<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FUISZ TECHNOLOGIES LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1579474
(State of Incorporation) (I.R.S. Employer Identification No.)
14555 AVION PARKWAY
CHANTILLY, VA 22021
(703) 803-3260
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------------
MR. PATRICK D. SCRIVENS
CHIEF FINANCIAL OFFICER
FUISZ TECHNOLOGIES LTD.
14555 AVION PARKWAY
CHANTILLY, VA 22021
(703) 803-3260
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
JOHN F. OLSON, ESQ.
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 955-8500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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 from 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 Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Per Aggregate Registration
Securities to be Registered Registered Security Offering Price Fee(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7% Convertible Subordinated Debentures due 2004 $75,000,000 100% $75,000,000 $22,727.27
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share (2) -- -- --
=================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(i) under the Securities Act of 1933,
as amended.
(2) Such indeterminate number of shares of Common Stock as may be
issuable upon conversion of the Convertible Subordinated Debentures
registered hereunder, including such shares as may be issuable
pursuant to antidilution adjustments. 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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
PROSPECTUS SUBJECT TO COMPLETION
November 25, 1997
FUISZ TECHNOLOGIES LTD.
$75,000,000
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
---------------
This Prospectus relates to the resale from time to time by the
holders (the "Selling Securityholders") of up to $75,000,000 aggregate principal
amount of 7% Convertible Subordinated Debentures due 2004 (the "Debentures") of
Fuisz Technologies Ltd., a Delaware corporation ("Fuisz" or the "Company"), and
the resale of shares of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company issuable upon the conversion thereof (the "Conversion
Shares").
The Debentures are convertible into shares of Common Stock of the
Company at any time before maturity, unless previously redeemed, at a conversion
price of $13.25 per share (equivalent to a conversion rate of 75.47 shares per
$1,000 principal amount of Debentures), subject to adjustment in certain events.
Interest on the Debentures is payable semi-annually on April 15 and October 15
of each year, commencing on April 15, 1998.
The Debentures do not provide for a sinking fund. The Debentures are
not redeemable by the Company prior to October 19, 2000. Thereafter, the
Debentures are redeemable at the option of the Company, in whole or in part, at
the redemption prices set forth herein, plus accrued interest. Upon a Repurchase
Event (as defined herein), each holder of Debentures shall have the right, at
the holder's option, to require the Company to repurchase such holder's
Debentures at a purchase price equal to 100% of the principal amount thereof,
plus accrued interest. See "Description of the Debentures - Certain Rights to
Require Repurchase of Debentures." The Debentures are unsecured obligations of
the Company, are subordinate to all present and future Senior Indebtedness (as
defined herein) of the Company and are effectively subordinated to all
indebtedness and liabilities of subsidiaries of the Company. See "Description of
the Debentures-Subordination."
The Debentures were originally issued by the Company in a private
placement on October 22, 1997 to Smith Barney Inc., Credit Suisse First Boston
Corporation and Lehman Brothers Inc. (the "Initial Purchasers") and were 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, and outside the United States in offshore
transactions in reliance on Regulation S under the Securities Act.
The Selling Securityholders may offer Debentures or Conversion Shares
from time to time to purchasers directly or through underwriters, dealers or
agents. Such Debentures or Conversion Shares may be sold at market prices
prevailing at the time of sale or at negotiated prices. Each Selling
Securityholder will be responsible for payment of any and all commissions to
brokers, which will be negotiated on an individual basis.
The Debentures have been designated for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market. The
Common Stock is listed on The Nasdaq Stock Market's National Market ("Nasdaq")
under the trading symbol "FUSE." On November 24, 1997, the last reported sale
price of the Common Stock as reported on Nasdaq was $9.00 per share. The
Conversion Shares have been approved for quotation on Nasdaq. For a
description of certain federal income tax
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consequences to the holders of the Debentures, see "Certain Federal Income Tax
Consequences."
The Company will not receive any of the proceeds from the sale of any
Debentures or Conversion Shares by the Selling Securityholders. Expenses of
preparing and filing the registration statement to which this Prospectus relates
and all post-effective amendments will be borne by the Company. See "Plan of
Distribution" for a description of the indemnification arrangements between the
Company and the Selling Securityholders.
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE DEBENTURES AND THE
COMMON STOCK 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.
---------------
The date of this Prospectus is November 25, 1997
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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 is
required to file periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained from the SEC at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic
filings made by the Company through the SEC's Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the SEC's web site
(http://www.sec.gov). Copies of other materials concerning the Company can be
inspected at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the SEC under the Securities Act with
respect to the securities offered hereby. As permitted by the rules and
regulations of the SEC, this Prospectus omits certain information contained in
the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC. Each such statement shall be deemed qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed by the Company with the SEC
pursuant to the Exchange Act and are hereby incorporated by reference:
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (File No. 0-27082);
2. Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997 (File No. 0-27082);
3. Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997 (File No. 0-27082);
4. Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1997 (File No. 0-27082);
5. The description of the Company's Common Stock in the
Registration Statement on Form 8-A, filed with the SEC on
October 24, 1995 (File No. 0-27082) and any amendments or
reports filed for the purpose of updating such
description.
6. Current Report on Form 8-K, filed with the SEC on October
29, 1997 (File No. 0-27082).
7. Current Report on Form 8-K, filed with the SEC on October
29, 1997 (File No. 0-27082).
8. Current Report on Form 8-K, filed with the SEC on
September 18, 1997 (File No. 0-27082).
9. Current Report on Form 8-K, filed with the SEC on
September 16, 1997, as amended on October 3, 1997 (File
No. 0-27082).
10. Current Report on Form 8-K, filed with the SEC on August
8, 1997 (File No. 0-27082).
11. Current Report on Form 8-K, filed with the SEC on June 5,
1997 (File No. 0-27082).
12. Current Report on Form 8-K, filed with the SEC on April
25, 1997 (File No. 0-27082).
All documents filed by the Company with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Debentures and Common Stock
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date any such document is filed.
Any statements contained in a document 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 in this Prospectus (or
in any other subsequently filed document which also is incorporated by reference
in this Prospectus) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus except as so modified or superseded.
No person has been authorized in connection with the offering made
hereby to give any information or 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 other person. This Prospectus does not constitute an offer to sell or
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made
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hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to Investor Relations, Fuisz Technologies Ltd., 14555 Avion Parkway,
Chantilly, VA 22021. Telephone inquiries may be directed to Investor Relations
at (703) 803-3260.
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and in the documents
incorporated by reference herein. Except as otherwise indicated, all references
to the "Company" refer to Fuisz Technologies Ltd. and its wholly owned
subsidiaries, unless the context otherwise requires. Statements in this
Prospectus under the caption "Business -- Strategy" and statements included or
incorporated by reference in this Prospectus regarding product development,
business strategy and expectations, are forward-looking statements that involve
risks and uncertainties. Certain factors that could cause the Company's actual
results to differ materially from those anticipated in these forward-looking
statements are set forth under "Risk Factors."
THE COMPANY
Fuisz Technologies Ltd. ("Fuisz" or the "Company") is engaged in the
development, manufacture and commercialization of its proprietary technologies
for a wide range of pharmaceutical, nutraceutical and food applications. The
Company's primary focus is on the commercialization of products incorporating
its CEFORM(TM) microsphere technology and its Shearform(TM) technology,
including controlled release and rapid dissolve over-the-counter ("OTC") and
prescription (or "ethical") pharmaceuticals.
Since January 1996, the Company has taken a number of steps to
promote the commercialization of its technologies in a range of pharmaceutical,
nutraceutical and food applications. The Company has made significant advances
in the development of its CEFORM microspheres and rapid dissolve tablet
manufacturing capabilities. Independent studies commissioned by the Company
indicate that the Company can engineer CEFORM microspheres with controlled
release and taste-masked characteristics which not only match existing
dissolution profiles of specified OTC and prescription drugs, but that also can
be formulated to improve the absorption rate of currently marketed drugs. The
Company is now able to manufacture its rapid dissolving Flash Dose(R) tablets on
conventional tablet press machinery, resulting in a faster and more cost
effective manufacturing process, greater tablet integrity and compatibility with
conventional high speed packaging processes. In addition, the Company has
acquired, and has entered into a definitive agreement and non-binding letters of
intent to acquire, a number of domestic and international businesses with
pharmaceutical product licenses and manufacturing, marketing and distribution
capabilities.
For pharmaceutical products, the Company has completed a current Good
Manufacturing Practice ("cGMP") pilot-manufacturing facility at its Chantilly,
Virginia headquarters to manufacture CEFORM microspheres and to process its
microspheres into traditional or its proprietary rapid dissolve tablets and
other dosage formats, and is constructing a facility to support commercial scale
production of certain pharmaceutical products utilizing the Company's
proprietary technologies. In addition, the Company intends to expand the
manufacturing plant at its recently acquired Clonmel Healthcare Ltd. ("Clonmel")
subsidiary in Ireland by constructing commercial scale facilities for use with
the Company's proprietary technologies with a planned capacity of more than two
billion dosage units annually. In the nutraceutical segment, the Company
recently introduced and is now marketing its Soft Chew calcium supplements
through Pangea, Ltd., a national network marketer of nutritional supplements and
skin care products which the Company acquired in May 1997 ("Pangea"). In the
food ingredient sector, the Company has entered into an exclusive manufacturing
and selling agreement with ConAgra, Inc. ("ConAgra") for use of the Company's
technology in the manufacture and sale of emulsifiers, salt replacing agents and
other food ingredients in the North and South American markets.
Utilizing its CEFORM microsphere technology, the Company can produce
microspheres of pharmaceutical compounds with modified absorption properties, if
required, which can be coated to create controlled release or taste-masked
pharmaceutical products. These microspheres, which may be incorporated into
rapid dissolving formats utilizing the Company's Shearform technology or into
conventional oral drug delivery formats such as capsules, are uniform in size
and shape and, the Company believes, have enhanced controlled release and
taste-masking characteristics when compared to pharmaceuticals processed through
other currently available techniques. The Company believes that its CEFORM
microsphere technology is superior to competitors' microparticle technology
because the CEFORM manufacturing process involves fewer steps, does not require
the use of solvents, and results in microspheres that are stable enough to be
processed with conventional tableting and
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packaging processes. In addition, the Company believes its CEFORM microsphere
technology allows for higher drug loading and more uniform coating than
competing technologies.
Utilizing its Shearform technology, the Company has developed a
variety of rapid dissolving formulations. These rapid dissolving formulations
are compatible with the Company's CEFORM microsphere technology and include:
- Flash Dose(R), a tablet which dissolves in the mouth in
several seconds without water.
- EZ Chew(R), a chewable tablet which dissolves in the mouth
with a few chews.
- Spoon Dose(TM), an innovative unit dose system that
delivers a powder dosage which dissolves almost
instantaneously in the mouth.
The Company's Shearform technology also has been used to develop the
Company's Soft Chew nutraceutical products, including mineral and vitamin
supplements. In addition, the Company's Shearform technology has broad
applications for food product ingredients.
Since January 1996, the Company has announced a number of new
development collaborations. The Company believes that its collaborative partners
turn to the Company to improve their product performance or compliance in terms
of (i) clinical effect (for example, faster absorption of an analgesic product
resulting from the application of the Company's CEFORM technology), and/or (ii)
consumer acceptance (for example, combining the Company's CEFORM microspheres in
a Shearform matrix dosage to produce pleasant tasting, rapid dissolving Flash
Dose tablets for pediatric, geriatric or other users who have difficulty in
swallowing conventional dosage forms). For major OTC products, the Company
generally seeks to partner with large pharmaceutical companies who have or wish
to acquire a significant franchise in a particular market segment. For
proprietary prescription products, the Company offers its technologies to patent
holders for development of product extensions or enhanced drug delivery
formulations. Under the Company's collaborative agreements, the Company
generally retains CEFORM microsphere manufacturing rights and, where
appropriate, also seeks to manufacture the Company's proprietary dosage
formulations, such as Flash Dose tablets.
The Company has commenced self-funded development projects in
instances where it believes that a high market potential exists (such as where
patent protection has ceased for an active ingredient or will cease within three
to five years) with the objective of developing improved delivery or dosage
characteristics, e.g., faster or improved absorption, controlled release and/or
taste-masked products. Application of the Company's technology to drugs reaching
the end of their patent protection may permit reformulations or product
extensions of such drugs which may permit new patent protection of valuable drug
compounds or otherwise maintain the use of the originating company's product.
The Company intends to seek partnering agreements for commercialization of
self-funded projects with major pharmaceutical companies. With respect to
customer-funded and Company-funded development collaborations, the Company will
seek to retain co-marketing rights in the pharmaceutical products for sale
through its own distribution channels, principally those being acquired in major
European markets.
The Company's business strategy is to: (i) develop existing and new
collaborative customer-funded arrangements; (ii) pursue Company-funded products
for further collaboration; (iii) enhance the Company's manufacturing capability;
(iv) expand proprietary product sales through acquisitions of marketing and
distribution channels in major international markets; (v) recruit and retain key
personnel; and (vi) protect and advance the Company's proprietary technology.
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THE OFFERING
SECURITIES OFFERED ................. $75,000,000 principal amount of 7%
Convertible Subordinated Debentures
due 2004 (the "Debentures") and
shares of Common Stock issuable
upon conversion thereof (the
"Conversion Shares").
PAYMENT OF INTEREST ................ April 15 and October 15, commencing
April 15, 1998.
CONVERSION ........................ Convertible into Common Stock of the
Company at the option of the holder at
any time at or before maturity, unless
previously redeemed, at $13.25 per
share, subject to adjustment upon the
occurrence of certain events.
SUBORDINATION ..................... Subordinated to all present and future
Senior Indebtedness (as defined) of
the Company and effectively
subordinated to all indebtedness and
other liabilities of the Company and
its subsidiaries. At September 30,
1997, the aggregate amount of Senior
Indebtedness outstanding and the
aggregate amount of indebtedness and
other liabilities of the Company and
its subsidiaries was approximately
$26.5 million. The Indenture contains
no limitation on the incurrence of
indebtedness (including Senior
Indebtedness) or other liabilities
by the Company and its subsidiaries.
REDEMPTION ........................ The Debentures are redeemable in whole
or in part, at the option of the
Company, at the redemption prices set
forth herein, together with accrued
interest, except that no redemption
may be made prior to October 19, 2000.
REDEMPTION AT HOLDER'S
OPTION ............................ In the event that there shall occur a
Repurchase Event (as defined), each
holder of Debentures shall have the
right, at the holder's option, to
require the Company to repurchase such
holder's Debentures at 100% of their
principal amount, plus accrued
interest. The term "Repurchase Event"
is limited to transactions involving
a Change in Control or a Termination
of Trading (each as defined), and does
not include other events that might
adversely affect the financial
condition of the Company or result in
a downgrade in the credit rating (if
any) of the Debentures. The Company's
ability to repurchase the Debentures
following a Repurchase Event is
dependent upon the Company's having
sufficient funds and may be limited
by the terms of the Company's Senior
Indebtedness or the subordination
provisions of the Indenture. There can
be no assurance that the Company will
be able to repurchase the Debentures
upon the occurrence of a Repurchase
Event.
USE OF PROCEEDS ................... The Company will not receive any
proceeds from the sale of the
Debentures and the Conversion Shares.
TRADING ........................... The Debentures have been designated
for trading on the PORTAL market. The
Common Stock is traded on Nasdaq under
the symbol "FUSE."
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RISK FACTORS
Prospective purchasers of the Debentures should consider carefully
the following risk factors, as well as the other information set forth elsewhere
in this Prospectus and incorporated by reference herein. This Prospectus
contains, in addition to historical information, forward-looking statements that
include risks and other uncertainties. The Company's actual results may differ
materially from those anticipated in these forward-looking statements. Factors
that might cause such a difference include those discussed in the following risk
factors and in the documents incorporated by reference herein. All
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements
set forth below.
