding), to make such
provisions apply to the common stock and the issuer thereof if different from
the Company and Common Stock of the Company (in lieu of the Company and the
Common Stock of the Company).
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 SUCCESSORS. All agreements of the Company in this
Indenture and the Debentures shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 16.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 16.3 NOTICES. Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail, postage prepaid, addressed as
follows:
if to the Company:
ALZA Corporation
950 Page Mill Road
P.O. Box 10950
Palo Alto, California 94303-0802
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Attention: Vice President and General Counsel
if to the Trustee:
The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center, 3rd Floor
Brooklyn, New York 11245
Attention: Institutional Trust Group
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Debentureholder shall be
mailed to such Holder by first class mail, postage prepaid, at his address as it
appears on the Debenture register and shall be sufficiently given to such Holder
if so mailed with the time prescribed.
Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 16.4 GOVERNING LAW. This Indenture and the Debentures shall
be governed by and construed in accordance with the laws of the state of New
York, as applied to contracts made and performed within the state of New York,
without regard to principles of conflict of laws.
Section 16.5 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 16.6 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
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(1) a statement that each person making such Officers'
Certificate or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement that, in the opinion of such person, such
covenant or condition has been complied with.
Section 16.7 LEGAL HOLIDAYS. A "Legal Holiday" is any day other than
a Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and to the extent applicable no interest, if any, shall accrue
for the intervening period.
Section 16.8 TRUST INDENTURE ACT CONTROLS. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in an indenture qualified under the Trust Indenture Act, such
required provision shall control.
Section 16.9 NO SECURITY INTEREST CREATED. Nothing in this Indenture
or in the Debentures, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its subsidiaries is located.
Section 16.10 BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Debentures, expressed or implied, shall give to any Person, other than the
parties hereto, any Paying Agent, any authenticating agent, any Debenture
registrar and their successors hereunder, the holders of Debentures and the
holders of Senior Indebtedness, any benefit or any legal for equitable right,
remedy or claim under this Indenture.
Section 16.11 TABLE OF CONTENTS, HEADINGS, ETC. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
74
<PAGE>
Section 16.12 AUTHENTICATING AGENT. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authenticating and delivery of Debentures in connection
with the original issuance thereof and transfers and exchanges of Debentures
hereunder, including under Sections 2.2, 2.6, 2.7, 2.9, 3.3, 14.2 and 15.2, as
fully to all intents and purposes as though the authenticating agent had been
expressly authorized by this Indenture and those Sections to authenticate and
deliver Debentures. For all purposes of this Indenture, the authentication and
delivery of Debentures by the authenticating agent shall be deemed to be
authentication and delivery of such Debentures "by the Trustee" and a
certificate of authentication executed on behalf of the Trustee by an
authenticating agent shall be deemed to satisfy any requirement hereunder or in
the Debentures for the Trustee's certificate of authentication. Such
authenticating agent shall at all times be a person eligible to serve as trustee
hereunder pursuant to Section 7.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticated agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 16.12, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture, and upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Debentures as the names and
addresses of such holders appear on the Debenture register.
The Trustee agrees to pay to the authenticating agent from time to
time reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 7.6.
75
<PAGE>
The provisions of Sections 7.2, 7.3, 7.4, 8.3 and this Section 16.12
shall be applicable to any authenticating agent.
Section 16.13 SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Debentures shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 16.14 RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of
the Debentureholders. The Registrar, Conversion Agent and the Paying Agent may
make reasonable rules for their functions.
Section 16.5 NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Debentures or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Debenture, each Debentureholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Debentures.
Section 16.16 EXECUTION IN COUNTERPARTS. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
The Chase Manhattan Bank, N.A. hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
76
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly signed, all as of the date first written above.
