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REGISTRATION NO. 33-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HEALTHSOURCE, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW HAMPSHIRE 02-0387748
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
TWO COLLEGE PARK DRIVE
HOOKSETT, NEW HAMPSHIRE 03106
(603) 268-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
NORMAN C. PAYSON, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEALTHSOURCE, INC.
TWO COLLEGE PARK DRIVE
HOOKSETT, NEW HAMPSHIRE 03106
(603) 268-7000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copy to:
DANIEL N. GREGOIRE, ESQ.
SHEEHAN PHINNEY BASS + GREEN
PROFESSIONAL ASSOCIATION
1000 ELM STREET
MANCHESTER, NH 03105-3701
(603) 668-0300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM
TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: ( )
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: (X)
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: ( )
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Each Maximum Proposed
Class of Offering Maximum Amount of
Securities to Amount to be Price Per Aggregate Registration
be Registered Registered Security Offering Price Fee (1)
- ------------- ---------- -------- -------------- -------
<S> <C> <C> <C> <C>
5% Convertible
Subordinated
Notes Due 2003 $247,250,000 100% $247,250,000 $85,259
Common Stock,
par value $.10 5,264,558 sh (2) -- -- --
per share
</TABLE>
(1) Calculated pursuant to Rule 457(i) under the Securities Act of 1933, as
amended.
(2) Based on a conversion price of $46.965 per share, and is deemed to
include any additional shares of Common Stock that may be issuable upon
conversion of the Notes as a result of the antidilution provisions
thereof. Pursuant to Rule 457(i), no registration fee is required for
these shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
HEALTHSOURCE, INC.
$247,250,000
5% CONVERTIBLE SUBORDINATED NOTES DUE 2003
The 5% Convertible Subordinated Notes Due 2003 (the "Notes") of
Healthsource, Inc., a New Hampshire corporation ("Healthsource" or the
"Company"), and the shares of the Company's Common Stock, par value $.10 per
share (the "Common Stock" and together with the Notes, the "Securities"),
issuable upon conversion thereof, may be offered for sale from time to time for
the account of certain holders of the Securities (the "Selling Holders") as
described under "Selling Holders." The Selling Holders may from time to time
sell the Securities offered hereby directly to other purchasers or through
agents in ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related to
then prevailing market prices or at negotiated prices. See "Plan of
Distribution."
The Notes will mature on March 1, 2003, unless previously redeemed or
converted. Interest on the Notes is payable semi-annually on March 1 and
September 1 of each year commencing September 1, 1996. The Notes bear interest
from March 6, 1996. Holders of the Notes (the "Holders") are entitled through
March 1, 2003, subject to prior redemption, to convert any Notes or portions
thereof into Common Stock at a conversion price of $46.965 per share, subject to
certain adjustments. See "Description of the Notes - Conversion of Notes." The
Notes have been designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market and the Company has applied
to list the Notes for trading on the New York Stock Exchange (the "NYSE"). The
Common Stock is traded on the NYSE under the symbol "HS." On June 3, 1996, the
last reported sale price of the Common Stock on the NYSE was $22 1/2 per share.
The Notes are redeemable, in whole or in part, at the option of the
Company, at any time on or after March 1, 1999, at the declining redemption
prices set forth herein plus accrued interest. In the event of a Change of
Control (as defined herein), each Holder of Notes may require the Company to
repurchase such Holder's Notes in whole or in part at a repurchase price of 101%
of the principal amount thereof plus accrued interest. See "Description of Notes
- - Change of Control."
The Notes represent unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company. In addition, because the Company's
operations are conducted primarily through its operating subsidiaries, including
regulated insurance companies and health maintenance organizations ("HMOs"),
claims of regulators, creditors and holders of indebtedness of such subsidiaries
will have priority with respect to the assets and earnings of such subsidiaries
over the claims of creditors of the Company, including Holders of the Notes.
The Notes were originally issued by the Company on March 6 and 8, 1996
to the Initial Purchasers (as defined herein) and were simultaneousy sold by the
Initial Purchasers in transactions exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed to be "qualified institutional buyers" as defined in Rule
144A under the Securities Act, to certain qualified institutional buyers acting
on behalf of institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act.
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The Company will not receive any of the proceeds from the sale of any
of the Notes or the Common Stock issuable upon conversion thereof offered by the
Selling Holders hereunder.
SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JUNE 4, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock is listed on the
New York Stock Exchange and, in connection with such listing, the Company also
files reports, proxy statements and other information with the NYSE. Such
reports, proxy statements and other information filed by the Company can be
inspected at the offices of the NYSE, 20 Broad Street, New York, NY 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Securities to be
offered and sold by means of this Prospectus. This Prospectus omits certain of
the information contained in the Registration Statement and the exhibits and
schedules thereto in accordance with the rules and regulations of the
Commission. For further information regarding the Company and the Securities
offered hereby, reference is made to the Registration Statement and the exhibits
and schedules filed therewith, which may be inspected without charge at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
copies of which may be obtained from the Commission at prescribed rates.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission by the
Company are incorporated by reference in their entirety in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
3. The Company's Current Reports on Form 8-K dated June 14,
1995, as amended August 4, 1995, January 26, 1996, February
23, 1996, February 27, 1996, March 20, 1996, April 17, 1996
and June 4, 1996.
4. The Company's Proxy Statement for the Annual Meeting to be
held on May 14, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference in this Prospectus and to be a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the request of such person, a copy of
any or all of the documents referred to above, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference herein
or any incorporated document. Requests should be directed to Healthsource, Inc.,
Two College Park Drive, Hooksett, New Hampshire 03106, attention: Chief
Financial Officer, telephone (603) 268-7000.
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SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by the more detailed information and consolidated financial
statements and related notes included in and incorporated by reference in this
Prospectus. In addition to other information in this Prospectus, the factors
set forth under "Risk Factors" below should be considered carefully in
evaluating an investment in the Securities offered hereby.
THE OFFERING
Issuer........................... Healthsource, INC.
Securities Offered............... $247,250,000 of 5% Convertible Subordinated
Notes Due 2003 issued under an indenture
(the "Indenture") between Healthsource and
The Bank of New York, as trustee (the
"Trustee"), and Common Stock issuable upon
conversion thereof.
Interest Payment Dates........... March 1 and September 1 of each year. The
Notes bear interest from March 6, 1996.
Maturity......................... March 1, 2003
Conversion Price................. Convertible into Common Stock, par value
$.10 per share, of the Company at $46.965
per share, subject to adjustment as set
forth herein.
Redemption....................... The Notes are redeemable, in whole or in
part, at the option of the Company, at any
time on or after March 1, 1999, at the
declining redemption prices set forth herein
plus accrued interest.
Change of Control................ In the event of a Change of Control (as
defined herein), Holders of the Notes will
have the right to require that the Company
repurchase the Notes in whole or in part at
a redemption price of 101% of the principal
amount thereof plus accrued interest. See
"Description of the Notes -- Change of
Control."
Ranking......................... The Notes are general unsecured obligations
of the Company and are subordinated in right
to payment to all existing and future Senior
Indebtedness (as defined herein) of the
Company. As of March 31, 1996, the Company
had approximately $10 million of Senior
Indebtedness outstanding. In addition,
because the Company's operations are
conducted primarily through its operating
subsidiaries, including regulated insurance
companies and HMOs, claims of holders of
indebtedness of such subsidiaries, as well
as claims of regulators and creditors of
such subsidiaries, have priority with
respect to the assets and earnings of such
subsidiaries over the claims of creditors of
the Company, including Holders of the Notes.
As of March 31, 1996, the aggregate
liabilities of such subsidiaries were
approximately $306 million. The Indenture
does not limit the amount of additional
indebtedness which the Company can create,
incur, assume or guarantee, nor does the
Indenture limit the amount of indebtedness
which any subsidiary can create, incur,
assume or guarantee. See "Description of the
Notes -- Subordination."
Use of Proceeds................. The Company will not receive any of the
proceeds from the sale of any of the Notes
or the Common Stock issuable upon conversion
thereof.
Trading......................... The Notes have been designated for trading
in the PORTAL market and the Company has
applied to list the Notes for trading on the
NYSE. The Common Stock issuable upon
conversion of the Notes has been listed for
trading on the NYSE. The Common Stock is
traded on the NYSE under the symbol "HS." On
June 3, 1996, the last reported sale price
of the Common Stock on the NYSE was $22 1/2
per share.
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THE COMPANY
Healthsource, a New Hampshire corporation established in 1985, is a
geographically diversified provider of a broad range of managed healthcare
services. Healthsource is a leading managed care provider with HMOs in North
Carolina, South Carolina, New Hampshire, Massachusetts, Indiana, Maine,
Tennessee, Arkansas, Syracuse, New York, Louisville, Kentucky, Georgia, north
central Texas, southwestern Ohio and Connecticut. In a joint venture with Chubb
Life Insurance Company, Healthsource also operates an HMO in the New York City
and northern New Jersey areas. Healthsource acquired the group health, HMO and
third-party administration ("TPA") business of Provident Life and Accident
Insurance Company of America of Chattanooga, Tennessee ("Provident") in May 1995
(the "Provident Transaction"). The national indemnity insurance and TPA business
acquired from Provident (collectively referred to as "Healthsource Provident")
is concentrated in the Southeast and serves a total of over 2 million members.
In February 1996, the Company completed the acquisition of substantially all of
the HMO assets of Central Massachusetts Health Care, Inc. ("CMHC"), an 83,400
member HMO in Worcester, Massachusetts. As a result of the Provident Transaction
and the membership of CMHC and strong enrollment gains in its existing plans, on
January 1, 1996 Healthsource provided or administered healthcare benefits for
approximately 3.5 million members. Healthsource also offers point of service
("POS") plans, preferred provider organization ("PPO") plans, utilization review
("UR") services, managed workers' compensation services, pharmacy benefit
management services and other managed care consulting and administrative
services to other healthcare payors including Provident and Liberty Mutual
Insurance Company. The Company's principal executive offices are located at Two
College Park Drive, Hooksett, New Hampshire 03106; telephone number (603)
268-7000.
Healthsource seeks to enhance its position as a leader in providing
quality and affordable healthcare in an expanding set of local markets.
Healthsource's business strategy has three components: (i) to expand the number
of geographic markets in which it offers HMOs and other services, (ii) to
increase HMO enrollment in its existing markets by capitalizing on the
historically low HMO penetration rate in most of those markets, emphasizing the
conversion to HMO membership of members currently being served in the Company's
indemnity and self-funded plans (especially those acquired in the Provident
Transaction) and continuing to develop and offer new products for different
segments of the population such as Medicare, and (iii) to continue positioning
its HMOs to be less vulnerable to declining average premiums by linking a large
portion of healthcare costs to premiums through global capitation arrangements
or other suitable arrangements with healthcare providers. When entering new
markets, Healthsource seeks to purchase existing plans or to seek strategic
alliances with local providers to support start-up HMOs thereby lowering the
risk of entry and enhancing the competitive position of such plans. In seeking
to convert existing members to HMO membership, Healthsource continues to
maintain close working relationships with local physicians and hospitals and, in
certain markets, to provide operating and financial support to primary care
practices in order to enhance the access to, and quality and cost effectiveness
of, its managed care products.
As part of its expansion strategy in all markets, Healthsource actively
seeks opportunities to acquire, make significant investments in, or provide
managed care services to HMOs, managed care companies, healthcare financing and
administrative companies, healthcare providers and related businesses. The
Company considers such opportunities in the ordinary course of its business.
RECENT DEVELOPMENTS
On May 31, 1996, the Company entered into an asset purchase agreement
with Chubb Life Insurance Company of America ("Chubb Life") and various of its
affiliates to acquire the remaining 85% interest in ChubbHealth, Inc.
("ChubbHealth"), a 45,000 member HMO operating in the New York City and
northern New Jersey areas. The Company will acquire the stock of ChubbHealth
for an estimated purchase price of $25 million, subject to adjustments. As part
of the transition process, the Company will continue to manage ChubbHealth's
operations and to plan the conversion to Healthsource systems. The Company has
also agreed to provide certain guaranties relating to ChubbHealth's operating
results during the transition period. Chubb Life and various of its affiliates
have agreed to continue to write POS products for the benefit of ChubbHealth
and to provide certain MIS and other services to ChubbHealth during the
transition period. The transaction remains subject to the receipt of
regulatory approvals and there can be no assurance as to when such approvals
will be obtained.
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On April 15, 1996, the Company announced that it had signed a letter of
intent to pay an aggregate consideration of $27 million to acquire Health
Direct, Inc., located in Des Plaines, Illinois, and to enter into a ten-year
globally capitated provider agreement with Advocate Health Care, a leading
eight-hospital health care system in the greater Chicago area, and its
affiliates. Health Direct is a 25,000 member HMO serving the greater Chicago
metropolitan area. The letter of intent is non-binding and subject to completion
of due diligence, the negotiation of definitive stock purchase and provider
agreements and the receipt of regulatory and other approvals. No assurance can
be given that definitive agreements will be reached or that such approvals will
be obtained.
Effective February 1, 1996, the Company acquired substantially all of
the HMO assets of CMHC, a not-for-profit HMO with 83,400 members located in
Worcester, Massachusetts. The Company paid approximately $46.5 million in cash
for such HMO assets, which after post-closing adjustments will have a closing
net worth of approximately $7.2 million (the "CMHC Transaction"). The Company
continues to operate this HMO under the name Healthsource CMHC from the
headquarters in Worcester and provides additional support and integration from
the Company's corporate staff and HMO in New Hampshire.
On January 22, 1996, the Company entered into a definitive agreement to
purchase substantially all of the operating assets of PACC HMO and PACC Health
Plans (jointly "PACC") for a price of approximately $80 million in cash subject
to significant accounting adjustments (the "PACC Transaction"). PACC is a
110,000 member not-for-profit managed care provider serving the greater
Portland, Oregon area. The assets being acquired are required to have a
consolidated net worth at closing of approximately $41 million. Due to the not-
for-profit status of PACC, the transaction is subject to the approval of the
Oregon Attorney General's Office. The transaction is also subject to regulatory
approvals and certain other material closing conditions. Healthsource cannot
predict when or if such approvals will be obtained or such closing conditions
will be satisfied.
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RISK FACTORS
Prospective purchasers of the Securities should carefully consider the
following factors, in addition to other information contained or incorporated by
reference in this Prospectus.
Control and Predictability of Healthcare Costs. The Company's
profitability depends in large part on predicting and maintaining effective
control of the healthcare costs of its HMOs. The future profitability of the
Company's HMOs is dependent upon controlling future healthcare costs in part
through appropriate benefit design, utilization control and negotiation of
favorable provider contracts, including global capitation arrangements with
major hospitals which effectively link healthcare costs for assigned members to
the premiums received for such members. The Company may be unable to predict
accurately or to control healthcare costs because of many factors, including the
inherent unpredictability of rates of utilization of services in any given
period and the volatility of such use particularly in quarterly periods; major
epidemics; undetected increases in costs of units of services (in some cases
implemented by providers without prior notice); changes in risk profile of a
rapidly increasing membership due to pre-existing medical conditions, revised
demographics and other factors; and increased utilization driven by changes in
physician practice patterns and new techniques (i.e., use of bone marrow
transplants for an increasing number of diagnostic categories). There can be no
assurance that the Company will be successful in predicting or mitigating the
effect of any of these factors.
Competition and Premium Pricing. The managed healthcare industry is
highly competitive at both the local HMO level and in the regional and national
employer markets. The principal competitive factors affecting the Company's
products are premium rates and fees, plan design and flexibility, and
physician/hospital network and reputation. The Company competes in all of its
markets with Blue Cross plans, indemnity insurers, HMOs, TPAs, PPOs and other
managed care companies. The Company also faces competition in many of its
markets from hospitals and other provider groups who have organized their own
networks to contract directly with employer groups.
The cost of providing benefits is in many instances the controlling
factor in obtaining and retaining employer groups, and in certain markets some
competitors are underpricing the Company's products. In many historically
under-penetrated markets such as the Carolinas, many new HMOs have been recently
licensed which is reflected in premium pressure for new and renewal business. As
a result of this competition and the writing of significant low option business
with appropriately lower premiums, the Company experienced a 6.5% decline in
average premium yield per member during the first quarter of 1996. The Company
expects that competition for all business (and related premium pressure) may
become even more intense during the remainder of 1996 and beyond and that, as a
result, the Company may not be able to secure adequate premium pricing.
Accounting; MIS and Network Disruption Issues. Reserves for incurred
but not reported claims ("IBNR") are a large component of the Company's medical
claims payable reserve and represent an estimation of unreported claims using
traditional actuarial techniques heavily influenced by historical claims
experience; rapid growth and changing risk profiles could render the Company's
IBNR estimates inaccurate and there can be no assurance as to the ultimate
accuracy of such estimates or that subsequent adjustments will not cause
fluctuations in the Company's operating results. The ability to predict IBNR,
control costs in general and to manage increasingly complicated global
capitation arrangements depends upon the use of sophisticated customized MIS
systems; there can be no assurance that such systems can be developed quickly
enough to effectively manage the increasing complexity of the Company's
contractual arrangements nor that facility or equipment problems will not
disrupt the Company's ability to effectively provide such MIS support. With the
increasing complexity of contractual arrangements comes the potential for
disagreements with major hospital providers over the reimbursement under such
contracts, which disagreements (if not resolved) could disrupt relations with
affiliated physician providers and could potentially affect the perception of
the Company's plans in the affected markets.
Acquisitions and New Products. A significant part of the Company's
business strategy is to diversify into new geographic markets through
acquisitions or start-up plans and to develop new products. Identifying and
pursuing acquisition opportunities, integrating acquired businesses and managing
growth requires a significant
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amount of management time and skill. The Company may be unable to (i) negotiate
acceptable terms with suitable acquisition candidates or ensure that, if
negotiated, such acquisitions will be either approved by all relevant regulatory
authorities or concluded, (ii) assimilate such acquired companies free from
hidden risks undetected at the time of closing or (iii) manage future growth
effectively. Until start-up HMOs reach a critical mass of membership, they
generally produce operating losses (despite capitated provider contracts) and
failure to generate sufficient membership in start-up markets could adversely
affect operating results. The Company is expanding its product offerings, most
notably by developing and seeking a license for Medicare risk products in most
of its markets. The Company will expend approximately $5 million in 1996 in
developing such Medicare products which will still require a substantial
marketing program before the Company generates revenues from such products in
any market; the failure to achieve Medicare membership quickly in various
markets may further impact operating results as such development expenses are
relatively fixed. There can be no assurance that the Company will successfully
mitigate any of the foregoing risks.
Impact of Healthcare Reform. Many federal and state proposals have been
made in the past to reform the healthcare system. The Company anticipates that
federal and state legislatures will continue to assess alternative healthcare
systems and payment methodologies as well as mandated coverages, capitation
limits, underwriting constraints and other measures that could affect the
Company's business. The Company is unable to predict which, if any, of these
healthcare reform proposals may be adopted. While the Company does not believe
it would be materially adversely impacted by most of the proposed reforms,
certain proposals could have such an impact; for example the imposition of a
single-payor system in any state could potentially eliminate the Company's
business in that state. See "Business - Governmental Regulation" in the
Company's Form 10-K.
Governmental Regulation. The Company's HMOs, insurance companies and
certain of its other subsidiaries are licensed by and subject to periodic
examination and extensive regulation by the states in which they operate and by
the federal government. Such state and federal statutes and regulations are
subject to change and such changes could adversely impact the Company's
operations in the future. There can be no assurance that the Company will be
able to obtain any regulatory approvals required to enter new markets or to
offer new products. See "Business - Governmental Regulation" in the Company's
Form 10-K.
Subordination of Notes; Restricted Subsidiaries. The indebtedness
evidenced by the Notes is subordinate to the prior payment in full of all Senior
Indebtedness (as defined herein). As of March 31, 1996, the Company had
approximately $10 million of Senior Indebtedness outstanding. In addition,
because the Company's operations are conducted primarily through its operating
subsidiaries, including regulated insurance companies and HMOs, claims of
holders of indebtedness of such subsidiaries, as well as claims of regulators
and creditors of such subsidiaries, have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including Holders of the Notes. As of March 31, 1996, the aggregate liabilities
of such subsidiaries were approximately $306 million. The Indenture does not
limit the amount of additional indebtedness, including Senior Indebtedness,
which the Company or any of its subsidiaries can create, incur, assume or
guarantee. During the continuance beyond any applicable grace period of any
default in the payment of principal, premium, interest or any other payment due
on the Senior Indebtedness, no payment of principal or interest on the Notes may
be made by the Company. In addition, upon any distribution of assets of the
Company upon any dissolution, winding up, liquidation or reorganization, the
payment of the principal and interest on the Notes is subordinated to the extent
provided in the Indenture to the prior payment in full of all Senior
Indebtedness and structurally subordinated to claims of regulators and creditors
of each HMO and insurance subsidiary. By reason of these subordinations, in the
event of the Company's dissolution, holders of Senior Indebtedness may receive
more, ratably, and Holders of the Notes may receive less, ratably, than the
other creditors of the Company. The Company's cash flow and ability to service
debt, including the Notes, are heavily dependent upon the earnings of its
subsidiaries and the distribution of those earnings to, or upon payments by
those subsidiaries to, the Company. The subsidiaries are in many cases regulated
HMO and insurance companies and the ability to make such distributions or
payments may be substantially limited by, or subject to continuing approval of,
the respective state insurance departments. See "Description of the Notes --
Subordination."
Repurchase of Notes at the Option of Holders Upon a Change of Control;
Availability of Funds. In the event of a Change of Control (as defined herein),
each Holder will have the option to require the Company to
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repurchase all or any part of the Holder's Notes for a purchase price equal to
101% of the principal amount thereof, plus accrued interest to the date of
purchase. If a Change of Control were to occur, there can be no assurance that
the Company would have sufficient funds to pay the Change of Control purchase
price for all Notes tendered by the Holders thereof. See "Subordination of
Notes; Restricted Subsidiaries" above. The Company's ability to pay the Change
of Control purchase price is, and may in the future be, limited by the terms of
the Company's bank credit facility or other agreements relating to borrowings
which constitute Senior Indebtedness.
Absence of Public Market; Possible Volatility of Prices. The Notes have
been designated for trading in the PORTAL market and the Company has applied to
list the Notes for trading on the NYSE; and the Common Stock is traded on the
NYSE. There can be no assurance that an active trading market will develop for
the Notes and, as a result, there can be no assurance as to the liquidity of
investments in the Notes. Also, there can be no assurance as to the price
Holders may realize upon the sale of the Notes and the Common Stock into which
the Notes are convertible. These prices are determined in the marketplace and
may be influenced by many factors, including the depth and liquidity of the
market for the Notes and Common Stock, the market price of the Common Stock,
interest rates, investor perception of the Company, general economic and market
conditions, fluctuations in quarterly earnings, general trends in the
healthcare market, and by regulatory developments especially at the federal
level. Accordingly, the market price of the Notes and Common Stock has been and
in the future may be highly volatile.
9
<PAGE> 12
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
In June 1996, the Company announced that it had signed an asset purchase
agreement with Chubb Life to acquire the remaining 85% interest in ChubbHealth
(the "Chubb Transaction"). The Company will acquire the stock of ChubbHealth
for an estimated purchase price of $25 million, subject to adjustments. The
agreement is subject to regulatory approvals.
In April 1996, the Company announced that it had signed a letter of
intent to pay an aggregate consideration of $27 million to acquire Health
Direct, Inc. The letter of intent is non-binding and subject to completion of
due diligence, the negotiation of definitive stock purchase and provider
agreements and the receipt of regulatory and other approvals.
In February 1996, the Company acquired substantially all of the HMO
assets of CMHC for approximately $46.5 million cash, subject to post-closing
purchase price adjustments. The purchase price was funded with borrowings
under the Chase Facility.
In January 1996, the Company announced that it had signed a definitive
agreement to purchase substantially all of the operating assets of PACC for an
estimated price of $80 million, subject to significant adjustments. The
definitive agreement is subject to regulatory approvals and other conditions.
Effective as of May 1, 1995, the Company acquired the medical services
operations of Provident for $231 million in cash and newly issued preferred
stock. The Company has formed two subsidiaries, Healthsource Provident
Administrators, Inc. and Healthsource Provident Insurance Company to operate the
acquired business.
The following pro forma financial information has been prepared giving
effect to the Provident Transaction, the CMHC Transaction, the pending Chubb
Transaction, the pending Health Direct transaction and the pending PACC
Transaction as if each acquisition had taken place as of January 1, 1995 for the
pro forma consolidated income statements and as if the pending Chubb
Transaction, the pending Health Direct transaction and the pending PACC
Transaction had taken place as of March 31, 1996 for the pro forma condensed
consolidated balance sheet. All five acquisitions have been accounted for as
purchases. The carrying values of assets and liabilities for each entity have
been estimated to approximate fair market value. Accordingly, no pro forma
adjustments to these amounts were made to reflect the allocation and amount of
the purchase price, the determination of which will be based upon final
appraisals and valuations of all transferred assets and liabilities. Any
adjustments to the allocation of the purchase price have been or will be made
within one year from the acquisition date and are not expected to be material to
the pro forma financial information taken as a whole.
The pro forma financial information is not necessarily indicative of the
results of operations or the financial position which would have been attained
had the acquisitions been consummated at either of the foregoing dates or which
may be attained in the future. The pro forma financial information should be
read in conjunction with the historical consolidated financial statements of
Healthsource.
HEALTHSOURCE, INC.
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
March 31, 1996
(all amounts in thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
---------- Pro Forma Financial Health Pro Forma
Healthsource PACC Adjustments Statements Direct Adjustments
------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash & cash equivalents $132,153 $ 0 $ 132,153 $ 5,897
Marketable securities 27,429 51,092 78,521 0
Premiums and administrative
fees receivable 115,204 2,358 117,562 1,099
Restricted investments 119,594 10,794 130,388
Other current assets 39,639 106 39,745 306
------------------------- ----------------------------
Total current assets 434,019 64,350 498,369 7,302
------------------------- ----------------------------
Long term marketable securities 116,028 0 116,028
Property & leasehold
improvements, net 114,747 2,374 117,121 1,251
Restricted investments 8,844 8,844 0
Intangible assets, net 299,568 27,451 (A) 327,019 24,860 (A)
Other assets 17,030 0 17,030 0
------------------------------------------- -------------------------------------------
Total assets 990,236 66,724 27,451 1,084,411 8,553 24,860
=========================================== ===========================================
Medical claims payable $180,864 $17,881 $ 198,745 $ 4,502
Accounts payable & accrued
expenses 125,843 2,887 128,730 1,161
Deferred revenue 12,371 907 13,278 0
Other current liabilities 6,620 254 6,874 0
------------------------- ----------------------------
Total current liabilities 325,698 21,929 347,627 5,663
------------------------- ----------------------------
Revolving note payable 10,000 71,500 (B) 81,500 27,750 (B)
Convertible subordinated notes 247,250 247,250
Other liabilities 6,237 746 6,983 0
------------------------- ----------------------------
Total liabilities 589,185 22,675 683,360 5,663
------------------------- ----------------------------
Common stock 6,368 11,520 (11,520)(C) 6,368 1 (1)(C)
Additional paid in capital 222,551 222,551 9,817 (9,817)(C)
Retained earnings 173,981 31,351 (31,351)(C) 173,981 (6,928) 6,928 (C)
Unrealized loss on
marketable securities (1,849) 1,178 (1,178)(C) (1,849) 0 0 (C)
------------------------- ----------------------------
Total equity 401,051 44,049 401,051 2,890
------------------------------------------- -------------------------------------------
Total liabilities & equity 990,236 66,724 27,451 1,084,411 8,553 24,860
=========================================== ===========================================
<CAPTION>
Pro Forma Pro Forma
Financial Chubb- Pro Forma Financial
Statements Health Adjustments Statements
---------------------------------------- ----------
<S> <C> <C> <C> <C>
Cash & cash equivalents $ 138,050 $ 3,097 $ 141,147
Marketable securities 78,521 0 78,521
Premiums and administrative
fees receivable 118,661 1,370 120,031
Restricted investments 130,388 130,388
Other current assets 40,051 902 40,953
-------------------------- -----------
Total current assets 505,671 5,369 511,040
-------------------------- -----------
Long term marketable securities 116,028 7,852 123,880
Property & leasehold
improvements, net 118,372 780 119,152
Restricted investments 8,844 2,800 11,644
Intangible assets, net 351,879 22,097 (A) 373,976
Other assets 17,030 2,292 (2,250)(C) 17,072
---------------------------------------- -----------
Total assets 1,117,824 19,093 19,847 1,156,764
======================================== ===========
Medical claims payable $ 203,247 $ 3,846 $ 207,093
Accounts payable & accrued
expenses 129,891 9,554 139,445
Deferred revenue 13,278 1,395 14,673
Other current liabilities 6,874 0 6,874
-------------------------- -----------
Total current liabilities 353,290 14,795 368,085
-------------------------- -----------
Revolving note payable 109,250 25,750 (B) 135,000
Convertible subordinated notes 247,250 247,250
Other liabilities 6,983 0 6,983
-------------------------- -----------
Total liabilities 716,773 14,795 757,318
-------------------------- -----------
Common stock 6,368 1,000 (1,000)(C) 6,368
Additional paid in capital 222,551 16,500 (16,500)(C) 222,551
Retained earnings 173,981 (13,202) 11,597 (C) 172,376
Unrealized loss on
marketable securities (1,849) 0 0 (C) (1,849)
-------------------------- -----------
Total equity 401,051 4,298 399,446
---------------------------------------- -----------
Total liabilities & equity 1,117,824 19,093 19,847 1,156,764
======================================== ===========
</TABLE>
SEE NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) ON PAGE 12.
10
<PAGE> 13
HEALTHSOURCE, INC.
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Quarter Ended March 31, 1996
(all amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
------------ Pro Forma Financial Pro Forma
Healthsource CMHC Adjustments Statements PACC Adjustments
------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Medical premiums $358,867 $10,423 $369,290 $33,058
Administrative and
managed care fees 60,225 0 60,225 0
-------------------------- ------------------------
Total Revenue 419,092 10,423 429,515 33,058
Expenses:
Cost of medical premiums 285,561 10,638 (750)(D) 295,449 28,596
Selling, general &
administrative 104,926 1,721 106,647 5,730
Depreciation &
amortization 8,709 0 111 (D) 8,820 0 229 (A)
-------------------------- ------------------------
Total Expenses 399,196 12,359 410,916 34,326
Operating Income 19,896 (1,936) 18,599 (1,268)
Interest & Other Income 6,461 127 6,588 1,096
Interest expense (2,373) (241)(D) (2,614) (1,073)(B)
-------------------------- ------------------------
Income before taxes 23,984 (1,809) 22,573 (172)
Provision for taxes (8,422) 0 564 (D) (7,858) 0 589 (E)
-------------------------- ------------------------
Net Income $ 15,562 $(1,809) $14,715 $ (172)
-------------------------- ------------------------
Preferred dividends (1,128) 0 (1,128) 0
-------------------------- ------------------------
Net Income applicable to
common shareholders $ 14,434 $(1,809) $13,587 $ (172)
========================== ========================
Shares used to compute
net income per share 65,953
Net income per share $0.22
<CAPTION>
Pro Forma Pro Forma Pro Forma
Financial Health Pro Forma Financial Chubb- Pro Forma Financial
Statements Direct Adjustments Statements Health Adjustments Statements
------------------------------------------ ---------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Medical premiums $402,348 $11,967 $414,315 $12,886 $427,201
Administrative and
managed care fees 60,225 60,225 60,225
--------------------------- ------------------------- ----------
Total Revenue 462,573 11,967 474,540 12,886 487,426
Expenses:
Cost of medical
premiums 324,045 8,915 332,960 10,418 343,378
Selling, general &
administrative 112,377 2,939 115,316 4,531 119,847
Depreciation &
amortization 9,049 127 207 (A) 9,383 319 184 (A) 9,886
--------------------------- ------------------------- ----------
Total Expenses 445,471 11,981 457,659 15,268 473,111
Operating Income 17,102 (14) 16,881 (2,382) 14,315
Interest & Other Income 7,684 80 7,764 199 7,963
Interest expense (3,687) (416)(B) (4,103) (386)(B) (4,489)
--------------------------- ------------------------- ----------
Income before taxes 21,099 66 20,542 (2,183) 17,789
Provision for taxes (7,269) 140 (E) (7,129) 757 228 (E) (6,143)
--------------------------- ------------------------- ----------
Net Income 13,830 $ 66 $13,413 $(1,426) $11,646
--------------------------- ------------------------- ----------
Preferred dividends (1,128) 0 (1,128) 0 (1,128)
--------------------------- ------------------------- ----------
Net Income applicable to
common shareholders $12,702 $ 66 $12,285 $(1,426) $10,518
=========================== ========================= ==========
Shares used to compute
net income per share 65,953
Net income per share $0.16
</TABLE>
SEE NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) ON PAGE 12.
11
<PAGE> 14
HEALTHSOURCE, INC.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A) - Represents the recording of the excess of purchase price over the
fair value of the net assets acquired along with the related amortization for
each acquisition:
<TABLE>
<CAPTION>
Health
PACC Direct ChubbHealth
------ ------ -----------
<S> <C> <C> <C>
Total purchase price: 70,000 27,000 25,000
Estimated acquisition costs: 1,500 750 750
------ ------ ------
71,500 27,750 25,750
Net assets acquired 44,049 2,890 3,653
------ ------ ------
27,451 24,860 22,097
Estimated useful life: 30 30 30
------ ------ ------
Annual amortization: 915 829 737
Pro-rated for quarter 229 207 184
</TABLE>
(B) - Represents the amount borrowed in conjunction with the purchase and the
related expense calculated as follows for each acquisition:
<TABLE>
<CAPTION>
Health
PACC Direct ChubbHealth
------ ------ -----------
<S> <C> <C> <C>
Amount borrowed: 71,500 27,750 25,750
Interest rate: 6.00% 6.00% 6.00%
------ ------ ------
Annual interest expense 4,290 1,665 1,545
Pro-rated for quarter 1,073 416 386
</TABLE>
(C) - Represents the elimination of existing PACC, Health Direct and
ChubbHealth equity in connection with the transactions.