LEVERAGE
On a pro forma as adjusted basis giving effect to the Company's
recent acquisitions of Clonmel, Pangea and Murat and the offering and sale of
the Debentures to the Initial Purchasers, the Company's indebtedness is
significant in relation to its stockholders' equity. On a pro forma as adjusted
basis, such debt accounted for approximately 56% of the Company's total
capitalization as of June 30, 1997. Prior to its recent acquisitions, the
Company's revenues have been generally limited to non-recurring research and
development fees and license fees pursuant to the Company's collaborative
agreements and not from product sales. The annual interest expense to the
Company relating to the Debentures will be $5,250,000 (assuming none of the
Debentures have been converted). There can be no assurance that the Company's
revenue stream and earnings will be sufficient to enable the Company to cover
its interest obligations on the Debentures or to enable it to repay principal
upon maturity of the Debentures.
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT
The Company has incurred net losses in each year since its inception,
including net losses of approximately $6.8 million during the year ended
December 31, 1996 and a net loss of approximately $14.1 million during the nine
months ended September 30, 1997. These losses have resulted in an accumulated
deficit of $29.4 million at December 31, 1996 and $43.5 million at September
30, 1997. The Company expects to incur additional losses in the near term.
The Company's ability to generate significant revenue and become
profitable will be dependent in large part on the ability of the Company to
enter into additional collaborative agreements and on the ability of the Company
and its collaborators to successfully manufacture and commercialize products
incorporating the Company's technologies. To date, the Company has not received
any significant revenue from sales of, or royalties from, products incorporating
its proprietary technologies. No assurance can be given that the Company will
ever generate significant revenue or become profitable or that it will generate
sufficient revenue or earnings to enable it to satisfy its obligations with
respect to the Debentures.
PRODUCTS IN DEVELOPMENT STAGE
Currently, the Company's Soft Chew calcium supplements are the only
commercially available products utilizing the Company's proprietary technology,
and the Company has not realized significant revenues from sales or royalties of
products incorporating its proprietary technologies. Most of the Company's
potential product applications are in the research or development stage. The
Company's operating revenue from inception through September 30, 1997 of
approximately $28.6 million has consisted principally of research and
development fees and license fees. To achieve profitable operations, the
Company, alone or with others, must successfully complete development of its
products, obtain any necessary regulatory approvals, complete manufacturing
scale-up and introduce and market its products. No assurance can be given that
the Company's product development efforts will be successfully completed, that
required regulatory approvals will be obtained or that future products, if
introduced, will be successfully manufactured or marketed or achieve consumer
acceptance. See "Business."
PRODUCT COMMERCIALIZATION
A component of the Company's strategy is to leverage its proprietary
technology to develop, manufacture and commercialize its own products. Such
products include those that are subject to existing development and
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license agreements where the Company has retained co-exclusive manufacturing and
marketing rights to the end-user products and others that are the subject of
self-funded development programs of the Company. The development of commercial
scale manufacturing facilities and marketing efforts by the Company will require
significant commitments of capital by the Company. Although several of the
businesses recently acquired by the Company have manufacturing and marketing
experience, prior to such acquisitions, the Company has had limited
manufacturing experience and no marketing experience. There can be no assurance
that the Company can successfully develop or capitalize on such experience, or
that the Company's products will be accepted in the marketplace.
Commercialization efforts by the Company may compete with activities of the
Company's collaborative partners, most of which have greater financial resources
than the Company. Moreover, there can be no assurance that the Company's active
pursuit of its own efforts to develop and commercialize products using the
Company's proprietary technology will not otherwise adversely affect the
Company's relations with its existing and potential collaborative partners. See
"Business."
ACQUISITION RISKS
One element of the Company's strategy is to capitalize on retained
co-marketing rights by acquiring marketing and distribution organizations with
existing product sales that the Company believes have been or in the near term
will be financially self-sufficient and which it believes will serve as a
platform to sell products incorporating the Company's proprietary technologies.
The Company has consummated four acquisitions in 1997, has entered into two
non-binding letters of intent and is exploring additional transactions. There
can be no assurance that the proposed transactions will be completed, that
completed acquisitions will be successfully integrated or that, once
integrated, such acquisitions will achieve levels of revenue, profitability or
productivity comparable to those historically achieved by such acquired
businesses or products or otherwise perform as expected. Acquisitions involve
special risks, including risks associated with unanticipated liabilities and
contingencies, diversion of management attention and possible adverse effects
on earnings resulting from increased goodwill amortization, increased interest
costs, the issuance of additional securities and difficulties related to the
integration of the acquired business or products. There can be no assurance
that acquired entities will generate positive cash flows and/or profits. Two of
the businesses acquired by the Company are located in Europe and the Company
plans to acquire additional businesses outside the United States. Foreign
acquisitions may subject the Company to the further risks of assimilating
differences in foreign business practices, hiring and retaining qualified
personnel, overcoming language barriers, limiting asset transfers, changes in
foreign regulations and political turmoil. There can be no assurance that the
Company will be able successfully to identify additional suitable acquisition
candidates, complete additional acquisitions or successfully integrate acquired
businesses into its operations. The failure to integrate acquired businesses
into its operations could have a material adverse effect on the Company's
business, financial condition and results of operations, including cash flow.
See "Recent Developments," "Business -- Acquisitions" and "Business --
Strategy."
LIMITED MANUFACTURING EXPERIENCE; RISK OF MANUFACTURING SCALE-UP
Products incorporating the Company's CEFORM or Shearform technology
have not been manufactured by the Company or by its collaborative partners on a
commercial scale and, to date, the Company has had limited commercial experience
with its nutraceutical products, which have been manufactured by third parties
in limited quantities. The Company currently plans to retain rights to
manufacture commercial quantities of pharmaceutical compounds processed using
the Company's CEFORM microsphere technology and to conduct other manufacturing
operations. Prior to the Company's recent acquisition of Clonmel, the Company
had limited experience manufacturing products for commercial purposes. The
Company intends to use Clonmel's facilities in Ireland for manufacturing
activities and is currently taking steps to expand this facility so that it may
be used to manufacture products employing the Company's proprietary technology.
In addition, a full-scale cGMP manufacturing facility is under construction in
Chantilly, Virginia. There can be no assurance that manufacturing and control
problems will not arise as the Company begins to scale up manufacturing
facilities or that manufacturing can be scaled up in a timely manner or at a
commercially reasonable cost to enable production in sufficient quantities.
Failure by the Company to successfully develop commercial-scale manufacturing
facilities and develop in a timely manner or at a commercially reasonable cost
the facilities necessary to manufacture products utilizing the Company's
technology will have a material adverse effect on the Company. If such
manufacturing or control problems arise or if the Company is not able to
successfully scale-up manufacturing in a timely or cost effective manner for any
reason, the Company's business could be materially adversely affected. See
"Business -- Manufacturing."
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As part of the Company's strategy, the Company seeks to manufacture
products incorporating the Company's technologies and pursuant to this strategy
has been expanding its manufacturing capabilities. Certain of the Company's
existing license agreements grant the Company's collaborative partners the
exclusive right to utilize the Company's technology to manufacture, or to
sublicense the right to manufacture, the pharmaceutical products covered by such
license agreements, other than the right to manufacture CEFORM microspheres
(which right generally is retained by the Company on an exclusive basis). There
can be no assurance that the Company's collaborative partners will contract with
the Company to manufacture licensed products using the Company's technology.
Failure of the Company's collaborative partners to contract with the Company for
the manufacture of products could have a material adverse effect on the
Company's business, financial condition or results of operations. See "Business
- -- Collaborative Agreements."
In connection with the manufacture of pharmaceuticals and food
ingredient products, the Company will be required to adhere to cGMP regulations
enforced by the U.S. Food and Drug Administration ("FDA") through its facilities
inspection program. The Company also will be required to comply with
manufacturing standards prescribed by various federal, state and local
regulatory agencies in the United States and other countries. See "Business --
Government Regulations."
DEPENDENCE UPON COLLABORATIVE PARTNERS; POTENTIAL CONFLICTS OF INTEREST
Although the Company intends to develop and commercialize certain of
its own products, the Company also has and anticipates that it will continue to
enter into collaborative arrangements with other companies, which will market
and manufacture products incorporating the Company's technologies. The Company's
prospects are, therefore, in part dependent upon the Company's ability to
attract and retain collaborative partners and to develop products and
manufacturing processes that meet the requirements of such collaborative
partners. There can be no assurance that the Company's existing or future
collaborative arrangements will result in successful product commercialization.
In addition, the Company is applying significant resources to Company-funded
development of products for which it later intends to seek collaborative
partners. There can be no assurance that the Company will be able to enter into
collaborative agreements with respect to such Company-funded projects.
The amount and timing of resources which the parties to collaborative
arrangements with the Company devote to these activities is not within the
control of the Company. If any of the Company's collaborators breaches or
terminates its agreement with the Company or otherwise fails to conduct its
collaborative activities in a timely manner, the development or
commercialization of the product candidate or research program under such
collaborative agreement may be delayed, and the Company may be required to
devote unforeseen additional resources to such development or commercialization,
or terminate such programs. The termination of collaborative arrangements could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that disputes will not
arise in the future with respect to the ownership or rights to any technology
developed with third parties. These and other possible disagreements between
collaborators and the Company could lead to delays in the collaborative
research, development or commercialization of certain product candidates, or
could require or result in litigation or arbitration, which would be time
consuming and expensive and would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
will also be dependent upon the testing, regulatory approval and marketing
efforts and, in certain cases, the manufacturing capabilities of its
collaborative partners. The Company anticipates that most licensees will be
given the exclusive or co-exclusive right to market products incorporating the
Company's technologies for a particular class of products for a particular
territory. The amount and timing of resources to be devoted by the Company's
collaborators to marketing are not within the control of the Company and there
can be no assurance that the Company's existing collaborative efforts will
result in the commercialization of products. See "Business -- Collaborative
Agreements."
In addition, the Company's collaborators may develop, either alone or
with others, products that compete with the development and marketing of the
Company's product candidates. Competing products, either developed by the
Company's collaborators or to which the collaborators have rights, may result in
the Company's collaborators withdrawing research, development or marketing
support with respect to all or a portion of the Company's technology, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Competition."
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NO ASSURANCE OF PRODUCT LICENSES; OTHER RISKS ASSOCIATED WITH COLLABORATIVE
AGREEMENTS
The Company has entered into development agreements with
collaborative partners for products using the Company's technologies. Pursuant
to these agreements, the Company typically has agreed to develop product
prototypes for the collaborative partner's evaluation. A definitive license
agreement for the manufacture and marketing of a product or products may be
entered into at the same time as the development agreement relating to such
product, or at a later date. In any event, under the Company's existing
collaborative agreements, collaborative partners generally have the right to
abandon a product, and consequently to terminate funding, at any time and for
any reason without penalty. Collaborative partners are also generally free to
market products using drug delivery or other technologies that are competitive
with those of the Company. A decision by a collaborative partner to delay
introduction or abandon one or more of its products incorporating the Company's
technology or to adopt a competing technology could adversely affect the
Company's business, financial condition and results of operations.
The Company's license agreements currently in effect generally
provide, and it is expected that future license agreements will provide, for the
Company to receive a payment at the time of execution of the agreement,
additional scheduled payments or payments based on the attainment of certain
milestones and royalty payments based on net sales of products by the licensee.
The timing and amount of such payments will fluctuate, and such fluctuations
could have a material adverse effect on the Company's cash position and results
of operations. See "Business -- Collaborative Agreements."
In addition, royalty rates for licenses of the Company's technologies
for OTC products are expected, consistent with industry practices, to be lower
than royalty rates for licenses relating to prescription products.
LIMITED MARKETING AND SALES EXPERIENCE
Prior to the Company's recent acquisitions of Clonmel, Pangea and
Murat, the Company had no marketing and sales experience. To date, the only
commercially available product incorporating the Company's proprietary
technology is a Soft Chew calcium supplement which is currently being
distributed by Pangea. There can be no assurance that the Company will be able
to successfully integrate the sales and marketing resources of its subsidiaries
into its current operations. Pangea's sales and marketing system involves
independent sales representatives who purchase products from the Company. The
Company, therefore, has limited control over actual sales activities. There can
be no assurance that Pangea or the Company's other recently acquired
subsidiaries will provide adequate sales and distribution networks for the
Company's products. The Company may require additional capital and/or third
party commitments to effectively sell and market the Company's products. See
"Recent Developments" and "Business."
RISKS INHERENT IN INTERNATIONAL OPERATIONS
On a pro forma basis, giving effect to the Company's recent
acquisitions of Clonmel, Pangea and Murat, the Company's international
operations accounted for 67% of consolidated net revenues for the nine months
ending September 30, 1997 and 73% for the year ended 1996. The Company has made
significant investments in its European subsidiaries and intends to make
additional acquisitions outside the United States. As such, the Company's
financial results could be adversely affected by fluctuations in foreign
exchange rates. Fluctuations in the value of foreign currencies affect the
dollar value of the Company's net investment in foreign subsidiaries, with this
fluctuation being included in a separate component of stockholders' equity.
Operating results of foreign subsidiaries are translated into U.S. dollars at
average monthly exchange rates. In addition, the U.S. dollar value of
transactions based in foreign currency (collection on foreign sales or payments
for foreign purchases) also fluctuates with exchange rates. At present, the
Company's largest foreign currency exposure results from activity in Irish
pounds and French francs.
Foreign operations may subject the Company to the further risks of
assimilating differences in foreign business practices, hiring and retaining
qualified personnel, overcoming language barriers, limiting asset transfers,
changes in foreign regulations and political turmoil. See "Recent Developments"
and "Business -- Acquisitions."
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CONSUMER ACCEPTANCE OF NEW TABLET FORM
Rapid dissolving tablets, a significant product application for the
Company's technology, represent a relatively new drug delivery format that has
had limited commercial exposure. As a consequence, the Company's revenues will
be dependent upon ultimate consumer acceptance of the Company's rapid dissolving
tablets as an alternative to conventional oral dosage forms. In particular, the
commercial success of the Company's rapid dissolving tablet form will depend on
whether consumers will pay more for, or buy more of, a pharmaceutical product
marketed in this format and whether this consumer appeal will make it economical
for the Company's collaborative partners to license the Company's technology or
to pursue commercialization of products utilizing this drug delivery format.
There can be no assurance that sufficient market interest for products which
incorporate the Company's technology will ever develop or, if developed, be
sustained. See "Business."
COMPETITION AND TECHNOLOGICAL CHANGE
The Company operates in a highly competitive and rapidly evolving
field, and new developments are expected to continue at a rapid pace, especially
in the drug delivery market. Competition from large pharmaceutical,
nutraceutical, food, consumer product and industrial companies including its
collaborators, joint ventures, academic institutions and other public and
private research organizations is expected to be intense. Many of these
competitors have substantially greater financial and technical resources and
production and marketing capabilities than the Company and many have
substantially greater experience in conducting clinical trials, obtaining
regulatory approvals and manufacturing and marketing pharmaceutical,
nutraceutical, food and other commercial products. There can be no assurance
that these competitors will not succeed in developing technologies and products
that are more effective, easier to use or less expensive than those which have
been or are being developed by the Company or that such technologies and
products would not render the Company's technology and products obsolete and
non-competitive. There can also be no assurance that the Company's collaborators
will not choose to use competing drug delivery methods.
The Company's rapid dissolving tablet technology competes directly
with rapid dissolving and effervescent tablet technologies developed by R.P.