ALZA CORPORATION
By: /S/ Bruce C. Cozadd
Name: Bruce C. Cozadd
Title: VP & CFO
Attest: /s/ Carol Gamble
Title: Vice President and Associate General Counsel
THE CHASE MANHATTAN BANK, N.A.
not in its individual capacity
but solely as Trustee
By: /s/ Cathleen M. Sokolowski
Name: Cathleen M. Sokolowski
Title: Vice President
Attest: /S/ Tim Burke
Title: Second Vice President
<PAGE>
EXHIBIT A
ALZA CORPORATION
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
No. __ CUSIP 022 615ADO
ALZA Corporation, a corporation duly organized and validly existing
under the laws of the State of Delaware (herein called the "Company"), which
term includes any successor corporation under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to
_____________________ or registered assigns, the principal sum of __________
($__________) on May 1, 2006, at the office or agency of the Company maintained
for that purpose in The City of New York, or, at the option of the holder of
this Debenture, at the Corporate Trust Office, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay interest, semi-annually on May 1
and November 1 of each year, commencing November 1, 1996, on said principal sum
at said office or agency, in like coin or currency, at the rate per annum of 5%,
from May 1 or November 1, as the case may be, next preceding the date of this
Debenture to which interest has been paid or duly provided for, unless the date
hereof is a date to which interest has been paid or duly provided for, in which
case from the date of this Debenture, or unless no interest has been paid or
duly provided for on the Debentures, in which case from April 29, 1996, until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any April 15 or
October 15, as the case may be, and before the following May 1 or November 1,
this Debenture shall bear interest from such May 1 or November 1; PROVIDED,
HOWEVER, that if the Company shall default in the payment of interest due on
such May 1 or November 1, then this Debenture shall bear interest from the next
preceding May 1 or November 1 to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for on such Debenture,
from April 29, 1996. The interest payable on the Debenture pursuant to the
Indenture on any May 1 or November 1 will be paid to the person in whose name
this Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the record date, which shall be the April 15 or October 15
(whether or not a Business Day) next preceding such May 1 or November 1, as
provided in the Indenture; PROVIDED that any such interest not punctually paid
or duly provided for shall be payable as provided in the Indenture. Interest
may, at the
<PAGE>
option of the Company, be paid by check mailed to the registered address of such
person.
Reference is made to the further provisions of this Debenture set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium, if any, and interest on
the Debentures to the prior payment in full of all Senior Indebtedness, as
defined in the Indenture, and provisions giving the holder of this Debenture the
right to convert this Debenture into Common Stock of the Company on the terms
and subject to the limitations referred to on the reverse hereof and as more
fully specified in the Indenture. Such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Debenture shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be construed in accordance
with and governed by the laws of said State.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee or a duly authorized authenticating agent under the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal.
Dated: ALZA CORPORATION
By:
-----------------------------
[SEAL] Attest:
-------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in
the within-named Indenture.
THE CHASE MANHATTAN BANK, N.A., not in its individual
capacity but solely as Trustee
By:
------------------------------
Authorized Signatory
By:
------------------------------
As Authenticating Agent
(if different from Trustee)
<PAGE>
[FORM OF REVERSE OF DEBENTURE]
ALZA CORPORATION
5% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
This Debenture is one of a duly authorized issue of Debentures of the
Company, designated as its 5% Convertible Subordinated Debentures due 2006 (the
"Debentures"), issued pursuant to an indenture, dated as of April 23, 1996 (the
"Indenture"), between the Company and The Chase Manhattan Bank, N.A., not in its
individual capacity but solely as trustee (the "Trustee"). Reference is hereby
made to the Indenture for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all
Debentures may be declared, and upon said declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, evidenced
as in the Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in any manner the
rights of the holders of the Debentures; PROVIDED, HOWEVER, that no such
supplemental indenture shall (i) extend the fixed maturity of any Debenture, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption thereof, or impair the right of any Debentureholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Debenture, or modify the provisions of the Indenture with
respect to the subordination of the Debentures in a manner adverse to the
Debentureholders in any material respect, or change the obligation of the
Company to repurchase any Debenture upon the occurrence of a Change in Control
in a manner adverse to the holder of the Debentures, or impair the right to
convert the Debentures into Common Stock subject to the terms set forth in the
Indenture without the consent of the holder of each Debenture so affected or
(ii) reduce the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders
<PAGE>
of all Debentures then outstanding. It is also provided in the Indenture that
the holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may on behalf of the holders of all of the Debentures waive any
past default or Event of Default under the Indenture and its consequences except
a default in the payment of interest or any premium on or the principal of any
of the Debentures, a default in the payment of redemption price pursuant to
Article III or repurchase price pursuant to Article XV or a failure by the
Company to convert any Debentures into Common Stock of the Company. Any such
consent or waiver by the holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Debenture and any Debentures which may be
issued in exchange or substitute hereof, irrespective of whether or not any
notation thereof is made upon this Debenture or such other Debentures.