(D) - Represents pro-forma adjustments for the one month during the first
quarter that Healthsource did not own CMHC.
(E) - Represents the tax impact of adjustments calculated as follows for each
acquisition:
<TABLE>
<CAPTION>
Health
PACC Direct ChubbHealth
------ ------ -----------
<S> <C> <C> <C>
Adjustment A 229 0 184
Adjustment B 1,073 416 386
PACC loss 172
Health Direct income (66)
----- --- ---
1,473 350 570
Effective tax rate: 40% 40% 40%
----- --- ---
589 140 228
</TABLE>
12
<PAGE> 15
HEALTHSOURCE, INC.
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1995
(all amounts in thousands except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
------------ Pro Forma Financial Pro Forma Financial
Healthsource Provident Adjustments Statements CMHC Adjustments Statements PACC
------------ --------- ----------- ---------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Medical premiums $ 996,464 $ 94,768 $1,091,232 $129,389 $1,220,621 $126,188
Administrative
and managed
care fees 170,233 48,887 219,120 0 219,120
---------- -------- ---------- -------- ---------- --------
Total Revenue 1,166,697 143,655 1,310,352 129,389 1,439,741 126,188
Expenses:
Cost of medical
premiums 771,284 76,519 847,803 112,056 3,200 (B) 963,059 106,539
Selling, general
& administrative 299,666 57,052 (1,729)(A) 354,989 16,384 (403)(C) 370,970 20,595
Depreciation &
amortization 24,129 11,305 1,896 (A) 33,613 1,682 1,333 (D) 36,628
(3,717)(A)
---------- -------- ---------- -------- ---------- --------
Total Expenses 1,095,079 144,876 1,236,405 130,122 1,370,657 127,134
Operating Income 71,618 (1,221) 73,947 (733) 69,084 (946)
Interest & Other (880)(A)
Income 20,823 4,897 (700)(A) 24,140 2,223 26,363 4,255
Interest expense (5,392) (2,266)(A) (7,658) (2,898)(E) (10,556)
---------- -------- ---------- -------- ---------- --------
Income before
taxes 87,049 3,676 90,429 1,490 84,891 3,309
Provision for
taxes (30,778) (1,170) 48 (A) (31,900) 0 2,213 (F) (29,687)
---------- -------- ---------- -------- ---------- --------
Net Income $ 56,271 $ 2,506 $ 58,529 $ 1,490 $ 55,204 $ 3,309
---------- -------- ---------- -------- ---------- --------
Preferred dividends (4,167) 0 (2,083)(A) (6,250) 0 (6,250) 0
---------- -------- ---------- -------- ---------- --------
Net income
applicable to
common shareholders $ 52,104 $ 2,506 $ 52,279 $ 1,490 $ 48,954 $ 3,309
========== ======== ========== ======== ========== ========
Shares used to
compute net income
per share: 64,195
Net income
per share: $0.81
<CAPTION>
Pro Forma Pro Forma Pro Forma
Pro Forma Financial Health Pro Forma Financial Pro Forma Financial
Adjustments Statements Direct Adjustments Statements ChubbHealth Adjustments Statements
------------ ---------- ------- ----------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Medical premiums $1,346,809 $21,423 $1,368,232 $ 35,788 $1,404,020
Administrative
and managed
care fees 219,120 7,888 227,008 227,008
---------- ------- ---------- -------- ----------
Total Revenue 1,565,929 29,311 1,595,240 35,788 1,631,028
Expenses:
Cost of medical
premiums 1,069,598 19,048 1,088,646 29,572 1,118,218
Selling, general
& administrative 391,565 11,077 402,642 14,942 417,584
Depreciation &
amortization 915 (D) 37,543 584 828 (D) 38,955 2,098 737 (D) 41,790
---------- ------- ---------- -------- ----------
Total Expenses 1,498,706 30,709 1,530,243 46,612 1,577,592
Operating Income 67,223 (1,398) 64,997 (10,824) 53,436
Interest & Other
Income 30,618 306 30,924 942 31,866
Interest expense (4,290)(E) (14,846) (1,665)(E) (16,511) (1,545)(E) (18,056)
---------- ------- ---------- -------- ----------
Income before taxes 82,995 (1,092) 79,410 (9,882) 67,246
Provision for taxes 758 (F) (28,929) 1,434 (F) (27,495) 3,447 912 (F) (23,135)
---------- ------- ---------- -------- ----------
Net Income $54,066 $(1,092) $ 51,915 $ (6,435) 44,111
---------- ------- ---------- -------- ----------
Preferred dividends (6,250) 0 (6,250) 0 (6,250)
---------- ------- ---------- -------- ----------
Net income applicable
to common
shareholders $ 47,816 $(1,092) $ 45,665 $ (6,435) $ 37,861
========== ======= ========== ======== ==========
Shares used to compute
net income per share: 64,195
Net income per share: $0.59
</TABLE>
SEE NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) ON PAGE 14.
13
<PAGE> 16
HEALTHSOURCE, INC.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(A)-Effective May 1, 1995, Healthsource acquired the group health, HMO and
third party administration business of Provident Life and Accident Insurance
Company of America, Inc. In connection with the agreement, Healthsource paid
$131 million in cash and issued $100 million in preferred stock. Pro forma
adjustments include savings expected from economies of scale ($1,729);
amortization of goodwill created in the transaction ($1,896); interest expense
associated with debt incurred as a result of the transaction ($2,266);
elimination of amortization expense associated with goodwill eliminated in the
transaction ($3,717); lost interest ($880); the incremental reduction in
interest income due to Provident's historical return being higher than
Healthsource's expected return ($700); and the related tax impact of these
adjustments. Additionally, an adjustment of $2,083 was made to reflect the
preferred stock dividend for the entire year.
(B)-Represents the payment of certain physician withhold amounts in accordance
with the terms of the purchase and sale agreement which was not reflected in
the CMHC financial statements.
(C)-Represents the elimination of non-recurring acquisition related expenses.
(D)-Represents the recording of the excess of purchase price over the fair
value of the net assets acquired along with the related amortization for each
acquisition:
<TABLE>
<CAPTION>
HEALTH
CMHC PACC DIRECT CHUBBHEALTH
------ ------ ------- -----------
<S> <C> <C> <C> <C>
Total purchase price: 46,500 70,000 27,000 25,000
Estimated acquisition costs: 1,800 1,500 750 750
------ ------ ------ ------
48,300 71,500 27,750 25,750
Net assets acquired: 8,320 44,049 2,890 3,653
------ ------ ------ ------
39,980 27,451 24,860 22,097
Estimated useful life: 30 30 30 30
------ ------ ------ ------
Annual amortization: 1,333 915 828 737
</TABLE>
(E)-Represents the amount borrowed in conjunction with the purchase and the
related interest expense calculated as follows for each acquisition:
<TABLE>
<CAPTION>
HEALTH
CMHC PACC DIRECT CHUBBHEALTH
------ ------ ------- -----------
<S> <C> <C> <C> <C>
Amount borrowed: 48,300 71,500 27,750 25,750
Interest rate: 6.00% 6.00% 6.00% 6.00%
------ ------ ------ ------
Annual interest expense 2,898 4,290 1,665 1,545
</TABLE>
(F)-Represents the tax impact of adjustments calculated as follows for each
acquisition:
<TABLE>
<CAPTION>
HEALTH
CMHC PACC DIRECT CHUBBHEALTH
------ ------ ------- ----------
<S> <C> <C> <C> <C>
Adjustment B 3,200
Adjustment C (403)
Adjustment D 1,333 915 828 737
Adjustment E 2,898 4,290 1,665 1,545
CMHC income (1,490)
PACC income (3,309)
Health Direct income 1,092
------- ------ ------ -----
5,538 1,896 3,585 2,282
Effective tax rate: 40% 40% 40% 40%
------ ----- ----- -----
2,213 758 1,434 912
</TABLE>
14
<PAGE> 17
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis in each of the five years in the period ended
December 31, 1995, and for the quarterly periods ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------------------------------ ----------------
1995 1994 1993 1992 1991 1996 1995
------------------------------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 7.8 -- -- -- -- 6.4 --
</TABLE>
The following table sets forth the Company's ratio of earnings to fixed
charges on a pro forma basis for the year ended December 31, 1995 and the
quarter ended March 31, 1996:
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1996
----------------- --------------
<S> <C> <C>
Ratio of earnings to fixed charges 3.1 3.6
</TABLE>
For purposes of computing the ratio of earnings to fixed charges,
earnings include pre-tax operating income and fixed charges include the total of
interest expense and preferred stock dividends. For periods prior to March 31,
1995, the Company had no fixed charges.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes or
the Common Stock issuable upon conversion thereof by the Selling Holders.
DESCRIPTION OF THE NOTES
The Notes were issued under an Indenture dated as of March 6, 1996 (as
proposed to be amended by the First Supplemental Indenture) (the "Indenture"),
between the Company and The Bank of New York, as trustee (the "Trustee"). A copy
of the form of Indenture (and the proposed form of First Supplemental Indenture)
is being filed with the Commission as an exhibit to the Registration Statement.
The following summaries of certain provisions of the Notes and the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and all the provisions of the Notes and the Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus. Wherever particular provisions or defined terms of
the Indenture (or of the form of Notes which is a part thereof) are referred to,
such provisions or defined terms are incorporated herein by reference. As used
in this "Description of the Notes," the "Company" refers to Healthsource, Inc.
and does not, unless the context otherwise indicates, include its subsidiaries.
15
<PAGE> 18
GENERAL
The Notes are general unsecured subordinated obligations of the Company
and are convertible into Common Stock as described below under the subheading
"Conversion of Notes." The Notes are limited to $247,250,000 aggregate principal
amount, have been issued in fully registered form only in denominations of
$1,000 in principal amount or any multiple thereof, and will mature on March 1,
2003, unless earlier redeemed at the option of the Company or at the option of
the Holder upon a Change of Control.
The Indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the repurchase of securities of the
Company or the incurrence of debt by the Company or any of its subsidiaries.
The Notes bear interest from March 6, 1996 at the annual rate set forth
on the cover page hereof, payable semi-annually on March 1 and September 1,
commencing on September 1, 1996, to Holders of record at the close of business
on the preceding February 15 and August 15, respectively. Interest is computed
on the basis of a 360-day year composed of twelve 30-day months.
Unless other arrangements are made, interest will be paid by check
mailed to Holders entitled thereto. Principal will be payable, and the Notes may
be presented for conversion, registration of transfer and exchange, without
service charge, at the office of the Trustee in New York, New York. Reference is
made to the information set forth below under the subheading "Form, Denomination
and Registration" for information as to Notes held by "qualified institutional
buyers" or by Holders outside of the United States in reliance upon Regulation
S.
The Notes are issued in fully registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples thereof.
CONVERSION OF NOTES
The Holders of Notes are entitled at any time after 60 days following
the latest date of original issuance thereof (March 8, 1996) through the close
of business on March 1, 2003, subject to prior redemption, to convert any Notes
or portions thereof (in denominations of $1,000 in principal amount or multiples
thereof) into Common Stock at a conversion price of $46.965, subject to
adjustment as described below; provided that in the case of Notes called for
redemption, conversion rights will expire at the close of business on the last
Trading Day prior to the date fixed for redemption, unless the Company defaults
in payment of the redemption price. A Note (or portion thereof) in respect of
which a Holder is exercising its option to require redemption upon a Change of
Control may be converted only if such Holder withdraws its election to exercise
such redemption option in accordance with the terms of the Indenture. Except as
described below, no adjustment will be made on conversion of any Notes for
interest accrued thereon or for dividends paid on any Common Stock issued. If
Notes not called for redemption are converted after the close of business on a
record date for the payment of interest and prior to the opening of business on
the next succeeding interest payment date, such Notes must be accompanied by
funds equal to the interest payable on such succeeding interest payment date on
the principal amount so converted. The interest payment with respect to a Note
called for redemption on a date during the period from the close of business on
or after any record date to the opening of business on the business day
following the corresponding payment date will be payable on the corresponding
interest payment date to the registered Holder at the close of business on that
record date (notwithstanding the conversion of such Note before the
corresponding interest payment date) and a Holder of Notes who elects to convert
need not include funds equal to the interest paid. The Company is not required
to issue fractional shares of Common Stock upon conversion of Notes and, in lieu
thereof, will pay a cash adjustment based upon the closing price of the Common
Stock on the last business day prior to the date of conversion.
The conversion price is subject to adjustment (under formulae set forth
in the Indenture) upon the occurrence of certain events, including: (i) the
issuance of Common Stock as a dividend or distribution on the outstanding Common
Stock, (ii) the issuance to all holders of Common Stock of certain rights or
warrants to purchase Common Stock at less than the current market price, (iii)
certain subdivisions, combinations and reclassifications of Common Stock, (iv)
distributions to all holders of Common Stock of capital stock of the
16
<PAGE> 19
Company (other than Common Stock) or evidences of indebtedness of the Company or
assets (including securities, but excluding those dividends, rights, warrants
and distributions referred to above and dividends and distributions in
connection with the liquidation, dissolution or winding up of the Company and
dividends and distributions paid exclusively in cash), (v) distributions
consisting exclusively of cash (excluding any cash portion of distributions
referred to in clause (iv) or in connection with a consolidation, merger or sale
of assets of the Company as referred to in clause (ii) of the second paragraph
below) to all holders of Common Stock in an aggregate amount that, together with
(x) all other such all-cash distributions made within the preceding 12 months in
respect of which no adjustment has been made and (y) 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 the
preceding 12 months in respect of which no adjustment has been made, exceeds 20%
of the Company's market capitalization (being the product of the then current
market price of the Common Stock times the number of shares of Common Stock then
outstanding) on the record date for such distribution and (vi) the purchase of
Common Stock pursuant to a tender offer made by the Company or any of its
subsidiaries which involves an aggregate consideration that, together with (x)
any cash and the fair market value of any other consideration payable in any
other tender offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding such tender offer in respect of which no
adjustment has been made and (y) the aggregate amount of any such all-cash
distributions referred to in clause (v) above to all holders of Common Stock
within the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 20% of the Company's market
capitalization on the expiration of such tender offer. No adjustment of the
conversion price will be made for shares issued pursuant to a plan for
reinvestment of dividends or interest.
Except as stated above, the conversion price will not be adjusted for
the issuance of Common Stock or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing. No
adjustment in the conversion price will be required unless such adjustment would
require a change of at least 1% in the conversion price then in effect; provided
that any adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment.
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or from par value to no par value or resulting
from a subdivision or a combination) or (ii) a consolidation or merger involving
the Company or a sale or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an entirety, in each
case as a result of which holders of Common Stock shall be entitled to receive
stock, other securities, other property or assets (including cash) with respect
to or in exchange for such Common Stock, the Holders of the Notes then
outstanding will be entitled thereafter to convert such Notes into the kind and
amount of shares of stock, other securities or other property or assets which
they would have owned or been entitled to receive upon such reclassification,
change, consolidation, merger, sale or conveyance had such Notes been converted
into Common Stock immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance assuming that a Holder of Notes would
not have exercised any rights of election as to the stock, other securities or
other property or assets receivable in connection therewith.
In the event of a taxable distribution to holders of Common Stock (or
other transaction) which results in any adjustment of the conversion price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to the United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Tax Considerations - U.S.
Holders - Adjustments to Conversion Price."
The Company from time to time may to the extent permitted by law reduce
the conversion price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such decrease, if the
Board of Directors has made a determination that such decrease would be in the
best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Company deems advisable to avoid or
diminish any income tax to its stockholders resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. See "Certain Tax Considerations."
SUBORDINATION
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<PAGE> 20
The payment of principal of, premium, if any, and interest on the Notes
is, to the extent set forth in the Indenture, subordinated in right of payment
to the prior payment in full of all Senior Indebtedness. Upon any distribution
to creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
related to the Company or its property, in an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, the
holders of all Senior Indebtedness will first be entitled to receive payment in
full of all amounts due or to become due thereon before the Holders of the Notes
will be entitled to receive any payment in respect of the principal of, premium,
if any, or interest on the Notes (except that Holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes to
Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness).
The Company also may not make any payment upon or in respect of the
Notes (except in such subordinated securities) if (a) a default in the payment
of the principal of, premium, if any, or interest on Senior Indebtedness occurs
and is continuing beyond any applicable period of grace or (b) any other default
occurs and is continuing with respect to Senior Indebtedness that permits
holders of the Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the representative or representatives of holders
of at least a majority in principal amount of Senior Indebtedness then
outstanding. Payments on the Notes may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is cured or waived, or (ii)
in the case of a non-payment default, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Senior Indebtedness has been accelerated. No new period of payment blockage may
be commenced within 360 days after the receipt by the Trustee of any prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 180 days.
"Senior Indebtedness" with respect to the Notes means the principal of,
premium, if any, and interest on, and any fees, costs, expenses and any other
amounts (including indemnity payments) related to the following, whether
outstanding on the date of the Indenture or thereafter incurred or created: (a)
indebtedness, matured or unmatured, whether or not contingent, of the Company
for money borrowed evidenced by notes or other written obligations, (b) any
interest rate contract, interest rate swap agreement or other similar agreement
or arrangement designed to protect the Company or any of its subsidiaries
against fluctuations in interest rates, (c) indebtedness, matured or unmatured,
whether or not contingent, of the Company evidenced by notes, debentures, bonds
or similar instruments or letters of credit (or reimbursement agreements in
respect thereof), (d) obligations of the Company as lessee under capitalized
leases and under leases of property made as part of any sale and leaseback
transactions, (e) indebtedness of others of any of the kinds described in the
preceding clauses (a) through (d) assumed or guaranteed by the Company and (f)
renewals, extensions, modifications, amendments and refundings of, and
indebtedness and obligations of a successor person issued in exchange for or in
replacement of, indebtedness or obligations of the kinds described in the
preceding clauses (a) through (f), unless the agreement pursuant to which any
such indebtedness described in clauses (a) through (f) is created, issued,
assumed or guaranteed expressly provides that such indebtedness is not senior or
superior in right of payment to the Notes; provided, however, that the following
shall not constitute Senior Indebtedness: (i) any indebtedness or obligation of
the Company in respect of the Notes; (ii) any indebtedness of the Company to any
of its subsidiaries or other affiliates; (iii) any indebtedness that is
subordinated or junior in any respect to any other indebtedness of the Company
other than Senior Indebtedness; and (iv) any indebtedness incurred for the
purchase of goods or materials in the ordinary course of business.
In the event that the Trustee (or paying agent if other than the
Trustee) or any Holder receives any payment of principal or interest with
respect to the Notes at a time when such payment is prohibited under the
Indenture, such payment shall be held in trust for the benefit of, and shall be
paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in full, Holders shall
be subrogated (equally and ratably with all other Indebtedness pari passu with
the Notes) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to the Holders have been applied to the payment of Senior
Indebtedness.
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<PAGE> 21
As of March 31, 1996, the Company had approximately $10 million in
principal amount of indebtedness that would be considered Senior Indebtedness
under the $300 million Chase Facility. The Company does not have any other
material Senior Indebtedness outstanding as of such date. Pursuant to the
recently amended terms of the Chase Facility, the Company will not be able to
make aggregate borrowings under the Chase Facility in excess of approximately
$260 million. Such borrowings would constitute Senior Indebtedness and would
rank prior in right of payment to the Holders of the Notes, notwithstanding that
it is incurred subsequent to the issuance of the Notes. The Indenture does not
prohibit or limit the incurrence of such Senior Indebtedness.
In addition, because the Company's operations are conducted primarily
through its operating subsidiaries, including regulated insurance companies and
HMOs, claims of holders of indebtedness of such subsidiaries, as well as claims
of regulators and creditors of such subsidiaries, have priority with respect to
the assets and earnings of such subsidiaries over the claims of creditors of the
Company, including Holders of the Notes. As of March 31, 1996, the aggregate
liabilities of such subsidiaries were approximately $306 million. Such HMO and
insurance subsidiaries are subject to certain minimum capital requirements
imposed by state insurance authorities. In addition, state insurance authorities
have the power to disapprove of the payment of dividends and other intercompany
payments by regulated HMO and insurance subsidiaries. Under certain
circumstances, state insurance authorities have the power to impose increased
minimum capital requirements and prohibit the payment of dividends and other
upstream payments by such HMO and insurance subsidiaries, which could adversely
affect the Company's ability to repurchase Notes whose Holders elect to cause
the Company to repurchase their Notes upon a Change of Control, repay the Notes
at maturity or make interest payments on the Notes. The Indenture does not limit
the amount of additional indebtedness which any of the Company's subsidiaries
can create, incur, assume or guarantee.
Because of these subordination provisions, in the event of a
liquidation or insolvency of the Company or any of its subsidiaries, Holders of
Notes may recover less, ratably, than the holders of Senior Indebtedness.
The Company expects from time to time to incur indebtedness
constituting Senior Indebtedness other than debt under the Chase Facility. The
Indenture does not prohibit or limit the incurrence of additional indebtedness,
including Senior Indebtedness, by the Company or its subsidiaries.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to
March 1, 1999. At any time on or after that date, the Notes may be redeemed at
the Company's option on at least 30 but not more than 60 days' notice, in whole
at any time or in part from time to time, at the following prices (expressed in
percentages of the principal amount), together with accrued interest to the date
fixed for redemption if redeemed during the 12-month period beginning March 1:
<TABLE>
<CAPTION>
REDEMPTION
DATE PRICE
---- -----
<S> <C> <C>
1999 102.5%
2000 101.7%
2001 100.8%
and 100% on or after March 1, 2002
</TABLE>
If fewer than all the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Note is to be
redeemed in part only, a new Note or Notes in principal amount equal to the
unredeemed principal portion thereof will be issued. If a portion of a Holder's
Notes is selected for partial redemption and such Holder converts a portion of
such Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption. No
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<PAGE> 22
sinking fund is provided for the Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right to require that the Company repurchase such Holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price in cash in
an amount equal to 101% of the principal amount thereof, together with accrued
and unpaid interest to the date of purchase, pursuant to an offer (the "Change
of Control Offer") made in accordance with the procedures described below and
the other provisions in the Indenture.
A "Change of Control" means an event or series of events in which (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) acquires "beneficial ownership" (as determined in accordance
with Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
50% of the total Voting Stock of the Company at an Acquisition Price (each term
as defined herein) less than the conversion price then in effect with respect to
the Notes and (ii) the holders of the Common Stock receive consideration which
is not all or substantially all common stock that is (or upon consummation of or
immediately following such event or events will be) listed on a United States
national securities exchange or approved for quotation on the NASDAQ National
Market or any similar United States system of automated dissemination of
quotations of securities' prices; provided, however, that any such person or
group shall not be deemed to be the beneficial owner of, or to beneficially own,
any Voting Stock tendered in a tender offer until such tendered Voting Stock is
accepted for purchase under the tender offer. "Voting Stock" means stock of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of a corporation (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency). "Acquisition Price" means
the weighted average price paid by the person or group in acquiring the Voting
Stock.
Within 30 days following any Change of Control, the Company shall send
by first-class mail, postage prepaid, to the Trustee and to each Holder of
Notes, at such Holder's address appearing in the security register, a notice
stating, among other things, that a Change of Control has occurred, the purchase
price, the purchase date, which shall be a business day no earlier than 30 days
nor later than 60 days from the date such notice is mailed, and certain other
procedures that a Holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance.
The Company will comply, to the extent applicable, with the
requirements of Rule 13e-4 under the Exchange Act and other securities laws or
regulations in connection with the repurchase of the Notes as described above.
The occurrence of certain of the events that would constitute a Change
of Control may constitute a default under the Chase Facility. Future
indebtedness of the Company may contain prohibitions of certain events which
would constitute a Change of Control or require the Company to offer to redeem
such indebtedness upon a Change of Control. Moreover, the exercise by the
Holders of Notes of their right to require the Company to purchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such purchase on the Company.
Finally, the Company's ability to pay cash to Holders of Notes upon a purchase
may be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required purchases. Furthermore, the Change of Control provisions may in certain
circumstances make more difficult or discourage a takeover of the Company and
the removal of the incumbent management.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to any person
unless: (i) either the Company is the resulting, surviving or transferee person
(the "Successor Company") or the Successor Company is a person organized and
existing under the laws of the United States or any State thereof or the
District of Columbia, and the Successor Company (if not the Company)
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<PAGE> 23
expressly assumes by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the Company
under the Indenture and the Notes, including the conversion rights described
above under "Conversion of Notes," (ii) immediately after giving effect to such
transaction no Event of Default has happened and is continuing and (iii) the
Company delivers to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: default in
payment of the principal of or premium, if any, on the Notes when due at
maturity, upon redemption or otherwise, including failure by the Company to
purchase the Notes when required as described under "Change of Control" (whether
or not such payment shall be prohibited by the subordination provisions of the
Indenture); default for 30 days in payment of any installment of interest on the
Notes (whether or not such payment shall be prohibited by the subordination
provisions of the Indenture); default by the Company for 90 days after notice in
the observance or performance of any other covenants in the Indenture; or
certain events involving bankruptcy, insolvency or reorganization of the
Company. The Indenture provides that the Trustee may withhold notice to the
Holders of Notes of any default (except in payment of principal, premium, if
any, or interest with respect to the Notes) if the Trustee considers it in the
interest of the Holders of Notes to do so.
The Indenture provides that if any Event of Default shall have occurred
and be continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the Holders of a majority in principal amount of Notes then
outstanding.
The Holders of a majority in principal amount of the Notes then
outstanding shall have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture. The Indenture provides that,
subject to the duty of the Trustee following an Event of Default to act with the
required standard of care, the Trustee will not be under an obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless the Trustee receives satisfactory
indemnity against any associated loss, liability or expense.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture will cease to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders of
Notes to receive payments of principal of, premium, if any, and interest on, the
Notes, (iv) rights of Holders of Notes to convert to Common Stock, (v) rights,
obligations and immunities of the Trustee under the Indenture and (vi) rights of
the Holders of Notes as beneficiaries of the Indenture with respect to the
property so deposited with the Trustee payable to all or any of them), if (A)
the Company will have paid or caused to be paid the principal of, premium, if
any, and interest on the Notes as and when the same will have become due and
payable or (B) all outstanding Notes (except lost, stolen or destroyed Notes
which have been replaced or paid) have been delivered to the Trustee for
cancellation or (C) (x) the Notes not previously delivered to the Trustee for
cancellation will 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 under
arrangements satisfactory to the Trustee upon delivery of notice and (y) the
Company will have irrevocably deposited with the Trustee, as trust funds, cash,
in an amount sufficient to pay principal of and interest on the outstanding
Notes, to maturity or redemption, as the case may be. Such trust may only be
established if such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument pursuant to which the
Company is a party or by which it is bound and the Company has delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions related to such defeasance have been complied with.
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<PAGE> 24
The Indenture will also cease to be in effect (except as described in
clauses (i) through (vi) in the immediately preceding paragraph) and the
indebtedness on all outstanding Notes will be discharged on the 123rd day after
the irrevocable deposit by the Company with the Trustee, in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders of
Notes, of cash, U.S. Government Obligations (as defined in the Indenture) or a
combination thereof, in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay the principal of,
premium, if any, and interest on the Notes then outstanding in accordance with
the terms of the Indenture and the Notes ("legal defeasance"). Such legal
defeasance may only be effected if (i) such deposit will not result in a breach
or violation of, or constitute a default under, any agreement or instrument to
which the Company is a party or by which it is bound, (ii) the Company has
delivered to the Trustee an opinion of counsel stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, based
thereon, the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge by the Company and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred, (iii) the Company
has delivered to the Trustee an opinion of counsel to the effect that after the
123rd day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and (iv) the Company has delivered to the
Trustee an Officers' Certificate and an opinion of counsel stating that all
conditions related to the defeasance have been complied with.
The Company may also be released from its obligations under the
covenants described above under "Change of Control" and "Merger, Consolidation
and Sale of Assets" with respect to the Notes outstanding on the 123rd day after
the irrevocable deposit by the Company with the Trustee, in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders of
Notes, of cash, U.S. Government Obligations or a combination thereof, in an
amount sufficient in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of, premium, if any, and interest on the Notes
then outstanding in accordance with the terms of the Indenture and the Notes
("covenant defeasance"). Such covenant defeasance may only be effected if (i)
such deposit will not result in a breach or violation of, or constitute a
default under, any agreement or instrument to which the Company is a party or by
which it is bound, (ii) the Company has delivered to the Trustee an Officers'
Certificate and an opinion of counsel to the effect that the Holders of Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and covenant defeasance by the Company and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit and covenant defeasance
had not occurred, (iii) the Company has delivered to the Trustee an opinion of
counsel to the effect that after the 123rd day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and (iv) the Company has delivered to the Trustee an Officers' Certificate and
an opinion of counsel stating that all conditions related to the covenant
defeasance have been complied with. Following such covenant defeasance, the
Company will no longer be required to comply with the obligations described
above under "Merger, Consolidation and Sale of Assets" and will have no
obligation to repurchase the Notes pursuant to the provisions described under
"Change of Control."
Notwithstanding any satisfaction and discharge or defeasance of the
Indenture, the obligations of the Company described under "Conversion of Notes"
will survive to the extent provided in the Indenture until the Notes cease to be
outstanding.
MODIFICATIONS OF 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
principal amount of the Notes at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the Holders of Notes, except that
no such modification shall (i) extend the fixed maturity of any Note, reduce the
rate or extend the time of payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon, reduce any amount payable upon
redemption thereof, change the obligation of the Company to make redemption of
any Note upon the happening of a Change of Control, impair
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<PAGE> 25
or affect the right of a Holder to institute suit for the payment thereof,
change the currency in which the Notes are payable, modify the subordination
provisions of the Indenture in a manner adverse to the Holders of Notes or
impair the right to convert the Notes into Common Stock subject to the terms set
forth in the Indenture, without the consent of the Holder of each Note so
affected or (ii) reduce the aforesaid percentage of Notes, without the consent
of the Holders of all of the Notes then outstanding.
REGISTRATION RIGHTS
The Company agreed, under the terms of a registration rights agreement
(the "Registration Rights Agreement") with the Initial Purchasers, for the
benefit of the Holders of Notes, that the Company would use its best efforts to
file with the Commission within 90 days after the original issuance date of the
Notes a shelf registration statement (the "Shelf Registration Statement") on
such form as the Company deems appropriate covering resales by the Holders of
Notes and the shares of Common Stock issuable upon conversion of the Notes and
would use all reasonable efforts to cause the Shelf Registration Statement to
become effective as promptly as practicable and keep such Shelf Registration
Statement effective until such date that is three years after the latest date of
original issuance of the Notes. The Company will be permitted to suspend the use
of the prospectus that is a part of such Shelf Registration Statement during
certain periods of time and under certain circumstances relating to pending
corporate developments and public filings with the Commission and similar
events. A Holder who sells the Notes and the Common Stock issued upon conversion
of the Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling stockholder in the related prospectus and to
deliver a prospectus to purchasers and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such Holder (including
certain indemnification provisions).
At any time during the three-year period following the date of latest
date of original issuance of the Notes when a registration statement under the
Securities Act covering the Notes and the Shares is not effective or the Company
has suspended use of the prospectus that is part of such registration statement,
neither the Notes nor the Shares may be sold or otherwise transferred except in
accordance with certain transfer restrictions set forth in the Indenture.
CONCERNING THE TRUSTEE
The Bank of New York, the Trustee under the Indenture, has been
appointed by the Company as the paying agent, conversion agent, registrar and
custodian with regard to the Notes. The Bank of New York also serves as the
transfer agent and registrar of the Common Stock. The Trustee and/or its
affiliates may in the future provide banking and other services to the Company
in the ordinary course of their respective businesses.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 800,000,000 shares
of Common Stock, par value $.10 per share, and 10,000,000 shares of Preferred
Stock (the "Preferred Stock"). As of May 31, 1996, 63,710,957 shares of Common
Stock were issued and outstanding and no shares of Preferred Stock were issued
and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the
election of directors and on all other matters to be voted upon by the
stockholders. The Company's Board of Directors is divided into three classes,
with the directors in each class holding office for a term of three years
following election. Subject to the rights of holders of outstanding Preferred
Stock, if any, the holders of Common Stock are entitled to receive such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor. The Company has not paid cash dividends on its
Common Stock since its inception and does not expect to pay cash dividends on
the Common Stock in the foreseeable future. In the event of a liquidation,
dissolution, or winding up of the Company, the holders of Common Stock have the
right to a ratable portion of the assets remaining after payment to the
Company's
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<PAGE> 26
creditors, subject to any preferential payments required to be made to holders
of outstanding Preferred Stock, if any. Holders of Common Stock do not have
cumulative voting, preemptive, redemption or conversion rights. All outstanding
shares of Common Stock are, and the shares issuable upon conversion of the Notes
sold in this offering will be, fully paid and nonassessable. The preferences and
rights of holders of shares of Common Stock may become subject to those of
holders of shares of any series of Preferred Stock which the Company may issue
in the future.
PREFERRED STOCK
The Board of Directors has the authority, without further stockholder
approval, to issue the shares of Preferred Stock in one or more series from time
to time and to fix the powers, designations, preferences, and rights, and the
qualifications, limitations, or restrictions of such preferences and/or rights.
While the issuance of Preferred Stock could provide needed flexibility in
connection with possible acquisitions and for other corporate purposes, such
issuance could also make it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company or discourage an attempt
to gain control of the Company, and might adversely affect the holders of Common
Stock. Among other things, the Preferred Stock may be issued with extraordinary
voting, dividend, redemption or conversion rights.
TRANSFER AGENT AND REGISTRAR
The Bank of New York has been appointed by the Company as the transfer
agent and registrar of the Common Stock.