Scherer & Company ("Scherer") and CIMA Labs Inc. ("CIMA"), among others. The
Company believes that certain pharmaceutical companies may be developing other
rapid dissolving tablet technologies that might be competitive with the
Company's technology. Scherer and CIMA have been successful in licensing their
technologies to a number of pharmaceutical companies. In addition, those
companies may be less dependent than the Company upon collaborative partners for
manufacturing and marketing products which incorporate their technologies. CIMA
has a license from Beecham Group plc, an affiliate of SmithKline Beecham
Corporation ("SmithKline"), one of the Company's collaborative partners,
pursuant to which CIMA licenses certain of its technology and pays a royalty
based on sales of its rapid dissolving tablets. The Company understands that the
technology upon which the Scherer tablets are based is owned by a subsidiary of
American Home Products, the parent of Whitehall Robins Healthcare ("Whitehall"),
one of the Company's collaborative partners. As a result, both Whitehall and
SmithKline may have an incentive to utilize technology developed by the
Company's competitors, although, to date, the Company does not believe these
relationships have had a material adverse effect on the Company. Other
collaborative partners of the Company may be involved in developing technologies
that compete with those of the Company. The Company's microsphere products will
compete with commercially available products produced by Eurand America (a
division of American Home Products), as well as taste-masked pharmaceutical
products manufactured internally by pharmaceutical companies. See "Business --
Competition."
PATENTS AND PROPRIETARY RIGHTS
The Company's success depends in large part on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. As of August 31, 1997, the Company has been
granted 60 U.S. patents and has filed a substantial number of applications for
additional U.S. patents, as well as corresponding patent applications outside
the United States, relating to the Company's technologies. There can be no
assurance that any of the pending patent applications will be approved, that the
Company will develop additional proprietary products that are patentable, that
any patents issued to the Company will provide the Company with competitive
advantages or will not be challenged by any third parties or that the patents of
others will not prevent the commercialization of products incorporating the
Company's technologies. Furthermore, there can be no assurance that others will
not independently develop similar products, duplicate any
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<PAGE> 15
of the Company's products or, if patents are issued to the Company, design
around the Company's patents. Any of the foregoing actions or results could have
a material adverse effect on the Company.
Litigation, which could result in substantial costs to the Company,
may also be necessary to enforce any patents issued or licensed to the Company
or to determine the scope and validity of third-party proprietary rights. If
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the U.S. Patent and
Trademark Office to determine priority of invention, which could result in
substantial cost to the Company, even if the eventual outcome is favorable to
the Company. An adverse outcome of any such litigation or interference
proceeding could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed to third parties or require the
Company to cease using such technology.
In addition to patent protection, the Company also relies on
unpatented trade secrets, proprietary know-how and technological advances which
it seeks to protect, in part, by confidentiality agreements with its
collaborators, employees and consultants. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets and proprietary know-how
will not otherwise become known or be independently discovered by others. See
"Business -- Patents and Proprietary Rights."
GOVERNMENT REGULATION AND PRODUCT APPROVAL
Manufacturing and sales of products and potential products by the
Company and its collaborative partners may be subject to extensive regulation by
the FDA and by comparable agencies in foreign countries. Although the nature and
extent of regulation varies by type of product, in general, products must meet
standards regarding safety and efficacy, manufacturing practices, labeling and
purity. In addition, certain products must receive FDA approval prior to
marketing. The FDA has extensive enforcement powers, including the power to
withhold approvals of new products, to initiate product recalls, to seize
products, to delay or prevent product sales and to halt operations.
Pharmaceutical Products. While some OTC drugs may be marketed after
incorporation of the Company's technology without specific FDA approval, other
products, including both prescription drugs and some OTC drugs, will require
specific FDA approval. Approval by the FDA for pharmaceutical products, if
required, may involve lengthy, detailed and costly laboratory and clinical
testing procedures. There can be no assurance that any products incorporating
the Company's technology will be determined to be safe and efficacious in
clinical trials or meet other applicable regulatory standards to receive the
necessary approvals for manufacture and marketing. Even if such approvals are
obtained, post-market evaluation of the products, if required, could result in
withdrawal or limitation of approvals. Delays in obtaining U.S. or foreign
approvals could adversely affect the marketing of the Company's products and
could adversely affect the Company's ability to receive royalties or other
payments.
Food Ingredient Products. The FDA also regulates food products and
the ingredients used to produce them. These materials, both the finished product
and the ingredients, must meet certain manufacturing, purity and labeling
requirements or be subject to FDA regulatory action. Food products sold by the
Company will be marketed on the basis that they are Generally Recognized as Safe
("GRAS"), but the Company does not intend to seek specific FDA approval for this
determination. If the FDA were to require the Company to demonstrate GRAS
status, or were to find that the Company's products were not GRAS, the Company
would be required to go through a lengthy and expensive regulatory review
process by the FDA, with no guarantee of ever obtaining approval. Such a
process, and the delays involved, could have a material adverse impact on the
Company.
Dietary Supplement Products. Potential products incorporating the
Company's technologies marketed as dietary supplements, such as vitamin and
mineral supplements, are presently regulated by the FDA and must meet certain
manufacturing, purity and labeling requirements. Recent legislation
significantly alters the way that dietary supplements are regulated,
particularly in the labeling and advertising of health claims. The new
regulatory requirements may affect marketing of dietary supplements produced
using the Company's technologies in ways that are currently difficult to
predict. These changes in the regulatory environment may have an adverse impact
on the Company.
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Good Manufacturing Practices. The manufacture of pharmaceutical
products, food products and food ingredients, whether by the Company or by its
licensees, must be conducted in accordance with the cGMP regulations of the FDA.
Any failure on the part of the Company or its licensees to adhere to cGMPs could
result in regulatory action that could have a material adverse effect on the
Company's business, results of operations and financial condition.
Other. Governments outside the United States will each have their own
set of regulatory standards, and possibly regulatory approvals, with which the
Company or its collaborators must comply to market products incorporating the
Company's technologies. Any failure to comply with such standards, or to obtain
such approvals, would adversely affect the Company.
The Company is also subject to numerous environmental and safety laws
and regulations. Any violation of, and the cost of compliance with, these
regulations could adversely impact the Company's operations. See "Business --
Government Regulations."
FINANCING REQUIREMENTS AND ACCESS TO CAPITAL
Implementation of the Company's business strategy will require
significant expenditures of capital. The Company believes that the net proceeds
of its sale of the Debentures to the Initial Purchasers, together with the
proceeds of the its initial public offering (the "IPO") and secondary offering
in April 1996 (the "Secondary Offering"), currently available funds and
internally generated cash flow will be sufficient to meet its operating needs
through the end of 1998. The Company's ability to meet its future capital
requirements, however, will depend on many factors, including the ability of the
Company to establish and maintain existing collaborative arrangements and
establish and maintain new collaborative arrangements with others; the costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims; complying with regulatory requirements; competing technological and
market developments; changes in the Company's existing research relationships;
and the effectiveness of product commercialization activities and arrangements.
In addition, if the Company elects, or is required by its collaborative
partners, to engage in significant commercial-scale manufacturing beyond its
current plans, to conduct significant marketing activities, or to seek,
independent of its collaborative partners, regulatory approvals for its
products, the Company will require substantial funds for these purposes. If the
proceeds of the Company's sale of the Debentures to the Initial Purchasers,
together with the Company's currently available funds and internally generated
cash flow, are not sufficient to satisfy its financing needs, the Company would
be required to seek additional funding through other arrangements with corporate
collaborators, through bank borrowings or through public or private sales of its
securities, including equity securities. Any such collaboration could result in
limitations on the Company's ability to control the research, development and
commercialization of resulting products, if any, as well as its profits
therefrom. In addition, the terms of any future bank borrowings could place
restrictions on the Company's ability to take certain actions, and any equity
financing could result in dilution to the Company's stockholders. The Company
does not currently have any committed sources of additional capital. There can
be no assurance that additional funds will be available on a timely basis, on
favorable terms or at all, or that such funds, if raised, would be sufficient to
permit the Company to continue to conduct its operations. If adequate funds are
not available, the Company may be required to curtail significantly, or
discontinue, one or more of its research and development programs. See "Business
- -- Collaborative Agreements."
PRODUCT LIABILITY AND INSURANCE
The development and sale of products in the pharmaceutical,
nutraceutical and food areas involve an inherent risk of product liability
claims. There can be no assurance that product liability claims will not be
filed against the Company for products sold by others that incorporate the
Company's technologies or that such companies would not seek indemnification or
other relief from the Company for any such claims brought against them. In
addition, there can be no assurance that product liability claims will not be
filed directly against the Company with respect to products manufactured by it.
A product liability claim could have a material adverse effect on the business
or financial condition of the Company. The Company currently maintains product
liability insurance in amounts which it believes are appropriate. There can be
no assurance, however, that product liability insurance will continue to be
available to the Company in the future on acceptable terms, if at all, or that,
if available, the coverages will be adequate to protect the Company against
future product liability claims.
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HAZARDOUS MATERIALS
The Company's activities involve the controlled use of various
chemicals. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company.
DEPENDENCE UPON KEY PERSONNEL
The Company's ability to successfully develop marketable products and
to maintain a competitive position will depend in large part upon its ability to
attract and retain highly skilled scientific, managerial and business
development personnel. The Company is highly dependent on the principal members
of its management and scientific staff and the loss of services of any of these
key employees could have a material adverse effect on the Company. In addition,
the Company's current plans call for a rapid increase in general staffing
levels, including increases in highly skilled scientific personnel. Competition
for qualified personnel is intense, and there can be no assurance that the
Company will be successful in hiring or retaining the personnel it requires for
operating its business.
CONTROL BY EXISTING OFFICERS AND DIRECTORS
The Company's executive officers and directors, and their affiliates,
beneficially own approximately 33.9% of the Company's outstanding Common Stock.
As a result, these stockholders acting together are able to exert considerable
influence over the election of the Company's directors and the outcome of most
corporate actions requiring stockholder approval, such as certain amendments to
the Company's Certificate of Incorporation or Bylaws.
VOLATILITY OF STOCK PRICE
The market prices of securities of companies whose future operating
results are significantly dependent upon specific developments are often highly
volatile. Factors such as announcements of technological innovations, the
attainment of (or failure to attain) milestones in the commercialization of the
Company's technologies, new products, new patents or changes in existing, or the
development of new, collaborative arrangements by the Company, its competitors
or other third parties, as well as government regulations, investor perception
of the Company, fluctuations in the Company's operating results and general
market conditions in the industry may cause the market price of the Common Stock
to fluctuate significantly. In addition, the stock market in general has
recently experienced extreme price and volume fluctuations, which have
particularly affected the market prices of technology companies and which have
often been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Common Stock
and the Debentures.
SUBORDINATION OF DEBENTURES
The Debentures are subordinate in right of payment to all current and
future Senior Indebtedness of the Company. Senior Indebtedness includes all
indebtedness of the Company, whether existing on or created or incurred after
the date of the issuance of the Debentures, that is not made subordinate to or
pari passu with the Debentures by the instrument creating the indebtedness. At
September 30, 1997, the aggregate amount of Senior Indebtedness outstanding and
the aggregate amount of indebtedness and other liabilities of the Company and
its subsidiaries to which the Debentures are effectively subordinated was
approximately $26.5 million. The Indenture does not limit the amount of
additional indebtedness, including Senior Indebtedness, which the Company can
create, incur, assume or guarantee. By reason of subordination of the
Debentures, in the event of insolvency, bankruptcy, liquidation, reorganization,
dissolution or winding up of the business of the Company or upon default in
payment with respect to any Senior Indebtedness of the Company or an event of
default with respect to such indebtedness resulting in the acceleration thereof,
the assets of the Company will be available to pay the amounts due on the
Debentures only after all Senior Indebtedness of the Company has been paid in
full. In addition, holders of the Debentures are effectively subordinated to the
claims of creditors of the Company's subsidiaries to the extent of the assets of
such subsidiaries. In the event of the insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any subsidiary of
the Company, creditors of such subsidiary generally
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will have the right to be paid in full before any distribution is made to the
Company or the holders of the Debentures. See "Description of Debentures."
LIMITATIONS ON REPURCHASE UPON A REPURCHASE EVENT
In the event of a Repurchase Event, which includes a Change in
Control and a Termination of Trading (each as defined herein), each holder of
the Debentures will have the right, at the holder's option, to require the
Company to repurchase all or a portion of such holder's Debentures at a purchase
price equal to 100% of the principal amount thereof plus accrued interest to the
repurchase date. The Company's ability to repurchase the Debentures upon a
Repurchase Event may be limited by the terms of the Company's Senior
Indebtedness and the subordination provisions of the Indenture. Further, the
ability of the Company to repurchase Debentures upon a Repurchase Event will be
dependent on the availability of sufficient funds and compliance with applicable
securities laws. Accordingly, there can be no assurance that the Company will be
able to repurchase the Debentures upon a Repurchase Event. The term "Repurchase
Event" is limited to certain specified transactions and may not include other
events that might adversely affect the financial condition of the Company or
result in a downgrade of the credit rating (if any) of the Debentures nor would
the requirement that the Company offer to repurchase the Debentures upon a
Repurchase Event necessarily afford holders of the Debentures protection in the
event of a highly leveraged reorganization, merger or similar transaction
involving the Company. See "Description of the Debentures."
ABSENCE OF PUBLIC MARKET; TRANSFER RESTRICTIONS
There is no existing market for the Debentures and there can be no
assurance as to the liquidity of any markets that may develop for the
Debentures, the ability of the holders to sell their Debentures or the price at
which holders of the Debentures may be able to sell their Debentures. Future
trading prices of the Debentures will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results, the
price of the Common Stock and the market for similar securities. The Initial
Purchasers' have informed the Company that the Initial Purchasers intend to make
a market in the Debentures offered hereby; however, the Initial Purchasers are
not obligated to do so, and any such market making activity may be terminated at
any time without notice to the holders of the Debentures. The Debentures have
been designated for trading in the PORTAL Market; however, the Company does not
intend to apply for listing of the Debentures on any securities exchange.
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RECENT DEVELOPMENTS
In order to capitalize on the co-marketing rights that it has
retained pursuant to its collaborative agreements, the Company has recently
consummated acquisitions of two international subsidiaries and one domestic
subsidiary which strengthen the Company's ability to market and distribute its
own products. The Company's largest acquisition, Clonmel Healthcare Ltd. in
Ireland, also provided the Company with an active GMP manufacturing facility
that the Company intends to expand by constructing commercial scale facilities
to manufacture products employing the Company's proprietary technology. In
addition, the Company has entered into an agreement to acquire an Italian
pharmaceutical marketer and has executed two non-binding letters of intent to
acquire certain product licenses and distribution channels in continental
Europe. The Company's strategy is to acquire marketing and distribution
organizations with existing product sales that it believes have been or in the
near term will be financially self-sufficient and which it believes will serve
as a platform to sell products for which the Company has retained co-marketing
rights. Where possible, the Company also seeks to retain such organizations' key
employees.
CLONMEL ACQUISITION
In September 1997, the Company acquired Clonmel, a leading private
manufacturer of branded generic pharmaceutical products in the Republic of
Ireland. Clonmel manufactures a range of prescription and over-the-counter
products which are marketed by its own sales force in Ireland and by its
distributors in Europe, Asia and the United States. For the twelve months ended
December 31, 1996, Clonmel's revenues were $19.7 million (based on the weighted
average exchange rate for the period) and net assets as of August 31, 1997 were
$7.0 million. As of November 15, 1997, Clonmel had 181 employees, 134 of whom
were involved in manufacturing and operations, 15 of whom were involved in
research and development and 32 of whom were involved in marketing or
administrative operations.