The indebtedness evidenced by the Debentures is, to the extent and in
the manner provided in the Indenture, expressly subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company, as defined in the Indenture, whether outstanding at the date of the
Indenture or thereafter incurred, and this Debenture is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Debenture, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Debenture at the place, at the respective times, at
the rate and in the coin or currency herein prescribed.
Interest on the Debentures shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
exchange of Debentures, Debentures may be exchanged for a like aggregate
principal amount of Debentures of other authorized denominations.
<PAGE>
The Debentures will not be redeemable at the option of the Company
prior to May 1, 1999. At any time on or after May 1, 1999, and prior to
maturity the Debentures may be redeemed at the option of the Company as a whole,
or from time to time in part, upon mailing a notice of such redemption not less
than 30 nor more than 60 days before the date fixed for redemption to the
holders of Debentures at their last registered addresses, all as provided in the
Indenture, at the following optional redemption prices (expressed as percentages
of the principal amount), together in each case with accrued interest to, but
excluding, the date fixed for redemption.
If redeemed during the 12-month period beginning May 1:
Redemption
Year Price
---- -----
1999 . . . . . . . . . . . . . . . . . 102.857%
2000 . . . . . . . . . . . . . . . . . 102.143%
2001 . . . . . . . . . . . . . . . . . 101.429%
2002 . . . . . . . . . . . . . . . . . 100.714%
2003 and thereafter. . . . . . . . . . 100.000%
provided that any semi-annual payment of interest becoming due on the date fixed
for redemption shall be payable to the holders of record on the relevant record
date of the Debentures being redeemed; provided, that ALZA may not redeem the
Debentures prior to May 1, 2000, unless the average of the Closing Prices of the
Common Stock, (proportionately adjusted to give effect to any (i) dividend or
distribution on Common Stock in shares of Common Stock, (ii) subdivision of
outstanding shares of Common Stock into a greater number of shares of Common
stock or (iii) combinations of outstanding shares of Common Stock into a smaller
number of shares of Common Stock occurring during the period for which such
average is being computed) for all of the Trading Days during a period of 30
consecutive calendar days ending not more than 10 days prior to ALZA's notice to
the Trustee of such redemption, equals or exceeds 150% of the Conversion Price
then in effect.
The Debentures are not subject to redemption through the operation of
any sinking fund.