CERTAIN TAX CONSIDERATIONS
GENERAL
The following is a discussion of certain U.S. federal income tax and estate
tax consequences of the purchase, ownership and disposition of the Notes as of
the date hereof. For purposes of this discussion, a "U.S. Holder" is a Holder
that is an individual who is a citizen or resident of the United States, a
corporation or a partnership that is organized under the laws of the United
States or any state thereof or an estate or trust whose income is includible in
gross income regardless of its source. A "Non-U.S. Holder" is a Holder that is
not a U.S. Holder. This summary applies only to Notes and Common Stock held as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). It does not discuss all of the tax
consequences that may be relevant to a Holder in light of its particular
circumstances or to Holders subject to special rules, such as dealers in
securities or foreign currencies, financial institutions, life insurance
companies, or regulated investment companies, or to Holders whose functional
currency is not the United States dollar or who hold the Notes or the Common
Stock as part of a synthetic security, conversion transaction, or certain
"straddle" or hedging transactions.
The U.S. federal income tax and estate tax considerations set forth below
are based upon the Code and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified, possibly with retroactive effect, so as to result in U.S. federal
income tax consequences different from those presented below.
U.S. HOLDERS
Interest. Interest on a Note should be taxable to a U.S. Holder as ordinary
interest income in accordance with the U.S. Holder's method of accounting for
U.S. federal income tax purposes.
Sale, Exchange or Redemption of a Note. A U.S. Holder should recognize gain
or loss, if any, on the sale, redemption or other taxable disposition of a Note
in an amount equal to the difference, if any, between the U.S. Holder's adjusted
tax basis in the Note and the amount received therefor (other than amounts
attributable to accrued and unpaid interest on the Notes, which should be
treated as interest for U.S. federal income tax purposes). Subject to the market
discount rules noted under "U.S. Holders -- Market Discount and Bond Premium"
below, gain or loss,
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<PAGE> 27
if any, recognized on the sale, redemption or other taxable disposition of a
Note generally should be long-term capital gain or loss if the Note was held for
more than one year as of the date of disposition.
Market Discount and Bond Premium. If a U.S. Holder acquires a Note
subsequent to its original issuance and the Note's stated redemption price at
maturity exceeds the U.S. Holder's initial tax basis in the Note by more than a
de minimis amount, the U.S. Holder should generally be treated as having
acquired the Note at a "market discount" equal to such excess. In addition, if a
U.S. Holder's initial tax basis in a Note exceeds the stated redemption price at
maturity of the Note, the U.S. Holder should generally be treated as having
acquired the Note with "bond premium" in an amount equal to such excess. U.S.
Holders should consult their tax advisers regarding the existence, if any, and
tax consequences of market discount and bond premium.
Conversion of the Notes. A U.S. Holder should not recognize gain or loss
upon conversion of the Notes into Common Stock. The U.S. Holder's tax basis in
shares of Common Stock received upon conversion should be the same as the U.S.
Holder's adjusted tax basis of the Notes converted (reduced by the portion of
such basis allocable to any fractional Common Stock interest for which the U.S.
Holder receives a cash payment from the Company). The holding period of the
Common Stock received in the conversion should include the holding period of the
Notes that were converted. A U.S. Holder generally should recognize gain (or
loss) upon a conversion to the extent that any cash paid in lieu of a fractional
share of Common Stock exceeds (or is less than) its tax basis allocable to such
fractional share.
Dividends. Dividends paid on Common Stock received upon conversion will be
taxable to a U.S. Holder as ordinary income, to the extent paid out of the
Company's current or accumulated earnings and profits. Subject to certain
restrictions, dividends received by a corporate U.S. Holder generally should be
eligible for the 70% dividends received deduction.
Sale of Common Stock. A U.S. Holder of Common Stock received on conversion
who sells or otherwise disposes of such stock in a taxable transaction will
recognize capital gain or loss equal to the difference between the cash and the
fair market value of any property received on such sale and the U.S. Holder's
tax basis in such stock. Such gain or loss will be long term gain or loss if the
holding period for such Common Stock was more than one year.
Redemption of Common Stock. A redemption by the Company of some or all of a
U.S. Holder's Common Stock will be treated as a dividend to the redeeming U.S.
Holder to the extent of the Company's current and accumulated earnings and
profits unless the redemption meets one of the tests under Section 302(b) of the
Code. If one of the tests under Section 302(b) is met, the redemption will be
treated as an exchange giving rise to capital gain or loss, except to the extent
of declared but unpaid dividends. Such gain or loss will be long term capital
gain or loss if the holding period for such Common Stock was more than one year.
U.S. Holders should consult their tax advisors as to the application of Section
302(b) to their particular circumstances.
Adjustments to Conversion Price. Pursuant to Treasury Regulations
promulgated under Section 305 of the Code, a U.S. Holder of a Note should be
treated as having received a constructive distribution from the Company upon an
adjustment in the conversion price of the Notes if (i) as a result of such
adjustment, the proportionate interest of such U.S. Holder in the assets or
earnings and profits of the Company is increased and (ii) the adjustment is not
made pursuant to a bona fide, reasonable, anti-dilution formula. An adjustment
in the conversion price would not be considered made pursuant to such a formula
if the adjustment were made to compensate for certain taxable distributions with
respect to the Common Stock into which the Notes are convertible. Thus, under
certain circumstances, a decrease in the conversion price of the Notes may be
taxable to a U.S. Holder of a Note as a dividend to the extent of the current or
accumulated earnings and profits of the Company. In addition, the failure to
adjust fully the conversion price of the Notes to reflect distributions of stock
dividends with respect to the Common Stock may result in a taxable dividend to
the U.S. Holders of the Common Stock.
Backup Withholding and Information Reporting. A U.S. Holder of a Note, or of
Common Stock issued upon conversion of a Note, may be subject to information
reporting and possible backup withholding. If applicable, backup withholding
would apply at a rate of 31% with respect to dividends or interest on, or the
proceeds of a sale,
25
<PAGE> 28
exchange, redemption, retirement, or other disposition of, such Note or Common
Stock, as the case may be, unless (i) such U.S. Holder is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact, or (ii) provides a taxpayer identification number, certifies as to no loss
of exemption from backup withholding, and otherwise complies with applicable
backup withholding rules.
NON-U.S. HOLDERS
The Notes. The payment of interest on a Note should generally not be subject
to U.S. federal withholding tax, if (1) the interest is not effectively
connected with the conduct of a trade or business within the United States, (2)
the Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (3) the Non-U.S. Holder is not a controlled foreign corporation that is
related to the Company actually or constructively through stock ownership and
(4) either (i) the beneficial owner of the Note certifies to the Company or its
agent, under penalties of perjury, that it is not a U.S. Holder and provides its
name and address on U.S. Treasury Form W-8 (or on a suitable substitute form) or
(ii) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Note certifies under penalties of
perjury that such a Form W-8 (or suitable substitute form) has been received
from the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payer with a copy thereof.
A Non-U.S. Holder should generally not be subject to U.S. federal income tax
on any gain or income realized in connection with the sale, exchange,
retirement, or other disposition of a Note, including the exchange of a Note for
Common Stock, unless the Non-U.S. Holder is an individual who is present in the
United States for 183 days or more in the taxable year of the disposition, and
either (a) has a tax home in the United States and the gain from the disposition
is not attributable to an office of other fixed place of business maintained by
such non-U.S. Holder in a foreign country or (b) the gain from the disposition
is attributable to an office or other fixed place of business maintained by such
non-U.S. Holder in the United States.
A Note held directly by an individual who, at the time of death, is not a
citizen or resident of the United States should not be includible in such
individual's gross estate for U.S. estate tax purposes as a result of such
individual's death if the individual does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote and, at the time of the individual's death, if payments
with respect to such Note would not have been effectively connected with the
conduct by such individual of a trade or business in the United States. Even if
the Note is includible in the gross estate under the foregoing rules, the Note
may be excluded under the provisions of an applicable estate tax treaty.
The Common Stock. In general, dividends (including any amounts that are
treated as dividends as described above) paid to a Non-U.S. Holder of the Common
Stock should be subject to U.S. federal income tax withholding at a 30% rate
unless such rate is reduced by an applicable income tax treaty. Dividends that
are effectively connected with such Non-U.S. Holder's conduct of a trade or
business in the United States or, if a tax treaty applies, attributable to a
permanent establishment, or, in the case of an individual, a "fixed base," in
the United States ("U.S. trade or business income") are generally subject to
U.S. federal income tax at regular rates, but are not generally subject to the
30% withholding tax if the Non-U.S. Holder files the appropriate form with the
payer. Any U.S. trade or business income received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be applicable under
an income tax treaty.
Dividends paid to an address in a foreign country are presumed (absent
actual knowledge to the contrary) to be paid to a resident of such country for
purposes of the withholding tax discussed above and, under the current
interpretation of Treasury Regulations, for purposes of determining the
applicability of a tax treaty rate. However, on April 22, 1996, the Internal
Revenue Service (the "Service") proposed regulations (the "Proposed
Regulations") which would generally be effective for payments made after
December 31, 1997, under which a Non-U.S. Holder of the Common Stock who wishes
to claim the benefit of an applicable tax treaty rate would be required to
satisfy applicable certification and other requirements. Prospective investors
who would be Non-U.S. Holders should consult their tax advisors regarding the
possible application of these rules.
26
<PAGE> 29
A Non-U.S. Holder of the Common Stock that is eligible for a reduced rate of
U.S. federal withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
A Non-U.S. Holder of the Common Stock should generally not be subject to
U.S. income or withholding tax on gain realized on the sale, exchange or
redemption (provided that the redemption is treated as the sale or exchange of
the stock) of such stock, unless the Non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of the
disposition, and either (a) has a tax home in the United States and the gain
from the disposition is not attributable to an office or other fixed place of
business maintained by such Non-U.S. Holder in a foreign country or (b) the gain
from the disposition is attributable to an office or other fixed place of
business maintained by such Non-U.S. Holder in the United States. Common Stock
held directly by an individual who at the time of death is not a citizen or
resident of the United States will nevertheless generally be includible in the
gross estate of such individual for U.S. estate tax purposes, subject to
contrary provisions of an applicable estate tax treaty.
Backup Withholding and Information Reporting. Payments on the Notes made by
the Company or any paying agent of the Company and payments of dividends on the
Common Stock to certain noncorporate Non-U.S. Holders generally should be
subject to information reporting and possibly to "backup withholding" at a rate
of 31%. Information reporting and backup withholding do not apply, however, to
payments made outside the United States by the Company or a paying agent on a
Note or to payments of dividends on the Common Stock if the certification
described under "Non-U.S. Holders -- The Notes" above is received, provided in
each case that the payer does not have actual knowledge that the Holder is a
U.S. Holder.
Payment of proceeds from a sale of a Note or the Common Stock to or through
the U.S. office of a broker is subject to information reporting and backup
withholding unless the Non-U.S. Holder certifies as to its non-U.S. status or
otherwise establishes an exemption from information reporting and backup
withholding. Payment outside the United States of the proceeds of the sale of a
Note or the Common Stock to or through a foreign office of a "broker" (as
defined in applicable U.S. Treasury Regulations) should not be subject to
information reporting or backup withholding, except that if the broker is a U.S.
person, a controlled foreign corporation for U.S. federal income tax purposes or
a foreign person 50% or more of whose gross income is from a U.S. trade or
business, information reporting should apply to such payment unless the broker
has documentary evidence in its records that the beneficial owner is not a U.S.
Holder and certain other conditions are not met or the beneficial owner
otherwise establishes an exemption.
The Proposed Regulations could affect the procedures to be followed by
a Non-U.S. Holder or a financial institution in establishing such Non-U.S.
Holder's non-United States status. Each Non-U.S. Holder should consult its tax
advisor regarding the effect, if any, of the Proposed Regulations on its
purchase, ownership, conversion, and disposition of the Notes, and its ownership
and disposition of the Common Stock obtained as a result of any such conversion.
THE U.S. FEDERAL INCOME TAX AND ESTATE TAX DISCUSSION SET FORTH ABOVE IS
INTENDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A
PARTICULAR HOLDER'S SITUATION. PERSONS CONSIDERING A PURCHASE OF THE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF THE NOTES AND THE COMMON
STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING
RETROACTIVE CHANGES) IN U.S. FEDERAL AND OTHER TAX LAWS.
SELLING HOLDERS
The Notes were initially issued and sold to Bear, Stearns & Co., Inc.,
Goldman, Sachs & Co., Merrill Lynch & Co., Morgan Stanley & Co. Incorporated,
Robertson, Stephens & Company and Smith Barney Inc.
27
<PAGE> 30
(together, the "Initial Purchasers"). The Selling Holders acquired the Notes (a)
from the Initial Purchasers in transactions complying with Rule 144A, Regulation
D or Regulation S under the Securities Act or (b) in other permitted resale
transactions exempt from registration under the Securities Act from the Initial
Purchasers or holders who acquired the Notes from the Initial Purchasers or
other prior holders thereof. The Company agreed to indemnify and hold the
Initial Purchasers harmless against certain liabilities under the Securities Act
that would arise in connection with the sale of the Notes by the Initial
Purchasers. The Selling Holders may from time to time offer and sell pursuant to
this Prospectus any or all of the Notes or Common Stock issued upon conversion
thereof.
Except as otherwise indicated, the table below sets forth certain
information with respect to the Selling Holders and the Securities as of June
4, 1996. The term Selling Holders includes the beneficial owners of the
securities listed below and their transferees, pledgees, donees or other
successors. Unless otherwise noted, the nature of beneficial ownership is sole
voting and/or investment power. Other than as a result of the ownership of
Securities indicated below, none of the Selling Holders has had any material
relationship with the Company or any of its affiliates within the past three
years.
Aggregate Principal Amount Number of Shares
of Notes of Common Stock
Name That May Be Sold That May Be Sold *
- ---- -------------------------- ------------------
San Diego City Employees
Retirement System 540,000 11,498
Occidental College 160,000 3,407
San Diego County Convertible 1,840,000 39,178
Boston Museum of Fine Arts 60,000 1,278
Wake Forest University 460,000 9,795
Presbyterian Healthcare 330,000 7,027
Equity Portfolio(1) 15,000,000 319,387
South Dakota Retirement System 3,500,000 7,452
The TCW Group, Inc. on behalf of
the following accounts:
(a) TCW Convertible Value Fund 2,230,000 47,482
(b) General Motors Salaried
Employees Convertible Fund 5,600,000 119,238
(c) State of Michigan Employees
Retirement Fund 1,440,000 30,661
(d) TCW Convertible Securities
Fund 3,325,000 70,797
(e) Cincinnati Bell Telephone
Convertible Value Fund 625,000 13,308
(f) Massachusetts Mutual Life
Insurance Company 590,000 12,563
(g) North Dakota State Workers
Compensation Fund 845,000 17,992
(h) TCW/DW Income & Growth Fund 415,000 8,836
(i) Medical Malpractice Insurance
Association 130,000 2,768
(j) TCW Convertible Strategy Fund 890,000 18,950
(k) TCW Convertible Value L.P. 340,000 7,239
(l) North Dakota State Land Dept. 310,000 6,601
Oppenheimer Bond Fund for Growth 6,000,000 127,755
Hillside Capital Corporation 85,000 1,810
Any other Selling Holder or future
transferee from any such
Selling Holder 202,535,000 4,312,466
------------ ---------
$247,250,000 5,264,558
(1) Equity Portfolio is a portfolio in the Preferred Master Trust Group
(the "Trust Group") and is a series of an investment company registered under
the Investment Company Act of 1940, as amended. American Express Financial
Corporation, ("AEFC"), formerly known as IDS Financial Corporation, an
investment adviser registered under the Investment Advisers Act of 1940, as
amended, provides investment advisory services to the Trust Group and to
certain other registered investment companies. AEFC is a wholly-owned
subsidiary of American Express Company. The information set forth in the table
with respect to the portfolio and the information set forth in this footnote
was provided by AEFC.
* Assumes a conversion price of $46.965 per share, and a cash payment in lieu of
any fractional share interest.
The preceding table has been prepared based upon information furnished
to the Company by the Depository Trust Company and by or on behalf of the
Selling Holders. Additional information concerning ownership of the Securities
offered hereby rests with certain holders of the Securities who are not named in
the preceding table, with whom the Company believes it has no affiliation and
from whom the Company has received no response to its request for such
information.
In view of the fact that Selling Holders may offer all or a portion of
the Notes or shares of Common Stock held by them pursuant to the offering
contemplated by this Prospectus, and because this offering is not being
underwritten on a firm commitment basis, no estimate can be given as to the
amount of Notes or the number of shares of Common Stock that will be held by the
Selling Holders after completion of the offering made hereby. In addition, the
Selling Holders may have sold, transferred or otherwise disposed of all or a
portion of their Notes and/or Common Stock since the date on which they provided
the information set for above, in transactions exempt from the registration
requirements of the Securities Act.
Information concerning the Selling Holders may change from time to time
and any such changed information will be set forth in supplements to this
Prospectus if and when necessary. In addition, the per share conversion price,
and therefor the number of shares issuable upon conversion of the Notes, is
subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of Notes and the number of shares of Common Stock issuable
upon conversion of the Notes offered hereby may increase or decrease.
PLAN OF DISTRIBUTION
The Securities covered hereby may be offered and sold from time to time
by the Selling Holders. The Selling Holders will act independently of the
Company in making decisions with respect to the timing, manner and size of each
sale. Sales of the Securities are, in general, expected to be made at the market
price prevailing at the time of each such sale; however, prices in negotiated
transactions may differ considerably. Such sales may be made
28
<PAGE> 31
on the NYSE or otherwise, at market prices prevailing at the time of sale, at
prices related to the then prevailing market prices or in negotiated
transactions, including without limitation pursuant to one or more of the
following methods: (a) purchases by a broker-dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (b) ordinary
brokerage transactions and transactions in which a broker solicits purchasers;
and (c) block trades in which a broker-dealer so engaged will attempt to sell
the Securities as agent but may take a position and resell a portion of the
block as principal to facilitate the transaction. The Selling Holders have
agreed that they will not participate in any underwritten offering of the
Securities and the Company has no obligation to conduct or cooperate in such an
offering for their benefit.
The Company has been advised that, as of the date hereof, the Selling
Holders have made no arrangement with any broker for the offering or sale of the
Notes or the shares of Common Stock issuable upon conversion thereof. Brokers,
dealers or agents may participate in such transactions as agents and may, in
such capacity, receive brokerage commissions from the Selling Holders or
purchasers of such securities. Such brokers, dealers or agents may also purchase
the Notes or shares of Common Stock issuable upon conversion thereof and resell
such securities for their own account. The Selling Holders and such brokers,
dealers or agents may be considered "underwriters" as that term is defined by
the Securities Act, although the Selling Holders disclaim such status. Any
commissions, discounts or profits received by such brokers, dealers or agents in
connection with the foregoing transactions may be deemed to be underwriting
discounts and commissions under the Securities Act.
To comply with the securities laws of certain jurisdictions, if
applicable, the Notes and Common Stock issuable upon conversion thereof will be
offered or sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain jurisdictions, the Notes and Common
Stock issuable upon conversion thereof may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or unless an
exemption from such registration or qualification is available and is complied
with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Notes or the shares of Common Stock
issuable upon conversion thereof may be limited in its ability to engage in
market activities with respect to such Notes or the shares of Common Stock
issuable upon conversion thereof. In addition and without limiting the
foregoing, each Selling Holder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-2, 10b-5, 10b-6 and 10b-7, which provisions may limit the
timing of purchases and sales of any of the Notes and shares of Common Stock
issuable upon conversion thereof by the Selling Holders. All of the foregoing
may affect the marketability of the Notes and shares of Common Stock issuable
upon conversion thereof.
The Company may suspend the use of this Prospectus and any supplements
hereto in certain circumstances due to pending corporate developments, public
filings with the Commission or similar events. The Company is obligated in the
event of such suspension to use its reasonable efforts to ensure that the use of
the Prospectus may be resumed as soon as practicable.
The Company has agreed to pay substantially all of the expenses
incident to the registration, offering and sale of the Notes or the shares of
Common Stock issuable upon conversion thereof to the public other than
commissions and discounts of brokers, dealers or agents and other than the fees
and disbursements of counsel to the Holders, which shall be paid by the Initial
Purchasers of the Notes. Such expenses (excluding such commissions and discounts
and fees and disbursements of counsel to the Holders) are estimated to be
approximately $275,300. The Company has also agreed to indemnify the Selling
Holders against certain liabilities, including certain liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Securities offered hereby and certain additional
legal matters will be passed upon for the Company by Sheehan Phinney Bass +
Green, Professional Association, Manchester, New Hampshire. Certain members of
Sheehan Phinney Bass + Green, Professional Association beneficially own an
aggregate of 60,840 shares of Common Stock as of the date hereof.
29
<PAGE> 32
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
With respect to the unaudited interim financial information for the period
ended March 31, 1996 and 1995 which is incorporated herein by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their report included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their report on the unaudited interim
financial information because such report is not a "report" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
30
<PAGE> 33
No dealer, sales representative, or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company or any Selling Holder.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof or that there been no change in the
affairs of the Company since such date.
----------------------
TABLE OF CONTENTS
Page
----
Available Information................. 3
Incorporation of Certain Documents
by Reference...................... 3
Summary............................... 4
Risk Factors.......................... 7
Pro Forma Financial Information....... 10
Ratio of Earnings to Fixed Charge..... 15
Use of Proceeds....................... 15
Description of the Notes.............. 15
Description of Capital Stock.......... 23
Certain Tax Considerations............ 24
Selling Holders....................... 27
Plan of Distribution.................. 28
Legal Matters......................... 29
Experts............................... 30
HEALTHSOURCE, INC.
$247,250,000
5% CONVERTIBLE
SUBORDINATED
NOTES DUE 2003
AND
COMMON STOCK
- -------------------------------------
PROSPECTUS
- -------------------------------------
JUNE 4, 1996
31
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the distribution of the Securities
being registered are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 85,300
Legal Fees and Expenses 75,000
Accounting Fees and Expenses 75,000
State Securities Laws Registration Fees and Expenses 10,000
Trustee and Registrar Fees and Expenses 10,000
Miscellaneous 20,000
--------
Total $275,300
========
</TABLE>
All such expenses will be borne by the Company, other than the fees and
expenses of counsel to the Selling Holders, which will be borne by the Initial
Purchasers of the Notes.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-Laws of the Company and the New Hampshire Business Corporation
Act provide that the Company shall indemnify any person who is or was a party to
any pending or completed action, other than an action by or in the right of the
Company, by reason of the fact that he is or was a director, officer, employee
or agent of the Company, against expenses, judgments, fines and amounts paid in
settlement if he acted in good faith and he reasonably believed, (i) in the case
of conduct in his official capacity that his conduct was in the best interests
of the Company, or (ii) in all other cases, that his conduct was not opposed to
its best interests; or, in the case of a criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. Any such director,
officer, employee or agent shall be indemnified by the Company in an action by
or in the right of the Company to the same extent and under the same
circumstances, except that no indemnification may be made for any claim as to
which the person shall have been adjudged to be liable to the Company. The
Company may not indemnify any such director, officer, employee or agent in
connection with any proceeding charging improper personal benefit to him if he
is adjudged liable on that basis. Prior to and as a condition of any
indemnification by the Company of any such director, officer, employee or agent,
the Board of Directors must make a determination that under the facts of the
matter, the person seeking indemnification met the applicable standard of
conduct. However, the Company must indemnify a director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the Company. In the case
of the advancement by the Company of expenses before the final disposition of a
proceeding involving any such person, such person must affirm his good faith
belief that his conduct met the applicable standard of conduct and must
undertake to repay the advance if it is ultimately determined that he did not
meet the applicable standard of conduct, and the Board of Directors must make a
determination that the facts then known would not preclude indemnification of
such person. The Company is obligated pursuant to indemnity agreements with its
directors and executive officers to indemnify them to the full extent permitted
by law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in
II-1
<PAGE> 35
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Source or Page
No. Document of This Report
- ------- -------- --------------
<S> <C> <C>
(4) Instruments Defining the Rights of Security Holders
4.1 Indenture dated as of March 6, 1996 by and Filed herewith
between Healthsource, Inc. and The Bank of New
York as Trustee and the form of First
Supplemental Indenture dated as of June 3, 1996
4.2 Note Resale Registration Rights Agreement dated Exhibit 4.2 to Form 10-Q for
as of March 6, 1996 by and between the Quarter Ended March 31,
Healthsource, Inc. and Bear, Stearns & Co., 1996
Inc. for itself and on behalf of the Initial
Purchasers
(5) Opinion regarding Legality
5.1 Opinion of Sheehan Phinney Bass + Green, Filed herewith
Professional Association
(12) Computation of Historical Financial Ratios Filed herewith
(15) Letter regarding Unaudited Interim Financial Information Filed herewith
(23) Consents of Experts and Counsel
23.1 Consent of Deloitte & Touche LLP Filed herewith
23.2 Consent of Sheehan Phinney Bass + Green, Included in Exhibit 5.1 above
Professional Association
(25) Statement of Eligibility of Trustee
25.1 Statement of The Bank of New York Filed herewith
</TABLE>
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
II-2
<PAGE> 36
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15 above, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in a successful defense of any action, suit or proceeding) is asserted
by such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Company hereby undertakes to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-3
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Healthsource, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Hooksett, State of New Hampshire, on June 4,
1996.
HEALTHSOURCE, INC.
/s/ Norman C. Payson, M.D.
By:________________________________
Norman C. Payson, M.D.
President and Chief Executive
Officer (Principal Executive Officer)
/s/ Thomas M. Congoran
By:________________________________
Thomas M. Congoran
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Each person whose signature appears below hereby constitutes and
appoints each of Norman C. Payson, M.D. and Thomas M. Congoran, with full power
to act without the other, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities (until revoked in writing) to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, to file the same, together with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
to sign any and all applications, registration statements, notices and other
documents necessary or advisable to comply with the applicable state securities
laws, and to file the same, together with all other documents in connection
therewith, with the appropriate state securities authorities, granting unto said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, full power and authority to perform and do each and every act and
thing necessary and advisable as fully to all intends and purposes as he might
or could perform and do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date Title Signature
- ---- ----- ---------
<S> <C> <C>
June 4, 1996 Director /s/ Norman C. Payson, M.D.
__________________________
Norman C. Payson, M.D.
June 4, 1996 Director and Chairman /s/ Merwyn Bagan, M.D.
of the Board __________________________
Merwyn Bagan, M.D.
</TABLE>
II-4
<PAGE> 38
<TABLE>
<S> <C> <C>
June 4, 1996 Director /s/ Paul D. Baron, M.D.
______________________________
Paul D. Baron, M.D.
June 4, 1996 Director /s/ Daniel F. Eubank, M.D.
______________________________
Daniel F. Eubank, M.D.
Director
______________________________
Robert A. Leipold, M.D.
June 4, 1996 Director /s/ Robert S. Cathcart, M.D.
______________________________
Robert S. Cathcart, M.D.
June 4, 1996 Director /s/ Francis G. Middleton, M.D.
______________________________
Francis G. Middleton, M.D.
June 4, 1996 Director /s/ Robert H. Bilbro, M.D.
______________________________
Robert H. Bilbro, M.D.
June 4, 1996 Director /s/ David W. Schall, M.D.
_______________________________
David W. Schall, M.D.
June 4, 1996 Director /s/ J. Harold Chandler
_______________________________
J. Harold Chandler
</TABLE>
II-5
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Source or Page
No. Document of This Report
- ------- -------- --------------
<S> <C> <C>
(4) Instruments Defining the Rights of Security Holders
4.1 Indenture dated as of March 6, 1996 by and Filed herewith
between Healthsource, Inc. and The Bank of New
York as Trustee and the form of First
Supplemental Indenture dated as of June 3, 1996
4.2 Note Resale Registration Rights Agreement dated Exhibit 4.2 to Form 10-Q for
as of March 6, 1996 by and between the Quarter Ended March 31,
Healthsource, Inc. and Bear, Stearns & Co., 1996
Inc. for itself and on behalf of the Initial
Purchasers
(5) Opinion regarding Legality
5.1 Opinion of Sheehan Phinney Bass + Green, Filed herewith
Professional Association
(12) Computation of Historical Financial Ratios Filed herewith
(15) Letter regarding Unaudited Interim Financial Information Filed herewith
(23) Consents of Experts and Counsel
23.1 Consent of Deloitte & Touche LLP Filed herewith
23.2 Consent of Sheehan Phinney Bass + Green, Included in Exhibit 5.1 above
Professional Association
(25) Statement of Eligibility of Trustee
25.1 Statement of The Bank of New York Filed herewith
</TABLE>
<PAGE> 1
EXHIBIT 4.1
================================================================================
HEALTHSOURCE, INC.
Issuer
AND
THE BANK OF NEW YORK
Trustee
INDENTURE
Dated as of March 6, 1996
5% Convertible Subordinated Notes Due 2003
================================================================================
<PAGE> 2
<TABLE>
CROSS REFERENCE TABLE
PURSUANT TO ITEM 601(b)(4)(iv)
OF REGULATION S-K
<CAPTION>
TRUST INDENTURE ACT SECTION REFERENCE
SECTION REFERENCE IN INDENTURE
- ------------------- ---------------------
<S> <C>
[Section 310](a)(1)................................ 7.10
(a)(2)................................ 7.10
(a)(3)................................ N/A
(a)(4)................................ N/A
(a)(5)................................ 7.10
(b)................................... 7.9
[Section 311](a)................................... 7.14
(b)................................... 7.14
[Section 312](a)................................... 2.5(a), 5.1
(b)................................... 16.5
(c)................................... 16.5
[Section 313](a)................................... 7.2
(b)................................... 7.2
(c)................................... 7.2
(d)................................... 7.2
[Section 314](a)................................... 5.2, 4.8(a)
(b)................................... N/A
(c)................................... 16.7
(d)................................... N/A
(e)................................... 16.7
[Section 315](a)................................... 7.1
(b)................................... 6.8
(c)................................... 7.1
(d)................................... 7.1
(e)................................... 6.9
[Section 316](a)(1)................................ 6.7
(a)(2)................................ N/A
(b)................................... 6.4
(c)................................... 9.2
[Section 317](a)................................... 6.2
(b)................................... 4.4
[Section 318](a)................................... 16.10, 16.11
<FN>
N/A means not applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.............................................. 2
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue
of Notes................................................. 8
Section 2.2 Form of Notes............................................ 8
Section 2.3 Date and Denomination of Notes;
Payments of Interest..................................... 10
Section 2.4 Execution of Notes....................................... 11
Section 2.5 Exchange and Registration of
Transfer of Notes; Restrictions
on Transfer; Depositary.................................. 12
Section 2.6 Mutilated, Destroyed, Lost or
Stolen Notes............................................. 23
Section 2.7 Temporary Notes.......................................... 24
Section 2.8 Cancellation of Notes Paid, Etc.......................... 25
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices........................................ 25
Section 3.2 Notice of Redemption;
Selection of Notes....................................... 26
Section 3.3 Payment of Notes Called for
Redemption............................................... 28
Section 3.4 Conversion Arrangement on Call
for Redemption........................................... 28
Section 3.5 Purchase of Notes Upon a Change
of Control............................................... 29
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
Section 4.1 Payment of Principal, Premium
and Interest............................................. 30
Section 4.2 Maintenance of Office or Agency.......................... 31
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.3 Appointments to Fill Vacancies in
Trustee's Office.......................................... 31
Section 4.4 Provisions as to Paying Agent............................. 31
Section 4.5 Corporate Existence....................................... 33
Section 4.6 Rule 144A Information Requirement......................... 33
Section 4.7 Stay, Extension and Usury Laws............................ 33
Section 4.8 Compliance Statement; Notice of
Defaults.................................................. 33
ARTICLE V
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY
Section 5.1 Noteholders' Lists........................................ 34
Section 5.2 Reports by Company........................................ 34
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default......................................... 35
Section 6.2 Payments of Notes on Default; Suit
Therefor.................................................. 37
Section 6.3 Application of Monies Collected by
Trustee................................................... 39
Section 6.4 Proceedings by Noteholder................................. 40
Section 6.5 Proceedings by Trustee.................................... 41
Section 6.6 Remedies Cumulative and Continuing........................ 41
Section 6.7 Direction of Proceedings and Waiver
of Defaults by Majority of
Noteholders............................................... 41
Section 6.8 Notice of Defaults........................................ 42
Section 6.9 Undertaking to Pay Costs.................................. 42
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.1 Duties and Responsibilities
of Trustee................................................ 43
Section 7.2 Reports by Trustee to Holders............................. 44
Section 7.3 Reliance on Documents, Opinions, Etc...................... 44
Section 7.4 No Responsibility for Recitals, Etc....................... 46
Section 7.5 Trustee, Paying Agents, Conversion
Agents or Registrar May Own Notes......................... 46
Section 7.6 Monies to Be Held in Trust................................ 46
Section 7.7 Compensation and Expenses of Trustee...................... 46
Section 7.8 Officers' Certificate as Evidence......................... 47
Section 7.9 Conflicting Interests of Trustee.......................... 47
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.10 Eligibility of Trustee.................................. 47
Section 7.11 Resignation or Removal of Trustee....................... 48
Section 7.12 Acceptance by Successor Trustee......................... 49
Section 7.13 Successor, by Merger, Etc............................... 50
Section 7.14 Limitation on Rights of Trustee
as Creditor............................................. 50
ARTICLE VIII
CONCERNING THE NOTEHOLDERS
Section 8.1 Action by Noteholders................................... 50
Section 8.2 Proof of Execution by Noteholders....................... 51
Section 8.3 Who Are Deemed Absolute Owners.......................... 51
Section 8.4 Company-Owned Notes Disregarded......................... 52
Section 8.5 Revocation of Consents, Future
Holders Bound........................................... 52
ARTICLE IX
NOTEHOLDERS MEETINGS
Section 9.1 Purposes for Which Meetings May be
Called.................................................. 53
Section 9.2 Manner of Calling Meetings; Record Date................. 53
Section 9.3 Call of Meeting by Company or
Noteholders............................................. 53
Section 9.4 Who May Attend and Vote at Meetings..................... 54
Section 9.5 Manner of Voting at Meetings and
Record to be Kept....................................... 54
Section 9.6 Exercise of Rights of Trustee and
Noteholders Not To Be Hindered or
Delayed................................................. 55
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 Supplemental Indentures Without
Consent of Noteholders.................................. 55
Section 10.2 Supplemental Indentures With
Consent of Noteholders.................................. 57
Section 10.3 Effect of Supplemental Indentures....................... 57
Section 10.4 Notation on Notes....................................... 58
Section 10.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee....................... 58
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 11.1 Company May Consolidate, Etc. on
Certain Terms........................................... 58
Section 11.2 Successor Company To Be Substituted..................... 59
Section 11.3 Opinion of Counsel To Be Given
to Trustee.............................................. 59
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 12.1 Legal Defeasance and Covenant
Defeasance of the Notes................................. 60
Section 12.2 Termination of Obligations upon
Cancellation of the Notes............................... 62
Section 12.3 Survival of Certain Obligations......................... 63
Section 12.4 Acknowledgment of Discharge by Trustee.................. 63
Section 12.5 Application of Trust Assets............................. 63
Section 12.6 Repayment to the Company; Unclaimed
Money................................................... 64
Section 12.7 Reinstatement........................................... 64
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 Indenture and Notes Solely Corporate
Obligations............................................. 65
ARTICLE XIV
CONVERSION OF NOTES
Section 14.1 Right to Convert........................................ 65
Section 14.2 Exercise of Conversion Privilege;
Issuance of Common Stock on
Conversion; No Adjustment for
Interest or Dividends................................... 66
Section 14.3 Cash Payments in Lieu of Fractional
Shares.................................................. 68
Section 14.4 Conversion Price........................................ 68
Section 14.5 Adjustment of Conversion Price.......................... 68
Section 14.6 Effect of Reclassification,
Consolidation, Merger or Sale........................... 78
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 14.7 Taxes on Shares Issued.................................. 79
Section 14.8 Reservation of Shares; Shares to Be
Fully Paid; Listing of Common Stock..................... 80
Section 14.9 Responsibility of Trustee............................... 80
Section 14.10 Notice to Holders Prior to Certain
Actions................................................. 81
ARTICLE XV
SUBORDINATION
Section 15.1 Agreement to Subordinate................................ 82
Section 15.2 Certain Definitions..................................... 82
Section 15.3 Liquidation; Dissolution; Bankruptcy.................... 83
Section 15.4 Default on Senior Indebtedness.......................... 83
Section 15.5 When Distribution Must Be Paid Over..................... 84
Section 15.6 Notice by Company....................................... 85
Section 15.7 Subrogation............................................. 85
Section 15.8 Relative Rights......................................... 85
Section 15.9 Subordination May Not Be Impaired by
Company................................................. 86
Section 15.10 Distribution or Notice to
Representative.......................................... 86
Section 15.11 Rights of Trustee and Paying Agent...................... 86
Section 15.12 Authorization to Effect Subordination................... 87
Section 15.13 Conversions Not Deemed Payment.......................... 87
Section 15.14 Amendments.............................................. 88
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Pooling of Interests.................................... 88
Section 16.2 Provisions Binding on Company's
Successors.............................................. 88
Section 16.3 Official Acts by Successor Company...................... 88
Section 16.4 Addresses for Notices, Etc.............................. 88
Section 16.5 Communications by Holders with Other
Holders................................................. 89
Section 16.6 Governing Law........................................... 89
Section 16.7 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee...................... 89
Section 16.8 Legal Holidays.......................................... 90
Section 16.9 No Security Interest Created............................ 90
Section 16.10 Trust Indenture Act..................................... 90
Section 16.11 Trust Indenture Act Controls............................ 90
Section 16.12 Benefits of Indenture................................... 90
Section 16.13 Table of Contents, Headings Etc......................... 90
Section 16.14 Authenticating Agent.................................... 90
Section 16.15 Execution in Counterparts............................... 91
</TABLE>
v
<PAGE> 8
INDENTURE dated as of March 6, 1996 between HEALTHSOURCE, INC., a New
Hampshire corporation (hereinafter sometimes called the "Company," as more fully
set forth in Section 1.1), and THE BANK OF NEW YORK, a New York banking
corporation (hereinafter sometimes called the "Trustee," as more fully set forth
in Section 1.1).