The total consideration for the acquisition (including amounts
payable under a consulting services agreement) consisted of (i) loan notes in
the amount of IR(pound)3.8 million (approximately $5.7 million), due April 30,
1998, IR(pound)4.0 million (approximately $6.0 million), due January 1, 1999 and
IR(pound)551,000 (approximately $830,000), due January 1, 2000 and (ii) one
million shares of Common Stock of the Company. Pursuant to the acquisition
agreement, the recipients of such shares have agreed that no such shares may be
sold, transferred, encumbered or otherwise disposed of prior to September 1,
1998, and that no more than 500,000 of such shares may be sold, transferred,
encumbered or otherwise disposed of prior to September 1, 1999. In addition,
$500,000 of contingent consideration is payable to the seller if Clonmel
executes certain contracts for the manufacture and supply of various
pharmaceutical products.
PANGEA ACQUISITION
In May 1997, the Company acquired Pangea, Ltd., a U.S. nationwide
marketer of nutritional supplements and skincare products, for approximately
$1.8 million in cash and assumed indebtedness. Pangea has a network of
approximately 3,000 independent sales representatives. In September 1997, the
Company's Soft Chew calcium nutritional supplement was introduced for marketing
by Pangea's sales representatives, the first Company product to be marketed
through Pangea. As of September 30, 1997, Pangea marketed 28 products through
its independent sales network.
MURAT ACQUISITION
In April 1997, the Company acquired Laboratoires Murat, a
privately-owned pharmaceutical sales and distribution company based in Paris,
France. Murat was purchased by the Company for approximately $5.0 million in
cash. Laboratoires Murat holds licenses and manufacturing rights to certain
products in France.
ISTORIA ACQUISITION
In October 1997, the Company acquired Istoria Farmaceutici
("Istoria"), a marketer of pharmaceutical products based in Padova, Italy for
approximately $6.4 million in cash and assumed indebtedness. Istoria employs 40
full- and part-time employees and sales people who market twelve products,
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including antihistamines, analgesics and antibiotics.
OTHER
The Company also has entered into two non-binding letters of intent
to make additional acquisitions for approximately $32 million in cash and Common
Stock. Calendar year 1996 sales revenues of the existing products covered by the
two letters of intent were approximately $17.0 million. In September 1997, the
Company entered into a non-binding letter of intent to acquire all rights to a
product in France and all license, patent and trademark rights to the product in
various other countries. In August 1997, the Company signed a non-binding letter
of intent to acquire certain product licenses of a drug marketing and
manufacturing company in continental Europe. In connection with the acquisition,
the Company also would seek to retain the sales distribution network with
responsibility for the existing products. There can be no assurance that the
transactions contemplated in the foregoing letters of intent will be consummated
or, if consummated, that the final terms of the acquisitions will be consistent
with those discussed above.
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RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the
periods indicated is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges . . . . . . . . -- -- -- -- -- -- --
</TABLE>
The ratio of earnings to fixed charges is computed by dividing fixed charges
into income before income taxes plus fixed charges. Fixed charges include
interest expense and that portion of net rental expense (one-third) deemed
representative of the interest factor. The ratio of earnings to fixed charges is
computed using pre-tax income. On this basis, earnings before fixed charges for
the years ended December 31, 1992, 1993, 1994, 1995, and 1996 and for the nine
months ended September 30, 1996 and 1997 were not adequate to cover fixed
charges by $3,896, $6,593, $6,227, $2,864, $6,628, $777 and $13,793,
respectively
USE OF PROCEEDS
The Company will not receive any proceeds from the sales of the
Debentures or the Conversion Shares by the Selling Securityholders.
BUSINESS
GENERAL
The Company is engaged in the development, manufacture and
commercialization of its proprietary technologies for a wide range of
pharmaceutical, nutraceutical and food applications. The Company's primary focus
is on the commercialization of products incorporating its CEFORM microsphere
technology and its Shearform technology, including controlled release and rapid
dissolve OTC and ethical pharmaceuticals.
Since January 1996, the Company has taken a number of steps to
promote the commercialization of its technologies in a range of pharmaceutical,
nutraceutical and food applications. The Company has made significant advances
in the development of its CEFORM microspheres and rapid dissolve tablet
manufacturing capabilities. Independent studies commissioned by the Company
indicate that the Company can engineer CEFORM microspheres with controlled
release and taste-masked characteristics which not only match existing
dissolution profiles of specified OTC and prescription drugs, but that also
improve the absorption rate of currently marketed drugs. The Company is now able
to manufacture its rapid dissolving Flash Dose tablets on conventional tablet
press machinery, resulting in a faster and more cost effective manufacturing
process, greater tablet integrity and compatibility with conventional high speed
packaging processes. In addition, the Company has acquired, and has entered into
a definitive agreement and non-binding letters of intent to acquire, a number of
domestic and international businesses with pharmaceutical product licenses and
manufacturing, marketing and distribution capabilities.
For pharmaceutical products, the Company has completed construction
of a cGMP pilot-manufacturing facility at its Chantilly, Virginia headquarters
to manufacture CEFORM microspheres and to process its microspheres into
traditional or its proprietary rapid dissolving tablets and other dosage
formats, and is constructing a facility to support commercial scale production
of certain pharmaceutical products utilizing the Company's proprietary
technologies. In addition, the Company intends to expand the manufacturing plant
at its recently acquired Clonmel subsidiary in Ireland by constructing
commercial scale facilities for use with the Company's proprietary technologies
with a planned capacity of more than two billion dosage units annually. In the
nutraceutical segment, the Company recently introduced and is now marketing its
Soft Chew calcium supplements through Pangea. In the food ingredient sector, the
Company has entered into an exclusive manufacturing and
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<PAGE> 22
selling agreement with ConAgra for use of the Company's technology in the
manufacture and sale of emulsifiers, salt replacing agents and other food
ingredients in the North and South American markets.
Utilizing its CEFORM microsphere technology, the Company can produce
microspheres of pharmaceutical compounds with modified absorption properties, if
required, which can be coated to create controlled release or taste-masked
pharmaceutical products. These coated microspheres, which may be incorporated
into rapid dissolving formats utilizing the Company's Shearform technology or
into conventional oral drug delivery formats such as capsules, are uniform in
size and shape and, the Company believes, have enhanced controlled release and
taste-masking characteristics when compared to pharmaceuticals processed through
other currently available techniques. The Company believes that its CEFORM
microsphere technology is superior to competitors' microparticle technology
because the CEFORM manufacturing process involves fewer steps, does not require
the use of solvents, and results in microspheres that are stable enough to be
processed with conventional tableting and packaging processes. In addition, the
Company believes its CEFORM microsphere technology allows for higher drug
loading and more uniform coating than competing technologies.
Utilizing its Shearform technology, the Company has developed a
variety of rapid dissolving formulations. These rapid dissolving formulations
are compatible with the Company's CEFORM microsphere technology and include:
- Flash Dose, a tablet which dissolves in the mouth in
several seconds without water.
- EZ Chew, a chewable tablet which dissolves in the mouth
with a few chews.
- Spoon Dose, an innovative unit dose system that delivers a
powder dosage which dissolves almost instantaneously in
the mouth.
The Company's Shearform technology also has been used to develop the
Company's Soft Chew nutraceutical products, including mineral and vitamin
supplements. In addition, the Company's Shearform technology has broad
applications for food product ingredients.
Since January 1996, the Company has announced a number of new
development collaborations. The Company believes that its collaborative partners
turn to the Company to improve their product performance or compliance in terms
of (i) clinical effect (for example, faster absorption of an analgesic product
resulting from the application of the Company's CEFORM technology), and/or (ii)
consumer acceptance (for example combining the Company's CEFORM microspheres in
a Shearform matrix dosage to produce pleasant tasting, rapid dissolving Flash
Dose tablets for pediatric, geriatric or other users who have difficulty in
swallowing conventional dosage forms). For major OTC products, the Company
generally seeks to partner with large pharmaceutical companies who have or wish
to acquire a significant franchise in a particular market segment. For
proprietary prescription products, the Company offers its technologies to patent
holders for development of product extensions or enhanced drug delivery
formulations. Under the Company's collaborative agreements, the Company
generally retains CEFORM microsphere manufacturing rights and, where
appropriate, also seeks to manufacture the Company's proprietary dosage
formulations, such as Flash Dose tablets.
The Company has commenced self-funded development projects in
instances where it believes that a high market potential exists (such as where
patent protection has ceased for an active ingredient or will cease within three
to five years) with the objective of developing improved delivery or dosage
characteristics, e.g., faster or improved absorption, controlled release and/or
taste-masked products. Application of the Company's technology to drugs reaching
the end of their patent protection may permit reformulations or product
extensions of such drugs which may permit new patent protection of valuable drug
compounds or otherwise maintain use of the originating company's product. The
Company intends to seek partnering agreements for commercialization of
self-funded projects with major pharmaceutical companies. With respect to
customer-funded and Company-funded development collaborations, the Company will
seek to retain co-marketing rights in the pharmaceutical products for sale
through its own distribution channels, principally those being acquired in major
European markets.
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STRATEGY
The Company's objective is to continue to develop and improve its
proprietary technologies and to expand the applications of its technologies in
the OTC and prescription pharmaceutical, nutraceutical and food markets. The
Company is pursuing this objective with the following strategy:
- Develop Existing and New Collaborative Customer-Funded
Agreements. In order to increase market exposure of its products and
to capitalize on its collaborative partners' market position and
distribution capabilities, the Company intends to continue to develop
its projects with its existing collaborative partners and to seek new
collaborative partners who will fund further product development
projects incorporating the Company's technology. The Company's
existing collaborative arrangements typically provide for a
customer-funded development project and contemplate a licensing
arrangement (which may be entered into at the same time as the
development project or at a later date) under which, if a project is
commercialized by the collaborative partner, the Company would
receive license fees and royalty payments from product sales. The
Company believes that such arrangements may also serve to validate
the Company's technologies in the pharmaceutical markets and thereby
assist the Company in attracting additional licensing arrangements on
favorable terms.
- Pursue Company-Funded Products for Further Collaboration. In
order to pursue enhanced royalty or marketing terms over those
obtained under customary development and licensing agreements, the
Company intends to develop drug formulations through Company-funded
projects in market segments where the Company believes there is
strong market potential and that its technology may provide a
significant competitive advantage, such as markets for ethical drugs
for which patents have or are about to expire. Application of the
Company's technology to drugs reaching the end of their patent
protection may permit reformulations or product extensions of such
drugs which may permit new patent protection of valuable drug
compounds or otherwise maintain use of the originating company's
product. After carrying such projects to an appropriate development
stage, the Company will offer companies that are seeking to maintain
or expand their market share an opportunity to enter into marketing
agreements covering the Company-funded products.
- Enhance Manufacturing Capability. The Company seeks to retain
manufacturing rights to its products to capture greater revenue and
generate production economies that may not be available to
pharmaceutical companies seeking to apply the Company's technologies
to only one or a few products. In order to manufacture products using
the Company's technologies, the Company has put in place a pilot
scale cGMP manufacturing facility and is constructing a full-scale
cGMP manufacturing facility at its Chantilly, Virginia headquarters.
The Company also is planning to construct its primary
commercial-scale manufacturing facility at its Clonmel facility. In
addition to manufacturing products for its licensees, the Company's
manufacturing facilities will be available for products that the
Company wishes to sell through its own distribution networks.
- Expand Proprietary Products Sales Through Acquired Marketing and
Distribution Channels. The Company intends to capitalize on the
co-marketing rights that it has retained (principally outside of
North America) on products subject to certain of its collaborative
development agreements. To implement this strategy, the Company has
acquired and will pursue further acquisitions of marketing and
distribution organizations with existing product sales that it
believes have been or in the near term will be financially
self-sufficient and which it believes will serve as a platform to
sell products for which the Company has retained co-marketing rights.
- Recruit and Retain Key Personnel. The Company has negotiated to
retain certain key owners or employees of its recently acquired
businesses and has sought to hire qualified scientists and key
employees who have demonstrated their capabilities at other drug
development companies. The Company expects to continue to recruit
additional talent from the pharmaceutical industry to strengthen its
operations, while seeking to retain senior executives as part of its
acquisition strategy. Between January 1, 1996 and November 15, 1997,
the Company has increased its pharmaceutical research and development
staff by 82 employees, its food and nutraceutical research and
development staff by four employees and its manufacturing and
operations staff by 142 employees.
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- Protect Proprietary Technology. The Company has sought and
intends to continue to pursue protection for its technology in the
United States and key international markets. The Company has been
granted 60 U.S. patents and has filed a substantial number of
applications for additional U.S. patents, as well as corresponding
patent applications outside the United States, relating to the
Company's technology.
INDUSTRY OVERVIEW
The global market for OTC and prescription drugs has become more
competitive and experienced other significant changes in recent years in
response to increased emphasis on containing healthcare costs. These changes in
the healthcare industry have also had an impact on participants in the
pharmaceutical industry. In particular, healthcare providers and payors have
implemented a variety of strategies to reduce the cost of medical care,
including the use of drugs having greater efficacy and/or higher patient
compliance, the use of generic versions of prescription and OTC drugs and the
use of OTC remedies when appropriate. Pharmaceutical companies have responded to
these concerns by developing treatments with improved efficacy, reduced
complications and side effects, easier dosing and lower costs. In addition, many
pharmaceutical companies are extending their presence in a particular
therapeutic area with the introduction of non-prescription, or OTC, versions of
a prescription drug.
As pharmaceutical companies adjust to the evolving healthcare
industry, they must differentiate their products in an increasingly crowded
therapeutic market. To do this effectively, they must develop products or
product extensions that can successfully compete in the generic and OTC market
for drugs, develop products or product extensions that enhance patient
compliance and brand loyalty, and accomplish this within a highly regulated and
cost-constrained environment.
The Company believes that its proprietary technologies can improve
product performance and consumer acceptance of prescription pharmaceutical
products. In some circumstances, the Company's CEFORM technology may be applied
to develop new drug delivery forms or to produce reformulations, such as reduced
dosages for the pediatric market. Application of the Company's technology to
drugs reaching the end of their patent protection may permit reformulations or
product extensions of such drugs which may permit new patent protection of
valuable drug compounds or otherwise maintain use of the originating company's
product.
In the OTC markets, competition typically is intense since most OTC
drugs do not enjoy patent protection. For this reason, several pharmaceutical
companies typically compete for sales of the same or equivalent OTC drugs.
Product differentiation and brand name identity are critical to marketing
success in this context, and pharmaceutical companies are continually seeking
new methods of distinguishing their products from those of their competitors. In
addition to the use of extensive advertising, packaging innovations and flavor
differences, pharmaceutical companies attempt to differentiate their OTC
products using improved drug dosage formats.
The Company believes that incorporating its rapid dissolving
technology into OTC products can provide a fundamental differentiating
characteristic, and a sustainable marketing advantage, for pharmaceutical
companies that offer their products in this format. The Company believes that
many consumers of OTC drugs will prefer its rapid dissolving tablets and
granules to more conventional oral drug delivery formats, such as traditional
tablets, capsules, liquid gel capsules and syrups. In particular, rapid
dissolving formulations may be especially attractive to consumers who experience
difficulty in swallowing conventional tablets or capsules, such as pediatric or
geriatric consumers.
TECHNOLOGY AND PRODUCT APPLICATIONS
The Company's core proprietary technologies are its CEFORM
microsphere and Shearform technologies. The Company's CEFORM microsphere
technology allows pharmaceutical compounds to be formulated to provide for
various delivery profiles such as rapid absorption, long-acting performance,
taste isolation and targeted delivery. The Company's Shearform technology can be
utilized to produce rapid dissolving, chewable tablet and powder dosing
pharmaceutical formulations and certain nutraceutical formulations. In addition,
the Company's Shearform technology has broad applications for food product
ingredients.
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CEFORM MICROSPHERE TECHNOLOGY
The Company has focused extensive activity on developing and applying
its CEFORM microsphere technology. This technology allows the Company to produce
uniformly sized and shaped microspheres of pharmaceutical compounds which the
Company believes demonstrate utilization and processing advantages over other
drug processing and delivery technologies. The proprietary CEFORM manufacturing
process produces microspheres which are almost perfectly spherical, have a
diameter that is typically 150-180 microns (or approximately twice the diameter
of human hair), and allow for high drug content.