If a Change in Control (as defined in the Indenture) occurs, the
holder of this Debenture shall have the right, in accordance with the provisions
of the Indenture, to require the Company to repurchase this Debenture or any
portion of the principal amount hereof that is an integral multiple of $1,000
for cash at a Repurchase Price equal to 100% of the principal amount plus
accrued and unpaid interest to, but excluding, the Repurchase Date; PROVIDED
that if such Repurchase Date is May 1 or November 1, then the interest payable
on such date shall be
<PAGE>
paid to the holder of record of the Debenture on the next preceding April 15 or
October 15, respectively. Unless the Company shall have theretofore called for
redemption all of the outstanding Debentures pursuant to Article III of the
Indenture, on or before the 30th day after the occurrence of a Change in
Control, the Company or, at the written request of the Company on or before the
15th day after such occurrence, the Trustee shall give to all holders of
Debentures notice of the occurrence of the Change in Control and of the
repurchase right set forth in the Indenture arising as a result thereof.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time prior to the close of business on May 1, 2006,
or, as to all or any portion hereof called for redemption, prior to the close of
business on the Business Day immediately preceding the date fixed for redemption
(unless the Company shall default in payment due upon redemption thereof), to
convert the principal hereof or any portion of such principal which is $1,000 or
an integral multiple thereof, into that number of shares of Company's Common
Stock, as said shares shall be constituted at the date of conversion, obtained
by dividing the principal amount of this Debenture or portion thereof to be
converted by the Conversion Price of $38.19 or such Conversion Price as adjusted
from time to time as provided in the Indenture, upon surrender of this
Debenture, together with a conversion notice as provided in the Indenture, to
the Company at the office or agency of the Company maintained for that purpose
in The City of New York, or at the option of such holder, the Corporate Trust
Office, and, unless the shares issuable on conversion are to be issued in the
same name as this Debenture, duly endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by
his duly authorized attorney. No adjustment in respect of interest or dividends
will be made upon any conversion; PROVIDED, HOWEVER, that if this Debenture
shall be surrendered for conversion during the period from the close of business
on any record date for the payment of interest to the close of business on the
Business Day preceding the interest payment date, this Debenture (unless it or
the portion being converted shall have been called for redemption during the
period from the close of business on any record date for the payment of interest
to the close of business on the Business Day preceding the interest payment
date) must be accompanied by an amount, in New York Clearing House funds or
other funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted. No fractional
shares will be issued upon any conversion, but an adjustment in cash will be
made, as provided in the Indenture, in respect of any fraction of a share which
would otherwise be issuable upon the surrender of any Debenture or Debentures
for conversion.
<PAGE>
Any Debentures called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed for redemption,
may be deemed to be purchased from the holder of such Debentures at an amount
equal to the applicable redemption price, together with accrued interest to the
date fixed for redemption, by one or more investment bankers or other purchasers
who may agree with the Company to purchase such Debentures from the holders
thereof and convert them into Common Stock of the Company and to make payment
for such Debentures as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Debenture at
the office or agency of the Company in The City of New York, or at the option of
the holder of this Debenture, at the Corporate Trust Office, a new Debenture or
Debentures of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange thereof, subject to the limitations
provided in the Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any Paying Agent,
any Conversion Agent and any Debenture registrar may deem and treat the
registered holder hereof as the absolute owner of this Debenture (whether or not
this Debenture shall be overdue and notwithstanding any notation of ownership or
other writing hereon), for the purpose of receiving payment hereof, or on
account hereof, for the conversion hereof and for all other purposes, and
neither the Company nor the Trustee nor any other authenticating agent nor any
Paying Agent nor any other Conversion Agent nor any Debenture registrar shall be
affected by any notice to the contrary. All payments made to or upon the order
of such registered holder shall, to the extent of the sum or sums paid, satisfy
and discharge liability for monies payable on this Debenture.
No recourse for the payment of the principal of or any premium or
interest on this Debenture, or for any claim based hereon or otherwise in
respect hereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Debenture, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer or director or subsidiary, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
<PAGE>
Terms used in this Debenture and defined in the Indenture are used
herein as therein defined.
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-- ____ Custodian _____
TEN ENT - as tenants by the (Cust.) (Minor)
entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants
with right of sur- -----------------------------------
vivorship and not (State)
as tenants in com-
mon
Additional abbreviations may also be used
though not in the above list.