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its 5% Convertible Subordinated Notes Due 2003
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $247,250,000 and, to provide the terms and conditions upon which the
Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to require repurchase by the
Company upon a Change of Control (as hereinafter defined), a form of conversion
notice and a certificate of transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issuance hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below) as follows:
<PAGE> 9
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act (as
hereinafter defined) or that are by reference defined in the Securities Act (as
hereinafter defined), except as herein otherwise expressly provided or unless
the context otherwise requires, shall have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of the execution of this Indenture. The words "herein," "hereof," "hereunder"
and words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other Subdivision. The terms defined in this
Article include the plural as well as the singular.
Accredited Investor: The term "Accredited Investor" shall have the
meaning specified in Rule 501(a) under the Securities Act.
Acquisition Price: The term "Acquisition Price" shall mean the weighted
average price paid by the person or group in acquiring the Voting Stock.
Affiliate: An "Affiliate" of any specified person shall mean an
"affiliate" as defined in Rule 144(a) as promulgated under the Securities Act.
Board of Directors: The term "Board of Directors" shall mean the Board
of Directors of the Company or a committee of such Board of Directors duly
authorized to act for it hereunder.
Board Resolution: The term "Board Resolution" shall mean a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by the Board of Directors, or a duly authorized
committee thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
Business Day: The term "Business Day" shall mean a day, other than a
Saturday, a Sunday or a day on which the banking institutions in the State of
New York are authorized or obligated by law or executive order to close or a day
that is declared a national or New York state holiday.
2
<PAGE> 10
Cedel: The term "Cedel" shall mean Cedel Bank societe anonyme.
Change of Control: The term "Change of Control" shall mean an event or
series of events pursuant to which (i) any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) acquires "beneficial
ownership" (as determined in accordance with Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 50% of the total Voting Stock of the
Company at an Acquisition Price less than the Conversion Price then in effect
with respect to the Notes and (ii) holders of the Common Stock receive
consideration that is not all or substantially all common stock that is (or upon
consummation of or immediately following such event or events shall be) listed
on a United States national securities exchange or approved for quotation on the
NASDAQ National Market or any similar United States system of automated
dissemination of quotations of securities' prices; provided, however, that any
such person or group shall not be deemed to be the beneficial owner of, or to
beneficially own, any Voting Stock tendered into a tender offer until such
tendered Voting Stock is accepted for purchase under the tender offer.
Closing Date: The term "Closing Date" shall mean March 6, 1996.
Commission: The term "Commission" shall mean the Securities and
Exchange Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class
of the Company that does not have a preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and that is not subject to redemption
by the Company. Subject to the provisions of Section 14.6, however, shares
issuable on conversion of Notes shall include only shares of the class
designated as common stock of the Company at the date of this Indenture or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and that do not have a preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and that are not subject
to redemption by the Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion that the total number of shares of such
class resulting from all such reclassification bears to the total number of
shares of all such classes resulting from all such reclassifications.
3
<PAGE> 11
Company: The term "Company" shall mean Healthsource, Inc., a New
Hampshire corporation, and subject to the provisions of Article XI, shall
include its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
specified in Section 14.4.
Corporate Trust Office of the Trustee: The term "Corporate Trust Office
of the Trustee," or other similar term, shall mean the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office is, at the date as of which this Indenture is dated,
located at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration.
Custodian: The term "Custodian" shall mean The Bank of New York, as
custodian with respect to the Notes in global form, or any successor entity
thereto.
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.
definitive Notes; in definitive form: The term "definitive Notes" shall
have the meaning specified in Section 2.2, any reference to Notes "in definitive
form" shall mean definitive Notes and any reference to Securities "in definitive
form" shall mean definitive Notes or Common Stock as the context requires.
Depositary: The term "Depositary" shall mean, with respect to the Notes
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to the Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
DWAC: The term "DWAC" shall mean Deposit and Withdrawal at Custodian
Service.
Euroclear: The term "Euroclear" shall mean Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System.
Event of Default: The term "Event of Default" shall mean any event
specified in Section 6.1(a), (b), (c), (d) or (e).
Exchange Act: The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
4
<PAGE> 12
global Note: The term "global Note" shall mean any and all notes in
global form.
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or
Notes, as the case may be, authenticated and delivered under this Indenture.
Noteholder; holder: The terms "Noteholder" or "holder" as applied to
any Note, or other similar terms (but excluding the term "beneficial holder"),
shall mean any person in whose name at the time a particular Note is registered
on the Note registrar's books.
Note register: The term "Note register" shall have the meaning
specified in Section 2.5(a).
Officers' Certificate: The term "Officers' Certificate," when used with
respect to the Company, shall mean a certificate signed by the President, the
Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, any Treasurer, the Secretary or any Assistant Secretary of the Company,
that is delivered to the Trustee. Each such certificate shall include the
statements provided for in Section 16.7 if and to the extent required by the
provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of or counsel to the
Company or other counsel acceptable to the Trustee, that is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
16.7 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 8.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for which monies in the
necessary amount shall have been deposited in trust with the Trustee
for payment or redemption; provided that if such Notes are to be
redeemed prior to the maturity thereof, notice of such redemption shall
have been given as in Article III provided, or provi-
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sion satisfactory to the Trustee shall have been made for giving such
notice;
(c) Notes paid pursuant to Section 2.6 hereof or Notes in lieu
of or in substitution for which other Notes shall have been
authenticated and delivered pursuant to the terms of Section 2.6 unless
proof satisfactory to the Trustee is presented that any such Notes are
held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XIV
and Notes not deemed outstanding pursuant to Section 3.2.
person: The term "person" shall mean a corporation, an association, a
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
PORTAL Market: The term "PORTAL Market" shall mean the Private
Offerings, Resales and Trading through Automated Linkages Market operated by the
National Association of Securities Dealers, Inc. or any successor thereto.
Predecessor Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note.
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.
Regulation S: The term "Regulation S" shall mean Regulation S under the
Securities Act and any successor regulation thereto.
Regulation S Global Note: The term "Regulation S Global Note" shall
have the meaning specified in Section 2.2.
Responsible Officer: The term "Responsible Officer," when used with
respect to the Trustee, shall mean an officer of the Trustee assigned and duly
authorized by the Trustee to administer its corporate trust matters.
Restricted Global Note: The term "Restricted Global Note" shall have
the meaning specified in Section 2.2.
Restricted Period: The term "Restricted Period" shall have the meaning
specified in Section 2.2.
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Restricted Securities: The term "Restricted Securities" shall have the
meaning specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated
under the Securities Act.
Securities Act: The term "Securities Act" shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder.
subsidiary: The term "subsidiary" of any specified person shall mean
(i) a corporation a majority of whose capital stock with voting power under
ordinary circumstances, to elect directors is at the time directly or indirectly
owned by such person or (ii) any other person (other than a corporation) in
which such person or such person and a subsidiary or subsidiaries of such person
or a subsidiary or subsidiaries of such person directly or indirectly, at the
date of determination thereof, has at least majority ownership.
Successor Company: The term "Successor Company" shall have the meaning
specified in Section 11.1.
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, except as provided in Sections 10.3 and 14.6;
provided that in the event said Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, said Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean The Bank of New York, 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.
U.S. Government Obligations: The term "U.S. Government Obligations"
shall mean securities that are (i) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by, and acting as an agency or
instrumentality of, the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian
with respect to any such U.S. Government Obligation or a specific payment of
principal or interest on any such U.S. Government Obligation held by such
custodian for the
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<PAGE> 15
account of the holder of such depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by such custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
Voting Stock: The term "Voting Stock" shall mean stock of the class or
classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of a corporation (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
The definitions of certain other terms are as specified in Sections
2.3, 2.5, 3.5, 12.1, 14.5, 14.6, 15.2 and 15.4.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be
designated as "5% Convertible Subordinated Notes Due 2003." Notes not to exceed
the aggregate principal amount of $247,250,000 upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and make available for delivery said Notes upon the written order
of the Company, signed by its (a) Chief Executive Officer, President, Chief
Operating Officer or Chief Financial Officer, and (b) any Treasurer or Secretary
or any Assistant Secretary, without any further action by the Company hereunder.
Section 2.2 Form of Notes. The Notes in definitive form ("definitive
Notes") shall be substantially in the form of Exhibit A hereto, with the legends
in substantially the form indicated in Exhibit A hereto and such other legends
as may be applicable thereto, which definitive Notes shall be registered in the
name of the holders thereof, duly executed by the Company and authenticated by
the Trustee or the authenticating agent as provided herein.
Unless issued in definitive form, Notes initially offered and sold in
reliance on Rule 144A shall be issued in the form of one or more permanent
global Notes (the "Restricted Global Note"), substantially in the form of
Exhibit B hereto, with the legends in substantially the form set forth in
Exhibit B
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<PAGE> 16
hereto and such other legends as may be applicable thereto, which Restricted
Global Note shall be deposited on behalf of the holders of the Notes represented
thereby with the Trustee, as custodian for the Depositary, and registered in the
name of a nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee or the authenticating agent as provided herein.
Notes offered and sold outside the United States in reliance on
Regulation S may be evidenced in the form of one or more permanent global Notes
(the "Regulation S Global Note"), substantially in the form of Exhibit C hereto,
with the legends in substantially the form set forth in Exhibit C hereto and
such other legends as may be applicable thereto, which Regulation S Global Note
shall be deposited on behalf of the holders of the Notes represented thereby
with the Trustee, as custodian for the Depositary, and registered in the name of
a nominee of the Depositary, duly executed by the Company and authenticated by
the Trustee or an authenticating agent as provided herein, for credit to the
accounts of the respective depositaries for Euroclear and Cedel (or such other
accounts as they may direct). Prior to or on the 40th day after the later of the
commencement of the offering of the Notes and the Closing Date (the "Restricted
Period"), beneficial interests in the Regulation S Global Note may only be held
through Morgan Guaranty Trust Company of New York, Brussels office, as operator
of Euroclear or Cedel or another agent member of Euroclear and Cedel acting for
and on behalf of them, unless delivery is made through the Restricted Global
Note in accordance with the certification requirements hereof. During the
Restricted Period, interests in the Regulation S Global Note may be exchanged
for interests in the Restricted Global Note or for definitive Notes only in
accordance with the certification requirements described in Section 2.5 below.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Notes may be listed, or to conform to usage.
Any global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a global Note to reflect the amount
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<PAGE> 17
of any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in such manner and upon instructions given by the holder of such Notes
in accordance with the Indenture. Payment of principal of and interest and
premium, if any, on any global Note shall be made to the holder of such Note.
The terms and provisions contained in the forms of Notes attached as
Exhibits A, B and C hereto shall constitute, and are hereby expressly made, a
part of this Indenture and to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, shall bear interest from March 6, 1996 and
shall be payable semiannually on each March 1 and September 1, commencing
September 1, 1996, as specified on the faces of the forms of Notes, attached as
Exhibits A, B and C hereto.
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted after the record
date and on or before the interest payment date) shall be entitled to receive
the interest payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and prior to such interest payment date. Interest may, at the
option of the Company, be paid by check mailed to the address of such person as
it appears on the Note register; provided that, with respect to any holder of
Notes with an aggregate principal amount equal to or in excess of $5,000,000, at
the request (such request to include appropriate wire instructions) of such
holder in writing to the Trustee on or before the record date preceding any
interest payment date, interest on such holder's Notes shall be paid by wire
transfer in immediately available funds. The term "record date" with respect to
any interest payment date shall mean the February 15 or August 15 preceding said
March 1 or September 1.
Interest on the Notes shall be computed on the basis of a 360-day year
composed of twelve 30-day months.
Any interest on any Note that is payable, but is not punctually paid or
duly provided for, on any said March 1 or September 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder; and such Defaulted
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Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than 25 days after the
receipt by the Trustee of such notice, unless the Trustee shall consent
to an earlier date), and at the same time, the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided. Thereupon, the Trustee shall fix a special record date
for the payment of such Defaulted Interest, which shall be not more
than 15 days and not less than 10 days prior to the date of the payment
and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such special record date and, in the name and at the expense
of the Company, shall cause notice of the payment of such Defaulted
Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Noteholder at his address as it appears in the
Note register, not less than 10 days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the persons in whose names the Notes (or
their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the signature of its Chief Executive Officer,
President, Chief Operating
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Officer or Chief Financial Officer and attested by the signature of its
Treasurer, Secretary or any of its Assistant Secretaries (any of which
signatures may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on forms of Notes attached as
Exhibits A, B and C hereto, manually executed by the Trustee (or an
authenticating agent appointed by the Trustee as provided by Section 16.14),
shall be entitled to the benefits of this Indenture or be valid or obligatory
for any purpose. Such certificate by the Trustee (or such an authenticating
agent) upon any Note executed by the Company shall be conclusive evidence that
the Note so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 4.2 being herein
sometimes collectively referred to as the "Note register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. Such Note register shall be
in written form or in any form capable of being converted into written form
within a reasonable period of time. The Trustee is hereby appointed "Note
registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount and
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bearing such restrictive legends as may be required by Section 2.5(d).
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
make available for delivery, the Notes that the Noteholder making the exchange
is entitled to receive.
All Notes presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Note registrar
or any co-registrar) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company, and the Note shall be duly
executed by the Noteholder thereof or his attorney duly authorized in writing.
No service charge shall be charged to the Noteholder for any exchange
or registration of transfer of Notes, but the Company may require payment of a
sum sufficient to cover any tax, assessments or other governmental charges that
may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of (a) any
Notes for a period of 15 days next preceding the mailing of a notice of
redemption or (b) any Notes called for redemption or, if a portion of any Note
is selected or called for redemption, such portion thereof selected or called
for redemption or (c) any Notes surrendered for conversion or, if a portion of
any Note is surrendered for conversion, such portion thereof surrendered for
conversion or (d) any Notes surrendered for redemption pursuant to Section 3.5
or, if a portion of any Note is surrendered for redemption pursuant to Section
3.5, such portion thereof surrendered for redemption pursuant to Section 3.5.
All Notes issued upon any transfer or exchange of Notes shall be the
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture as the Notes surrendered upon such
registration of transfer or exchange.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Notes to be traded on
the PORTAL Market shall be represented by the Restricted Global Note registered
in the name of the Depositary or the nominee of the Depositary. The transfer and
exchange of beneficial interests in any global Note that does not involve the
issuance of a definitive Note or the transfer of
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<PAGE> 21
interests to another global Note shall be effected through the Depositary (but
not the Trustee or the Custodian) in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depositary therefor. Neither the Trustee nor the Custodian (in such respective
capacities) shall have any responsibility for the transfer and exchange of
beneficial interests in such global Note that does not involve the issuance of a
definitive Note or the transfer of interests to another global Note.
At any time at the request of the beneficial holder of an interest in a
global Note, such beneficial holder shall be entitled to obtain a definitive
Note upon written request to the Trustee and the Custodian in accordance with
the standing instructions and procedures existing between the Depositary and the
Custodian for the issuance thereof. Upon receipt of any such request, the
Trustee or the Custodian, at the direction of the Trustee, shall cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of the global Note
to be reduced and, following such reduction, the Company shall execute and the
Trustee shall authenticate and make available for delivery to such beneficial
holder (or its nominee) a Note or Notes in the appropriate aggregate principal
amount in the name of such beneficial holder (or its nominee) and bearing such
restrictive legends as may be required by this Indenture.
Any transfer of a beneficial interest in a global Note that cannot be
effected through book-entry settlement must be effected by the delivery to the
transferee (or its nominee) of a definitive Note or Notes registered in the name
of the transferee (or its nominee) on the books maintained by the Trustee. With
respect to any such transfer, the Trustee or the Custodian, at the direction of
the Trustee, shall cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Custodian, the aggregate
principal amount of the global Note to be reduced and, following such reduction,
the Company shall execute and the Trustee shall authenticate and make available
for delivery to the transferee (or such transferee's nominee, as the case may
be), a definitive Note or Notes in the appropriate aggregate principal amount in
the name of such transferee (or its nominee) and bearing such restrictive
legends as may be required by this Indenture. As a condition to such transfer,
if such transfer is made to an Accredited Investor, the Trustee or the
Custodian, at the direction of the Trustee, shall request such representations
and agreements relating to the restrictions on transfer of such Note or Notes
from such transferee (or such transferee's nominee) substantially in the form as
set forth in Exhibit D hereto and as the Trustee (or the Custodian) may
otherwise reasonably require.
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Any transfer of a definitive Note or Notes must be effected by the
delivery to the transferee (or its nominee) of a definitive Note or Notes
registered in the name of the transferee (or its nominee) on the books
maintained by the Trustee. With respect to any such transfer, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the transferee (or such transferee's nominee, as the case may be), a definitive
Note or Notes in the appropriate aggregate principal amount in the name of such
transferee (or its nominee) and bearing such restrictive legends as may be
required by this Indenture. As a condition to such transfer, if such transfer is
made to an Accredited Investor, the Trustee or the Custodian, at the direction
of the Trustee, shall request such representations and agreements relating to
the restrictions on transfer of such Note or Notes from such transferee (or such
transferee's nominee) substantially in the form as set forth in Exhibit D hereto
and as the Trustee (or the Custodian) shall otherwise reasonably require.
(c) So long as the Notes are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Note to a
QIB in accordance with Rule 144A, unless otherwise requested by the transferor,
and upon receipt of the definitive Note or Notes being so transferred, together
with a certificate in the form of Exhibit E hereto from the transferor that the
transferor reasonably believes the transferee is a QIB and is obtaining such
beneficial interest in a transaction meeting the requirements of Rule 144A and
any applicable securities laws of any state of the United States or any other
jurisdiction (or other evidence satisfactory to the Trustee), the Trustee shall
make or direct the Custodian to make, an endorsement on the Restricted Global
Note to reflect an increase in the aggregate principal amount of the Notes
represented by the Restricted Global Note, the Trustee shall cancel such
definitive Note or Notes and cause, or direct the Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of Notes
represented by the Restricted Global Note to be increased accordingly.
So long as the Notes are eligible for book-entry settlement, or unless
otherwise required by law, upon any transfer of a definitive Note in accordance
with Regulation S, if requested by the transferor, and upon receipt of the
definitive Note or Notes being so transferred, together with a certificate in
the form of Exhibit F hereto from the transferor that the transfer was made in
accordance with Rule 903 or 904 of Regulation S under the Securities Act (or
other evidence satisfactory to the Trustee), the Trustee shall make or direct
the Custodian to make, an endorsement on the Regulation S Global Note to reflect
an increase in the aggregate principal amount of the Notes represented by the
Regulation S Global Note, the Trustee
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<PAGE> 23
shall cancel such definitive Note or Notes and cause, or direct the Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal amount of
Notes represented by the Regulation S Global Note to be increased accordingly.
If a holder of a beneficial interest in the Restricted Global Note
wishes at any time to exchange its interest in the Restricted Global Note for an
interest in the Regulation S Global Note, or to transfer its interest in the
Restricted Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Regulation S Global Note, such holder may, subject to
the rules and procedures of the Depositary and to the requirements set forth in
the following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent beneficial interest in the
Regulation S Global Note. Upon receipt by the Trustee, as transfer agent, of (1)
instructions given in accordance with the Depositary's procedures from or on
behalf of a holder of a beneficial interest in the Restricted Global Note,
directing the Trustee (via DWAC), as transfer agent, to credit or cause to be
credited a beneficial interest in the Regulation S Global Note in an amount
equal to the beneficial interest in the Restricted Global Note to be exchanged
or transferred, (2) a written order given in accordance with the Depositary's
procedures containing information regarding the Euroclear or Cedel account to be
credited with such increase and the name of such account, and (3) a certificate
in the form of Exhibit G given by the holder of such beneficial interest stating
that the exchange or transfer of such interest has been made pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act
(or other evidence satisfactory to the Trustee), the Trustee, as transfer agent,
shall promptly deliver appropriate instructions to the Depositary (via DWAC),
its nominee, or the custodian for the Depositary, as the case may be, to reduce
or reflect on its records a reduction of the Restricted Global Note by the
aggregate principal amount of the beneficial interest in such Restricted Global
Note to be so exchanged or transferred from the relevant participant, and the
Trustee, as transfer agent, shall promptly deliver appropriate instructions (via
DWAC) to the Depositary, its nominee, or the custodian for the Depositary, as
the case may be, concurrently with such reduction, to increase or reflect on its
records an increase of the principal amount of such Regulation S Global Note by
the aggregate principal amount of the beneficial interest in such Restricted
Global Note to be so exchanged or transferred, and to credit or cause to be
credited to the account of the person specified in such instructions (who shall
be Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear or Cedel or another agent member of Euroclear or Cedel, or both, as
the case may be, acting for and on behalf of them) a beneficial interest in such
Regulation S Global Note
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<PAGE> 24
equal to the reduction in the principal amount of such Restricted Global Note.
If a holder of a beneficial interest in the Regulation S Global Note
wishes at any time to exchange its interest in the Regulation S Global Note for
an interest in the Restricted Global Note, or to transfer its interest in the
Regulation S Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Restricted Global Note, such holder may, subject to
the rules and procedures of Euroclear or Cedel and the Depositary, as the case
may be, and to the requirements set forth in the following sentence, exchange or
cause the exchange or transfer or cause the transfer of such interest for an
equivalent beneficial interest in such Restricted Global Note. Upon receipt by
the Trustee, as transfer agent, of (l) instructions given in accordance with the
procedures of Euroclear or Cedel and the Depositary, as the case may be, from or
on behalf of a beneficial owner of an interest in the Regulation S Global Note
directing the Trustee, as transfer agent, to credit or cause to be credited a
beneficial interest in the Restricted Global Note in an amount equal to the
beneficial interest in the Regulation S Global Note to be exchanged or
transferred, (2) a written order given in accordance with the procedures of
Euroclear or Cedel and the Depositary, as the case may be, containing
information regarding the account with the Depositary to be credited with such
increase and the name of such account, and (3) prior to the expiration of the
Restricted Period, a certificate in the form of Exhibit H given by the holder of
such beneficial interest and stating that the person transferring such interest
in such Regulation S Global Note reasonably believes that the person acquiring
such interest in the Restricted Global Note is a QIB and is obtaining such
beneficial interest in a transaction meeting the requirements of Rule 144A and
any applicable securities laws of any state of the United States or any other
jurisdiction (or other evidence satisfactory to the Trustee), the Trustee, as
transfer agent, shall promptly deliver (via DWAC) appropriate instructions to
the Depositary, its nominee, or the custodian for the Depositary, as the case
may be, to reduce or reflect on its records a reduction of the Regulation S
Global Note by the aggregate principal amount of the beneficial interest in such
Regulation S Global Note to be exchanged or transferred, and the Trustee, as
transfer agent, shall promptly deliver (via DWAC) appropriate instructions to
the Depositary, its nominee, or the custodian for the Depositary, as the case
may be, concurrently with such reduction, to increase or reflect on its records
an increase of the principal amount of the Restricted Global Note by the
aggregate principal amount of the beneficial interest in the Regulation S Global
Note to be so exchanged or transferred, and to credit or cause to be credited to
the account of the person specified in such instructions a beneficial interest
in the Restricted Global Note equal to the reduction in the principal amount of
the Regulation S Global Note. After the expiration of the Restricted Period, the
certif-
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<PAGE> 25
ication requirement set forth in clause (3) of the second sentence of this
paragraph shall no longer apply to such exchanges and transfers.
If a holder of a definitive Note wishes at any time to exchange its
Note for a beneficial interest in any global Note (or vice versa), or to
transfer its definitive Note to a person who wishes to take delivery thereof in
the form of a beneficial interest in a global Note (or vice versa), such Notes
and beneficial interests may be exchanged or transferred for one another only in
accordance with such procedures as are substantially consistent with the
provisions of the two preceding paragraphs (including the certification
requirements intended to ensure that such exchanges or transfers comply with
Rule 144, Rule 144A or Regulation S, as the case may be) and as may be from time
to time adopted by the Company and the Trustee.
Any beneficial interest in one of the global Notes that is transferred
to a person who takes delivery in the form of an interest in the other global
Note shall, upon transfer, cease to be an interest in such global Note and
become an interest in the other global Note and, accordingly, shall thereafter
be subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other global Note for as long as it remains such an
interest.
Any global Note may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the provisions
of this Indenture as may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the Notes to be
tradeable on the PORTAL Market or as may be required for the Notes to be
tradeable on any market developed for trading of securities pursuant to Rule
144A or required to comply with any applicable law or any regulation thereunder
or with Regulation S or with the rules and regulations of any securities
exchange upon which the Notes may be listed or traded or to conform with any
usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d) to
bear the legend set forth in this Section 2.5(d) (together with any Common Stock
issued upon conversion of the Notes and required to bear the legend set forth in
Section 2.5(e), collectively, the "Restricted Securities") shall be subject to
the restrictions on transfer set forth in this Section 2.5(d), unless such
restrictions on transfer shall have been waived by the written consent of the
Company or removed in accordance with the provisions of Section 2.5(f), and the
holder of each such Restricted Security, by such holder's acceptance thereof,
agrees to be bound by such restrictions on transfer. As used in this Section
2.5(d), the term "transfer" encompasses any
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<PAGE> 26
sale, pledge, transfer or other disposition of any Restricted Security.
Until three years after the later of the original issuance date of any
Note and the last date on which the Company or an Affiliate of the Company was
the owner of such Note, any certificate evidencing such Note (and all securities
issued in exchange therefor or substitution thereof, other than Common Stock, if
any, issued upon conversion thereof, which shall bear the legend set forth in
Section 2.5(e), if applicable) shall bear a legend in substantially the
following form, unless otherwise agreed by the Company (with notice thereof to
the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT PRIOR TO THE DATE THAT IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH HEALTHSOURCE, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE
(THE "RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE, A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THE NOTE EVIDENCED HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO
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<PAGE> 27
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW
YORK, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D)
OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK
OF NEW YORK, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms may, upon satisfaction of the requirements of Section 2.5(f) and
surrender of such Note for exchange to the Note registrar in accordance with the
provisions of this Section 2.5, be exchanged for a new Note or Notes, of like
tenor and aggregate principal amount, which shall not bear the restrictive
legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.5(d)), a global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the global Notes. Initially, the global Notes shall
be issued to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Trustee as Custodian for Cede
& Co.
If at any time the Depositary for the global Notes notifies the Company
that it is unwilling or unable to continue as Depositary for such Notes, the
Company may appoint a successor Depositary with respect to such Notes. If a
successor Depositary for the Notes is not appointed by the Company within 90
days after the Company receives such notice, the Company shall execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, shall authenticate and make available for delivery, Notes in
definitive form, in an aggregate principal amount equal to the principal amount
of the global Notes in exchange for such global Notes.
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<PAGE> 28
Definitive Notes issued in exchange for all or a part of a global Note
pursuant to this Section 2.5(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. Upon
execution and authentication, the Trustee shall make available for delivery such
definitive Notes to the persons in whose names such definitive Notes are so
registered.
At such time as all interests in global Notes have been redeemed,
converted, repurchased or canceled, such global Notes shall be, upon receipt
thereof, canceled by the Trustee in accordance with standing procedures and
instructions existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in a global Note is exchanged for
definitive Notes, redeemed, converted, canceled or transferred to a transferee
who receives definitive Notes therefor or any definitive Note is exchanged or
transferred for part of a global Note, the principal amount of such global Note
shall, in accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be reduced or increased, as the case
may be, and an endorsement shall be made on such global Note by the Trustee or
the Custodian, at the direction of the Trustee, to reflect such reduction or
increase.
The Company and the Trustee may for all purposes, including the making
of payments due on the Notes, deal with the Depositary as the authorized
representative of the Noteholders for the purposes of exercising the rights of
Noteholders hereunder. The rights of the owner of any beneficial interest in a
global Note shall be limited to those established by law and agreements between
such owners and depository participants or Euroclear and Cedel; provided that no
such agreement shall give any rights to any person against the Company or the
Trustee without the written consent of the parties so affected. Multiple
requests and directions from and votes of, the Depositary as holder of notes in
book entry form with respect to any particular matter shall not be deemed
inconsistent to the extent they do not represent an amount of notes in excess of
those held in the name of the Depositary or its nominee.
(e) Until three years after the later of the original issuance date of
any Note (other than any Note represented by the Regulation S Global Note) and
the last date on which the Company or an Affiliate of the Company was the owner
of such Note, any stock certificate representing Common Stock issued upon
conversion of such Note shall bear a legend in substantially the following form,
unless otherwise agreed by the Company (with written notice thereof to the
Trustee and any transfer agent for the Common Stock):
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<PAGE> 29
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT PRIOR TO THE DATE
THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED
AND THE LAST DATE ON WHICH HEALTHSOURCE, INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 OF THE SECURITIES ACT) OF THE COMPANY
WAS THE OWNER OF THE NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK
EVIDENCED HEREBY WAS ISSUED OR THE COMMON STOCK EVIDENCED HEREBY (THE
"RESTRICTION TERMINATION DATE"), (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER, FURNISHES TO
THE BANK OF NEW YORK, AS TRANSFER AGENT, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE COMMON STOCK EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM SUCH TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT; (2) PRIOR TO ANY SUCH TRANSFER PURSUANT
TO CLAUSE (C), (D) OR (E) ABOVE, IT WILL FURNISH TO THE BANK OF NEW YORK,
AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS
LEGEND WILL BE REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms may, upon satisfaction of the
requirements of Section 2.5(f) and surrender of the certificates representing
such shares of Common Stock for exchange in accordance with the procedures of
the transfer agent for the Common Stock, be exchanged for a new certificate or
certificates for a like aggregate number of shares
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<PAGE> 30
of Common Stock, which shall not bear the restrictive legend required by this
Section 2.5(e).