In utilization terms, independent studies have indicated that CEFORM
microspheres can be formulated without loss of bioavailability for a variety of
drug delivery criteria ranging from improved or faster absorption to long-acting
controlled delivery products. Based on development work to date, the Company
believes that a wide range of OTC and prescription drugs may be processed using
its CEFORM microsphere technology and that CEFORM microspheres can be useful in
taste isolation and taste masking. The flexibility of the CEFORM technology also
enables CEFORM microspheres to be used in solid or liquid formulations at high
dosage levels and to be incorporated into a wide range of dosage forms,
including the Company's rapid dissolving formulations, such as the Flash Dose,
EZ Chew and Spoon Dose formulations, as well as conventional tablets, capsules,
suspensions, effervescent tablets and sachets.
In processing terms, the Company's CEFORM microspheres can be
produced using a continuous, single-step and solvent-free process which the
Company believes to be available for a wide range of pharmaceutical applications
and to involve a simpler manufacturing process than competing microparticle
production techniques. Due to the very brief application of heat and the wide
range of temperatures which can be used, even drugs which are thermally unstable
may be formulated into microspheres without degradation. The Company also
believes that all excipients used in the generation of CEFORM microspheres are
standard GRAS materials. Currently, the Company can process CEFORM microspheres
in batch sizes of at least 120 Kg under cGMP conditions. In its collaborative
agreements, the Company typically has retained manufacturing rights to its
CEFORM microspheres.
The Company particularly believes that pharmaceutical compounds
processed into CEFORM microspheres using its technology will, when used in
conjunction with commercially available coating materials and equipment, have
advantages for both controlled release and taste-masking applications.
Controlled release and taste-masking techniques typically rely upon the
formulation of pharmaceutical compounds into small particles which are then
coated with a material designed to resist dissolving for some period of time.
For taste- masking applications, the coating is designed to resist dissolution
only long enough for coated particles to pass from the mouth into the stomach,
where they can no longer be tasted. Controlled release systems typically utilize
coating materials that resist dissolving for a longer period of time or are
designed to dissolve at a specified rate over a controlled period of time. The
uniformity of size and shape of CEFORM microspheres makes them well suited for
coating in a standard fluidized bed apparatus. The highly spherical nature,
narrow particle size distribution, and uniform surface morphology provides for
consistent and reproducible coating and, therefore, increases the efficiency of
the coating process. This external coating can be applied to achieve additional
taste-masking of the drug, and controlled release. The Company believes the
flexibility of this technology allows for microspheres of differing
characteristics in a single dosage form.
SHEARFORM TECHNOLOGY
The Company's Shearform technology is used to produce matrices of
saccharides, polysaccharides or other carrier materials, which are then
processed into amorphous fibers or flakes and recrystallized to a predetermined
level. This process is used to produce the Company's Flash Dose and other rapid
dissolving formulations, as well as its Soft Chew products. The Shearform
technology can also be applied to food product ingredients to provide for
enhanced flavoring and performance.
Pharmaceutical Applications
To produce the Company's rapid dissolving formulations, a carrier
material produced using the Shearform Matrix technology is processed together
with a pharmaceutical compound, which may be in the form of CEFORM microspheres.
The result is a microscopic crystalline floss that can be formed into a matrix
in which the voids or cavities contain the active pharmaceutical compound. The
floss provides adhesive properties for bonding with
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active pharmaceutical compounds. When placed on the tongue, the crystalline
floss rapidly dissolves, leaving the active drug ingredient to be ingested or
absorbed. The Company's experience indicates that the Shearform process does not
change the physical or chemical characteristics of a pharmaceutical compound,
and the Company expects that this would be true for most drugs.
In addition to its application in rapid dissolving formulations, the
Company believes its Shearform technology has several beneficial attributes,
including (i) compatibility with pharmaceutical compounds (including CEFORM
microspheres) that have been coated to mask their unpleasant taste, which is
critical in a rapid dissolving formulations because the pharmaceutical compound
is exposed directly to the mouth; (ii) capability of achieving high dosage
levels, allowing the Company in many cases to match the range of doses available
in conventional tablets or capsules; and (iii) potential availability for a wide
variety of pharmaceutical compounds and for pharmaceutical combinations, such as
multi-symptom cough and cold medications.
In contrast to traditional wet granulation production techniques, the
Company's Shearform matrix tablet production methods use dry granulation
processes. The Company believes that its dry granulation processes are less
costly than the freeze-drying and effervescent processes employed in
manufacturing competing rapid dissolving tablet technologies. Because the
Company's Flash Dose tablet formulations can be processed on a conventional
high-speed tablet press, the Company believes that it can manufacture its rapid
dissolve tablets more efficiently than other competing rapid dissolve
technologies.
The Company has developed a number of dosage formats for
pharmaceutical products employing the Company's Shearform technology:
Flash Dose. Flash Dose is a tablet that dissolves in the mouth in
several seconds without water. The tablet can incorporate pharmaceutical
compounds processed using the Company's CEFORM microsphere technology or using
traditional taste-masking techniques. Flash Dose tablets can incorporate large
doses of drug, can be manufactured using a conventional high-speed tablet press
and can be packaged using traditional bubble-packaging processes.
EZ Chew. EZ Chew is a chewable tablet produced through a modified
Shearform matrix that dissolves in the mouth with a few chews to provide a
texture and taste that consumers may find superior to conventional chewables.
The manufacturing process is similar to that of Flash Dose tablets and can
incorporate an even larger drug dosage.
Spoon Dose. Spoon Dose is an innovative dosage system designed to
deliver a unit dose of pharmaceutical compounds into the mouth. Spoon Dose
relies on a blend of CEFORM microspheres and various excipients to deliver a
drug formulation which turns to a smooth liquid consistency upon tongue contact.
Spoon Dose systems can incorporate a broad range of drugs and compounds and are
manufactured by a cost-effective process.
Food Applications
The Company's Shearform technology also has broad applications for
improving the performance of food product ingredients. The Company's food
product development efforts focus on producing long-lasting flavor systems and
enhancing the performance of food ingredients such as emulsifiers, salt
replacing agents and sweeteners. The Company has entered into an exclusive
manufacturing and selling agreement with ConAgra in order to promote rapid
commercialization of food product ingredients incorporating the Company's
technologies in North and South America. The Company is exploring similar
arrangements to cover food ingredients sales in Europe and Japan.
In confection and food applications, the Company's Shearform Matrix
technology can be used to produce spheres containing flavor and sweetener which
function as sustained release flavor delivery systems. The Company's sustained
release flavor delivery technology has been incorporated into chewing gums, in
which flavor release of 40 minutes has been achieved, a duration more than
double that of typical chewing gums. This attribute is useful in conventional
chewing gums, for which long lasting flavor is desirable, or in functional
chewing gums, such as medicated gums, for which long-lasting flavor is essential
to promote user compliance.
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Nutraceuticals
Using the Company's Shearform technology, a range of Soft Chew
products have been developed. The first product, a calcium supplement intended
to reduce the risk of osteoporosis, was commercially launched in September 1997
through the Company's Pangea subsidiary. The Company expects that future
products will include such items as multi-vitamins, fiber drinks, breath
fresheners, as well as a matrix to be used in nutritional bars.
Veterinary Products
The Company's CEFORM and Shearform technologies also have
applications in the veterinary drug market for companion animals. Pursuant to a
collaboration with IDEXX Laboratories, Inc., ("IDEXX") a leader in the animal
health field, the Company is identifying a portfolio of pharmaceutical products
for companion animals which can be developed using the CEFORM technology. The
Company believes that the taste elimination achievable with the Company's CEFORM
microsphere technology, combined with quick oral dissolution of Flash Dose
tablets, should make it easier to administer such pharmaceuticals to companion
animals.
COLLABORATIVE AGREEMENTS
The Company has agreements with a number of companies for the
development of products utilizing the Company's technology and, in some
instances, has entered into license agreements with such parties. In addition to
its current collaborative partners, the Company is engaged in active discussions
with a number of other companies to enter into similar arrangements.
The Company's collaborative arrangements typically provide for a
development project which may be followed by commercialization pursuant to a
licensing arrangement. If a development project is successful, the collaborative
partner may elect to proceed to commercialize the product pursuant to a
definitive license agreement. Under the license agreements, the Company expects
that its licensee typically will be responsible for marketing and distributing
the products incorporating the Company's technology. The Company typically will
retain the right to manufacture CEFORM microsphere formulations of the
pharmaceutical product and, where appropriate, also will seek to secure an
agreement to handle tableting manufacture of the product, applying either the
Company's proprietary rapid dissolve formulations or traditional manufacturing
processes. The Company's existing license agreements generally provide for a
one-time license fee upon execution, certain milestone or scheduled license
payments and an ongoing royalty equal to a percentage of net sales of the
licensee's products utilizing the licensed technology, subject in certain cases
to minimum royalty payments. The licensee typically is granted the right, which
may be exclusive or coexclusive with the Company or another party, to market and
in some cases to manufacture products incorporating the Company's technology for
a designated class of products in a designated territory. In general, however,
under existing license agreements the licensee has no contractual obligation to
bring the product to market despite the Company's completion of the development
and formulation phases of a project. The collaborative partner typically can
terminate the development and license agreements at any time, although the
agreements generally provide that any fees previously paid to the Company are
non-refundable.
Product development programs under the Company's collaborative
agreements can be viewed as falling into three stages, the third stage generally
only being necessary if clinical testing is required. The actual composition of
any particular program is dictated primarily by required regulatory filings and
the collaborative partner's requirements. The first stage generally consists of
a development program, usually culminating in the preparation, under cGMP
conditions, of a number of prototype formulations for testing in a pilot
pharmacokinetic study against the appropriate reference product. The tasks
generally comprising the first stage are subdivided into a number of subunits
including: preformulation, analytical development, formulation development,
process initiation, stress stability testing and in certain cases the generation
of taste-masked CEFORM-based formulations. This is typically the procedure for
the development of products complying with a U.S. monograph. A more complex
controlled release drug delivery program may involve production of the prototype
formulations for pharmacokinetic and stability testing.
The second stage generally includes further development and testing
and culminates in scale-up of processing to the commercial manufacturing level.
This stage is divided into distinct units, including: further formulation
optimization, process optimization, analytical validation and process
validation. During this stage, pivotal batches for pharmacokinetic, clinical,
stability, bioavailability and, where relevant, regulatory filings are
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manufactured. A formal transfer of the manufacturing process and analytical
testing from the Company's Product department to its Manufacturing and Quality
Control departments takes place during this stage.
For products complying with the U.S. monograph system, and those as
to which an abbreviated new drug application ("ANDA"), a supplemental new drug
application ("SNDA") or certain European filings are required, the second stage
represents completion of all steps required prior to the regulatory filing for
and commercial development of the product, although collaborative partners may
elect to undertake further stability, clinical or marketing studies before
determining whether to make regulatory filings, enter into a license agreement
and/or commercialize a product, even though clinical studies in patients to test
efficacy and safety are not required for these products.
For new drug application ("NDA") products where clinical studies in
patients are required, the third stage of a program must be performed. The
duration of this stage is dictated by the extent of the clinical program and
typically extends for more than a year. In such programs, clinical supplies are
manufactured at full commercial scale to ensure that a consistency of
manufacturing is achieved. Depending on the product in question, commercial
scale typically rises from 250,000 to 1.5 million units. Thereafter, these
products must be submitted for regulatory approval and receive such approval, as
well as satisfy any other studies that the collaborative partners may choose to
undertake before the product is brought onto the market.
SMITHKLINE
In July 1994, the Company entered into a development agreement with
SmithKline Beecham Corporation for the development of Flash Dose and EZ Chew
delivery formats of a major OTC product. As part of this arrangement, the
Company has also entered into a license agreement with SmithKline under which
SmithKline is licensed worldwide to make, use and sell the resulting products.
The license is exclusive to SmithKline for Flash Dose versions of the product.
The license is exclusive, except as to one other party, for EZ Chew versions of
the product.
The Company has completed the development process up to pivotal batch
manufacturing and the Company has proposed a manufacturing program to SmithKline
for proceeding with commercial batch manufacturing. The Company believes that no
regulatory filing and approval are required to bring this product to market.
WHITEHALL
In February 1995, the Company entered into a development agreement
with Whitehall Robins Healthcare for the development of Flash Dose and EZ Chew
versions of a major OTC product. As part of this arrangement, the Company also
entered into license agreements with Whitehall pursuant to which Whitehall is
exclusively licensed for North America to make, use and sell the resulting
products. Pre- marketing approval from the FDA of this product in the new
delivery format will be required prior to commercialization, and accordingly
Whitehall must file an SNDA with the FDA to proceed with commercialization. The
Company has completed the research and development stage for the Flash Dose
versions of the product and is currently completing related formulation and
pharmacokinetic studies for the product.
BOOTS
In July 1995, the Company entered into a development agreement with
Boots Healthcare International ("Boots") for a Flash Dose version of ibuprofen
in adult and pediatric dosages for selected European, African and Pacific
markets. Boots also entered into a license agreement with the Company with
respect to the defined territories and licensed products. The license is
co-exclusive with the Company. Pre-marketing regulatory approval for this
product in the new delivery format will be required prior to commercialization.
The Company has completed the research and development stage for the
Flash Dose versions of the product and is currently completing related
formulation and pharmacokinetic studies for the product.
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MCNEIL
In November 1995, the Company entered into its first development
agreement with McNeil Consumer Products Company ("McNeil") for the development
of Flash Dose and EZ Chew versions of acetaminophen, a drug currently marketed
by McNeil under the Tylenol(R) brand. In January 1996, the Company entered into
a second development agreement with McNeil for the development of Flash Dose and
EZ Chew versions of acetaminophen with cough/cold combinations. As part of these
arrangements, the Company has also entered into two separate license agreements
with McNeil under which McNeil is exclusively licensed for North America and,
except for the Company and one other party, exclusively licensed for the rest of
the world.
The Company is currently completing large scale manufacture of
certain dosage strengths of the acetaminophen product for further testing by
McNeil. The Company believes that no regulatory filing and approval are required
to bring this product to market.
KOS
In March 1996, the Company entered into development agreements with
Kos Pharmaceuticals Inc. ("Kos"), pursuant to which the Company currently is
working with Kos on the development of controlled release, once-daily dosage
formulations of two prescription drugs. Each product will require regulatory
filings and approval by the FDA. In June 1996, the Company entered into an
additional agreement with Kos relating to the development of an additional
pharmaceutical product.
The Company has completed all phases of development with respect to
one of the drug products, has commenced development tasks on the second drug
product and is working with Kos to plan the scope of the project under the June
1996 agreement.
BAYER
In November 1996, the Company entered into a development agreement
with Bayer Corporation ("Bayer") for the development of a Flash Dose version of
an OTC product. The Company believes that no regulatory filings and approval are
necessary to bring this product to market, provided that it complies with the
underlying drug monograph.
The Company has provided Bayer with sample product for commercial
evaluation.
ASTRA
In December 1996, the Company entered into a development agreement
with Astra Hassle AB ("Astra") for the development of formulations of a
prescription drug. Pre-marketing approval from the FDA of this product in the
new delivery format will be required prior to commercialization. Prior to
commercializing the product, Astra will be required to file an SNDA with the
FDA. The Company has completed its feasibility studies and has presented Astra
with sample product, which Astra is currently in the process of evaluating.
IDEXX
In January 1997, the Company entered into a development agreement
with IDEXX Laboratories, Inc. for the development of a number of pharmaceutical
products for companion animals utilizing the Company's rapid dissolving tablet
technology. Under the terms of the agreement, IDEXX will have an exclusive
worldwide right to market the products. The parties currently are evaluating
product candidates.