<PAGE>
CONVERSION NOTICE
To: ALZA CORPORATION
The undersigned registered owner of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or the portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of ALZA Corporation in accordance with the terms of the Indenture referred
to in this Debenture, and directs that the shares issuable and deliverable upon
such conversion, together with any check in payment for fractional shares and
any Debentures representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Debenture not converted are
to be issued in the name of a person other than the undersigned, the undersigned
will check the appropriate box below and pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the undersigned on account
of interest accompanies this Debenture.
Dated:
---------------
-------------------------------------------------------
-------------------------------------------------------
Signature(s)
Signature(s) must be guaranteed by an eligible
Guarantor Institution (banks, stockbrokers, savings and
loan associations and credit unions) with membership in
an approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to be issued, or
Debentures to be delivered, other than to and in the
name of the registered holder.
-------------------------------------------------------
Signature Guarantee
<PAGE>
Fill in for registration of
shares of Common Stock if
to be issued, and Debentures if
to be delivered, other than
to and in the name of the
registered holder:
- -------------------------
(Name)
- -------------------------
(Street Address)
- -------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all): $
---------
-----------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE>
OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
To: ALZA CORPORATION
The undersigned registered owner of this Debenture hereby irrevocably
acknowledges receipt of a notice from ALZA Corporation (the "Company") as to the
occurrence of a Change in Control with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this Debenture, or
the portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Debenture at the repurchase price, together with accrued interest to, but
excluding, such date, to the registered holder hereof.
Dated:
--------------- --------------------------------------------------
--------------------------------------------------
Signature(s)
NOTICE: The above signatures of the holder(s)
hereof must correspond with the name as written
upon the face of the Debenture in every particular
without alteration or enlargement or any change
whatever.
Principal amount to be repurchased (if less than
all):
$
--------
--------------------------------------------------
Social Security or Other Taxpayer
Identification Number
<PAGE>
ALZA CORPORATION
March 31, 1996
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Primary
------------------------
Quarter Ended March 31,
1996 1995
--------- ---------
<S> <C> <C>
Common stock 83,611 82,072
$25 warrants - -
$65 warrants - -
5 1/4% zero coupon convertible
subordinated debentures due 2014 - -
Stock options 1,004 317
--------- ---------
Weighted average common and dilutive
common equivalent shares 84,615 82,389
--------- ---------
--------- ---------
Net income $ 20,383 $ 17,037
--------- ---------
--------- ---------
Net income per common and common equivalent share $ .24 $ .21
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
Fully Diluted
--------------------------
Quarter Ended March 31,
1996 1995
--------- ---------
<S> <C> <C>
Common stock 83,611 82,072
$25 warrants - -
$65 warrants - -
5 1/4% zero coupon convertible
subordinated debentures due 2014 - -
Stock options 1,106 317
--------- ---------
Weighted average common and dilutive
common equivalent shares 84,717 82,389
--------- ---------
--------- ---------
Net income $ 20,383 $ 17,037
--------- ---------
Net income per common and common equivalent share $ .24 $ .21
--------- ---------
--------- ---------
</TABLE>
-18-
<PAGE>
Primary and fully diluted earnings per share are based on weighted average
shares of common stock outstanding plus dilutive common equivalent shares. The
5 1/4% zero coupon convertible subordinated debentures due 2014 (issued in July
1994) are considered common stock equivalents; they were antidilutive for the
quarters ended March 31, 1996 and March 31, 1995.
Fully diluted earnings per share are not presented on the face of the
condensed consolidated statement of income (unaudited) since they are not
materially different from primary earnings per share.
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN ITEM 1 OF FORM 10-Q DATED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 114
<SECURITIES> 343
<RECEIVABLES> 109
<ALLOWANCES> 0
<INVENTORY> 38
<CURRENT-ASSETS> 627
<PP&E> 367
<DEPRECIATION> 86
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 65
<BONDS> 368
0
0
<COMMON> 352
<OTHER-SE> 162
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 21
<TOTAL-REVENUES> 97
<CGS> 16
<TOTAL-COSTS> 47
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 33
<INCOME-TAX> 13
<INCOME-CONTINUING> 20
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