(f) Upon any sale or transfer of any Restricted Security (including any
interest in a global Note) (i) that is effected pursuant to an effective
registration statement under the Securities Act, (ii) in the case of the Common
Stock only, that is effected pursuant to Rule 144 as promulgated under the
Securities Act as determined by counsel to the Company or the Trustee or (iii)
in connection with which the Trustee (or transfer agent for the Common Stock, in
the case of shares of Common Stock) receives certificates and other information
(including an Opinion of Counsel, if requested) reasonably acceptable to the
Company and the Trustee (or such transfer agent, as the case may be) to the
effect that such security shall no longer be subject to the resale restrictions
under federal and state securities laws, then (A) in the case of a Restricted
Security in definitive form, the Note registrar or co-registrar (or transfer
agent, in the case of Common Stock) shall permit the holder thereof to exchange
such Restricted Security for a security that does not bear the legends set forth
in Section 2.5(d) or 2.5(e), as applicable, and shall rescind any such
restrictions on transfer and (B) in the case of Restricted Securities
represented by a global Note, such Note shall no longer be subject to the
restrictions contained in the legend set forth in Section 2.5(d) (but still
subject to the other provisions hereof). In addition, any Note (or security
issued in exchange or substitution therefor) or shares of Common Stock issued
upon conversion of any Note, in either case, as to which the restrictions on
transfer described in the legends set forth in Section 2.5(d) and 2.5(e),
respectively, have expired by their terms, may, upon surrender thereof (in
accordance with the terms of this Indenture in the case of Notes) together with
such certifications and other information (including an Opinion of Counsel
having substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Company, addressed to the Company and the Trustee
and in a form acceptable to the Company, to the effect that the transfer of such
Restricted Security has been made in compliance with Rule 144 or such successor
provision) acceptable to the Company and the Trustee (or transfer agent, as the
case may be) as either of them may reasonably require, be exchanged for a new
Note or Notes of like tenor and aggregate principal amount (in the case of
Notes), or a new certificate or certificates for a like aggregate number of
shares of Common Stock (in the case of Common Stock), or a new certificate or
other instrument of like tenor and amount (in the case of securities issued in
exchange or substitution for Notes), which shall not bear the restrictive
legends set forth in Sections 2.5(d) and 2.5(e).
(g) Each holder of a Note agrees to indemnify the Company and the
Trustee against any liability that may result
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<PAGE> 31
from the transfer, exchange or assignment of such holder's Note in violation of
any provision of this Indenture and/or applicable U.S. federal or state
securities law.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request, the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and make available for
delivery a new Note bearing a number not contemporaneously outstanding in
exchange and substitution for the mutilated Note or in lieu of and in
substitution for the Note so destroyed, lost or stolen. The Company may charge
such applicant for the expenses of the Company in replacing a Note. In every
case the applicant for a substituted Note shall furnish to the Company, to the
Trustee and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless from any
loss, liability, cost or expense caused by or connected with such substitution,
and in every case of destruction, loss or theft, the applicant shall also
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note that has matured or is about to mature or has been
called for redemption or is about to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof, except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be required by them
to save each of them harmless from any loss, liability, cost or expense caused
by or connected with such substitution, and in case of destruction, loss or
theft, evidence satisfactory to the Company, the Trustee and, if applicable, any
paying agent or conversion agent of the destruction, loss or theft of such Note
and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 in lieu of any Note that is destroyed, lost or stolen shall constitute an
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Note
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<PAGE> 32
shall be enforceable by anyone, and shall be entitled to all the benefits of
(but shall be subject to all the limitations set forth in) this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
To the extent permitted by law, all Notes shall be held and owned upon the
express condition that the foregoing provisions are exclusive with respect to
the replacement or payment or conversion of mutilated, destroyed, lost or stolen
Notes and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment or conversion of negotiable instruments or other
securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and make available for delivery temporary Notes (printed or
lithographed). Temporary Notes shall be issuable in any authorized denomination
and shall be substantially in the form of the definitive Notes but with such
omissions, insertions and variations as may be appropriate for temporary Notes,
all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Trustee or such authenticating
agent upon the same conditions and in substantially the same manner, and with
the same effect, as the definitive Notes. Without unreasonable delay the Company
shall execute and deliver to the Trustee or such authenticating agent definitive
Notes (other than in the case of Notes in global form) and thereupon any or all
temporary Notes (other than any such global Note) may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to Section
4.2 and the Trustee or such authenticating agent shall authenticate and make
available for delivery in exchange for such temporary Notes an equal aggregate
principal amount of definitive Notes. Such exchange shall be made by the Company
at its own expense and without any charge therefor. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits and
subject to the same limitations under this Indenture as definitive Notes
authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it or, if surrendered to the Trustee, shall be promptly canceled by
it and no Notes shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Indenture. The Trustee shall return canceled Notes
to the Company. If the Company shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of
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<PAGE> 33
the indebtedness represented by such Notes unless and until the same are
delivered to the Trustee for cancellation.
Section 2.9 CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Notes are not redeemable at the
option of the Company prior to March 1, 1999. At any time on or after that date,
the Notes may be redeemed at the Company's option, upon notice as set forth in
Section 3.2, in whole at any time or in part from time to time, at the optional
redemption prices set forth in the forms of Note attached as Exhibits A, B and
C, together with accrued interest to the date fixed for redemption.
Section 3.2 Notice of Redemption; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and, in the case of any redemption pursuant to Section 3.1, it or, at
its request accompanied by the proposed form of notice of redemption (which must
be received by the Trustee at least ten days prior to the date the Trustee is
requested to give notice as described below, unless a shorter period is agreed
to by the Trustee), the Trustee in the name of and at the expense of the
Company, shall publish a notice in the Wall Street Journal and mail or cause to
be mailed a notice of such redemption at least 30 and not more than 60 days
prior to the date fixed for redemption to the holders of Notes so to be redeemed
as a whole or in part at their last addresses as the same appear on the Note
register, provided that if the Company shall give such notice, it shall also
give such notice, and notice of the Notes to be redeemed, to the Trustee. Such
mailing shall be by first class mail. The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Note designated for
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<PAGE> 34
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
Each such notice of redemption shall identify the Notes to be redeemed
(including CUSIP numbers), specify the aggregate principal amount of Notes to be
redeemed, the date fixed for redemption, the redemption price at which Notes are
to be redeemed, the place or places of payment, that payment will be made upon
presentation and surrender of such Notes, that interest accrued to the date
fixed for redemption shall be paid as specified in said notice and that on and
after said date, interest thereon or on the portion thereof to be redeemed shall
cease to accrue. Such notice shall also state the current Conversion Price and
the date on which the right to convert such Notes or portions thereof into
Common Stock shall expire. If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed. In case any Note
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof shall be issued.
On or prior to the Business Day prior to the redemption date specified
in the notice of redemption given as provided in this Section 3.2, the Company
shall deposit with the Trustee or with one or more paying agents (or, if the
Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 4.4) an amount of money sufficient to redeem on the
redemption date all the Notes so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued interest to the date fixed for
redemption. If any Note called for redemption is converted pursuant hereto, any
money deposited with the Trustee or any paying agent or so segregated and held
in trust for the redemption of such Note shall be paid to the Company upon its
request or, if then held by the Company, shall be discharged from such trust. If
fewer than all the Notes are to be redeemed, the Company shall give the Trustee
written notice in the form of an Officers' Certificate not fewer than 45 days
(or such shorter period of time as may be acceptable to the Trustee) prior to
the redemption date as to the aggregate principal amount of Notes to be
redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed (in principal amounts of
$1,000 or integral multiples thereof), by lot or, in its discretion, on a pro
rata basis. If any Note selected for partial redemption is converted in part
after such selection, the converted portion of such Note shall be deemed (so far
as may be) to be the portion to be selected for redemption. The Notes (or
portions thereof) so selected shall be deemed duly
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<PAGE> 35
selected for redemption for all purposes hereof, notwithstanding that any such
Note is converted as a whole or in part before the mailing of the notice of
redemption.
Upon any redemption of less than all Notes, the Company and the Trustee
may treat as outstanding any Notes surrendered for conversion during the period
of 15 days next preceding the mailing of a notice of redemption and need not
treat as outstanding any Note authenticated and delivered during such period in
exchange for the unconverted portion of any Note converted in part during such
period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest thereon accrued to the date fixed for redemption, and on
and after said date (unless the Company shall default in the payment of such
Notes at the redemption price, together with interest thereon accrued to said
date), interest on the Notes or portion of Notes so called for redemption shall
cease to accrue, and such Notes shall cease after the close of business on the
Business Day next preceding the date fixed for redemption to be convertible into
Common Stock and, except as provided in Sections 7.6 and 12.4, to be entitled to
any benefit or security under this Indenture, and the holders thereof shall have
no right in respect of such Notes except the right to receive the redemption
price thereof and unpaid interest thereon to the date fixed for redemption. On
presentation and surrender of such Notes at a place of payment in said notice
specified, the said Notes or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; provided that any
semi-annual payment of interest becoming due on the date fixed for redemption
shall be payable to the holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount equal to the unredeemed portion of
the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any
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Event of Default other than under Section 6.1(a) or (b), a Responsible Officer
of the Trustee has actual knowledge. If any Note called for redemption shall not
be so paid upon surrender thereof for redemption, the principal and premium, if
any, shall, until paid or duly provided for, bear interest from the date fixed
for redemption at the rate borne by the Note and such Note shall remain
convertible into Common Stock until the principal and premium, if any, shall
have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or prior to the Business Day prior to the date
fixed for redemption, an amount not less than the applicable redemption price,
together with interest accrued to the date fixed for redemption, of such Notes.
Notwithstanding anything to the contrary contained in this Article III, the
obligation of the Company to pay the redemption price of such Notes, together
with interest accrued to the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which shall be filed
with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article XIV) surrendered by such purchasers for conversion, all as
of the time immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be deemed to have been
extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Notes. Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Notes shall increase or otherwise affect any of
the powers, duties, responsibilities or obligations of the Trustee as set forth
in this Indenture, and the Company agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes 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.
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Section 3.5 Purchase of Notes Upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each holder of
Notes shall have the right to require that the Company repurchase such holder's
Notes in whole or in part in integral multiples of $1,000 at a purchase price
(the "Change of Control Purchase Price") in cash in an amount equal to 101% of
the principal amount of such Notes, plus accrued and unpaid interest thereon, if
any, to the purchase date (the "Change of Control Purchase Date") pursuant to
the offer described below (the "Change of Control Offer") and in accordance with
the other procedures set forth in this Indenture.
(b) Within 30 days following any Change of Control, the Company shall
publish a notice in the Wall Street Journal, notify the Trustee thereof and give
written notice of such Change of Control to each holder of Notes, by first-class
mail, postage prepaid, at the Noteholder's address appearing in the Note
register, stating, among other things, (i) that a Change of Control has
occurred, (ii) the Change of Control Purchase Price, (iii) the Change of Control
Purchase Date (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act), (iv) that any
Note not tendered shall continue to accrue interest and to have all of the
benefits of this Indenture, (v) that, unless the Company defaults in the payment
of the Change of Control Purchase Price, any Notes accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest after the Change
of Control Purchase Date and (vi) certain other procedures that a holder of
Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.
(c) The Company shall comply with the applicable tender offer rules,
including Rule 13e-4 under the Exchange Act, and any other applicable securities
laws or regulations in connection with a Change of Control Offer, and any
provisions of this Indenture that conflict with such laws shall be deemed to be
superseded by the provisions of such laws.
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
Section 4.1 Payment of Principal, Premium and Interest. The Company
covenants and agrees that it shall duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any
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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 Notes entitled thereto as
they shall appear on the Note register; provided that, with respect to any
holder of Notes with an aggregate principal amount equal to or in excess of
$5,000,000, at the request (such request to include appropriate wire
instructions) of such holder in writing to the Trustee, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds. An
installment of principal or interest shall be considered paid on the date due if
the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company
or any Affiliate of any of them) holds on that date money designated for and
sufficient to pay the installment of principal or interest and is not prohibited
from paying such money to the holders of the Notes pursuant to the terms of this
Indenture.
Section 4.2 Maintenance of Office or Agency. The Company shall maintain
in the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated by the Trustee. If at any time the Company shall fail to maintain any
such 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 of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar and conversion agent and each of the Corporate Trust Office of
the Trustee and the office of The Bank of New York in the Borough of Manhattan,
The City of New York, as one such office or agency of the Company for the
purposes set forth in the first paragraph of this Section 4.2.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 7.11(a) and the
third paragraph of Section 7.12.
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Section 4.3 Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
shall appoint, in the manner provided in Section 7.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 4.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the Trustee,
or if the Trustee shall appoint such a paying agent, the Company or the Trustee,
as the case may be, shall cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 4.4:
(1) that it shall hold all sums held by it as such agent for the
payment of the principal of, premium, if any, or interest on the Notes
(whether such sums have been paid to it by the Company or by any other
obligor on the Notes) in trust for the benefit of the holders of the Notes;
(2) that it shall give the Trustee notice of any failure by the Company
(or by any other obligor on the Notes) to make any payment of the principal
of, premium, if any, or interest on the Notes when the same shall be due and
payable; and
(3) that at any time during the continuance of an Event of Default,
upon request of the Trustee, it shall forthwith pay to the Trustee all sums
so held in trust.
The Company shall, before each due date of the principal of, premium,
if any, or interest on the Notes, deposit with the paying agent a sum sufficient
to pay such principal, premium, if any, or interest, and (unless such paying
agent is the Trustee) the Company shall promptly notify the Trustee of any
failure to take such action.
(b) If the Company shall act as its own paying agent, it shall, on or
before each due date of the principal of, premium, if any, or interest on the
Notes, set aside, segregate and hold in trust for the benefit of the holders of
the Notes a sum sufficient to pay such principal, premium, if any, or interest
so becoming due and shall notify the Trustee of any failure to take such action
and of any failure by the Company (or any other obligor under the Notes) to make
any payment of the principal of, premium, if any, or interest on the Notes when
the same shall become due and payable.
(c) Anything in this Section 4.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for
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any other reason, pay or cause to be paid to the Trustee all sums held in trust
by the Company or any paying agent hereunder as required by this Section 4.4,
such sums to be held by the Trustee upon the trusts herein contained and upon
such payment by the Company or any paying agent to the Trustee, the Company or
such paying agent shall be released from all further liability with respect to
such sums.
(d) Anything in this Section 4.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.4 is subject to
Sections 12.3 and 12.4.
Section 4.5 Corporate Existence. Subject to Article XI, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
Section 4.6 Rule 144A Information Requirement. During the three-year
period following the original issuance date of any Note and during the
three-year period following the last date on which the Company or an Affiliate
of the Company was the owner of any Note (or shares of Common Stock issued upon
conversion of any Note), if the Company is subject neither to Section 13 nor
Section 15(d) of the Exchange Act, the Company shall at the written request of
any holder or beneficial holder of such Note (or shares of Common Stock issued
upon conversion of Notes) provide to such holder or beneficial holder of such
Note (or shares of Common Stock issued upon conversion of Notes) and any
prospective transferee designated by such holder or beneficial holder of such
Note (or shares of Common Stock issued upon conversion of Notes) such
information, if any, required by Rule 144A(d)(4) under the Securities Act (so
long as such information is required to permit such transfer under Rule 144A).
Section 4.7 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 that would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Notes as contemplated herein, wherever enacted, now or at any time hereafter
in force, or that 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 shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
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Section 4.8 Compliance Statement; Notice of Defaults
(a) The Company will deliver to the Trustee annually, commencing April
30, 1996, a certificate, from its principal executive officer, principal
financial officer or principal accounting officer, stating whether or not to the
best knowledge of the signer thereof the Company is in compliance (without
regard to periods of grace or notice requirements) with all conditions and
covenants under this Indenture, and if the Company shall not be in compliance,
specifying such non-compliance and the nature and status thereof of which such
signer may have knowledge.
(b) The Company shall file with the Trustee written notice of the
occurrence of any default or Event of Default within ten days of its becoming
aware of any such default or Event of Default.
ARTICLE V
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY
Section 5.1 Noteholders' 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 holders of Notes and shall otherwise comply with
Trust Indenture Act Section 312(a). If the Trustee is not the Notes registrar,
the Company shall furnish to the Trustee on or before at least seven Business
Days preceding each interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
reasonably may require of the names and addresses of holders of Notes, and the
Company shall otherwise comply with Trust Indenture Act Section 312(a).
Section 5.2 Reports by Company. The Company shall deliver to the
Trustee within 15 days after it files the same with the Commission, copies of
all reports and information (or copies of such portions of any of the foregoing
as the Commission may by its rules and regulations prescribe), if any, which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act or pursuant to the immediately following sentence. So long
as at least $5,000,000 aggregate principal amount of Notes remain outstanding,
the Company shall file with the Commission such reports as may be required
pursuant to Section 13 of the Exchange Act in respect of a security registered
pursuant to Section 12 of the Exchange Act, regardless of whether the Company is
otherwise required to file such reports. If the Company is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act (or otherwise
required to file reports pursuant to the immediately
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preceding sentence), the Company shall deliver to the Trustee, within 15 days
after it would have been required to file such information with the Commission
were it required to do so, annual and quarterly financial statements, including
any notes thereto (and, in the case of a fiscal year end, an auditors' report by
an independent certified public accounting firm of established national
reputation), and a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," in each case substantially equivalent to that which
it would have been required to include in such quarterly or annual reports,
information, documents or other reports if it had been subject to the
requirements of Section 13 or 15(d) of the Exchange Act. The Company shall
provide copies of the foregoing materials to the Noteholders to the extent
required by the Trust Indenture Act once this Indenture has been qualified. The
Company shall also comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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 the principal of or premium, if any, on
the Notes when due at maturity, upon redemption or otherwise, including
failure by the Company to purchase the Notes when required under Section 3.5
(whether or not such payment shall be prohibited by the subordination
provisions of this Indenture); or
(b) default in the payment of any installment of interest on the Notes
as and when the same shall become due and payable (whether or not such
payment shall be prohibited by the subordination provisions of this
Indenture), and continuance of such default for a period of 30 days; or
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(c) a failure on the part of the Company duly to observe or perform any
other covenants or agreements on the part of the Company in this Indenture
(other than a default in the performance or breach of a covenant or
agreement that is specifically dealt with elsewhere in this Section 6.1)
that continues for a period of 90 days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee, by the holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding determined
in accordance with Section 8.4; or
(d) 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
(e) 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 90 consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 6.1(d) or (e)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 8.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of,
premium, if any, on the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 6.1(d) or (e) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately due and payable. The
foregoing provision is subject to the conditions that if, at any time after
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the principal of the Notes 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 Notes and the principal of and premium, if any, on any and all
Notes that shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, 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, premium, if
any, and accrued interest on Notes that shall have become due by acceleration,
shall have been cured or waived pursuant to Section 6.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes 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 thereto. The Company shall notify a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes and the Trustee shall be restored respectively
to their several positions and rights hereunder, and all rights, remedies and
powers of the Company, the holders of Notes and the Trustee shall continue as
though no such proceeding had been taken.
Section 6.2 Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of 30 days,
or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall have become due
and payable, whether at maturity of the Notes or in connection with any
redemption, by declaration or otherwise, then, upon demand of the Trustee, the
Company shall pay to the Trustee, for the benefit of the holders of the Notes,
the whole amount that then shall have become due and payable on all such Notes
for principal premium, if any, or interest, or both, as the case may be, with
interest upon the overdue principal, premium, if any, and (to the extent that
payment of such
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interest is enforceable under applicable law) upon the overdue installments of
interest at the rate borne by the Notes; 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 Notes
to the registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Notes 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 Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes 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 proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes 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 Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property and to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same after the deduction of
any amounts due the Trustee under Section 7.7; and any receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the
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Noteholders to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property that the holders
of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
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 Notes, and it shall not be necessary to make any holders of the
Notes 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 Notes 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;
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Second: Subject to the provisions of Article XV, in case the principal
of the outstanding Notes shall not have become due and be unpaid, to the
payment of interest on the Notes 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 Notes, such payments to be made ratably to
the persons entitled thereto; and
Third: Subject to the provisions of Article XV, in case the principal
of the outstanding Notes shall have become due, by declaration or otherwise,
and be unpaid, to the payment of the whole amount then holding and unpaid
upon the Notes for principal, premium, if any, and interest, with interest
on the overdue principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest at the rate borne by the Notes; and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon the
Notes, then to the payment of such principal, 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
Note over any other Note, ratably to the aggregate of such principal and
premium, if any, and accrued and unpaid interest.
Section 6.4 Proceedings by Noteholder. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 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; it being understood and intended, and being expressly covenanted by
the taker and holder of every Note with every other taker and holder and the
Trustee, that no one or more holders of Notes shall have any right in any
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manner whatever by virtue of or by availing of any provision of this Indenture
to affect, disturb or prejudice the rights of any other holder of Notes, 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 Notes (except as
otherwise provided herein). For the protection and enforcement of this Section
6.4, each and every Noteholder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of, premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder
except as otherwise set forth herein.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, 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 2.6, all powers and remedies given by this Article VI to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of such powers and remedies or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes 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
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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 Noteholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Noteholders.
Section 6.7 Direction of Proceedings and Waiver of Defaults by Majority
of Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding (determined in accordance with Section 8.4) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided 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 that is not inconsistent with
such direction. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding (determined in accordance with Section 8.4) may on
behalf of the holders of all of the Notes 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 Notes, (ii) a failure
by the Company to convert any Notes into Common Stock or (iii) a default in
respect of a covenant or provisions hereof that under Article X cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Upon any such waiver, the Company, the Trustee and the holders of
the Notes 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 Notes 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 Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of a default, mail to all Noteholders, as the names and addresses
of such holders appear upon the Note register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; and provided that, except in the case of default in
the payment of the principal of, premium, if any, or interest on any of the
Notes, the Trustee shall be protected in withholding such notice if and so long
as a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the interests of
the Noteholders.
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Section 6.9 Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, 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 6.9
shall not apply to any suit instituted by the Trustee, to any suit instituted by
any Noteholder or group of Noteholders holding in the aggregate more than 10% in
principal amount of the Notes at the time outstanding determined in accordance
with Section 8.4 or to any suit instituted by any Noteholder for the enforcement
of the payment of the principal of, premium, if any, or interest on any Note on
or after the due date expressed in such Note or to any suit for the enforcement
of the right to convert any Note in accordance with the provisions of Article
XIV.
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.1 Duties and Responsibilities 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 person would exercise
or use under the circumstances in the conduct of such person's 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; provided that in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to
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examine the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
(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 an officer of the Trustee 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.
(e) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
Section 7.2 Reports by Trustee to Holders. Within 60 days after each
May 15 commencing with the May 15 following the date of this Indenture, the
Trustee shall, if required by the Trust Indenture Act, mail to each Noteholder a
brief report dated as of such May 15 that complies with Section 313(a) of the
Trust Indenture Act. The Trustee also shall comply with Sections 313(b) and
313(c) of the Trust Indenture Act.
The Company shall promptly notify the Trustee in writing if the Notes
become listed or delisted on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Noteholders shall
be mailed to the Company and, to the extent required by Section 5.2 hereof and
Section 313(d) of the Trust Indenture Act, filed with the Commission and each
stock exchange, if any, on which the Notes are listed.
Section 7.3 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 7.1:
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(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed or
required by the Trust Indenture Act); and any resolution of the Board of
Directors may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) The Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;
(d) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due
care hereunder; no Depositary, Custodian or paying agent who is not the
Trustee shall be deemed an agent of the Trustee, and the Trustee (in its
capacity as Trustee) shall not be responsible for any act or omission by any
such Depositary, Custodian or paying agent;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request or direction
of any of the holders pursuant to this Indenture unless such holders have
offered the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that would be incurred by it in compliance with
such request or direction.
(f) 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 that it
believes to be authorized or within its rights or powers;
(g) In connection with any request to transfer or exchange any Note,
the Trustee may request a direction (in the form of an Officers'
Certificate) from the Company and an Opinion of Counsel with respect to
compliance with any restrictions on transfer or exchange imposed by this
Indenture, the Securities Act, other applicable law or the rules
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and regulations of any exchange on which the Notes or the capital stock may
be traded, and the Trustee may rely and shall be protected in acting upon
such direction and in accordance with such Officers' Certificate and Opinion
of counsel;
(h) The Trustee may rely and shall be fully protected in acting upon
the determination and notice by the Company of the Conversion Price; and
(i) The Trustee shall not be deemed to have knowledge of any Event of
Default or other fact or event upon the occurrence of which it may be
required to take action hereunder unless one of its Responsible Officers has
actual knowledge thereof.
Section 7.4 No Responsibility for Recitals, Etc. The recitals contained
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 7.5 Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or any Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 7.6 Monies to Be Held in Trust. Subject to the provisions of
Section 12.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed to in writing from time to time by the Company and the Trustee.
Section 7.7 Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as the Company and the Trustee shall from time to
time agree in writing, for all services rendered by it hereunder in any capacity
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Company shall pay or
reimburse the Trustee upon its request for
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all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify each of the Trustee or any predecessor
Trustee in any capacity under this Indenture and its agents and any
authenticating agent for, and to hold them harmless against, any and all loss,
liability, damage, claim or expense, including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or bad faith on the part
of the Trustee or such agent or authenticating agent, as the case may be, and
arising out of or in connection with the acceptance or administration of this
trust or in any other capacity hereunder, including the costs and expenses of
defending themselves against any claim of liability in the premises. The
obligations of the Company under this Section 7.7 to compensate or indemnify the
Trustee and to pay or reimburse the Trustee for expenses, disbursements and
advances shall be secured by a lien prior to that of the Notes upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the holders of particular Notes. The obligation of the
Company under this Section shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 6.1(d) hereof or Section 6.1(e) hereof,
the expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
Section 7.8 Officers' Certificate as Evidence. Except as otherwise
provided in Section 7.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee, and such Officers' Certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
Section 7.9 Conflicting Interests of Trustee. In the event that the
Trust Indenture Act is applicable hereto, and if the Trustee has or shall
acquire a conflicting interest within the meaning of Section 310(b) of the Trust
Indenture Act and
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there exists an Event of Default hereunder (exclusive of any period of grace or
requirement of notice), the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
Section 7.10 Eligibility of Trustee. There shall at all times be a
Trustee hereunder that shall be a person that satisfied the requirements of
Trust Indenture Act Section 310(a)(1) and Section 310(a)(5) and that has a
combined capital and surplus of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article VII.
Section 7.11 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written notice of such
resignation to the Company; and the Company shall mail, or cause to be mailed,
notice thereof to the holders of Notes at their addresses as they shall appear
on the Note register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 7.9 after written
request therefor by the Company or by any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months; or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 7.10 and shall fail to resign after written request
therefor by the Company or by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed, or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
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then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee or any Noteholder who
has been a bona fide holder of a Note or Notes for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and nominate a
successor trustee, which shall be deemed appointed as successor trustee unless
within ten days after notice to the Company of such nomination the Company
objects thereto, in which case the Trustee so removed or any Noteholder, upon
the terms and conditions and otherwise as provided in the next paragraph, may
petition any court of competent jurisdiction for an appointment of a successor
trustee.
If no successor trustee shall have been so appointed and have accepted
appointment within 60 days after removal or the mailing of such notice of
resignation to the Noteholders, the Trustee resigning or being removed may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or, in the case of either resignation or removal, any Noteholder who
has been a bona fide holder of a Note or Notes for at least six months may, on
behalf of himself and all others similarly situated, petition any such court for
the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 7.11 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.12.
Section 7.12 Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 7.11 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but on the written request of the Company
or of
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the successor trustee, the Trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 7.7, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the Trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such, except
for funds held in trust for the benefit of holders of particular Notes, to
secure any amounts then due it pursuant to the provisions of Section 7.7.
No successor trustee shall accept appointment as provided in this
Section 7.12 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 7.9 and eligible under the
provisions of Section 7.10.
Upon acceptance of appointment by a successor trustee as provided in
this Section 7.12, the Company shall mail or cause to be mailed notice of the
succession of such Trustee hereunder to the holders of Notes at their addresses
as they shall appear on the Note register. If the Company fails to mail such
notice within ten days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 7.13 Successor, by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor to
the Trustee hereunder, provided such corporation shall be qualified under the
provisions of Section 7.9 and eligible under the provisions of Section 7.10
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
Section 7.14 Limitation on Rights of Trustee as Creditor. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Notes) and the Trust Indenture Act is applicable hereto, the Trustee
shall be subject to the provisions of Section 311(a) or, if applicable, Section
311(b) of the Trust Indenture Act regarding the collection of the claims against
the Company (or any such other obligor).
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ARTICLE VIII
CONCERNING THE NOTEHOLDERS
Section 8.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes 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 Noteholders
in person or by agent or proxy appointed in writing, (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders 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 Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than 15 days
prior to the date of commencement of solicitation of such action.
Section 8.2 Proof of Execution by Noteholders. Subject to the
provisions of Sections 7.1, 7.2 and 9.5, proof of the execution of any
instrument by a Noteholder 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 Notes shall be proved by the Note register or by a certificate of the
Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 9.5.
Section 8.3 Who Are Deemed Absolute Owners. The Company, the Trustee,
any paying agent, any conversion agent and any Note registrar may deem the
person in whose name such Note shall be registered upon the books of the Company
to be, and may treat him as, the absolute owner of such Note (whether or not
such Note 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 Note, for conversion of
such Note and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any conversion agent nor any Note 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
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paid, effectual to satisfy and discharge the liability for monies payable upon
any such Note.
The Depositary shall be deemed to be the owner of any global Note for
all purposes, including receipt of notices to Noteholders and payment of
principal of, premium, if any, and interest on the Notes. None of the Company,
the Trustee (in its capacity as Trustee), any paying agent or the Note registrar
(or co-registrar) shall have any responsibility for any aspect of the records
relating to or payments made on account of beneficial interests of a global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests; provided that the foregoing shall not apply to
the Trustee or any other person acting in its capacity as Custodian.
Section 8.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes that
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action, only Notes that a Responsible Officer actually knows are so owned shall
be so disregarded. Notes so owned that have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 8.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledger's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and subject to Section 7.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose of
any such determination.
Section 8.5 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 Notes specified in this Indenture in connection
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with such action, any holder of a Note that is shown by the evidence to be
included in the Notes the holders of which have consented to such action may, by
filing written notice with the Trustee at its Corporate Trust Office and upon
proof of holding as provided in Section 8.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE IX
NOTEHOLDERS' MEETINGS
Section 9.1 Purposes for Which Meetings May be Called. A meeting of
Noteholders 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:
(i) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of Article VI;
(ii) to remove the Trustee and appoint a successor trustee pursuant to
the provisions of Article VII;
(iii) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.2; or
(iv) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of the Notes under
any other provisions of this Indenture or under applicable law.
Section 9.2 Manner of Calling Meetings; Record Date. The Trustee may at
any time call a meeting of Noteholders to take any action specified in Section
9.1, to be held at such time and at such place in the City of New York, State of
New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed not less
than 30 nor more than 60 days prior to the date fixed for the meeting to such
Noteholders at their addresses as such addresses appear in the Note register.
For the purpose of determining Noteholders entitled to notice of any meeting of
Noteholders, the Trustee shall fix in advance a
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date as the record date for such determination, such date to be a business day
not more than ten days prior to the date of the mailing of such notice as
hereinabove provided. Only persons in whose name any Note shall be registered in
the Note register at the close of business on a record date fixed by the Trustee
as aforesaid, or by the Company or the Noteholders as provided in Section 9.3,
shall be entitled to notice of the meeting of Noteholders with respect to which
such record date was so fixed.
Section 9.3 Call of Meeting by Company or Noteholders. In case at any
time the Company, pursuant to a resolution of its Board of Directors or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding shall have requested the Trustee to call a meeting of Noteholders to
take any action authorized in Section 9.1 by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed notice of such meeting within 20 days after
receipt of such request, then the Company or the holders of Notes in the amount
above specified, as the case may be, may fix the record date with respect to,
and determine the time and the place 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. The record date fixed as provided in the preceding
sentence shall be set forth in a written notice to the Trustee and shall be a
business day not less than 15 nor more than 20 days after the date on which the
original request is sent to the Trustee.
Section 9.4 Who May Attend and Vote at Meetings. Only persons entitled
to receive notice of a meeting of Noteholders and their respective proxies duly
appointed by an instrument in writing shall be entitled to vote at such meeting.
The only persons who shall be entitled to be present or to speak at any meeting
of Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel. When a determination of
Noteholders entitled to vote at any meeting of Noteholders has been made as
provided in this Section, such determination shall apply to any adjournments
thereof.
Section 9.5 Manner of Voting at Meetings and Record to be Kept. The
vote upon any resolution submitted to any meeting of Noteholders shall be by
written ballots on each of which shall be subscribed the signature of the
Noteholder or proxy casting such ballot and the identifying number or numbers of
the Notes held or represented in respect of which such ballot is cast. The
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
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each meeting of Noteholders shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 9.2.
The record shall show the identifying numbers of the Notes voting in favor of or
against any resolution. Each counterpart of such record shall be signed and
verified by the affidavits of the chairman and secretary of the meeting and one
of the counterparts shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee.
Any counterpart record so signed and verified shall be conclusive
evidence of the matters therein stated and shall be the record referred to in
clause (b) of Section 8.1.
Section 9.6 Exercise of Rights of Trustee and Noteholders Not To Be
Hindered or Delayed. Nothing in this Article IX contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hinderance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 Supplemental Indentures Without Consent of Noteholders.
The Company, when authorized by a Board Resolution, 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 Notes pursuant to the requirements of Section 14.6;
(b) subject to Article XV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another person to the Company, or
successive successions, and the assumption by the Successor Company of the
covenants, agreements and obligations of the Company pursuant to Article XI;
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(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes 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 that in respect of
any such additional covenant, restriction or condition, such supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other
defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes in coupon
form (including Notes registrable as to principal only) and to provide for
exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that 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 that shall not adversely
affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Notes;
(h) to modify, eliminate or add to the provisions of this Indenture to
such extent necessary to effect the qualification of this Indenture under
the Trust Indenture Act (if applicable), or under any similar federal
statute hereafter enacted (if applicable); or
(i) to modify, eliminate or add to the provisions of this Indenture to
allow for the issuance of one or more Notes in global form, in addition to
the global Note provided for herein, representing beneficial interests in
Notes issued outside the United States in reliance on Regulation S under the
Securities Act, with such transfer restrictions and legends as are
consistent with such Regulation, and to add provisions relating to the
exchange and transfer of beneficial interests in any Note or Notes
represented by any such global Note or Notes, any definitive Note and any
global Note referred to in Section 2.5(b) hereof.
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The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations that 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 that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
10.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 10.2.