CONAGRA
In June 1997, the Company entered into a license agreement with
ConAgra, Inc. under which ConAgra was granted an exclusive license to make, use
and sell certain food ingredients utilizing the Company's Shearform technology
in North and South America. As part of the terms of the agreement ConAgra
received a warrant to purchase one million shares of Fuisz Common Stock at an
initial exercise price of $25 per share.
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HOECHST
In August 1997, the Company entered into a development agreement with
Hoechst Marion Roussel, Inc. ("Hoechst") for the development of a Flash Dose
version of a non-sedating antihistamine, Allegra(R). Pre-marketing approval from
the FDA of this product in the new delivery format will be required prior to
commercialization. Hoechst will be required to file an SNDA with the FDA.
Under the development agreement, payments are to be made at specified
times or upon the achievement of specified milestones. The Company has already
begun formulation of the product.
COMMERCIALIZATION OF OTC AND PRESCRIPTION DRUGS BY THE COMPANY
In order to pursue enhanced royalty or marketing terms over those
obtainable under customary development and licensing agreements, the Company
intends to develop drug formulations under its own research and development
projects in markets where it believes there is strong market potential and that
its technology may provide a significant competitive advantage, such as markets
for ethical drugs for which patents have or are about to expire. The Company
currently has 15 active Company-funded development projects covering a range of
OTC and prescription pharmaceutical formulations. After carrying such projects
to an appropriate development stage, the Company intends to offer companies that
are seeking to maintain or expand their market share an opportunity to enter
into marketing agreements covering the Company-funded products. With respect to
customer-funded and Company-funded development collaborations, the Company
intends to seek to retain co-marketing rights in the pharmaceutical products for
sale through its own distribution channels, principally those being acquired in
major European markets.
MANUFACTURING
The Company has been actively developing its manufacturing
capabilities in order to position the Company to manufacture its own and its
collaborator's requirements for CEFORM microspheres and products. The Company
believes that by manufacturing products incorporating its technologies, it will
be able to capture greater revenue and realize production economies of scale
that may not be available to a pharmaceutical company licensing the Company's
technology for only one or a few products. The Company intends to leverage its
retained co-marketing rights, its Company-funded projects and other proprietary
technologies and its manufacturing capacity by acquiring businesses, products
and marketing capabilities, primarily in overseas markets.
The Company has completed a current Good Manufacturing Practice
(cGMP) pilot-manufacturing facility at its Chantilly, Virginia headquarters to
manufacture CEFORM microspheres and to process its microspheres into traditional
or its proprietary rapid dissolving tablets and other dosage formats, and is
constructing a facility to support commercial scale production of certain
pharmaceutical products utilizing the Company's proprietary technologies. In
addition, the Company intends to expand the manufacturing plant at its Clonmel
facility in Ireland by constructing commercial scale facilities for use with the
Company's proprietary technologies with a planned capacity of more than two
billion dosage units annually.
The Company's Clonmel site currently includes a cGMP and FDA approved
facility for both antibiotics and multipurpose pharmaceutical manufacture.
In addition to developing manufacturing capabilities on its own,
third parties or the Company's licensees may, under certain circumstances,
manufacture products incorporating the Company's proprietary technologies.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on
expanding the potential commercial applications of its proprietary drug and food
delivery technologies. The Company expects that a significant amount of its
research and development efforts will be funded by collaborative partners but
intends to continue to invest in internal research and development to enhance
its technology and to develop new applications. The Company received $2.4
million for client-sponsored research and development activities in 1996 (and
$2.0 million and $843,000 in 1995 and 1994, respectively) and spent $6.3 million
on Company-sponsored research and development in 1996 (versus $2.4 million and
$2.5 million in 1995 and 1994, respectively). The Company
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received $4.2 million for client-sponsored research and development activities
in the first nine months of 1997 and spent $6.4 million on Company-sponsored
research and development during such time.
PATENTS AND PROPRIETARY RIGHTS
The Company's policy is to aggressively protect its proprietary
technology by a variety of means including applying for patents in the United
States and in appropriate foreign countries. As of August 31, 1997, the Company
had been granted 60 U.S. patents and had filed a substantial number of
additional U.S. patent applications, as well as corresponding patent
applications outside the United States, relating to the Company's technology.
There can be no assurance that patents will issue on any of the
Company's patent applications. Even if such patents issue, there can be no
assurance that these patents or the Company's existing patents will not, in the
future, be held to be invalid if challenged, or will provide protection against
competitive products or will not be designed around or that products utilizing
the Company's technology will not conflict with current or future patent rights
of others. In addition, the products of others could infringe the patent rights
of the Company. The defense and prosecution of patent claims is both costly and
time consuming, even if the eventual outcome is favorable to the Company. Any
adverse outcome in a proceeding involving patent rights of others could subject
the Company to significant liabilities to third parties, require disputed rights
to be licensed from third parties or require the Company to cease selling its
products.
The Company also relies upon trade secrets and other unpatented
proprietary know-how in its product development activities. The Company's
employees are required to enter into agreements providing for confidentiality
and the assignment of rights to inventions made by them while in the employ of
the Company. The Company also has entered into nondisclosure agreements which
are intended to maintain the secrecy of its confidential information delivered
to third parties for research and other purposes.
GOVERNMENT REGULATIONS
The Company's research and development activities and the
manufacturing and marketing of products incorporating the Company's technology
are subject to regulation by numerous governmental agencies in the United States
and in other countries. In the United States, the Company expects that the FDA
will regulate the Company's products and technologies in three different
categories depending on the specific product: as drugs, as dietary supplements
or food ingredients. In addition, the Company will be subject to the FDA's cGMP
regulations. If the Company fails to comply with FDA regulations, the FDA may
take a variety of regulatory actions against the Company, including initiating
product recalls, enjoining further sales of the product, seizing and destroying
existing products, halting operations and imposing criminal liability on the
manufacturer.
FDA REGULATION OF DRUGS
The Company expects that the FDA will regulate the Company's products
for use with human drugs as OTC or prescription drugs, depending on the
regulatory status of the drug in which the Company's technology is used.
Furthermore, the Company expects that the FDA will regulate the marketing of OTC
drugs using the Company's products under two different processes, the OTC
monograph process or the more complex and lengthy NDA process, depending upon
the specific drug product. There can be no assurance that marketing approval
will be obtained in a timely fashion, if at all, for any of the Company's
products.
OTC Monograph System
In order for the manufacturer of an OTC drug to market a product
based on the FDA's OTC monograph system, the product must conform to the
conditions contained in the applicable FDA monograph. OTC monographs contain
lists of active ingredients that, when used in specific dosages and in
conformity with specific labeling requirements, are Generally Recognized as Safe
and Effective ("GRASE") by the FDA for use in OTC products. In addition to
dosage and labeling requirements, the product must comply with specified testing
procedures for the specific OTC product and must be manufactured in compliance
with cGMPs.
The Company expects that some of its products will be incorporated in
OTC drugs, such as antacids and acetaminophen that are formulated on the basis
of an FDA monograph. With respect to this class of drugs, no
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separate approval is required to incorporate these ingredients as inactive
components of an OTC drug marketed under an OTC monograph. However, if the FDA
believes that incorporation of the Company's technology changes or reduces the
drug's safety or efficacy, it is possible that the FDA would consider the
product to be outside the monograph and thus require a full or supplemental NDA.
There can be no assurance that the FDA will not reach this determination as to
any drug incorporating the Company's technology. Further, there can be no
assurance that the FDA may not at some future date modify the relevant OTC
monographs to require additional data for drugs produced using the Company's
manufacturing technology. Such a possibility is not remote, as the FDA currently
requires the submission of clinical data for approval of extended release
formulations of OTC products. Use of the Company's microsphere technology to
create controlled release or extended release formulations of current OTC
monograph products could require the development of significant clinical data
which would delay approval of the products.
NDA Approval
Before a drug that is not subject to a monograph can be marketed in
the United States, the FDA must approve an NDA for the drug. An NDA is a lengthy
and complex regulatory submission, and preparation of an NDA and development of
the data that make up the NDA are time-consuming and expensive. The Company
expects that its product technology will be incorporated in drugs that are sold
as OTC or prescription drugs based on an approved NDA. Although the Company is
focused on the development of new delivery technologies for existing
pharmaceutical compounds, the formulation of any pharmaceutical compound in any
new product will be subject to regulation by the FDA and comparable agencies in
other countries which impose mandatory procedures and standards for the conduct
of clinical trials and the production and marketing of products for diagnostic
and human therapeutic use. In the United States, use of the Company's technology
in these drugs will require approval by the FDA of either an SNDA, an NDA, or an
ANDA if the new version of the drug is equivalent to a drug that is already on
the market subject to a full NDA. SNDAs, NDAs and ANDAs are subject to extensive
review by the FDA, and approval may take months or years to obtain. The
packaging and labeling of the developed products by third parties using the
Company's technology may also be subject to FDA regulations.
If there are any modifications to the drug, including changes in
indication, manufacturing process, inactive ingredients, labeling or a change in
manufacturing facility, an SNDA may be required to be approved by the FDA. The
SNDA must conform to format requirements for an NDA, but need only contain
information supporting the change proposed in the SNDA. An SNDA, while generally
containing less information than an NDA, is also subject to lengthy review
requirements and may also require the expenditure of substantial resources.
User-fee legislation establishes specific time frames for completion
of FDA regulatory reviews. While this program provides some measure of assurance
that the FDA's review is conducted in a timely fashion, there is no guarantee
that the time periods will be met in all cases or that the review will provide a
positive result. Even after the FDA approval has been obtained, further studies,
including post-market studies, may be required to provide additional data on
safety and will be required to gain approval for the use of a product as a
treatment for clinical indications other than those for which the product was
initially tested. Also, the FDA will require post-market reporting and may
require surveillance programs to monitor the side effects of the drug. Results
of post-marketing programs may limit or expand the further marketing of the
products.
In most cases, drugs marketed OTC on the basis of an NDA were
approved as prescription drugs (usually in a stronger dosage form) for a period
of time before the manufacturer filed an NDA or SNDA for OTC use. This history
of prescription use enables the FDA to judge whether the drug in question is
sufficiently safe to allow it to be marketed on an OTC basis. Without such a
history, the FDA is unlikely to approve an NDA to switch a prescription drug to
OTC status.
In the case of reformulated pharmaceutical products (products already
on the market based on an approved NDA), the Company expects that if the
reformulated pharmaceutical product can be shown to have equivalent
bioavailability as compared to an approved product, then extensive human and
animal studies may not be required for FDA approval of an SNDA. Bioavailability
of a human drug refers to the rate and extent to which the active ingredient is
absorbed from a drug product by the body and becomes available at the site of
action. Demonstration of bioavailability requires testing in humans governed by
the FDA's institutional review board and informed consent regulations.
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The Company has development and license agreements for certain drugs,
such as ibuprofen, which are currently sold OTC, but are also covered by an NDA.
Manufacturers of these drugs will likely have to obtain pre-market approval to
market these drugs using the Company's tableting technology by filing an SNDA
with the FDA. The process of filing and receiving approval of an SNDA can be
lengthy. The Company plans to market its tableting technology to other
manufacturers of drugs covered by NDAs, whether OTC or restricted to
prescription use only. These manufacturers also will be required to obtain
pre-market approval to use the technology by filing SNDAs.
The FDA has an abbreviated process for approving new versions of
drugs which are the "same as" drugs on the market that are already subject to a
full NDA ("listed drugs"). A new version of a drug -- sometimes referred to as a
"generic drug" -- is considered the same as the listed drug if it is identical
in active ingredient(s), dosage form, strength, route of administration, and
conditions of use. In order to gain approval under this process, the
manufacturer must submit an ANDA, which contains chemistry, manufacturing, and
control information and data to show that the manufacturer's drug is both
pharmaceutically equivalent and bioequivalent to the listed drug. A drug is
pharmaceutically equivalent to the listed drug if it contains an identical
amount of the same active ingredient. Bioequivalence means that the drug is
absorbed by the body to the same extent and at the same rate as the listed drug
when administered under similar conditions. The studies needed to prove
bioequivalence are generally less extensive than those required for approval of
a full NDA.
If the Company's technology is incorporated into an existing approved
ANDA product, the manufacturer must submit a supplement to its original
abbreviated application. This supplement must be filed and approved by the FDA
prior to marketing of the reformulated product. The data needed to support such
a supplement are similar to those needed to file a full ANDA. However, there is
no guarantee that FDA would accept an ANDA or a supplement to an ANDA for a
product incorporating the Company's technology. Depending on the way in which
the Company's technology is incorporated into the drug product, and the manner
in which it affects the active ingredient, the agency might require a full NDA.
In some cases, FDA may approve a manufacturer's drug through the ANDA
process even if it is not bioequivalent to the listed drug. In such cases, the
manufacturer must submit a petition to show that the active ingredient is the
same pharmacological or therapeutic class as the listed drug and that the new
drug can be expected to have the same therapeutic effect as the listed drug when
administered to patients for the same use. However, there can be no assurance
that FDA would grant such a petition.
Whether or not FDA approval has been obtained for use of the
Company's products in human drugs, approval of a product by regulatory
authorities in countries outside the United States must be obtained prior to the
commencement of marketing of the product in such countries. The requirements
governing the conduct of clinical trials and product approvals vary widely from
country to country, and the time required for approval may be longer or shorter
than that required for FDA approval. Although there are some procedures for
unified filings for certain European countries, in general, each country at this
time has its own procedures and requirements.
FDA REGULATION OF DIETARY SUPPLEMENTS OF VITAMINS AND MINERALS
The Company expects that certain OTC products and nutraceuticals
incorporating the Company's technology will be regulated by the FDA as dietary
supplements. Dietary supplements are regulated under the FDA's food regulatory
authority. The Dietary Supplement Health and Education Act of 1994 ("DSHEA")
significantly alters the way that dietary supplements are regulated,
particularly in labeling and advertising of health claims and statements of
nutritional support. Although the statute and recently adopted regulations
implementing DSHEA provide increased flexibility for making health claims and
statements of nutritional support, continuing uncertainty regarding the new
regulatory requirements and of the FDA's enforcement in this area could have an
adverse impact on the Company.
The Company currently is party to a collaborative arrangement under
which the Company's technology will be used in dietary supplements. While the
Company believes that materials produced using the Company's technologies will
be considered GRAS, there can be no guarantee that this will be the case.
Furthermore, the new regulatory requirements may affect marketing of dietary
supplements produced using the Company's products in ways that are difficult to
predict at present.
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Governments outside the United States may also have separate
regulatory mechanisms for dietary supplements with which the Company will have
to comply to market its products.
FDA REGULATION OF FOOD INGREDIENTS
The Company expects that its products used as food ingredients will
be regulated by the FDA as foods under the Federal Food, Drug and Cosmetic Act
of 1938 (the "Act"). Under the Act, materials used in food products and the food
products themselves must meet certain manufacturing, purity and labeling
requirements or be subject to FDA regulatory action. In addition, ingredients
added to food must be the subject of an approved food additive petition unless:
(1) the substance is GRAS under the conditions of its intended use by experts
qualified by scientific training and experience to evaluate the safety of food
ingredients, or, in the case of a substance used in food prior to January 1,
1958, the substance has been shown to be safe through experience based on common
use in food, or (2) the substance was marketed based on a sanction or approval
from the FDA or the U.S. Department of Agriculture ("USDA") prior to September
6, 1958 ("prior-sanctioned").
Manufacturers generally take one of three approaches to establishing
that their products are GRAS: relying upon FDA regulations listing GRAS
substances, filing a GRAS affirmation petition, or relying upon the GRAS
self-affirmation process. Alternatively, manufacturers may establish that their
products are prior-sanctioned. If the FDA determines that a substance used as a
food ingredient is neither GRAS nor prior-sanctioned, then it may not be used in
food until approval of a food additive petition is obtained from the FDA.
In general, seeking FDA recognition of a substance as GRAS through a
GRAS affirmation petition or demonstrating the safety and effectiveness of a
food ingredient through a food additive petition is a lengthy process and
requires extensive documentation by the petitioner. An alternative, known as
GRAS self-affirmation, allows manufacturers to market their products without
obtaining any FDA approval. Under this process, manufacturers may make an
independent determination that their products are GRAS, despite the lack of any
existing regulation or approved GRAS affirmation petition. However, the FDA
expects manufacturers of products marketed on this basis to have available the
evidence relied on by the manufacturer in determining that the product was GRAS.
The Company intends to base the marketing of its food products on
GRAS self-affirmation, rather than on any filing with the FDA. The Company
believes that, because its food products consist of GRAS ingredients that are
only physically, not chemically, manipulated, it has adequate grounds to make
this independent determination of its products' status as GRAS. However, there
can be no assurance that the FDA, were it to review the Company's
self-affirmation, would agree that the Company's products are GRAS. If the FDA
did not agree, it could initiate regulatory action against the Company's
products, including injunctions prohibiting further sale, removal of the
products from the market, seizure and destruction of existing products and
possible criminal prosecution. Furthermore, the Company's decision to rely on
self-affirmation may limit the marketability of the Company's products to food
manufacturers, as many food manufacturers require confirmation of GRAS status
from the FDA before they will purchase substances for use in foods from third
parties.
If the FDA challenges the Company's self-affirmation of GRAS status,
the Company must either establish independently that food products using its
technology are GRAS through the GRAS affirmation petition process, or obtain a
food additive approval. Significant delays in marketing of the Company's
products would be the likely result. In a GRAS affirmation petition, the Company
would have to prove, based on common use in food prior to January 1, 1958 or on
the basis of published and unpublished data, that the Company's products are
GRAS. There can be no guarantee that the FDA would approve the Company's GRAS
affirmation petition. In addition, FDA review and subsequent promulgation of a
formal GRAS regulation are generally lengthy processes, which would delay
marketing of the Company's products. Furthermore, if the FDA decided that the
Company's food ingredient differed significantly in structure, function or
composition from substances found currently in food, and denied the Company's
GRAS affirmation petition, the Company could not lawfully market its products
without obtaining approval of a food additive petition. The food additive
petition process, which would be required if the FDA found that the Company's
products are not GRAS, is extremely complex, involving a regulatory review
process that may take many years and involve the expenditure of substantial
resources. There can be no assurance that approval would be obtained in a timely
fashion, if at all.
If the Company's technology is incorporated in products claiming a
therapeutic benefit, such products could be regulated as a drug rather than a
food. Regulation of these products as a drug would require extensive
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clinical testing and review by the FDA to support the claims made for the
product. The uncertainty regarding the regulatory status of this type of product
could have an adverse impact on the Company.
In addition to the FDA regulatory framework for product approvals,
the Company is subject to regulation under state and federal laws, including
requirements regarding occupational safety, laboratory practices, environmental
protection and hazardous substance control, and may be subject to other present
and possible future local, state, federal and foreign regulations.
Governments outside the United States will each impose their own set
of regulatory standards, and possibly regulatory approvals, with which the
Company must comply to market products for use in foods.
GOOD MANUFACTURING PRACTICES
To assure that regulated products meet the statutory requirements for
safety, identity, strength, quality, and purity, the FDA has issued
comprehensive, binding regulations setting forth minimum cGMPs for the
preparation of pharmaceuticals, food products, and food ingredients. Failure to
comply with cGMP regulations will subject the product, as well as the person
responsible for the noncompliance, to regulatory action.
The cGMP regulations for pharmaceuticals are quite stringent. They
specify detailed criteria for personnel, buildings and facilities, equipment,
control of components and drug product containers and closures, warehousing and
distribution procedures, laboratory controls, records and reports, and returned
and salvaged drug products. Key personnel involved in the manufacture and
control of drugs must have appropriate education, training and/or experience to
enable them to perform their assigned functions. A drug produced under
conditions that do not conform to cGMPs is considered adulterated and may be
subject to recall, injunction, or seizure by the FDA.
cGMPs for food products are primarily focused on maintaining sanitary
conditions. Under the Act, a food product is adulterated and subject to
regulatory action if it was prepared, packed, or held under unsanitary
conditions. In general, cGMP regulations have been issued for food products and
ingredients in general, and for certain specific product types. They cover
generally the sanitary practices of personnel, construction of buildings and
facilities, design and care of equipment, and production and process controls.
For certain products, the regulations include requirements for record keeping to
ensure efficient recall of foods found to be contaminated.
The FDA conducts periodic, unannounced inspections of food and drug
production facilities to ensure compliance with cGMPs. Failure to maintain
compliance with cGMPs could result in regulatory action that would have an
adverse impact on the Company and its products.
COMPETITION
The markets for prescription and OTC pharmaceutical products, drug
delivery systems and food products are highly competitive. In the pharmaceutical
market, the Company will compete with other providers of oral drug delivery
systems, including rapid dissolving tablets and other delivery forms, to attract
licensees. In addition, the products of the Company's licensees which
incorporate the Company's technologies will compete with products of other
pharmaceutical companies for sales to the ultimate consumer. Other providers of
drug delivery systems and food ingredients products include major pharmaceutical
and diagnostic companies, companies specializing in drug delivery technology,
chemical companies, food ingredient companies, consumer food companies and other
companies, universities and institutions. Many of these competitors have
substantially greater financial and technical resources and production and
marketing capabilities than the Company. Technological advances by the Company's
competitors which result in processes or technologies superior to those of the
Company could render the Company's proprietary technology obsolete or lead to
competition from other companies.
Among the technologies expected to provide competition for the
Company's rapid dissolving tablets are the Zydis(R) technology developed by
Scherer, which is based on a freeze dried gelatin tablet, and the OraSolv(R)
technology of CIMA, which produces an effervescent tablet. The principal
competitive factors in the market for rapid dissolving tablet technologies are
compatibility with taste-masking techniques, dosage capacity, drug
compatibility, cost and ease of manufacture and required capital investment for
manufacturing. The Company believes that its rapid dissolving tablet technology
competes favorably with respect to these factors. Both Scherer
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and CIMA have, however, preceded the Company in the market for rapid dissolving
tablets and each has been successful in licensing its technology to a number of
pharmaceutical companies. The Company also believes that certain pharmaceutical
companies may be developing other rapid dissolving tablet technologies which
might be competitive with the Company's technology. CIMA has a license from
Beecham Group plc, an affiliate of SmithKline, one of the Company's
collaborative partners, pursuant to which CIMA licenses certain of its
technology and pays a royalty based on sales of its rapid dissolving tablets.
The Company understands that technology upon which the Scherer tablets are based
is owned by a subsidiary of American Home Products, the parent of Whitehall, one
of the collaborative partners of the Company. As a result, both Whitehall and
SmithKline may have an incentive to utilize technologies developed by the
Company's competitors, although, to date, the Company does not believe these
relationships have had a material adverse effect on the Company. There can be no
assurance that the Company will be able to compete effectively with these
technologies in either their current versions or in improved versions that might
be developed. In addition, other collaborative partners of the Company may be
involved in development of technologies that compete with those of the Company.
One or more of these technologies could in the future provide competition for
the Company's products and technologies. The Company's microsphere products will
compete with commercially available products, such as those produced by Eurand
America (a division of American Home Products), as well as taste-masked
pharmaceutical products manufactured internally by pharmaceutical companies. See
"Risk Factors -- Competition and Technological Change."
EMPLOYEES
As of November 15, 1997 the Company had 402 employees, of which 161
were engaged in manufacturing and operations, 117 were engaged directly in
scientific and product research and development and 124 were engaged in
executive, administrative and financial functions. Of the 402 employees, 243
were employed by the Company's international subsidiaries. All hourly employees
of Clonmel are members of the Services, Industrial, Professional, Technical
Union ("SIPTU") or are otherwise covered pursuant to the terms of a collective
bargaining agreement with SIPTU. Management believes it maintains good relations
with its employees.
PROPERTIES
The Company leases approximately 91,000 square feet of laboratory,
production and office space in Northern Virginia. Of the leased facilities,
approximately 8,000 square feet are leased through November 1998 with a
five-year renewal option, 17,000 square feet are leased through January 1999,
11,000 square feet are leased through January 2002 and the remaining space is
leased through the year 2005 with a five-year renewal option. In January 1997,
the Company purchased approximately 3,000 square feet of office space in Dublin,
Ireland for administrative and business development uses and entered into a
lease for approximately 3,000 square feet of laboratory space outside of Dublin.
The Company also owns two buildings through its Clonmel subsidiary in Clonmel,
Ireland. One building contains approximately 48,000 square feet of cGMP
manufacturing, laboratory and office space. The other building contains
approximately 25,000 square feet of cGMP manufacturing space. The Company
believes that these facilities are adequate to meet the Company's short-term
needs and that any additional required space will be available on commercially
reasonable terms.
LEGAL PROCEEDINGS
The Company is currently not a party to any material legal
proceedings.
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DESCRIPTION OF THE DEBENTURES
The Debentures were issued under an indenture dated as of October 22,
1997 (the "Indenture") between the Company and The Bank of New York, as trustee
(the "Trustee"). The following summaries of certain provisions of the Indenture
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture, including the
definition therein of certain terms. Wherever particular sections or defined
terms of the Indenture are referred to, such sections or defined terms are
incorporated herein by reference. Copies of the form of Indenture and the
related registration rights agreement between the Company and the Initial
Purchasers are available from the Company or the Initial Purchasers upon
request.
GENERAL
The Debentures are unsecured obligations of the Company and will
mature on October 15, 2004. The Debentures bear interest at the rate per annum
shown on the front cover of this Prospectus from the date of initial issuance of
Debentures pursuant to the Indenture, or from the most recent Interest Payment
Date to which interest has been paid or provided for, payable semi-annually on
April 15 and October 15 of each year, commencing April 15, 1998, to the Person
in whose name the Debenture (or any predecessor Debenture) is registered at the
close of business on the preceding March 31 or September 30, as the case may be.
Interest on the Debentures is paid on the basis of a 360-day year of twelve
30-day months.
Principal of, and premium, if any, and interest on, the Debentures is
payable (i) in respect of Debentures held of record by the Depository Trust
Company ("DTC") or its nominee in same day funds on or prior to the payment
dates with respect to such amounts and (ii) in respect of Debentures held of
record by holders other than DTC or its nominee at the office of the Trustee,
and the Debentures may be surrendered for transfer, exchange or conversion at
the office of the Trustee. In addition, with respect to Debentures held of
record by holders other than DTC or its nominee, payment of interest may be made
at the option of the Company by check mailed to the address of the persons
entitled thereto as it appears in the Register for the Debentures on the Regular
Record Date for such interest.
The Debentures were issued only in registered form, without coupons
and in denominations of $1,000 or any integral multiple thereof. No service
charge will be made for any transfer or exchange of the Debentures, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge and any other expenses (including the fees and expenses of
the Trustee) payable in connection therewith. The Company is not required (i) to
issue, register the transfer of or exchange any Debentures during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Debenture selected
for redemption in whole or in part, except the unredeemed portion of Debentures
being redeemed in part.
All monies paid by the Company to the Trustee or any Paying Agent for
the payment of principal of and premium and interest on any Debenture which
remain unclaimed for two years after such principal, premium or interest become
due and payable may be repaid to the Company. Thereafter, the Holder of such
Debenture may, as an unsecured general creditor, look only to the Company for
payment thereof.
The Indenture does not contain any provisions that would provide
protection to Holders of the Debentures against a sudden and dramatic decline in
credit quality of the Company resulting from any takeover, recapitalization or
similar restructuring, except as described below under "Certain Rights to
Require Repurchase of Debentures."
CONVERSION RIGHTS
The Debentures are convertible into Common Stock at any time prior to
redemption or final maturity, initially at the conversion price of $13.25 per
share. The right to convert Debentures that have been called for redemption will
terminate at the close of business on the second business day preceding the
Redemption Date. See "Optional Redemption."
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<PAGE> 38
The conversion price is subject to adjustment upon the occurrence of
any of the following events: (i) the subdivision, combination or
reclassification of outstanding shares of Common Stock; (ii) the payment in
shares of Common Stock of a dividend or distribution on any class of capital
stock of the Company; (iii) the issuance of rights or warrants to all holders of
Common Stock entitling them to acquire shares of Common Stock at a price per
share less than the Current Market Price; (iv) the distribution to holders of
Common Stock of shares of capital stock other than Common Stock, evidences of
indebtedness, cash or assets (including securities, but excluding dividends or
distributions paid exclusively in cash and dividends, distributions, rights and
warrants referred to above); (v) a distribution consisting exclusively of cash
(excluding any cash distributions referred to in (iv) above) to all holders of
Common Stock in an aggregate amount that, together with (A) all other cash
distributions (excluding any cash distributions referred to in (iv) above) made
within the 12 months preceding such distribution and (B) any cash and the fair
market value of other consideration payable in respect of any tender offer by
the Company or a subsidiary of the Company for the Common Stock consummated
within the 12 months preceding such distribution, exceeds 12.5% of the Company's
market capitalization (being the product of the Current Market Price times the
number of shares of Common Stock then outstanding) on the date fixed for
determining the stockholders entitled to such distribution; and (vi) the
consummation of a tender offer made by the Company or any subsidiary of the
Company for the Common Stock which involves an aggregate consideration that,
together with (X) any cash and other consideration payable in respect of any
tender offer by the Company or a subsidiary of the Company for the Common Stock
consummated within the 12 months preceding the consummation of such tender offer
and (Y) the aggregate amount of all cash distributions (excluding any cash
distributions referred to in (iv) above) to all holders of the Common Stock
within the 12 months preceding the consummation of such tender offer, exceeds
12.5% of the Company's market capitalization at the date of consummation of such
tender offer. No adjustment of the conversion price will be required to be made
until cumulative adjustments amount to at least one percent of the conversion
price, as last adjusted. Any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
In addition to the foregoing adjustments, the Company from time to
time may, to the extent permitted by law, reduce the conversion price of the
Debentures by any amount for any period of at least 20 days, in which case the
Company shall give at least 15 days' notice of such decrease. The Company also
is permitted to reduce the conversion price as it considers to be advisable in
order that any event treated for federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the holders of the Common Stock or,
if that is not possible, to diminish any income taxes that are otherwise payable
because of such event. In the case of any consolidation or merger of the Company
with any other corporation (other than one in which no change is made in the
Common Stock), or any sale or transfer of all or substantially all of the assets
of the Company, the Holder of any Debenture then outstanding will, with certain
exceptions, have the right thereafter to convert such Debenture only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Debenture might have been converted immediately
prior to such consolidation, merger, sale or transfer; and adjustments will be
provided for events subsequent thereto that are as nearly equivalent as
practical to the conversion price adjustments described above.
Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon the then
Closing Price at the close of business on the day of conversion. If any
Debentures are surrendered for conversion during the period from the close of
business on any Regular Record Date through and including the next succeeding
Interest Payment Date (except any such Debentures called for redemption), such
Debentures when surrendered for conversion must be accompanied by payment of
funds in an amount equal to the interest thereon which the registered Holder on
such Regular Record Date is to receive. Except as described in the preceding
sentence, no interest will be payable by the Company on converted Debentures
with respect to any Interest Payment Date subsequent to the date of conversion.