Section 10.2 Supplemental Indentures With Consent of Noteholders. With
the consent (evidenced as provided in Article VIII) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding, the Company, when authorized by a Board Resolution and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, 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, alter the obligation
of the Company to redeem the Notes at the option of the holder upon the
occurrence of a Change of Control or impair or affect the right of any
Noteholder 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 Notes, modify the subordination provisions in a
manner adverse to the holders of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth herein without the
consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding.
Upon the request of the Company, accompanied by a copy of a Board
Resolution certified by its Secretary or Assistant Secretary authorizing the
execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of Noteholders 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,
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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 Noteholders 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 10.3 Effect of Supplemental Indentures. Any supplemental
indenture executed pursuant to the provisions of this Article X shall comply
with the Trust Indenture Act, as then in effect, if such supplemental indenture
is then required to so comply. 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 Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 10.4 Notation on Notes. Notes 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, but they need not do so. If the
Company or the Trustee shall determine to add such a notation, new Notes 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 16.14) and delivered in exchange
for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.5 Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee shall be furnished with and, subject to the
provisions of Sections 7.1 and 7.2, may rely upon 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.
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ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 11.1 Company May Consolidate, Etc. on Certain Terms. The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease all or substantially all of its assets to any person unless: (i) either
the Company is the resulting, surviving or transferee person (the "Successor
Company") or the Successor Company is a person organized and existing under the
laws of the United States or any State thereof or the District of Columbia, and
the Successor Company (if not the Company) expressly assumes by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under this Indenture and the Notes,
including the rights pursuant to Article XIV hereof; (ii) immediately after
giving effect to such transaction, no Event of Default has happened and is
continuing; and (iii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with this
Indenture.
Section 11.2 Successor Company To Be Substituted. In case of any such
consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the Successor Company, 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, premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such Successor
Company shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party hereto. Such Successor
Company thereupon may cause to be signed, and may issue either in its own name
or in the name of Healthsource, Inc. any or all of the Notes issuable hereunder
that theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such Successor Company 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 Notes that previously shall have been signed
and delivered by the officers of the Company to the Trustee for, authentication,
and any Notes that such Successor Company thereafter shall cause to be signed
and delivered to the Trustee for that purpose. All the Notes so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the
execution hereof. In the event of any such consolidation, merger, sale,
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conveyance, transfer or lease, the person named as the "Company" in the first
paragraph of this Indenture or any successor that 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 Notes and from its obligations under
this Indenture.
In case of any such consolidation, merger, sale, conveyance, transfer
or lease, such changes in phraseology and form (but not in substance) may be
made in the Notes thereafter to be issued as may be appropriate.
Section 11.3 Opinion of Counsel To Be Given to Trustee. The Trustee
subject to Sections 7.1 and 7.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or lease and any such assumption complies with the
provisions of this Article XI.
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 12.1 Legal Defeasance and Covenant Defeasance of the Notes.
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Notes, elect to have either paragraph (b) or paragraph (c)
below be applied to the outstanding Notes upon compliance with the conditions
set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of the Sections of and matters under this
Indenture referred to in clauses (i) and (ii) below and to have satisfied all
its other obligations under such Notes and this Indenture insofar as such Notes
are concerned, except for the following, which shall survive until otherwise
terminated or discharged hereunder: (i) the rights of holders of outstanding
Notes to receive solely from the trust fund described in paragraph (d) below and
as more fully set forth in such paragraph, payments in respect of the principal
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of, premium, if any, and interest on such Notes when such payments are due and
(ii) obligations listed in Section 12.3.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article XI and in Section
3.5 with respect to the outstanding Notes on and after the date the conditions
set forth in paragraph (d) are satisfied (hereinafter, "covenant defeasance"),
and the Notes shall thereafter be deemed to be not "outstanding" for the purpose
of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document, and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.1(c), but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(i) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form and
substance satisfactory to the Trustee, cash or U.S. Government Obligations
maturing as to principal and interest at such times, or a combination
thereof, in such amounts as are sufficient, without consideration of the
reinvestment of such interest and after payment of all federal, state and
local taxes or other charges or assessments in respect thereof payable by
the Trustee, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof (in form and
substance reasonably satisfactory to the Trustee) delivered to the Trustee,
to pay the principal of, premium, if any, and interest on the outstanding
Notes on the dates on which any such payments are due and payable in
accordance with the terms of this Indenture and of the Notes;
(ii) (A) No Event of Default shall have occurred or be continuing on
the date of such deposit, and (B) no Default or Event of Default under
Section 6.1(d) or 6.1(e)
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shall occur on or before the 123rd day after the date of such deposit;
(iii) Such deposit shall not result in a Default under this Indenture
or a breach or violation of, or constitute a default under, any other
instrument or agreement to which the Company is a party or by which it or
its property is bound;
(iv) In the case of a legal defeasance under paragraph (b) above, the
Company has delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
holders of the Notes shall not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge
and shall be subject to federal income tax on the same amounts and in the
same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; and, in the case of a
covenant defeasance under paragraph (c) above, the Company shall deliver to
the Trustee an Officers' Certificate and an Opinion of Counsel, in form and
substance reasonably satisfactory to the Trustee, to the effect that holders
of the Notes shall not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred;
(v) The holders shall have a perfected security interest under
applicable law in the cash or U.S. Government Obligations deposited pursuant
to Section 12(d)(i) above;
(vi) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, after the passage of 123 days following the deposit, the
trust funds shall not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights generally;
(vii) such defeasance shall not cause the Trustee to have a conflicting
interest with respect to any securities of the Company; and
(viii) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating
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to the defeasance contemplated by this Section 12.1 have been complied with;
provided, that no deposit under clause (d)(i) above shall be effective to
terminate the obligations of the Company under the Notes or this Indenture prior
to the passage of 123 days following such deposit.
Section 12.2 Termination of Obligations upon Cancellation of the Notes.
In addition to the Company's rights under Section 12.1, the Company may
terminate all of its obligations under this Indenture (subject to Section 12.3)
when:
(a) (i) all Notes theretofore authenticated and delivered (other than
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.6) have been delivered to the Trustee for
cancellation; and
(ii) the Company has paid or caused to be paid all other sums payable
hereunder and under the Notes by the Company; or
(b) (i) the Notes not previously 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
under arrangements satisfactory to the Trustee upon delivery of notice; (ii)
the Company shall have irrevocably deposited with the Trustee, as trust
funds, cash, in an amount sufficient to pay principal of and interest on the
outstanding Notes, to maturity or redemption, as the case may be; (iii) such
deposit shall not result in a breach or violation of, or constitute a
default under, any agreement or instrument pursuant to which the Company is
a party or by which it or its property is bound; and (iv) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions related to such defeasance have been
complied with.
Section 12.3 Survival of Certain Obligations. Notwithstanding the
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 12.1 or 12.2, the respective obligations of the Company and the Trustee
under Sections 2.3, 2.4, 2.5, 2.6, 3.1, 4.2, 5.1, 6.4, 6.9, 7.6, 7.11, 12.5,
12.6, 12.7, Articles XIV and XV shall survive until the Notes are no longer
outstanding, and thereafter, the obligations of the Company and the Trustee
under Sections 6.9, 7.6, 12.5, 12.6 and 12.7 shall survive. Nothing contained in
this Article XII shall abrogate any of the rights, obligations or duties of the
Trustee under this Indenture.
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Section 12.4 Acknowledgment of Discharge by Trustee. Subject to Section
12.7, after (i) the conditions of Section 12.1 or 12.2 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified in Section
12.3.
Section 12.5 Application of Trust Assets. The Trustee shall hold any
cash or U.S. Government Obligations deposited with it in the irrevocable trust
established pursuant to Section 12.1 or 12.2, as the case may be. The Trustee
shall apply the deposited cash or the U.S. Government Obligations, together with
earnings thereon in accordance with this Indenture and the terms of the
irrevocable trust agreement established pursuant to Section 12.1 or 12.2, as the
case may be, to the payment of principal of, premium, if any, and interest on
the Notes. The cash or U.S. Government Obligations so held in trust and
deposited with the Trustee in compliance with Section 12.1 or 12.2, as the case
may be, shall not be part of the trust estate under this Indenture, but shall
constitute a separate trust fund for the benefit of all holders entitled
thereto. Except as specifically provided herein, the Trustee shall not be
requested to invest any amounts held by it for the benefit of the holders or pay
interest on uninvested amounts to any holder.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.1 hereof or Section 12.2 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the holders of outstanding
Notes.
Section 12.6 Repayment to the Company; Unclaimed Money. Subject to
applicable laws governing escheat of such property, and upon termination of the
trust established pursuant to Section 12.1 hereof or 12.2 hereof, as the case
may be, the Trustee shall promptly pay to the Company upon written request any
excess cash or U.S. Government Obligations held by them. Additionally, if
amounts for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee shall, upon written request, pay such
amounts back to the Company forthwith. Thereafter, all liability of the Trustee
with respect to such amounts shall cease. After payment to the Company, holders
entitled to such payment must look to the Company for
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such payment as general creditors unless an applicable abandoned property law
designates another person.
Section 12.7 Reinstatement. If the Trustee is unable to apply any cash
or U.S. Government Obligations in accordance with Section 12.1 or 12.2 by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
12.1 or 12.2 until such time as the Trustee is permitted to apply all such cash
or U.S. Government Obligations in accordance with Section 12.1 or 12.2, as the
case may be; provided that if the Company makes any payment of principal of,
premium, if any, or interest on any Notes following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the holders of
such Notes to receive such payment from the amounts held by the Trustee.
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of, or premium, if any, or interest on
any Note, 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 Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor entity, either directly or through
the Company or any successor entity, 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 Notes.
ARTICLE XIV
CONVERSION OF NOTES
Section 14.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time after 60 days following the latest date of original
issuance of the Notes and prior to the close of business on March 1, 2003
(except
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that, with respect to any Note or portion of a Note that shall be called for
redemption or delivered for repurchase, such right shall terminate, except as
provided in the fourth paragraph of Section 14.2, at the close of business on
the last Trading Day prior to the date fixed for redemption of such Note or
portion of a Note unless the Company shall default in payment due upon
redemption thereof) to convert the principal amount of any such Note, or any
portion of such principal amount that 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 aggregate principal
amount of the Notes or portion thereof surrendered for conversion by the
Conversion Price in effect at such time rounded to three digits, by surrender of
the Note so to be converted in whole or in part in the manner provided in
Section 14.2. A holder of Notes is not entitled to any rights of a holder of
Common Stock until such holder has converted his Notes to Common Stock and only
to the extent such Notes are deemed to have been converted to Common Stock under
this Article XIV.
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 Note in definitive form, the holder of
any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at an office or agency maintained by the Company pursuant to
Section 4.2, 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 form of Note (or such other notice that is acceptable
to the Company) to the office or agency that the holder elects to convert such
Note or the portion thereof specified in said notice. Such notice shall also
state the name or names (with address) in which the certificate or certificates
for shares of Common Stock that 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 Note surrendered for conversion shall, unless the shares
issuable on conversion are to be issued in the name of the holder of such Note
as it appears on the Note register, 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.
In order to exercise the conversion privilege with respect to any
interest in a global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program and follow the other procedures set forth in such program.
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
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conversion are to be issued in a name other than that of the Noteholder (as if
such transfer were a transfer of the Note or Notes (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
4.2, a certificate or certificates for the number of full shares issuable upon
the conversion of such Note 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 Note 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 make available for delivery
to the holder of the Note so surrendered, without charge to him, a new Note or
Notes in authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 14.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided 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 Note shall have been surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the opening of business on the next succeeding interest payment
date shall (unless such Note or portion thereof being converted shall have been
called for redemption) be accompanied by payment, in funds acceptable to the
Company, of an amount equal to the interest otherwise payable on such interest
payment date on the principal amount being converted; provided, however, that no
such payment need be made if there shall exist at the time of conversion a
default in the payment of interest on the Notes. An amount equal to such payment
shall be paid by the Company on such interest payment date to the holder of such
Note at the close of business on such record date; provided that if the Company
shall default in the payment of interest on such interest payment date, such
amount shall be paid to the person who made such required payment. The interest
payment with respect to a Note called for redemption on a date during the period
from the close of business on or after any record date to the opening of
business on the business day
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following the corresponding payment date will be payable on the corresponding
interest payment date to the registered Holder at the close of business on that
record date (notwithstanding the conversion of such Note before the
corresponding interest payment date) and a Holder who elects to convert need not
include funds equal to the interest paid. Except as provided above in this
Section 14.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article XIV.
Upon the conversion of an interest in a global Note, the Trustee, or
the Custodian at the direction of the Trustee, shall make a notation on such
global Note as to the reduction in the principal amount represented thereby.
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 Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (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 Note or Notes, the Company shall make an
adjustment therefor in cash at the current market value thereof. 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 Notes (or specified
portions thereof) are deemed to have been converted and such Closing Price shall
be determined as provided in Section 14.5(g).
Section 14.4 Conversion Price. The Conversion Price shall be as
specified in the forms of Notes (herein called the "Conversion Price") attached
as Exhibits A, B and C hereto, subject to adjustment as provided in this Article
XIV.
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 the numerator of which shall
be the number of shares of Common Stock outstanding at the close of business
on the Record Date (as defined in Section 14.5(g)) fixed for such
determination and the denominator of which shall be the sum
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of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the Record
Date. The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company nor shall any
shares be deemed outstanding.
(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 in Section 14.5(g)) on the Record Date
fixed for determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect at
the opening of business on the date after the Record Date by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
at the close of business on the Record Date plus the number of shares that
the aggregate offering price of the total number of shares so offered would
purchase at such Current Market Price, and the denominator of which shall be
the number of shares of Common Stock outstanding on the close of business on
the Record Date plus the total number of additional shares of Common Stock
so offered for subscription or purchase. Such adjustment shall become
effective immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration or termination of such rights or warrants,
the Conversion Price shall be readjusted to the Conversion Price that 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 that would then be in effect if such date fixed for
the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than such Current Market Price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.
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(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 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 (x) in connection with the
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, (y) exclusively in cash or (z) referred to in Section 14.5(a)
(any of the foregoing hereinafter in this Section 14.5(d) called the
"Securities")), then, in each such case, the Conversion Price shall be
reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the Record Date (as defined in Section 14.5(g)) with respect to
such distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in Section 14.5(g)) on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on
such date of the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator shall be such Current Market
Price, such reduction to become effective immediately prior to the opening
of business on the day following the Record Date; provided, however, that in
the event the then fair market value (as so determined) of the portion of
the Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion the amount
of Securities such holder would have received had such holder converted each
Note on such 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 that would then be in
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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 comprising all or part of such
distribution, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price pursuant to
Section 14.5(g) to the extent possible.
Notwithstanding the foregoing provisions of this Section 14.5(d), no
adjustment shall be made hereunder for any distribution of Securities if the
Company makes proper provision so that each Noteholder who converts such
Note (or any portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the amount and kind of Securities that such
holder would have been entitled to receive if such holder had, immediately
prior to such determination date, converted such Note into Common Stock;
provided that, with respect to any Securities that are convertible,
exchangeable or exercisable, the foregoing provision shall only apply to the
extent (and so long as) the Securities receivable upon conversion of such
Note would be convertible, exchangeable or exercisable, as applicable,
without any loss of rights or privileges for a period of at least 60 days
following conversion of such Note.
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 (the "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
not be deemed distributed for purposes of this Section 14.5(d) (and no
adjustment to the Conversion Price under Section 14.5(d) shall be required)
until the occurrence of the earliest Trigger Event. In addition, in the
event of any distribution of rights or warrants, or any Trigger Event with
respect thereto, that shall have resulted in an adjustment to the Conversion
Price under this Section 14.5(d), (1) in the case of any such rights or
warrants that shall all have been redeemed or repurchased without exercise
by any holders thereof, the Conversion Price shall be readjusted upon such
final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution,
equal to the per share redemption or
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repurchase price received by a holder of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants all
of which shall have expired or been terminated without exercise by any
holder thereof, the Conversion Price shall be readjusted as if such issuance
had not occurred.
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), 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 any cash that is distributed
upon a merger or consolidation to which Section 14.6 applies or as part of a
distribution referred to in Section 14.5(d) for which an adjustment to the
Conversion Price is provided therein) in an aggregate amount that, combined
together with (1) the aggregate amount of any other such distributions to
all holders of its Common Stock made exclusively in cash within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to this Section 14.5(e) has been made, and (2)
the aggregate of any cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in
a Board Resolution) of consideration payable in respect of any tender offer,
by the Company or any of its subsidiaries for all or any portion of the
Common Stock concluded within the 12 months preceding the date of
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payment of such distribution, and in respect of which no adjustment pursuant
to Section 14.5(f) has been made, exceeds 20.0% of the product of the
Current Market Price (determined as provided in Section 14.5(g)) on the
Record Date with respect to such distribution times the number of shares of
Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date, unless the Company
elects to reserve such cash for distribution to the holders of the Notes
upon the conversion of the Notes so that any such holder converting Notes
shall receive upon such conversion, in addition to the shares of Common
Stock to that such holder is entitled, the amount of cash which such holder
would have received if such holder had, immediately prior to the Record Date
for such distribution of cash, converted its Notes into Common Stock, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such date by a fraction (i) the numerator of
which shall be equal to the Current Market Price on the Record Date less an
amount equal to the quotient of (x) the excess of such combined amount over
such 20.0% and (y) the number of shares of Common Stock outstanding on the
Record Date and (ii) the denominator of which shall be equal to the Current
Market Price on such date; provided, however, that in the event the portion
of the cash so distributed applicable to one share of Common Stock is equal
to or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Noteholder shall have the right to receive upon
conversion the amount of cash such holder would have received had such
holder converted each Note 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 that would then be in effect if
such dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require the
payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution), as of the expiration of such tender offer,
of consideration payable in
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respect of any other tender offer, by the Company or any of its subsidiaries
for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer, and in respect of which no
adjustment pursuant to this paragraph (f) has been made, and (2) the
aggregate amount of any distributions to all holders of the Company's Common
Stock made exclusively in cash within 12 months preceding the expiration of
such tender offer, and in respect of which no adjustment pursuant to
paragraph (e) of this Section has been made, exceeds 20.0% of the product of
the Current Market Price (determined as provided in paragraph (g) of this
Section) as of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) times the number
of shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time and the denominator shall be the sum
of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, such reduction to become effective immediately prior to
the opening of business on the day following the Expiration Time. In the
event that the Company is obligated to purchase shares pursuant to any such
tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price that
would then be in effect if such tender 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
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regular way on such day or, in case no such sale takes place on such
day, the average of the reported closing bid and asked prices, regular
way, in each case on the 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, whose
determination shall be conclusive and described in a Board Resolution.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question; provided that
(1) if the "ex" date (as hereinafter defined) for any event (other than
the issuance or distribution or Change of Control 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, distribution or Change of Control 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,
distribution or Change of Control 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
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"ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined by the Board of Directors in a
manner consistent with any determination of such value for purposes of
Section 14.5(d) or (f), whose determination shall be conclusive and
described in a Board Resolution) of the evidences of indebtedness,
shares of capital stock or assets being distributed applicable to one
share of Common Stock as of the close of business on the day before
such "ex" date. For purposes of any computation under 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 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 of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 14.5, such adjustments shall be
made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 14.5 and to avoid unjust or
inequitable results as determined in good faith by the Board of
Directors.
(3) "fair market value" shall mean the amount that a willing
buyer would pay a willing seller in an arm's-length transaction.
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(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security) is
exchanged for or converted into any combination of cash, securities or
other property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract or
otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York Stock
Exchange or that other national security exchange is open for business
or (y) if the applicable security is quoted on the Nasdaq National
Market, a day on which trades may be made thereon or (z) if the
applicable security is not so listed, admitted for trading or quoted,
any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
(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 20 days, the reduction is irrevocable during the period and the
Board of Directors shall have made a determination that such reduction would
be in the best interests of the Company, which determination shall be
conclusive and described in a Board Resolution. Whenever the Conversion
Price is reduced pursuant to the preceding sentence, the Company shall mail
to all holders of record of the Notes a notice of the reduction at least 15
days prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period it shall 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, that any adjustments that by reason of this Section 14.5(i)
are not
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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-hundredth 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.
No adjustment need be made for a change in the par value, or to or from
no par value, of the Common Stock.
To the extent the Notes become convertible into cash, assets, property
or securities (other than Common Stock of the Company), no adjustment need
be made thereafter as to the cash, assets, property or such securities
(except as such securities may otherwise by their terms provide), and
interest shall not accrue on such 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 Note at his last address
appearing on the Note register provided for in Section 2.5, within 20 days
after execution thereof. Failure to deliver such notice shall not effect the
legality or validity of any such supplemental indenture.
(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 Note converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such holder any amount in cash in lieu of
any fraction pursuant to Section 14.3.
Section 14.6 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of outstanding shares of Common Stock (other than a change in par value, or to
or from
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no par value, as a result of a subdivision or combination), (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 if such
supplemental indenture is then required to so comply) providing that such Note
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 Notes (assuming, for such purposes, a sufficient number of authorized
shares of Common Stock available to convert all such Notes) immediately prior to
such reclassification, change, consolidation, merger, combination, sale or
conveyance, assuming such holder of Common Stock did not exercise his rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such reclassification,
change, 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 ("non-electing share"), then for the purposes of this
Section 14.6 the kind and amount of securities, cash or other property
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
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article XIV.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality or
validity of such supplemental indenture.
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The above provisions of this Section 14.6 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 Notes shall be made without charge to the converting Noteholder
for any transfer or similar tax in respect of the issue thereof. The Company
shall not, however, be required to pay any tax that 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 Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 14.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action that 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 Notes, the Company shall take all corporate
action that 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 that may be
issued upon conversion of Notes shall, upon issue, be fully paid and
nonassessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company further covenants that it shall, if permitted by the rules
of the New York Stock 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 Notes.
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 Notes to determine whether any facts exist that 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
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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, that may at any time be issued or delivered upon the conversion of any
Note; 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 XIV.
Without limiting the generality of the foregoing, neither the Trustee nor any
conversion agent shall be under any responsibility to determine whether a
supplemental indenture under Section 14.6 hereof need to be entered into or 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 Noteholders upon
the conversion of their Notes after any event referred to in such Section 14.6
or to 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:
(a) the Company makes any distribution or dividend that would require
an adjustment in the Conversion Price pursuant to Section 14.5; or
(b) the Company takes any action that would require a supplemental
indenture pursuant to Section 14.6; or
(c) 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 Notes at his address appearing on the Note register, as promptly as
possible but in any event at least 15 days prior to the applicable date
hereinafter specified, a notice stating (x) the date on which a record date is
to be taken for the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (y) the date on which such reclassification,
change, consoli-
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dation, merger, sale, conveyance, 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 record of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reclassification, change, consolidation, merger, sale, conveyance, 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, change, consolidation, merger, sale, conveyance,
transfer, dissolution, liquidation or winding-up. Neither the failure to give
such notice nor any defect therein shall affect the legality or validity of the
proceedings referenced in clauses (a) through (c) of this Section 14.10.
ARTICLE XV
SUBORDINATION
Section 15.1 Agreement to Subordinate. The Company agrees, and each
Noteholder by accepting a Note agrees, that the indebtedness evidenced by the
Note is subordinated in right of payment, to the extent and in the manner
provided in this Article XV, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of the holders of
Senior Indebtedness.
Section 15.2 Certain Definitions. For purposes of this Article XV, the
following terms shall have the meaning indicated:
(1) "Representative" shall mean the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
(2) "Senior Indebtedness" with respect to the Notes means the principal
of, premium, if any, and interest on, and any fees, costs, expenses and any
other amounts (including indemnity payments) related to the following,
whether outstanding on the date hereof or hereafter incurred or created: (a)
indebtedness, matured or unmatured, whether or not contingent, of the
Company for money borrowed evidenced by notes or other written obligations,
(b) any interest rate contract, interest rate swap agreement or other
similar agreement or arrangement designed to protect the Company or any of
its subsidiaries against fluctuations in interest rates, (c) indebtedness,
matured or unmatured, whether or not contingent, of the Company evidenced by
notes, debentures, bonds or similar instruments or letters of credit (or
reimbursement agreements in respect thereof), (d) obligations of the Company
as lessee under capitalized leases and
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under leases of property made as part of any sale and lease-back
transactions, (e) indebtedness of others of any of the kinds described in
the preceding clauses (a) through (d) assumed or guaranteed by the Company
and (f) renewals, extensions, modifications, amendments, and refundings of,
and indebtedness and obligations of a successor person issued in exchange
for or in replacement of, indebtedness or obligations of the kinds described
in the preceding clauses (a) through (f), unless the agreement pursuant to
which any such indebtedness described in clauses (a) through (f) is created,
issued, assumed or guaranteed expressly provides that such indebtedness is
not senior or superior in right of payment to the Notes; provided, however,
that the following shall not constitute Senior Indebtedness: (i) any
indebtedness or obligation of the Company in respect of the Notes, (ii) any
indebtedness of the Company to any of its subsidiaries or other Affiliates;
(iii) any indebtedness that is subordinated or junior in any respect to any
other indebtedness of the Company other than Senior Indebtedness; and (iv)
any indebtedness incurred for the purchase of goods or materials in the
ordinary course of business.
For the purposes of this Indenture, Senior Indebtedness shall not be
deemed to have been paid in full until the holders of the Senior Indebtedness
shall have indefeasibly received payment in full in cash of all Senior
Indebtedness; provided that if any holder of Senior Indebtedness agrees to
accept payment in full of such Senior Indebtedness for consideration other than
cash, such holder shall be deemed to have indefeasibly received payment in full
of such Senior Indebtedness. The provisions of this Article XV shall continue to
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Indebtedness is rescinded or must otherwise be returned by any
holder of Senior Indebtedness upon the insolvency, bankruptcy or organization of
the Company or otherwise, all as though such payment had not been made.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
Section 15.3 Liquidation; Dissolution; Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, in an assignment for the
benefit of creditors or any marshalling of the Company's assets and liabilities,
holders of Senior Indebtedness shall be entitled to receive payment in full of
all amounts due or to become due thereon before Noteholders shall be entitled to
receive any payment with respect to the principal of, premium, if any, or
interest on the Notes (except that Noteholders may receive securities that are
subordinated to at least the same extent as the
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Notes to Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness).
Section 15.4 Default on Senior Indebtedness. The Company may not make
any payment upon or in respect of the Notes (except in such subordinated
securities) if:
(a) a default in the payment of the principal of, premium, if any, or
interest on Senior Indebtedness occurs and is continuing beyond any
applicable period of grace; or
(b) a default, other than a default referred to in subsection (i)
above, on Senior Indebtedness occurs and is continuing that permits holders
of the Senior Indebtedness as to which such default relates to accelerate
its maturity and the Trustee receives a notice of the default (a "Payment
Blockage Notice") from the representative or representatives of holders of
at least a majority in principal amount of Senior Indebtedness then
outstanding. No nonpayment default that existed or was continuing on the
date of delivery of any such Payment Blockage Notice to the Trustee shall
be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than
180 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(a) in the case of a payment default, upon the date on which the
default is cured or waived, or
(b) in the case of a default referred to in Section 15.4(b) hereof, 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of such Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced within 360
days after the receipt by the Trustee of any prior Payment Blockage Notice.
No default referred to in Section 15.4(b) hereof that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of
not less than 180 days,
if this Article XV otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 15.5 When Distribution Must Be Paid Over. In the event that the
Trustee (or Paying Agent if other than the
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Trustee) or any Noteholder receives any payment of principal or interest with
respect to the Notes at a time when such payment is prohibited by Section 15.3
or 15.4 hereof, such payment shall be held by the Trustee (or Paying Agent if
other than the Trustee) or such Noteholder, in trust for the benefit of, and
immediately shall be paid over and delivered, upon written request, to, the
holders of Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article XV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Noteholders or the Company or any other person money or assets to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article XV, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
Section 15.6 Notice by Company. The Company shall promptly notify the
Trustee and the Paying Agent of any facts known to the Company that would cause
a payment of any principal or interest with respect to the Notes to violate this
Article XV, but failure to give such notice shall not affect the subordination
of the Notes to the Senior Indebtedness as provided in this Article XV.
Section 15.7 Subrogation. After all Senior Indebtedness is paid in full
and until the Notes are paid in full, Noteholders shall be subrogated (equally
and ratably with all other Indebtedness pari passu with the Notes) to the rights
of holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Noteholders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article XV to holders of Senior Indebtedness that
otherwise would have been made to Noteholders is not, as between the Company and
Noteholders, a payment by the Company on the Notes.
Section 15.8 Relative Rights. This Article XV defines the relative
rights of Noteholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
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(a) impair, as between the Company and the Noteholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
(b) affect the relative rights of Noteholders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(c) prevent the Trustee or any Noteholder from exercising its available
remedies upon a default or Event of Default, subject to the rights of
holders and owners of Senior Indebtedness to receive distributions and
payments otherwise payable to Noteholders.
If the Company fails because of this Article XV to pay principal of or
interest on a Note on the due date, the failure is still a default or Event of
Default.
Section 15.9 Subordination May Not Be Impaired by Company. No right of
any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any holder of Notes or by the failure of the Company or
any holder of Notes to comply with this Indenture.
Section 15.10 Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee and the Noteholders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other person making any distribution to the Trustee or to the Noteholders for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XV.
Section 15.11 Rights of Trustee and Paying Agent. Notwithstanding the
provisions of this Article XV or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment or distribution by the Trustee, and the
Trustee and the Paying Agent may continue to make payments on the Notes, unless
the Trustee shall have received at its Corporate Trust Office at least three
Business Days prior to the date of
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such payment written notice of facts that would cause the payment of any
principal and interest with respect to the Notes to violate this Article XV.
Only the Company or a Representative may give the notice. Nothing in this
Article XV shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.6 hereof.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a trustee or agent on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee or
agent on behalf of any such holder). In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XV, 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 XV, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such person to
receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 15.12 Authorization to Effect Subordination. Each holder of a
Note by the holder's acceptance thereof authorizes and directs the Trustee on
the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article XV, and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
Without limiting the foregoing, each Representative is hereby irrevocably
authorized and empowered (in its own name or in the name of the Noteholders or
the Trustee or otherwise), but shall have no obligation, to demand, sue for,
collect and receive every payment or distribution referred to in Section 15.3
above and give acquittance therefor and to file claims and proofs of claim and
take such other action as it may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the holders or owners of the
Senior Indebtedness hereunder; provided that for purposes of this Section 15.12
holders or owners of Senior Indebtedness may act only through such
Representative.
Section 15.13 Conversions Not Deemed Payment. For the purposes of this
Article XV only, the issuance and delivery of
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Common Stock upon conversion of the Notes in accordance with Article XIV shall
not be deemed to constitute a payment or distribution on account of the
principal of or interest on the Notes or on account of the purchase or other
acquisition of Notes. Nothing contained in this Article or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than holders of Senior Indebtedness and the holders, the
right, which is absolute and unconditional, of the holder of any Note to convert
such Note in accordance with Article XIV.
Section 15.14 Amendments. The provisions of this Article XV shall not
be amended or modified without the written consent of the holders of Senior
Indebtedness.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Pooling of Interests. The Company desires to preserve its
ability to account for acquisition and other business combination transactions
using the pooling-of-interests method where appropriate, and the provisions of
this Indenture shall be interpreted accordingly.
Section 16.2 Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements in this Indenture made by the
Company shall bind its successors and assigns whether so expressed or not.
Section 16.3 Official Acts by Successor Company. Any act or proceeding
by any provision of this Indenture authorized or required to be done or
performed by any board (including the Board of Directors), 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 16.4 Addresses for Notices, Etc. Any notice or demand that by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
sent by prepaid overnight delivery or being deposited postage prepaid by
registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Healthsource, Inc.,
Two College Park Drive, Hooksett, New Hampshire 03106, Attention: Chief
Financial Officer with a copy to Sheehan, Phinney, Bass + Green, Professional
Association. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be deemed to have been sufficiently given or made,
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for all purposes, if given or served by being sent by prepaid overnight delivery
or being deposited postage prepaid by registered or certified mail in a post
office letter box addressed to the Corporate Trust Office of the Trustee, which
office is, at the date as of which this Indenture is dated, located at 101
Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate
Trust Trustee Administration.
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 Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 16.5 Communications by Holders with Other Holders. Noteholders
may communicate pursuant to Section 312(b) of the Trust Indenture Act with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Note registrar and any other person shall have the
protection of Section 312(c) of the Trust Indenture Act.
Section 16.6 Governing Law. This Indenture and each Note shall be
deemed to be a contract made under the substantive laws of New York and for all
purposes shall be construed in accordance with the substantive laws of New York
without regard to conflicts of laws principles thereof.
Section 16.7 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture,
including those actions set forth in Trust Indenture Act Section 314(c), the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the Opinion of such Counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate
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or opinion has read such covenant or condition; (2) a brief statement as to the
nature and scope of the examination or investigation upon which the statement or
opinion contained in such certificate or opinion is based; (3) a statement that,
in the opinion of such person, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and (4) a statement as to
whether or not, in the opinion of such person, such condition or covenant has
been complied with.
Section 16.8 Legal Holidays. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption of any
Note shall not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
Section 16.9 No Security Interest Created. Nothing in this Indenture or
in the Notes, 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 Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act.
Section 16.11 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies, or conflicts with the duties imposed by operation
of the Trust Indenture Act, the imposed duties, upon qualification of this
Indenture under the Trust Indenture Act, shall control.
Section 16.12 Benefits of Indenture. Nothing in this Indenture or in
the Notes, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder and the holders of Notes, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 16.13 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.
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Section 16.14 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "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 Notes 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 7.10.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor company is otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the parties hereto or the authenticating agent or such successor company.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from time to time
reasonable compensation for its services.
The provisions of Sections 7.3, 7.4, 7.5, 8.3 and this Section 16.14
shall be applicable to any authenticating agent.
Section 16.15 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.
91
<PAGE> 99
92
<PAGE> 100
The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed and attested, all as of the date first written above.
HEALTHSOURCE, INC.
By: /s/ Norman C. Payson, M.D.
-----------------------------------------
Name: Norman C. Payson, M.D.
Title: President and Chief Executive Officer
Attest:
/s/ Jon S. Richardson
- ----------------------------
Jon S. Richardson, Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Mary Jane Morrissey
-----------------------------------------
Name: Mary Jane Morrissey
Title: Vice President
Attest:
/s/
- ----------------------------
<PAGE> 101
EXHIBIT A - FORM OF DEFINITIVE NOTE
[FORM OF FACE OF NOTE]
No. A-1
$_______________________________
CUSIP 42221EAB0
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL
NOT PRIOR TO THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON
WHICH HEALTHSOURCE, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED
IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF
THE NOTE (THE "RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE
TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON
CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW
YORK, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY BEFORE THE
RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER
AND SUBMIT THIS
A-1
<PAGE> 102
CERTIFICATE TO THE BANK OF NEW YORK, AS TRUSTEE. IF THE PROPOSED
TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF NEW YORK, AS TRUSTEE,
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
HEALTHSOURCE, INC., a corporation duly organized and validly
existing under the laws of the State of New Hampshire (the "Company"), which
term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to ___________
________________, or registered assigns, the principal sum of
______________________________________ Dollars on March 1, 2003, at the office
or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, or, at the option of the holder of this Note,
at the Corporate Trust Office of the Trustee, 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 March
1 and September 1 of each year, commencing September 1, 1996, on said principal
sum at said office or agency, in like coin or currency, at the rate per annum
specified in the title of this Note, from the March 1 or September 1 as the case
may be, next preceding the date of this Note 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 Note, or unless
no interest has been paid or duly provided for on the Notes, in which case from
March 6, 1996, until payment of said principal sum has been made or duly
provided for; provided that if the Company shall default in the payment of
interest due on such March 1 or September 1, then this Note shall bear interest
from the next preceding March 1 or September 1 to which interest has been paid
or duly provided for or, if no interest has been paid or duly provided for on
such Note, from March 6, 1996. The interest so payable on any March 1 or
September 1 will be paid to the person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the record date,
which shall be the February 15 or August 15 (whether or not a Business Day) next
preceding such March 1 or September 1, respectively; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest shall be paid by check mailed to the registered
holder at the registered address of such person unless other arrangements are
made in accordance with the provisions of the Indenture.
A-2
<PAGE> 103
Reference is made to the further provisions of this Note set forth
on the reverse hereof, including, without limitation, provisions giving the
holder of this Note the right to convert this Note 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 Note 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, without regard to conflicts of laws
principles thereof.
This Note 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.
A-3
<PAGE> 104
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
HEALTHSOURCE, INC.
By: _____________________________________
Name:
Title:
Attest:
__________________________________
Secretary
A-4
<PAGE> 105
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated: March 6, 1996
This is one of the Notes described in the within-named
indenture.
THE BANK OF NEW YORK, as Trustee
By: ___________________________________
Authorized Signatory
[FORM OF REVERSE OF NOTE]
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
This Note is one of a duly authorized issue of Notes of the
Company, designated as its 5% Convertible Subordinated Notes due 2003 (herein
called the "Notes"), limited to the aggregate principal amount of $247,250,000
all issued or to be issued under and pursuant to an Indenture dated as of March
6, 1996 (the "Indenture"), between the Company and The Bank of New York, as
trustee (the "Trustee"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a complete description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Notes. Each Note is subject to, and
qualified by, all such terms as set forth in the Indenture certain of which are
summarized hereon and each holder of a Note is referred to the corresponding
provisions of the Indenture for a complete statement of such terms. To the
extent that there is any inconsistency between the summary provisions set forth
in the Notes and the Indenture, the provisions of the Indenture shall govern.
Capitalized terms used but not defined in this Note shall have the meanings
ascribed to them in the Indenture.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of, premium, if any, and
accrued interest on all Notes may be declared, and upon said declaration shall
become, due and payable, in the manner, with
A-5
<PAGE> 106
the effect and subject to the conditions provided in the Indenture.
The payment of principal of, premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness (as defined
in the Indenture). Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payments in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of
the Notes (except in such subordinated securities) if (a) a default in the
payment of the principal of, premium, if any, or interest on Senior Indebtedness
occurs and is continuing beyond any applicable period of grace or (b) any other
default occurs and is continuing with respect to Senior Indebtedness that
permits holders of the Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the representative or representatives of holders
of at least a majority in principal amount of Senior Indebtedness then
outstanding. Payments on the Notes may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is cured or waived, or (ii)
in the case of a non-payment default, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Senior Indebtedness has been accelerated. No new period of payment blockage may
be commenced within 360 days after the receipt by the Trustee of any prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 180 days.
In the event that the Trustee (or paying agent if other than the
Trustee) or any holder of the Notes receives any payment of principal or
interest with respect to the Notes at a time when such payment is prohibited
under the Indenture, such payment shall be held in trust for the benefit of, and
shall be paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in
A-6
<PAGE> 107
full, the holders of the Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Notes have
been applied to the payment of Senior Indebtedness.
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 Notes 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 Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, 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,
alter the obligation of the Company to redeem the Notes at the option of the
holders upon the occurrence of a Change of Control or impair or affect the right
of any Noteholder 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 Notes, modify the subordination
provisions in a manner adverse to the holders of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture without the consent of the holder of each Note so affected or (ii)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Notes then outstanding. It is also provided in the Indenture that, prior
to any declaration accelerating the maturity of the Notes, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes 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 Notes, a failure by
the Company to convert any Notes into Common Stock of the Company or a default
in respect of a covenant or provision of the Indenture that under Article X
thereof cannot be modified or amended without the consent of the holders of all
Notes then outstanding. Any such consent or waiver by the holder of this Note
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Note and any
Notes that may be issued in exchange or substitution hereof, irrespective of
whether or not any notation thereof is made upon this Note or such other Notes.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the
A-7
<PAGE> 108
principal of and any premium and interest on this Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day
year composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes are not redeemable at the option of the Company prior to
March 1, 1999. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in the Indenture, in whole at any
time or in part from time to time, at the optional redemption prices set forth
below, together with accrued interest to the date fixed for redemption.
If redeemed during the 12-month period beginning:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
March 1, 1999 102.5%
March 1, 2000 101.7%
March 1, 2001 100.8%
</TABLE>
and 100% on or after March 1, 2002; provided that if the date fixed for
redemption is a date on or after the record date and on or before the next
following interest payment date, then the interest payable on such date shall be
paid to the holder of record on the next preceding February 15 or August 15,
respectively.
If a Change of Control (as defined in the Indenture) shall occur
at any time, then each holder of Notes shall have the right to require that the
Company purchase such holder's Notes in whole or in part in integral multiples
of $1,000, at a purchase price in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company and in accordance
with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder hereof has
the right, at its option, at any time after 60 days following the latest date of
original issuance of the Notes and prior to the close of business on March 1,
2003, or, as to all or
A-8
<PAGE> 109
any portion hereof called for redemption, prior to the close of business on the
Trading Day next 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 that is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Company's
Common Stock, as said shares shall be constituted at the date of conversion,
obtained by dividing the principal amount of this Note or portion thereof to be
converted by the conversion price of $46.965 or such conversion price as
adjusted from time to time as provided in the Indenture, upon surrender of this
Note, 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 Borough of Manhattan, The City of New York, or at the option of such
holder, the Corporate Trust Office of the Trustee, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, 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 that if this Note shall be surrendered for conversion
during the period from the close of business on any record date for the payment
of interest and prior to the close of business on the next succeeding interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption on a date in such period) must be accompanied by
an amount, in funds acceptable to the Company, equal to the interest payable
on such interest payment date on the principal amount being converted. The
interest payment with respect to a Note called for redemption on a date during
the period from the close of business on or after any record date to the
opening of business on the business day following the corresponding payment
date will be payable on the corresponding interest payment date to the
registered Holder at the close of business on that record date (notwithstanding
the conversion of such Note before the corresponding interest payment date) and
a Holder who elects to convert need not include funds equal to the interest
paid. 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 that would otherwise be issuable upon the surrender of
any Note or Notes for conversion.
Upon due presentment for registration of transfer of this Note at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust Office
of the Trustee, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange thereof,
subject to the conditions and limitations provided in the Indenture, without
charge except for any tax or other governmental charge imposed in connection
therewith.
A-9
<PAGE> 110
The Company, the Trustee, any authenticating agent, any paying
agent, any conversion agent and any Note registrar may deem and treat the
registered holder hereof as the absolute owner of this Note (whether or not this
Note shall be overdue and notwithstanding any notation of ownership or other
writing hereon made by anyone other than the Company or any Note registrar), for
the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the
Trustee nor any other authenticating agent nor any paying agent nor any other
conversion agent nor any Note 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 Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, 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
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any Successor Company, either
directly or through the Company or any Successor Company, 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.
A-10
<PAGE> 111
ABBREVIATIONS
The following abbreviations, when used in the inscription of the
face of this Note, 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 -
TEN ENT - as tenants by the ___________________ Custodian
entireties (Cust)
JT TEN - as joint tenants with
right of survivorship ___________________ under
and not as tenants in (Minor)
common
Uniform Gifts to
Minors Act_________________________
(State)
Additional abbreviations may also be used though
not in the above list.
A-11
<PAGE> 112
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Healthsource, Inc.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock, par value $.10 per share, of the Company in accordance
with the terms of the Indenture referred to in this Note, and directs that the
shares issuable and deliverable upon such conversion, together with any check in
payment for fractional shares and any Notes 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 Note 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 Note.
Dated:_______________________
____________________________________
____________________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are
to be issued, or Notes to be delivered,
other than to and in the name of the
registered holder.
____________________________________________
Signature Guarantee
Fill in for registration of shares if to
A-12
<PAGE> 113
be issued, and Notes 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
A-13
<PAGE> 114
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: Healthsource, Inc.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Healthsource, Inc. (the "Company") as to
the occurrence of a Change of Control with respect to the Company and requests
and instructs the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 principal amount or an integral multiple
thereof) below designated, in accordance with the terms of the Indenture
referred to in this Note, together with accrued interest to such date, to the
registered holder hereof.
Dated:_________________________________
_________________________________________
_________________________________________
Signature(s)
_________________________________________
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if
less than all): $_______________________
A-14
<PAGE> 115
[FORM OF ASSIGNMENT]
For value received _____________________________ hereby sell(s),
assign(s) and transfer(s) unto _________________________ (Please insert social
security or other identifying number of assignee) the within Note, and hereby
irrevocably constitutes and appoints ________________________________ attorney
to transfer the said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the within Note (or any
issuance of shares of Common Stock upon conversion of the within Note) occurring
prior to the third anniversary of the date of original issuance of such Note,
the undersigned confirms that such Note (or shares of Common Stock, as the case
may be) are being transferred:
/ / To Healthsource, Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the Securities
Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended.
Unless one of the boxes above is checked, the Trustee will refuse
to register any of the within Notes (or such shares of Common Stock, as the case
may be) in the name of any person other than the registered holder thereof (or
hereof); provided, however, that the Trustee may, in its sole discretion,
register the transfer of such Notes (or such shares of Common Stock, as the case
may be) if it has received such certifications, legal opinions and/or other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended.
In addition, if the transferee is an institutional accredited
investor or a purchaser who is not a U.S. person, the holder must furnish to the
Trustee (i) in the case of an institutional accredited investor, a signed letter
A-15
<PAGE> 116
containing certain representations and agreements relating to the
restrictions on transfer of the security evidenced hereby in
substantially the form of Exhibit D to the Indenture and (ii) such
other certifications, legal opinions or other information as it
may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as
amended.
Dated:__________________
________________________
________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant
to Securities and Exchange Commission
Rule 17Ad-15.
_______________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect
payment upon a Change of Control or the assignment must correspond with
the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
A-16
<PAGE> 117
EXHIBIT B - FORM OF RESTRICTED GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. B-1 $________________________
CUSIP 42221EAA2
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS RESTRICTED GLOBAL NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR
BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF
THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL
NOT PRIOR TO THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY AND
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<PAGE> 118
THE LAST DATE ON WHICH HEALTHSOURCE, INC. (THE "COMPANY") OR ANY
"AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE
COMPANY WAS THE OWNER OF THE NOTE (THE "RESTRICTION TERMINATION DATE")
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON
STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT;
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE BANK OF NEW
YORK, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C),
(D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE BANK OF NEW YORK, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
HEALTHSOURCE, INC., a corporation duly organized and validly
existing under the laws of the State of New Hampshire (the "Company"), which
term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to
________________________________________________________________________________
________________________________________________________________________________
____________________, or registered assigns, the principal sum of
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<PAGE> 119
________________________________________________________________________________
________________________________________________________________________________
_____________________________ Dollars (subject to adjustment as set forth in the
next paragraph hereof) on March 1, 2003, at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
or, at the option of the holder of this Restricted Global Note, at the Corporate
Trust Office of the Trustee, 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 March 1 and
September 1 of each year, commencing September 1, 1996, on said principal sum at
said office or agency, in like coin or currency, at the rate per annum specified
in the title of this Restricted Global Note, from the March 1 or September 1, as
the case may be, next preceding the date of this Restricted Global Note 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 Restricted Global Note, or unless no interest has been paid or duly
provided for on the Notes, in which case from March 6, 1996, until payment of
said principal sum has been made or duly provided for; provided that if the
Company shall default in the payment of interest due on such March 1 or
September 1, then this Restricted Global Note shall bear interest from the next
preceding March 1 or September 1, to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from March 6, 1996. The interest so payable on any March 1 or September 1 will
be paid to the person in whose name this Restricted Global Note (or one or more
Predecessor Notes) is registered at the close of business on the record date,
which shall be the February 15 or August 15 (whether or not a Business Day) next
preceding such March 1 or September 1, respectively; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest shall be paid by check mailed to the registered
holder at the registered address of such person unless other arrangements are
made in accordance with the provisions of the Indenture.
The aggregate principal amount of this Restricted Global Note
represented hereby may from time to time be reduced or increased to reflect
exchanges of a part of this Restricted Global Note for interests in the
Regulation S Global Note or definitive Notes or exchanges of interests in the
Regulation S Global Note or definitive Notes for a part of this Restricted
Global Note or conversions or redemptions of a part of this Restricted Global
Note or cancellations of a part of this Restricted Global
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Note or transfers of interests in the Regulation S Global Note or definitive
Notes in return for a part of this Restricted Global Note or transfers of a part
of this Restricted Global Note effected by delivery of interests in the
Regulation S Global Note or definitive Notes, in each case, and in any such
case, by means of notations on the Schedule of Exchanges, Conversions,
Redemptions, Cancellations and Transfers on the last page hereof.
Notwithstanding any provision of this Restricted Global Note to the contrary,
(i) exchanges of a part of this Restricted Global Note for interests in the
Regulation S Global Note or definitive Notes, (ii) exchanges of interests in the
Regulation S Global Note or definitive Notes for a part of this Restricted
Global Note, (iii) conversions or redemptions of a part of this Restricted
Global Note, (iv) cancellations of a part of this Restricted Global Note, (v)
transfers of interests in the Regulation S Global Note or definitive Notes in
return for a part of this Restricted Global Note and (vi) transfers of a part of
this Restricted Global Note effected by delivery of interests in the Regulation
S Global Note or definitive Notes may be effected without the surrendering of
this Restricted Global Note, provided that appropriate notations on the Schedule
of Exchanges, Conversions, Redemptions, Cancellations and Transfers are made by
the Trustee, or the Custodian at the direction of the Trustee, to reflect the
appropriate reduction or increase, as the case may be, in the aggregate
principal amount of this Restricted Global Note resulting therefrom or as a
consequence thereof.
Reference is made to the further provisions of this Restricted
Global Note set forth on the reverse hereof, including, without limitation,
provisions giving the holder of this Restricted Global Note the right to convert
this Restricted Global Note 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 Restricted Global Note 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, without regard to
conflicts of laws principles thereof.
This Restricted Global Note 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.
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<PAGE> 121
IN WITNESS WHEREOF, the Company has caused this Restricted Global
Note to be duly executed under its corporate seal.
HEALTHSOURCE, INC.
By: _________________
Name:
Title:
Attest:
_____________________________
Secretary
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<PAGE> 122
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated: March 6, 1996
This is one of the Notes described in the within-named indenture.
THE BANK OF NEW YORK, as Trustee
By: ____________________________________
Authorized Signatory
[FORM OF REVERSE OF RESTRICTED GLOBAL NOTE]
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
This Restricted Global Note is one of a duly authorized issue of
Notes of the Company, designated as its 5% Convertible Subordinated Notes Due
2003 (herein called the "Notes"), limited to the aggregate principal amount of
$247,250,000 all issued or to be issued under and pursuant to an Indenture dated
as of March 6, 1996 (the "Indenture"), between the Company and The Bank of New
York, as trustee (the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a complete description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Trustee, the Company and the holders of the Notes. Each Note is subject to,
and qualified by, all such terms as set forth in the Indenture certain of which
are summarized hereon and each holder of a Note is referred to the corresponding
provisions of the Indenture for a complete statement of such terms. To the
extent that there is any inconsistency between the summary provisions set forth
in the Notes and the Indenture, the provisions of the Indenture shall govern.
Capitalized terms used but not defined in this Note shall have the meanings
ascribed to them in the Indenture.
In case an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of, premium, if any, and accrued
interest on
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<PAGE> 123
all Notes 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 payment of principal of, premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness (as defined
in the Indenture). Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payments in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of
the Notes (except in such subordinated securities) if (a) a default in the
payment of the principal of, premium, if any, or interest on Senior Indebtedness
occurs and is continuing beyond any applicable period of grace or (b) any other
default occurs and is continuing with respect to Senior Indebtedness that
permits holders of the Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the representative or representatives of holders
of at least a majority in principal amount of Senior Indebtedness then
outstanding. Payments on the Notes may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is cured or waived, or (ii)
in the case of a non-payment default, 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Senior Indebtedness has been accelerated. No new period of payment blockage may
be commenced within 360 days after the receipt by the Trustee of any prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 180 days.
In the event that the Trustee (or paying agent if other than the
Trustee) or any holder of the Notes
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<PAGE> 124
receives any payment of principal or interest with respect to the Notes at a
time when such payment is prohibited under the Indenture, such payment shall be
held in trust for the benefit of, and shall be paid over and delivered to, the
holders of Senior Indebtedness or their representative as their respective
interests may appear. After all Senior Indebtedness is paid in full and until
the Notes are paid in full, the holders of the Notes shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Notes) to
the rights of holders of Senior Indebtedness to receive distributions applicable
to Senior Indebtedness to the extent that distributions otherwise payable to the
holders of the Notes have been applied to the payment of Senior Indebtedness.
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 Notes 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 Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, 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,
alter the obligation of the Company to redeem the Notes at the option of the
holders upon the occurrence of a Change of Control or impair or affect the right
of any Noteholder 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 Notes, modify the subordination
provisions in a manner adverse to the holders of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture without the consent of the holder of each Note so affected or (ii)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Notes then outstanding. It is also provided in the Indenture that, prior
to any declaration accelerating the maturity of the Notes, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes 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 Notes, a failure by
the Company to convert any Notes into Common Stock of the Company or a default
in respect of a covenant or provision of the
B-8
<PAGE> 125
Indenture that under Article X thereof cannot be modified or amended without the
consent of the holders of all Notes then outstanding. Any such consent or waiver
by the holder of this Restricted Global Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Restricted Global Note and any Notes that may be
issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Restricted Global Note or such other Notes.
No reference herein to the Indenture and no provision of this
Restricted Global Note 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 Restricted Global Note at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day
year composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes are not redeemable at the option of the Company prior to
March 1, 1999. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in the Indenture, in whole at any
time or in part from time to time, at the optional redemption prices set forth
below together with accrued interest to the date fixed for redemption.
If redeemed during the 12-month period beginning:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
March 1, 1999 102.5%
March 1, 2000 101.7%
March 1, 2001 100.8%
</TABLE>
and 100% on or after March 1, 2002; provided that if the date fixed for
redemption is on a date or after the
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<PAGE> 126
record date and on or before the next following interest payment date, then the
interest payable on such date shall be paid to the holder of record on the next
preceding February 15 or August 15, respectively.
If a Change of Control (as defined in the Indenture) shall occur
at any time, then each holder of Notes shall have the right to require that the
Company purchase such holder's Notes in whole or in part in integral multiples
of $1,000, at a purchase price in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by the Company and in accordance
with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder hereof has
the right, at its option, at any time after 60 days following the latest date
of original issuance of the Notes and prior to the close of business on March
1, 2003, or, as to all or any portion hereof called for redemption, prior to
the close of business on the Trading Day next 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 that
is $1,000 or an integral multiple thereof, into that number of fully paid and
non-assessable shares of Company's Common Stock, as said shares shall be
constituted at the date of conversion, obtained by dividing the principal
amount of this Restricted Global Note or portion thereof to be converted by the
conversion price of $46.965 or such conversion price as adjusted from time to
time as provided in the Indenture, upon surrender of this Restricted Global
Note, 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 Borough of Manhattan, The City of New York, or at the option of such
holder, the Corporate Trust Office of the Trustee, and, unless the shares
issuable on conversion are to be issued in the same name as this Restricted
Global Note, 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 that if this Restricted Global Note shall be
surrendered for conversion during the period from the close of business on any
record date for the payment of interest and prior to the close of business on
the next succeeding interest payment date, this Restricted Global Note (unless
it or the portion being converted shall have been called for redemption on a
date in such period) must be accompanied by an amount, in funds acceptable to
the Company, equal to the interest payable on such interest payment date on the
principal amount being converted.
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<PAGE> 127
The interest payment with respect to a Note called for redemption on a date
during the period from the close of business on or after any record date to the
opening of business on the business day following the corresponding payment date
will be payable on the corresponding interest payment date to the registered
Holder at the close of business on that record date (notwithstanding the
conversion of such Note before the corresponding interest payment date) and a
Holder who elects to convert need not include funds equal to the interest paid.
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 that would otherwise be issuable upon the surrender of any Note or Notes
for conversion.
Upon due presentment for registration of transfer of this
Restricted Global Note at the office or agency of the Company in the Borough of
Manhattan, The City of New York, or at the option of the holder of this
Restricted Global Note, at the Corporate Trust Office of the Trustee, a new Note
or Notes of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange thereof, subject to the conditions
and 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 Note registrar may deem and treat the
registered holder hereof as the absolute owner of this Restricted Global Note
(whether or not this Restricted Global Note shall be overdue and notwithstanding
any notation of ownership or other writing hereon made by anyone other than the
Company or any Note registrar), for the purpose of receiving payment hereof, or
on account hereof, for the conversion hereof and for all other purposes, and
neither the Company nor the Trustee nor any other authenticating agent nor any
paying agent nor any other conversion agent nor any Note 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 Restricted Global Note.
No recourse for the payment of the principal of or any premium or
interest on this Restricted Global Note, 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 Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past,
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<PAGE> 128
present or future, of the Company or of any Successor Company, either directly
or through the Company or any Successor Company, 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.
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<PAGE> 129
ABBREVIATIONS
The following abbreviations, when used in the inscription of the
face of this Restricted Global Note, 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
(Cust)
TEN ENT - as tenants by the __________________ under
entireties (Minor)
JT TEN - as joint tenants with
right of survivorship Uniform Gifts to
and not as tenants in Minors Act____________________________
common (State)
Additional abbreviations may also be used though
not in the above list.
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<PAGE> 130
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Healthsource, Inc.
The undersigned registered owner of this Restricted Global Note hereby
irrevocably exercises the option to convert this Restricted Global Note, or the
portion hereof (which is $1,000 principal amount or an integral multiple
thereof) below designated, into shares of Common Stock in accordance with the
terms of the Indenture referred to in this Restricted Global Note, and directs
that the shares issuable and deliverable upon such conversion, together with any
check in payment for fractional shares and any Notes 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 Restricted Global Note 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 Restricted Global Note.
Dated:_______________________
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant
to Securities and Exchange Commission
Rule 17Ad-15 if shares of Common Stock
are to be issued, or Notes to be delivered,
other than to and in the name of the
registered holder.
____________________________________________
Signature Guarantee
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<PAGE> 131
Fill in for registration of shares if to be issued, and Notes 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)
$_____________
________________________________
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<PAGE> 132
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: Healthsource, Inc.
The undersigned registered owner of this Restricted Global Note
hereby irrevocably acknowledges receipt of a notice from Healthsource, Inc. (the
"Company") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Restricted Global Note, or the portion thereof (which is $1,000
principal amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Restricted Global
Note, together with accrued interest to such date, to the registered holder
hereof.
Dated:____________________________
____________________________________
____________________________________
Signature(s)
____________________________________
Social Security or Other
Taxpayer Identification
Number
Principal amount to be
repaid (if less than all):
$________________________
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<PAGE> 133
[FORM OF ASSIGNMENT]
For value received
____________________________________ hereby
sell(s), assign(s) and transfer(s) unto ____________________ (please insert
social security or other identifying number of assignee) the within Note, and
hereby irrevocably constitutes and appoints attorney to transfer the said Note
on the books of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Note (or any
issuance of shares of Common Stock upon conversion of the within Note) occurring
prior to the third anniversary of the date of original issuance of such Note,
the undersigned confirms that such Note (or shares of Common Stock, as the case
may be) are being transferred:
/ / To Healthsource, Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the
Securities Act of 1933, as amended.
Unless one of the boxes above is checked, the Trustee will refuse
to register any of the within Notes (or such shares of Common Stock, as the case
may be) in the name of any person other than the registered holder thereof (or
hereof); provided, however, that the Trustee may, in its sole discretion,
register the transfer of such Notes (or such shares of Common Stock, as the case
may be) if it has received such certifications, legal opinions and/or other
information as the Company has
B-17
<PAGE> 134
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
In addition, if the transferee is an institutional accredited
investor or a purchaser who is not a U.S. person, the holder must furnish to the
Trustee (i) in the case of an institutional accredited investor, a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the security evidenced hereby in substantially the form of
Exhibit D to the Indenture, and (ii) such other certifications, legal opinions
or other information as it may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended.
Dated:____________________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant
to Securities and Exchange Commission
Rule 17Ad-15.
_______________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect payment upon
a Change of Control or the assignment must correspond with the name as written
upon the face of the Note in every particular without alteration or enlargement
or any change whatever.
B-18
<PAGE> 135
SCHEDULE A
SCHEDULE OF EXCHANGES
The initial principal amount of this Restricted Global Note is
U.S. $_____________. The following additions to principal, redemptions,
exchanges of a part of this Restricted Global Note for an interest in the
Regulation S Global Note or definitive Note and conversions into Common Shares
have been made:
<TABLE>
<CAPTION>
==============================================================================================
Principal
Amount Re-
Principal deemed,
Amount Added Exchanged for
on Interest in
Exchange of the Regula- Remaining
Date of Addi- Interest in tion S Principal
tion to Prin- the Regula- Global Note Amount Out-
cipal, Re- tion S Global or Definitive standing Notation
demption, Note or De- Notes or Con- Following Made by or
Exchange or finitive verted into such Transac- on behalf of
Conversion Notes Common Shares tion the Trustee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
==============================================================================================
</TABLE>
B-19
<PAGE> 136
EXHIBIT C - FORM OF REGULATION S GLOBAL NOTE
[FORM OF FACE OF NOTE]
No. C-1 $_________________
CUSIP U42262AA0
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS REGULATION S GLOBAL NOTE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR
BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF
THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
REGULATION S GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE
"DEPOSITARY"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1),
(2), (3)
C-1
<PAGE> 137
OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON WHICH HEALTHSOURCE,
INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER
THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE
"RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES TO THE BANK OF NEW YORK, AS TRUSTEE, A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE NOTE EVIDENCED HEREBY BEFORE THE RESTRICTION
TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE BANK OF NEW YORK, AS TRUSTEE. IF THE
PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE BANK OF NEW YORK,
AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
C-2
<PAGE> 138
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
HEALTHSOURCE, INC., a corporation duly organized and validly
existing under the laws of the State of New Hampshire (the "Company"), which
term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to
________________________________________________________________________________
________________________________________________________________________________
______________________, or registered assigns, the principal sum of
________________________________________________________________________________
________________________________________________________________________________
_______________________________ Dollars (subject to adjustment as set forth in
the next paragraph hereof) on March 1, 2003, at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, or, at the option of the holder of this Regulation S Global Note, at the
Corporate Trust Office of the Trustee, 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 March
1 and September 1 of each year, commencing September 1, 1996, on said principal
sum at said office or agency, in like coin or currency, at the rate per annum
specified in the title of this Regulation S Global Note, from the March 1 or
September 1, as the case may be, next preceding the date of this Regulation S
Global Note 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 Regulation S Global Note, or unless no interest
has been paid or duly provided for on the Notes, in which case from March 6,
1996, until payment of said principal sum has been made or duly provided for;
provided that if the Company shall default in the payment of interest due on
such March 1 or September 1, then this Regulation S Global Note shall bear
interest from the next preceding March 1 or September 1, to which interest has
been paid or duly provided for or, if no interest has been paid or duly provided
for on such Note, from March 6, 1996. The interest so payable on any March 1 or
September 1 will be paid to the person in whose name this Regulation S Global
Note (or one or more Predecessor Notes) is registered at
C-3
<PAGE> 139
the close of business on the record date, which shall be the February 15 or
August 15 (whether or not a Business Day) next preceding such March 1 or
September 1, respectively; provided that any such interest not punctually paid
or duly provided for shall be payable as provided in the Indenture. Interest
shall be paid by check mailed to the registered holder at the registered address
of such person unless other arrangements are made in accordance with the
provisions of the Indenture.
The aggregate principal amount of this Regulation S Global Note
represented hereby may from time to time be reduced or increased to reflect
exchanges of a part of this Regulation S Global Note for interests in the
Restricted Global Note or definitive Notes or exchanges of interests in the
Restricted Global Note or definitive Notes for a part of this Regulation S
Global Note or conversions or redemptions of a part of this Regulation S Global
Note or cancellations of a part of this Regulation S Global Note or transfers of
interests in the Restricted Global Note or definitive Notes in return for a part
of this Regulation S Global Note or transfers of a part of this Regulation S
Global Note effected by delivery of interests in the Restricted Global Note or
definitive Notes, in each case, and in any such case, by means of notations on
the Schedule of Exchanges, Conversions, Redemptions, Cancellations and Transfers
on the last page hereof. Notwithstanding any provision of this Regulation S
Global Note to the contrary, (i) exchanges of a part of this Regulation S Global
Note for interests in the Restricted Global Note or definitive Notes, (ii)
exchanges of interests in the Restricted Global Note or definitive Notes for a
part of this Regulation S Global Note, (iii) conversions or redemptions of a
part of this Regulation S Global Note, (iv) cancellations of a part of this
Regulation S Global Note, (v) transfers of interests in the Restricted Global
Note or definitive Notes in return for a part of this Regulation S Global Note
and (vi) transfers of a part of this Regulation S Global Note effected by
delivery of interests in the Restricted Global Note or definitive Notes may be
effected without the surrendering of this Regulation S Global Note, provided
that appropriate notations on the Schedule of Exchanges, Conversions,
Redemptions, Cancellations and Transfers are made by the Trustee, or the
Custodian at the direction of the Trustee, to reflect the appropriate reduction
or increase, as
C-4
<PAGE> 140
the case may be, in the aggregate principal amount of this Regulation S Global
Note resulting therefrom or as a consequence thereof.
Reference is made to the further provisions of this Regulation S
Global Note set forth on the reverse hereof, including, without limitation,
provisions giving the holder of this Regulation S Global Note the right to
convert this Regulation S Global Note 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 Regulation S Global Note 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, without
regard to conflicts of laws principles thereof.
This Regulation S Global Note 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.
C-5
<PAGE> 141
IN WITNESS WHEREOF, the Company has caused this Regulation S
Global Note to be duly executed under its corporate seal.
HEALTHSOURCE, INC.
By: ___________________
Name:
Title:
Attest:
_____________________________
Secretary
C-6
<PAGE> 142
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated: March 6, 1996
This is one of the Notes described in the within-named indenture.
THE BANK OF NEW YORK, as Trustee
By: ____________________________________
Authorized Signatory
As Authenticating Agent
(if different from Trustee)
[FORM OF REVERSE OF REGULATION S GLOBAL NOTE]
HEALTHSOURCE, INC.
5% Convertible Subordinated Notes Due 2003
This Regulation S Global Note is one of a duly authorized issue of
Notes of the Company, designated as its 5% Convertible Subordinated Notes Due
2003 (herein called the "Notes"), limited to the aggregate principal amount of
$247,250,000 all issued or to be issued under and pursuant to an Indenture dated
as of March 6, 1996 (the "Indenture"), between the Company and The Bank of New
York, the trustee (the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a complete description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Trustee, the Company and the holders of the Notes. Each Note is subject to,
and qualified by, all such terms as set forth in the Indenture certain of which
are summarized hereon and each holder of a Note is referred to the corresponding
provisions of the Indenture for a complete statement of such terms. To the
extent that there is any inconsistency between the summary provisions set forth
in the Notes and the Indenture, the
C-7
<PAGE> 143
provisions of the Indenture shall govern. Capitalized terms used but not defined
in this Note shall have the meanings ascribed to them in the Indenture.
In case an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of, premium, if any, and accrued
interest on all Notes 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 payment of principal of, premium, if any, and interest on the
Notes will, to the extent set forth in the Indenture, be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness (as defined
in the Indenture). Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payments in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect of
the Notes (except in such subordinated securities) if (a) a default in the
payment of the principal of, premium, if any, or interest on Senior Indebtedness
occurs and is continuing beyond any applicable period of grace or (b) any other
default occurs and is continuing with respect to Senior Indebtedness that
permits holders of the Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the representative or representatives of holders
of at least a majority in principal amount of Senior Indebtedness then
outstanding. Payments on the Notes may and shall be resumed (i) in the case of a
payment default, upon the date on which such default is
C-8
<PAGE> 144
cured or waived, or (ii) in the case of a non-payment default, 179 days after
the date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Senior Indebtedness has been accelerated. No new period of
payment blockage may be commenced within 360 days after the receipt by the
Trustee of any prior Payment Blockage Notice. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived for a period of not less
than 180 days.
In the event that the Trustee (or paying agent if other than the
Trustee) or any holder of the Notes receives any payment of principal or
interest with respect to the Notes at a time when such payment is prohibited
under the Indenture, such payment shall be held in trust for the benefit of, and
shall be paid over and delivered to, the holders of Senior Indebtedness or their
representative as their respective interests may appear. After all Senior
Indebtedness is paid in full and until the Notes are paid in full, the holders
of the Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Notes have
been applied to the payment of Senior Indebtedness.
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 Notes 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 Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, 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,
alter the obligation of the Company to redeem the Notes at the option of the
holders upon the occur-
C-9
<PAGE> 145
rence of a Change of Control or impair or affect the right of any Noteholder 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 Notes, modify the subordination provisions in a manner
adverse to the holders of the Notes, or impair the right to convert the Notes
into Common Stock subject to the terms set forth in the Indenture without the
consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes 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 Notes, a failure by the Company to
convert any Notes into Common Stock of the Company or a default in respect of a
covenant or provision of the Indenture that under Article X thereof cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Any such consent or waiver by the holder of this Regulation S
Global Note (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such holder and upon all future holders and owners of this
Regulation S Global Note and any Notes that may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Regulation S Global Note or such other Notes.
No reference herein to the Indenture and no provision of this
Regulation S Global Note 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 Regulation S Global Note at
the place, at the respective times, at the rate and in the coin or currency
herein prescribed.
C-10
<PAGE> 146
Interest on the Notes shall be computed on the basis of a 360-day
year composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes are not redeemable at the option of the Company prior to
March 1, 1999. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in the Indenture, in whole at any
time or in part from time to time, at the optional redemption prices set forth
below, together with accrued interest to the date fixed for redemption.
If redeemed during the 12-month period beginning:
Date Percentage
---- ----------
March 1, 1999 102.5%
March 1, 2000 101.7%
March 1, 2001 100.8%
and 100% on or after March 1, 2002; provided that if the date fixed for
redemption is on a date or after the record date and on or before the next
following interest payment date, then the interest payable on such date shall be
paid to the holder of record on the next preceding February 15 or August 15,
respectively.
If a Change of Control (as defined in the Indenture) shall occur
at any time, then each holder of Notes shall have the right to require that the
Company purchase such holder's Notes in whole or in part in integral multiples
of $1,000, at a purchase price in cash in an amount equal to 101% of the
principal amount of such Notes, plus accrued and unpaid interest, if any, to the
repurchase date pursuant to an offer to be made by
C-11
<PAGE> 147
the Company and in accordance with the procedures set forth in the Indenture.
Subject to the provisions of the Indenture, the holder hereof has
the right, at its option, at any time after 60 days following the latest date of
original issuance of the Notes and prior to the close of business on March 1,
2003, or, as to all or any portion hereof called for redemption, prior to the
close of business on the Trading Day next 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 that
is $1,000 or an integral multiple thereof, into that number of fully paid and
non-assessable shares of Company's Common Stock, as said shares shall be
constituted at the date of conversion, obtained by dividing the principal
amount of this Regulation S Global Note or portion thereof to be converted by
the conversion price of $46.965 or such conversion price as adjusted from time
to time as provided in the Indenture, upon surrender of this Regulation S
Global Note, 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 Borough of Manhattan, The City of New York, or at the option of such
holder, the Corporate Trust Office of the Trustee, and, unless the shares
issuable on conversion are to be issued in the same name as this Regulation S
Global Note, 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 that if this Regulation S Global Note shall
be surrendered for conversion during the period from the close of business on
any record date for the payment of interest and prior to the close of business
on the next succeeding interest payment date, this Regulation S Global Note
(unless it or the portion being converted shall have been called for redemption
on a date in such period) must be accompanied by an amount, in funds acceptable
to the Company, equal to the interest payable on such interest payment date on
the principal amount being converted. The interest payment with respect to a
Note called for redemption on a date during the period from the close of
business on or after any record date to the opening of business on the business
day following the corresponding payment date will be payable on the
C-12
<PAGE> 148
corresponding interest payment date to the registered Holder at the close of
business on that record date (notwithstanding the conversion of such Note before
the corresponding interest payment date) and a Holder who elects to convert need
not include funds equal to the interest paid. 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 that would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Upon due presentment for registration of transfer of this
Regulation S Global Note at the office or agency of the Company in the Borough
of Manhattan, The City of New York, or at the option of the holder of this
Regulation S Global Note, at the Corporate Trust Office of the Trustee, a new
Note or Notes of authorized denominations for an equal aggregate principal
amount will be issued to the transferee in exchange thereof, subject to the
conditions and 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 Note registrar may deem and treat the
registered holder hereof as the absolute owner of this Regulation S Global Note
(whether or not this Regulation S Global Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Company or any Note registrar), for the purpose of receiving
payment hereof, or on account hereof, for the conversion hereof and for all
other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note 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
Regulation S Global Note.
No recourse for the payment of the principal of or any premium or
interest on this Regulation S Global Note, 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
C-13
<PAGE> 149
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any Successor Company, either
directly or through the Company or any Successor Company, 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.
C-14
<PAGE> 150
ABBREVIATIONS
The following abbreviations, when used in the inscription of
the face of this Regulation S Global Note, 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 (Cust)
TEN ENT - as tenants by the ______________________ under
entireties (Minor)
JT TEN - as joint tenants with
right of survivorship Uniform Gifts to
and not as tenants in Minors Act__________________________
common (State)
Additional abbreviations may also be used
though not in the above list.
C-15
<PAGE> 151
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Healthsource, Inc.
The undersigned registered owner of this Regulation S Global Note
hereby irrevocably exercises the option to convert this Regulation S Global
Note, or the portion hereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, into shares of Common Stock in accordance
with the terms of the Indenture referred to in this Regulation S Global Note,
and directs that the shares issuable and deliverable upon such conversion,
together with any check in payment for fractional shares and any Notes
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 Regulation S Global Note 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 Regulation S Global Note.
Dated:_______________________
_______________________________________
_______________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved signature guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or
Notes to be delivered, other than to and in the name of the registered holder.
_______________________________________
Signature Guarantee
C-16
<PAGE> 152
Fill in for registration of shares if to be issued, and Notes 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) $____________
________________________________
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<PAGE> 153
[FORM OF OPTION TO ELECT REPAYMENT
UPON A CHANGE OF CONTROL]
To: Healthsource, Inc.
The undersigned registered owner of this Regulation S Global Note
hereby irrevocably acknowledges receipt of a notice from Healthsource, Inc. (the
"Company") as to the occurrence of a Change of Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Regulation S Global Note, or the portion thereof (which is $1,000
principal amount or an integral multiple thereof) below designated, in
accordance with the terms of the Indenture referred to in this Regulation S
Global Note, together with accrued interest to such date, to the registered
holder hereof.
Dated:__________________
___________________________________
___________________________________
Signature(s)
___________________________________
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if
less than all): $__________________
C-18
<PAGE> 154
[FORM OF ASSIGNMENT]
For value received
_______________________________ hereby
sell(s), assign(s) and transfer(s) unto _____________________ (please insert
social security or other identifying number of assignee) the within Note, and
hereby irrevocably constitutes and appoints attorney to transfer the said Note
on the books of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Note (or any
issuance of shares of Common Stock upon conversion of the within Note) occurring
prior to the third anniversary of the date of original issuance of such Note,
the undersigned confirms that such Note (or shares of Common Stock, as the case
may be) are being transferred:
/ / To Healthsource, Inc. or a subsidiary thereof;
or
/ / Pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended;
or
/ / To an Institutional Accredited Investor pursu-
ant to and in compliance with the Securities
Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S
under the Securities Act of 1933, as amended;
or
/ / Pursuant to and in compliance with Rule 144
under the Securities Act of 1933, as amended.
Unless one of the boxes above is checked, the Trustee will refuse
to register any of the within Notes (or such shares of Common Stock, as the case
may be) in the name of any person other than the registered holder thereof (or
hereof); provided, however, that the Trustee may, in its sole discretion,
register the transfer of such Notes (or such shares of Common Stock, as the case
may be) if it has received such certifications, legal opinions and/or other
information as the Company has
C-19
<PAGE> 155
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
In addition, if the transferee is an institutional accredited
investor or a purchaser who is not a U.S. person, the holder must furnish to the
Trustee (i) in the case of an institutional accredited investor, a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the security evidenced hereby in substantially the form of
Exhibit D to the Indenture, and (ii) such other certifications, legal opinions
or other information as it may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended.
Dated:____________________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed
by an eligible Guarantor Institution
(banks, stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15.
____________________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect payment upon
a Change of Control or the assignment must correspond with the name as written
upon the face of the Note in every particular without alteration or enlargement
or any change whatever.
C-20
<PAGE> 156
SCHEDULE A
SCHEDULE OF EXCHANGES
The initial principal amount of this Regulation S Global Note
is U.S.$ _____________. The following additions to principal, redemptions,
exchanges of a part of this Regulation S Global Note for an interest in the
Restricted Global Note, definitive Note and conversions
into Common Shares have been made:
<TABLE>
<CAPTION>
==============================================================================================
Principal
Amount Re-
Principal deemed,
Amount Added Exchanged for
on Interest in
Exchange of the Regula- Remaining
Date of Addi- Interest in tion S Principal
tion to Prin- the Regula- Global Note Amount Out-
cipal, Re- tion S Global or Definitive standing Notation
demption, Note or De- Notes or Con- Following Made by or
Exchange or finitive verted into such Transac- on behalf of
Conversion Notes Common Shares tion the Trustee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
==============================================================================================
</TABLE>
C-21
<PAGE> 157
EXHIBIT D - FORM OF TRANSFEREE CERTIFICATE FOR NOTES
TO BE ISSUED TO ACCREDITED INVESTORS
The Bank of New York,
as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Healthsource, Inc.
5% Convertible Subordinated
Notes Due 2003 (the "Notes")
Reference is hereby made to the Indenture dated as of March 6,
1996 (as supplemented from time to time, the "Indenture") between Healthsource,
Inc. and The Bank of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
The undersigned is delivering this letter in connection with the
transfer of Notes to the undersigned, which Notes are to be held by the
undersigned in definitive registered form.
The undersigned hereby confirms that:
(i) the undersigned is an "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act (an "Institutional Accredited Investor");
(ii) (A) any purchase of Notes by the undersigned will be for the
undersigned's own account or for the account of one or more other Institutional
Accredited Investors or as fiduciary for the account of one or more trusts, each
of which is an "accredited investor" within the meaning of Rule 501(a)(7) under
the Securities Act and for each of which we exercise sole investment discretion
or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities
Act, or a
D-1
<PAGE> 158
"savings and loan association" or other institution described in Section
3(a)(5)(A) of the Securities Act that is acquiring Notes as fiduciary for the
account of one or more institutions for which we exercise sole investment
discretion;
(iii) the undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of purchasing Notes;
(iv) the undersigned is not acquiring Notes with a view to
distribution thereof or with any present intention of offering or selling Notes
or the Common Stock issuable upon conversion thereof, except as permitted below;
provided that the disposition of the undersigned's property and property of any
accounts for which the undersigned is acting as fiduciary shall remain at all
times within the undersigned's control; and
(v) the undersigned acknowledges that it has had access to such
financial and other information as the undersigned deems necessary in connection
with the undersigned's decision to purchase Notes.
The undersigned understands that the Notes have been issued in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Notes and the shares of Common
Stock issuable upon conversion thereof (collectively, the "Securities") have not
been registered under the Securities Act or any applicable state securities
laws, and the undersigned agrees, on the undersigned's own behalf and on behalf
of each account for which the undersigned acquires any Securities, that if in
the future the undersigned decides to resell or otherwise transfer such
Securities, such Securities may be resold or otherwise transferred only (a) to
the Company or any subsidiary thereof, (b) to a person who is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, (c) to an Institutional
Accredited Investor that, prior to such transfer, furnishes to the trustee (or
transfer agent, as the case may be) for such Securities a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of such Securities (the form of
D-2
<PAGE> 159
which letter can be obtained from such trustee, or transfer agent, as the case
may be), (d) outside the United States in a transaction meeting the requirements
of Regulation S under the Securities Act, (e) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if applicable) or
(f) pursuant to a registration statement which has been declared effective under
the Securities Act. The undersigned agrees that any such transfer of Securities
referred to in this paragraph shall be in accordance with applicable securities
laws of any State of the United States or any other applicable jurisdiction and
in accordance with the legends set forth on the Securities. The undersigned
further agrees to provide any person purchasing any of the Securities from the
undersigned a notice advising such purchaser that resales of such Securities are
restricted as stated herein. The undersigned understands that the registrar and
transfer agent for the Securities will not be required to accept for
registration or transfer any Securities, except upon presentation of evidence
satisfactory to the Company that the foregoing restrictions on transfer have
been complied with. The undersigned further understands that any Securities will
be in the form of definitive physical certificates and that such certificates
will bear a legend (unless the sale of the Securities has been registered under
the Securities Act) reflecting the substance of this paragraph.
The undersigned acknowledges that the Transferor, others and you
will rely upon the undersigned's confirmation, acknowledgments and agreements
set forth herein, and the undersigned agrees to notify you promptly in writing
if any of the
D-3
<PAGE> 160
undersigned's representations or warranties herein ceases to be accurate and
complete.
Dated: __________, ____
_____________________________________
(Name of Transferor)
By:__________________________________
Name:
Title:
Address:
D-4
<PAGE> 161
EXHIBIT E - FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM DEFINITIVE REGISTERED
FORM TO RESTRICTED GLOBAL NOTE
The Bank of New York
as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Healthsource, Inc.
5% Convertible Subordinated
Notes Due 2003 (the "Notes")
Reference is hereby made to the Indenture dated as of March 6,
1996 (as supplemented from time to time, the "Indenture") between Healthsource,
Inc. and The Bank of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$__________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of Notes
held of record in definitive registered form through Note No. _______ (the
"Definitive Note") in the name of _______________ (the "Transferor"). The
Transferor hereby requests that on [INSERT DATE] such beneficial interest
represented by the Definitive Note be transferred or exchanged for an interest
in the Restricted Global Note (CUSIP No. 42221EAA2.) in the same principal
denomination and transferred to ______________ (the Depositary account no.
________). If this is a partial transfer, a minimum of U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof of the Definitive Note will
remain outstanding.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), to a transferee that the Transferor reasonably believes is
purchasing the Notes for its own account or an account with respect to which the
transferee exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer"
E-1
<PAGE> 162
within the meaning of Rule 144A, in each case in a transaction meeting the
requirements of Rule 144A and in accordance with any applicable securities laws
of any state of the United States or any other jurisdiction. The Transferor does
hereby certify that it has notified the transferee that it has relied on Rule
144A under the Securities Act on a basis for the exemption from the registration
requirements of the Securities Act used in connection with such transfer.
E-2
<PAGE> 163
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
Dated: ____________, _______
[Name of Transferor]
By: _________________________
Name:
Title:
Telephone No.:
Signatures must be guaranteed
by an "eligible guarantor
institution" meeting the
requirements of the transfer
agent, which requirements
include membership or
participation in STAMP or such
other "signature guarantee
program" as may be determined
by the transfer agent in addition
to, or in substitution for, STAMP,
all in accordance with the
Securities Exchange Act of 1934,
as amended.
_____________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: Healthsource, Inc.
E-3
<PAGE> 164
EXHIBIT F - FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM DEFINITIVE REGISTERED
FORM TO REGULATION S GLOBAL NOTE
The Bank of New York,
as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Healthsource, Inc.
5% Convertible Subordinated
Notes Due 2003 (the "Notes")
Reference is hereby made to the Indenture dated as of March 6,
1996 (as supplemented from time to time, the "Indenture") between Healthsource,
Inc. and The Bank of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$_________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of Notes
held of record in definitive registered form through Note No. _________ (the
"Definitive Note") in the name of ________(the "Transferor"). The Transferor
hereby requests that on [INSERT DATE] such beneficial interest represented by
the Definitive Note be transferred or exchanged for an interest in the
Regulation S Global Note (CUSIP (CINS) No. U42262AA0) in the same principal
denomination and transfer to (account no. ________). If this is a partial
transfer, a minimum amount of U.S.$1,000 and any- integral multiple of
U.S.$1,000 in excess thereof of the Definitive Note will remain outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or 904 of Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), and
accordingly, the Transferor further certifies that:
F-1
<PAGE> 165
(A) (1) the offer of the Notes was not made to a person in
the United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144A
under the Securities Act to a transferee that the Transferor reasonably
believes is purchasing the Notes for its own account or an account with
respect to which the transferee exercises sole investment discretion
and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States or any
other jurisdiction. The Transferor does hereby certify that it has
notified the transferee that it has relied on Rule 144A under the
Securities Act as a basis for the exemption from the registration
requirements of the Securities Act used in connection with such
transfer.
F-2
<PAGE> 166
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company. Terms used in this certificate and
not otherwise defined in the Indenture have the meaning set forth in Regulation
S under the Securities Act.
Dated: ____________, ______
[Name of Transferor]
By: ___________________________
Name:
Title:
Telephone No.:
Signatures must be guaranteed
by an "eligible guarantor
institution" meeting the
requirements of the transfer
agent, which requirements include
membership or participation in
STAMP or such other "signature
guarantee program" as may be
determined by the transfer agent
in addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of
1934, as amended.
__________________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: Healthsource, Inc.
F-3
<PAGE> 167
EXHIBIT G - FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RESTRICTED GLOBAL
NOTE TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.5(c)
of the Indenture)
The Bank of New York,
as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Healthsource, Inc.
5% Convertible Subordinated
Notes Due 2003 (the "Notes")
Reference is hereby made to the Indenture dated as of March 6,
1996 (as supplemented from time to time, the "Indenture") between Healthsource,
Inc. and The Bank of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$_________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of Notes
beneficially held through interests in the Restricted Global Note (CUSIP No.
42221EAA2 (the "Definitive Note") in the name of ________(the "Transferor")
account no. _________. The Transferor hereby requests that on [INSERT DATE] such
beneficial interest in the Restricted Global Note be transferred or exchanged
for an interest in the Regulation S Global Note (CUSIP (CINS) No. U42262AA0) in
the same principal denomination and transfer to (account no. ________). If this
is a partial transfer, a minimum amount of U.S.$1,000 and any integral multiple
of U.S.$1,000 in excess thereof of the Restricted Global Note will remain
outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or
G-1
<PAGE> 168
904 of Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and accordingly, the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a person
in the United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144A
under the Securities Act to a transferee that the Transferor reasonably
believes is purchasing the Notes for its own account or an account with
respect to which the transferee exercises sole investment discretion
and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction
meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States or any
other jurisdiction. The Transferor does hereby certify that it has
notified the transferee that it has relied on Rule 144A under the
Securities Act as a basis for the exemption from the registration
requirements of the Securities Act used in connection with such
transfer.
G-2
<PAGE> 169
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company. Terms used in this certificate and
not otherwise defined in the Indenture have the meaning set forth in Regulation
S under the Securities Act.
Dated: _______________, _______
[Name of Transferor]
By: ______________________________
Name:
Title:
Telephone No.:
Signatures must be guaranteed
by an "eligible guarantor
institution" meeting the
requirements of the transfer
agent, which requirements include
membership or participation in
STAMP or such other "signature
guarantee program" as may be
determined by the transfer agent
in addition to, or in substitution
for, STAMP, all in accordance with
the Securities Exchange Act of
1934, as amended.
__________________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: Healthsource, Inc.
G-3
<PAGE> 170
EXHIBIT H - FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
NOTE TO RESTRICTED GLOBAL NOTE
PRIOR TO EXPIRATION OF RESTRICTED PERIOD
(Transfers pursuant to Section 2.5(c)
of the Indenture)
The Bank of New York,
as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Healthsource, Inc.
5% Convertible Subordinated
Notes Due 2003 (the "Notes")
Reference is hereby made to the Indenture dated as of March 6,
1996 (as supplemented from time to time, the "Indenture") between Healthsource,
Inc. and The Bank of New York, as Trustee. Capitalized terms used but not
defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$_________ (being U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof) principal amount of Notes
beneficially held through interests in the Restricted Global Note (CUSIP No.
42221EAA2 (the "Definitive Note") in the name of ________(the "Transferor")
account no. _________. The Transferor hereby requests that on [INSERT DATE] such
beneficial interest in the Restricted Global Note be transferred or exchanged
for an interest in the Regulation S Global Note (CUSIP (CINS) No. U42262AA0) in
the same principal denomination and transfer to (account no. ________). If this
is a partial transfer, a minimum amount of U.S.$1,000 and any integral multiple
of U.S.$1,000 in excess thereof of the Restricted Global Note will remain
outstanding.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act of 1933, as amended (the
H-1
<PAGE> 171
"Securities Act"), to a transferee that the Transferor reasonably believes is
purchasing the Notes for its own account or an amount with respect to which the
transferee exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United States
or any other jurisdiction. The Transferor does hereby certify that it has
notified the transferee that it has relied on Rule 144A under the Securities Act
as a basis for the exemption from the registration requirements of the
Securities Act used in connection with such transfer.
H-2
<PAGE> 172
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company. Terms used in this certificate and
not otherwise defined in the Indenture have the meaning set forth in Regulation
S under the Securities Act.
Dated: _______________, ______
[Name of Transferor]
By: ______________________________
Name:
Title:
Telephone No.:
Signatures must be guaranteed by
an "eligible guarantor institution"
meeting the requirements of the
transfer agent, which requirements
include membership or participation
in STAMP or such other "signature
guarantee program" as may be
determined by the transfer agent in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934,
as amended.
__________________________________
Signature Guarantee
Please print name and address (including zip code number)
cc: Healthsource, Inc.
H-3
<PAGE> 173
================================================================================
HEALTHSOURCE, INC.
Issuer
AND
THE BANK OF NEW YORK
Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of June 3, 1996
to
INDENTURE
Dated as of March 6, 1996
5% Convertible Subordinated Notes Due 2003
================================================================================
<PAGE> 174
FIRST SUPPLEMENTAL INDENTURE dated as of June 3, 1996, between
HEALTHSOURCE, INC., a New Hampshire corporation (the "Company"), and THE BANK OF
NEW YORK, a New York banking corporation (the "Trustee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and the Trustee have heretofore executed and delivered
a certain indenture dated as of March 6, 1996 (the "Indenture"), pursuant to
which 5% Convertible Subordinated Notes Due 2003 (the "Notes") in an aggregate
principal amount of $247,250,000 have been issued;
WHEREAS, Section 10.1(f) of the Indenture provides, among other things,
that, without the consent of the holders of the Notes, the Company, when
authorized by Board Resolutions, and the Trustee, may enter into an indenture
supplemental to the Indenture to cure any ambiguity or to correct or supplement
any provision contained therein or in any supplemental indenture that may be
defective or inconsistent with any other provision contained therein or in any
supplemental indenture, or to make such other provisions in regard to matters or
questions arising under the Indenture that shall not adversely affect the
interests of the holders of the Notes;
WHEREAS, the Company and the Trustee join in the execution of this First
Supplemental Indenture for the purpose of amending certain provisions of the
Indenture as hereinafter set forth;
WHEREAS, the execution and delivery of this First Supplemental Indenture
has been authorized by Board Resolutions and the Trustee; and
WHEREAS, all conditions precedent and requirements necessary to make this
First Supplemental Indenture a valid and legally binding instrument in
accordance with its terms have been complied with, performed and fulfilled and
the execution and delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and intending to be legally bound
hereby, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all holders of the Notes, as follows:
2
<PAGE> 175
ARTICLE I.
AMENDMENTS
SECTION 1.1. The first sentence of the fifth paragraph of Section 14.2 of
the Indenture is hereby amended to read as follows:
"Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date
through the opening of business on the next succeeding interest payment date
shall (unless such Note or portion thereof being converted shall have been
called for redemption on a date during the period from the close of business on
or after any record date to the opening of business on the business day
following the corresponding payment date) be accompanied by payment, in funds
acceptable to the Company, of an amount equal to the interest otherwise payable
on such interest payment date on the principal amount being converted; provided,
however, that no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes.
SECTION 1.2 The second sentence of the thirteenth paragraph within the
"FORM OF REVERSE OF NOTE" portion of Exhibit A of the Indenture (which paragraph
begins "Subject to the provisions of the Indenture") is hereby amended to read
as follows:
"No adjustment in respect of interest or dividends will be made upon any
conversion; provided that if this Note shall be surrendered for conversion
during the period from the close of business on any record date for the payment
of interest through the opening of business on the next succeeding interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption on a date during the period from the close of
business on or after any record date to the opening of business on the business
day following the corresponding payment date) must be accompanied by an amount,
in funds acceptable to the Company, equal to the interest payable on such
interest payment date on the principal amount being converted."
SECTION 1.3 The second sentence of the thirteenth paragraph within the
"FORM OF REVERSE OF RESTRICTED GLOBAL NOTE" portion of Exhibit B of the
Indenture (which paragraph begins "Subject to the provisions of the Indenture")
is hereby amended to read as follows:
"No adjustment in respect of interest or dividends will be made upon any
conversion; provided that if this Restricted Global Note shall be surrendered
for conversion
3
<PAGE> 176
during the period from the close of business on any record date for the payment
of interest and through the opening of business on the next succeeding interest
payment date, this Restricted Global Note (unless it or the portion being
converted shall have been called for redemption on a date during the period from
the close of business on or after any record date to the opening of business on
the business day following the corresponding payment date) must be accompanied
by an amount, in funds acceptable to the Company, equal to the interest payable
on such interest payment date on the principal amount being converted."
SECTION 1.4 The second sentence of the thirteenth paragraph within the
"FORM OF REVERSE OF REGULATION S GLOBAL NOTE" portion of Exhibit C of the
Indenture (which paragraph begins "Subject to the provisions of the Indenture")
is hereby amended to read as follows:
"No adjustment in respect of interest or dividends will be made upon any
conversion; provided that if this Regulation S Global Note shall be surrendered
for conversion during the period from the close of business on any record date
for the payment of interest and through the opening of business on the next
succeeding interest payment date, this Regulation S Global Note (unless it or
the portion being converted shall have been called for redemption on a date
during the period from the close of business on or after any record date to the
opening of business on the business day following the corresponding payment
date) must be accompanied by an amount, in funds acceptable to the Company,
equal to the interest payable on such interest payment date on the principal
amount being converted."
ARTICLE II.
MISCELLANEOUS
SECTION 2.1. Nothing in this First Supplemental Indenture is intended to
or shall provide any rights to any parties other than those expressly
contemplated by this First Supplemental Indenture.
SECTION 2.2. This First Supplemental Indenture shall be deemed to be a
contract made under the substantive laws of New York and for all purposes shall
be construed in accordance with the substantive laws of New York.
SECTION 2.3. This instrument may be executed in any
4
<PAGE> 177
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 2.4. Except as expressly modified hereby, all the provisions of
the Indenture are and shall continue to be in full force and effect. Each
reference in the Indenture to "this Indenture", "hereunder", "hereof" and words
of like import referring to the Indenture and each reference in any other
transaction document relating to the Indenture shall mean the Indenture as
amended hereby.
5
<PAGE> 178
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested all as of the day and year first above written.
HEALTHSOURCE, INC.
By__________________________
Name:
Title:
Attest:
________________________
THE BANK OF NEW YORK,
as Trustee
By__________________________
Name:
Title:
Attest:
________________________
6
<PAGE> 1
EXHIBIT 5.1
SHEEHAN
PHINNEY
BASS +
GREEN
PROFESSIONAL
ASSOCIATION
[LOGO] WRITER'S DIRECT DIAL
ATTORNEYS AT LAW (603) 627-8130
1000 ELM STREET June 4, 1996
P.O. BOX 3701
MANCHESTER
NEW HAMPSHIRE Healthsource, Inc.
03105-3701 Two College Park Drive
FAX 603-627-8121 Hooksett, New Hampshire 03106
603-668-0300
RE: Form S-3 Registration Statement
1 HARBOUR PLACE
SUITE 325 Ladies and Gentlemen:
PORTSMOUTH
NEW HAMPSHIRE We have acted as counsel to Healthsource, Inc., a
03801-3856 New Hampshire corporation (the "Company"), in
FAX 603-433-3126 connection with the registration on Form S-3 (the
603-433-2111 "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), of the Company's
143 NORTH MAIN STREET 5% Convertible Subordinated Notes Due 2003 (the "Notes")
SUITE #103 and the Common Stock, $.10 par value, issuable upon
CONCORD conversion thereof (the "Common Stock"). The Notes were
NEW HAMPSHIRE issued on March 6 and 8, 1996 in transactions exempt from
03301-5089 the registration requirements of the Securities Act
FAX 603-224-8899 pursuant to section 4(2) thereof.
603-223-2020
In connection with this opinion, we have examined
the Registration Statement. We also have examined
originals or duplicates certified to our satisfaction of
(i) the Articles of Incorporation, as amended, of the
Company, (ii) the By-Laws, as amended, of the Company,
(iii) certain resolutions adopted by the Board of
Directors of the Company and committees thereof, (iv) the
Indenture dated as of March 6, 1996 between the Company
and The Bank of New York, as Trustee, (the "Indenture"),
under which the Notes were issued, and (v) such other
documents and records as we have deemed necessary and
relevant for the purposes hereof. In addition, we have
made such investigations of fact and law as we have
deemed necessary and relevant as a basis hereof.
In expressing this opinion, we have assumed the
genuineness of all signatures, the authenticity of all
documents and records submitted to us as originals,
the conformity to original documents and records of all
documents and records submitted to us as copies, and the
truthfulness of all matters of fact contained therein. We
have also assumed that the Indenture is a valid and
binding obligation of the Trustee, enforceable as to the
Trustee in accordance with its terms.
<PAGE> 2
Healthsource, Inc.
June 4,1996
Page 2
Based on the foregoing, and subject to the limitations and assumptions
set forth herein, and having due regard for such legal considerations as we deem
relevant, we are of the opinion that:
1. The Company is duly incorporated, validly existing and in good standing
under the laws of the State of New Hampshire.
2. The Notes constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, except that enforcement may
be subject to or limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally and (b) general principles of
equity (regardless of whether such enforcement may be sought in a
proceeding in equity or at law).
3. The Common Stock issuable upon conversion of the Notes has been duly
authorized by the Company and, when isued and delivered upon such
conversion in accordance with the terms and provisions of the Notes and
the Indenture, will be validly issued, fully paid and non-assessable.
The opinions expressed herein are limited to (a) the laws of the State
of New Hampshire and, with regard to the enforceability of the Notes, the laws
of the State of New York, and (b) the laws of the United States of America, and
we render no opinion with respect to the law of any other jurisdiction.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name therein.
Very truly yours,
SHEEHAN PHINNEY BASS + GREEN,
PROFESSIONAL ASSOCIATION
By: /s/ Daniel N. Gregoire
-------------------------------
Daniel N. Gregoire
<PAGE> 1
EXHIBIT 12
<TABLE>
HEALTHSOURCE, INC.
COMPUTATION OF HISTORICAL FINANCIAL RATIOS
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------------- ------------------------
1995 1994 1993 1992 1991 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL RATIO OF EARNINGS
TO FIXED CHARGES:
Pre-tax earnings............... 87,049,000 56,813,000 36,414,000 23,613,000 17,346,000 23,984,000 17,717,000
Interest....................... 5,392,000 0 0 0 0 2,373,000 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total earnings and fixed
charges.................... 92,441,000 56,813,000 36,414,000 23,613,000 17,346,000 26,357,000 17,717,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Interest expense.............. 5,392,000 0 0 0 0 2,373,000 0
Preferred stock dividends(A).. 6,412,000 0 0 0 0 1,735,000 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
11,804,000 0 0 0 0 4,108,000 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
7.8 0.0 0.0 0.0 0.0 6.4 0.0
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, 1995 ENDED MARCH 31, 1996
----------------- --------------------
<S> <C> <C>
PRO FORMA RATIO OF EARNINGS
TO FIXED CHARGES:
Pre-tax earnings............... 67,246,000 17,789,000
Interest....................... 18,056,000 4,489,000
---------- ----------
Total earnings and fixed
charges.................... 85,302,000 22,278,000
---------- ----------
Interest expense.............. 18,056,000 4,489,000
Preferred stock dividends(A).. 9,615,000 1,735,000
---------- ----------
27,671,000 6,224,000
---------- ----------
3.1 3.6
========== ==========
<FN>
(A) Dividends have been tax effected to arrive at the pre-tax amount required
to cover the dividend requirement.
</TABLE>
<PAGE> 1
EXHIBIT 15
June 4, 1996
Healthsource, Inc.
Two College Park Drive
Hooksett
New Hampshire 03106
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Healthsource, Inc. and Subsidiaries for the periods ended
March 31, 1996 and 1995, as indicated in our report dated May 10, 1996; because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, is being
used in this Registration Statement.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
Boston, Massachusetts
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in this Registration Statement of
Healthsource, Inc. and Subsidiaries on Form S-3 of our report dated February
16, 1996, appearing in the Annual Report on Form 10-K of Healthsource, Inc., and
Subsidiaries for the year ended December 31, 1995.
Deloitte & Touche LLP
Boston, Massachusetts
June 4, 1996
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / /
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
HEALTHSOURCE, INC.
(Exact name of obligor as specified in its charter)
New Hampshire 02-0387748
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Two College Park Drive
Hooksett, New Hampshire 03106
(Address of principal executive offices) (Zip code)
5% Convertible Subordinated Notes Due 2003
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit
hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of
1939 (the "Act") and Rule 24 of the Commission's Rules of
Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item
2, the answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of
New York, a corporation organized and existing under the laws of the
State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in The City of New York, and State of New York, on the 30th day of May,
1996.
THE BANK OF NEW YORK
By: /s/ Paul J. Schmalzel
-------------------------------
Name: Paul J. Schmalzel
Title: Assistant Treasurer
-4-
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal
Reserve System, at the close of business December 31, 1995, published in
accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................27,068,535
LESS: Allowance for loan and
lease losses ..............520,024
LESS: Allocated transfer risk
reserve......................1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
Total assets ......................... $42,711,907
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing .......9,172,079
Interest-bearing .........12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ..........64,417
Interest-bearing ......... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
Total liabilities .................... 39,224,720
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. (5,747)
Total equity capital ................ 3,487,187
Total liabilities and equity
capital ........................... $42,711,907
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