No other payment or adjustment for interest or dividends is to be made upon
conversion.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on
the Debentures are, to the extent set forth in the Indenture, subordinated in
right of payment to the prior payment in full of all Senior Indebtedness. If
there is a payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
or provision for such payment in money or money's worth before
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<PAGE> 39
the Holders of the Debentures will be entitled to receive any payment in respect
of the principal of or premium, if any, or interest on the Debentures. In the
event of the acceleration of the Maturity of the Debentures, the holders of all
Senior Indebtedness will first be entitled to receive payment in full in cash of
all amounts due thereon or provision for such payment in money or money's worth
before the Holders of the Debentures will be entitled to receive any payment for
the principal of or premium, if any, or interest on the Debentures. No payments
on account of principal of or premium, if any, or interest on the Debentures or
on account of the purchase or acquisition of Debentures may be made if there has
occurred and is continuing a default in any payment with respect to Senior
Indebtedness, any acceleration of the maturity or any Senior Indebtedness or if
any judicial proceeding is pending with respect to any such default.
Senior Indebtedness is defined in the Indenture as the principal of
and premium, if any, and interest on (i) all indebtedness of the Company for
money borrowed, whether outstanding on the date of execution of the Indenture or
thereafter created, incurred or assumed, except any such other indebtedness that
by the terms of the instrument or instruments by which such indebtedness was
created or incurred expressly provides that it (a) is junior in right of payment
to the Debentures or (b) ranks pari passu in right of payment with the
Debentures, and (ii) any amendments, renewals, extensions, modifications,
refinancings and refundings of any of the foregoing. For the purposes of this
definition, "indebtedness for money borrowed" when used with respect to the
Company means (i) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money (including without limitation fees,
penalties and other obligations in respect thereof), whether or not evidenced by
bonds, debentures, notes or other written instruments, (ii) any deferred payment
obligation of, or any such obligation guaranteed by, the Company for the payment
of the purchase price of property or assets evidenced by a note or similar
instrument and (iii) any obligation of, or any such obligation guaranteed by,
the Company for the payment of rent or other amounts under a lease of property
or assets which obligation is required to be classified and accounted for as a
capitalized lease on the balance sheet of the Company under generally accepted
accounting principles.
The Debentures are obligations exclusively of the Company.
Substantial operations of the Company are currently and are expected in the
future to be conducted principally through subsidiaries, which are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts due pursuant to the Debentures or to make any funds available
therefor, whether by dividends, loans or other payments. In addition, the
payment of dividends and certain loans and advances to the Company by such
subsidiaries may be subject to certain statutory or contractual restrictions,
are contingent upon the earnings of such subsidiaries and are subject to various
business considerations.
The Debentures are effectively subordinated to all indebtedness and
other liabilities and commitments (including trade payables and lease
obligations) of the Company's subsidiaries to the extent of the assets of such
subsidiaries. Any right of the Company to receive assets of any such subsidiary
upon the liquidation or reorganization of any such subsidiary (and the
consequent right of the Holders of the Debentures to participate in those
assets) is effectively subordinated to the claims of that subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
The Indenture does not limit or prohibit the incurrence of Senior
Indebtedness. At September 30, 1997, the aggregate amount of Senior Indebtedness
outstanding and the aggregate amount of indebtedness and other liabilities of
the Company and its subsidiaries to which the Debentures are effectively
subordinated was approximately $26.5 million. The Company also expects to incur
Senior Indebtedness from time to time in the future.
OPTIONAL REDEMPTION
The Debentures will be redeemable, at the Company's option, in whole
or from time to time in part, at any time on or after October 19, 2000, upon not
less than 30 nor more than 60 days' notice mailed to each Holder of Debentures
to be redeemed at its address appearing in the Security Register and prior to
Maturity at the following Redemption Prices (expressed as percentages of the
principal amount) plus accrued interest to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
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<PAGE> 40
If redeemed during the 12-month period beginning October 15, in the
year indicated (October 19, in the case of 2000), the redemption price shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- -----
<S> <C> <C>
2000 104.00%
2001 103.00
2002 102.00
2003 101.00
</TABLE>
No sinking fund is provided for the Debentures.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, or permit any Person to consolidate with or merge into
the Company or convey, transfer or lease its properties substantially as an
entirety to the Company, unless (a) if applicable, the Person formed by such
consolidation or into which the Company is merged or the Person or corporation
which acquires the properties and assets of the Company substantially as an
entirety is a corporation, limited liability company, partnership or trust
organized and validly existing under the laws of the United States or any state
thereof or the District of Columbia and expressly assumes payment of the
principal of and premium, if any, and interest on the Debentures and performance
and observance of each obligation of the Company under the Indenture, (b) after
consummating such consolidation, merger, transfer or lease, no Default or Event
of Default will occur and be continuing, (c) such consolidation, merger or
acquisition does not adversely affect the validity or enforceability of the
Debentures and (d) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease complies with the provisions of the
Indenture.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES
In the event of any Repurchase Event (as defined below) occurring
after the date of issuance of the Debentures and on or prior to Maturity, each
Holder of Debentures will have the right, at the Holder's option, to require the
Company to repurchase all or any part of the Holder's Debentures on the date
(the "Repurchase Date") that is 30 days after the date the Company gives notice
of the Repurchase Event as described below at a price (the "Repurchase Price")
equal to 100% of the principal amount thereof, together with accrued and unpaid
interest to the Repurchase Date. On or prior to the Repurchase Date, the Company
shall deposit with the Trustee or a Paying Agent an amount of money sufficient
to pay the Repurchase Price of the Debentures which are to be repaid on or
promptly following the Repurchase Date.
Failure by the Company to provide timely notice of a Repurchase
Event, as provided for below, or to repurchase the Debentures when required
under the preceding paragraph will result in an Event of Default under the
Indenture whether or not such repurchase is permitted by the subordination
provisions of the Indenture.
On or before the 15th day after the occurrence of a Repurchase Event,
the Company is obligated to mail to all Holders of Debentures a notice of the
occurrence of such Repurchase Event and identifying the Repurchase Date, the
date by which the repurchase right must be exercised, the Repurchase Price for
Debentures and the procedures which the Holder must follow to exercise this
right. To exercise the repurchase right, the Holder of a Debenture must deliver,
on or before the close of business on the Repurchase Date, written notice to the
Company (or an agent designated by the Company for such purpose) and to the
Trustee of the Holder's exercise of such right, together with the certificates
evidencing the Debentures with respect to which the right is being exercised,
duly endorsed for transfer.
A "Repurchase Event" shall have occurred upon the occurrence of a
Change in Control or a Termination of Trading (each as defined below).
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<PAGE> 41
A "Change in Control" shall occur when: (i) all or substantially all
of the Company's assets are sold as an entirety to any person or related group
of persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
total voting power of all classes of capital stock entitled to vote generally in
the election of directors of the continuing or surviving corporation immediately
after such consolidation or merger in substantially the same proportion as their
ownership of Common Stock immediately before such transaction; (iii) any person,
or any persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Exchange Act) at least 50%
of the total voting power of all classes of capital stock of the Company
entitled to vote generally in the election of directors of the Company; (iv) at
any time during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (v) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution.
A "Termination of Trading" shall occur if the Common Stock (or other
common stock into which the Debentures are then convertible) is neither listed
for trading on a U.S. national securities exchange nor approved for trading on
an established automated over-the-counter trading market in the United States.
The right to require the Company to repurchase Debentures as a result
of the occurrence of a Repurchase Event could create an event of default under
Senior Indebtedness of the Company, as a result of which any repurchase could,
absent a waiver, be blocked by the subordination provisions of the Debentures.
See "Subordination." Failure by the Company to repurchase the Debentures when
required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions. The
Company's ability to pay cash to the Holders of Debentures upon a repurchase may
be limited by certain financial covenants contained in the Company's Senior
Indebtedness.
In the event a Repurchase Event occurs and the Holders exercise their
rights to require the Company to repurchase Debentures, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase.
The foregoing provisions would not necessarily afford Holders of the
Debentures protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders. In addition, the
foregoing provisions may discourage open market purchases of the Common Stock or
a non-negotiated tender or exchange offer for such stock and, accordingly, may
limit a stockholder's ability to realize a premium over the market price of the
Common Stock in connection with any such transaction.
RULE 144A INFORMATION REQUIREMENT
The Company has agreed to furnish to the Holders or beneficial
holders of the Debentures and prospective purchasers of the Debentures
designated by the holders of the Debentures, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until such time as the Company registers the Debentures and the underlying
Common Stock for resale under the Securities Act.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect
to the Debentures: (a) default in the payment of principal of or any premium on
any Debenture when due (even if such payment is prohibited by the subordination
provisions of the Indenture), whether at maturity, upon redemption, upon
acceleration or otherwise; (b) default in the payment of any interest on any
Debenture when due, which default continues for 30 days (even if
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<PAGE> 42
such payment is prohibited by the subordination provisions of the Indenture);
(c) failure to provide timely notice of a Repurchase Event as required by the
Indenture; (d) default in the payment of the Repurchase Price in respect of any
Debenture on the Repurchase Date therefor (even if such payment is prohibited by
the subordination provisions of the Indenture); (e) default in the performance
of any other covenant of the Company in the Indenture which continues for 60
days after written notice as provided in the Indenture; (f) default under one or
more bonds, debentures, notes or other evidences of indebtedness for money
borrowed by the Company or any subsidiary of the Company or under one or more
mortgages, indentures or instruments under which there may be issued or by which
there may be secured or evidenced any indebtedness for money borrowed by the
Company or any subsidiary of the Company, whether such indebtedness now exists
or shall hereafter be created, which default individually or in the aggregate
shall constitute a failure to pay the principal of indebtedness in excess of $5
million when due and payable after the expiration of any applicable grace period
with respect thereto or shall have resulted in indebtedness in excess of $5
million becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such indebtedness having
been discharged, or such acceleration having been rescinded or annulled, within
a period of 30 days after there shall have been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Debentures a written notice
specifying such default and requiring the Company to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or annulled; and (g)
certain events in bankruptcy, insolvency or reorganization of the Company or any
subsidiary of the Company.
If an Event of Default with respect to the Debentures shall occur and
be continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Debentures then outstanding may declare the
principal of and premium, if any, on all such Debentures to be due and payable
immediately, but if the Company cures all Events of Default (except the
nonpayment of interest on, premium, if any, and principal of any Debentures) and
certain other conditions are met, such declaration may be canceled and past
defaults may be waived by the holders of a majority in principal amount of
Outstanding Debentures. If an Event of Default shall occur as a result of an
event of bankruptcy, insolvency or reorganization of the Company or any
subsidiary of the Company, the aggregate principal amount of the Debentures
shall automatically become due and payable. The Company is required to furnish
to the Trustee annually a statement as to the performance by the Company of
certain of its obligations under the Indenture and as to any default in such
performance. The Indenture provides that the Trustee may withhold notice to the
Holders of the Debentures of any continuing default (except in the payment of
the principal of or premium, if any, or interest on any Debentures) if the
Trustee considers it in the interest of Holders of the Debentures to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Outstanding Debentures, to execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture or modify in any manner the rights of
Holders of the Debentures, provided that without the consent of each holder of
Outstanding Debentures, no supplemental indenture may (i) change the stated
maturity of the principal of, or any installment of interest on, any Debenture,
or reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Debenture or any premium or
interest thereon is payable, or impair the right to institute suit for
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), (ii) adversely affect
the right to convert the Debentures as provided in the Indenture, (iii) modify
the provisions of the Indenture with respect to the subordination of the
Debentures in a manner adverse to the Holders of Debentures, (iv) impair the
right of Holders of Debentures to require the Company to repurchase Debentures
upon the occurrence of a Repurchase Event or (v) reduce the percentage in
principal amount of Outstanding Debentures, the consent of whose Holders is
required for any waiver of compliance with certain provisions of the Indenture
or certain defaults thereunder.
Modifications and amendments of the Indenture may be made by the
Company and the Trustee without the consent of the Holders to: (a) cause the
Indenture to be qualified under the Trust Indenture Act; (b) evidence the
succession of another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the Debentures; (c) add
to the covenants of the Company for the benefit of the Holders or an additional
Event of Default, or surrender any right or power conferred upon the Company;
(d) secure the Debentures; (e) make provision with respect to the conversion
rights of Holders in the event of a consolidation,
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<PAGE> 43
merger or sale of assets involving the Company, as required by the Indenture;
(f) evidence and provide for the acceptance of appointment by a successor
Trustee with respect to the Debentures; or (g) cure any ambiguity, correct or
supplement any provision which may be defective or inconsistent with any other
provision, or make any other provisions with respect to matters or questions
arising under the Indenture which shall not be inconsistent with the provisions
of the Indenture, provided, however, that no such modification or amendment may
adversely affect the interests of Holders in any material respect.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while
Debentures remain Outstanding if (a) all Outstanding Debentures will become due
and payable at their scheduled maturity within one year or (b) all Outstanding
Debentures are scheduled for redemption within one year, and in either case the
Company has deposited with the Trustee an amount sufficient to pay and discharge
all Outstanding Debentures on the date of their scheduled maturity or the
scheduled date of redemption.
FORM, DENOMINATION AND REGISTRATION
The Debentures will be issued in fully registered form, without
coupons, in denominations of $1,000 in principal amount and integral multiples
thereof.
Global Debentures; Book-Entry Form. Debentures sold in reliance on
Rule 144A may be evidenced by a global Debenture (hereinafter referred to as
the "Rule 144A Global Debenture") and Debentures sold in reliance on
Regulation S may be evidenced by a global Debenture (hereinafter referred to as
the "Regulations S Global Debenture," and, together with the Rule 144A Global
Debenture, the "Global Debentures"). The Global Debentures will be deposited
with, or on behalf of, DTC and registered in the name of Cede & Co. ("Cede") as
DTC's nominee. Beneficial interests in the Regulation S Global Debenture may
only be held through the Euroclear System or Cedel. Except as set forth below,
the Global Debentures may be transferred, in whole or in part, only to another
nominee of DTC or to a successor of DTC or its nominee. The Rule 144A Global
Debenture will be (i) reduced in principal amount to reflect the subsequent
transfer by owners of beneficial interests in the Rule 144A Global Debenture to
persons other than Qualified Institutional Buyers pursuant to Rule 144A under
the Securities Act and (ii) increased in principal amount to reflect the
subsequent transfer of Debentures to Qualified Institutional Buyers pursuant to
Rule 144A. The Regulation S Global Debenture will be (i) reduced in principal
amount to reflect the subsequent transfer by owners of beneficial interests in
the Regulation S Global Debenture to persons other than persons acquiring such
Debentures in compliance with Regulation S under the Securities Act and (ii)
increased in principal amount to reflect the subsequent transfer of Debentures
to persons acquiring such Debentures in compliance with Regulation S under the
Securities Act.
The Holders of Debentures may hold their interests in the Global
Debentures directly through DTC if such Holder is a participant in DTC, or
indirectly through organizations which are participants in DTC (the
"Participants"). Transfers between Participants will be effected in the ordinary
way in accordance with DTC's rules and will be settled in same day funds. The
laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in the Global Debentures to such persons may be limited.
Holders of Debentures who are not Participants may beneficially own
interests in the Global Debentures held by DTC only through Participants or
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly ("Indirect Participants"). So long as Cede, as the nominee of DTC,
is the registered owner of the Global Debentures, Cede for all purposes will be
considered the sole holder of the Global Debentures.
Payment of interest on and the redemption price or repurchase price
(upon redemption at the option of the Company or repurchase at the option of the
Holder upon a Repurchase Event) of the Global Debentures will be made to Cede,
the nominee for DTC, as the registered owner of the Global Debentures, by wire
transfer of immediately available funds. Neither the Company, the Trustee nor
any paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
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<PAGE> 44
With respect to any payment of interest on and the redemption price
or repurchase price (upon redemption at the option of the Company or repurchase
at the option of the Holder upon a Repurchase Event) of the Global Debentures,
DTC's practice is to credit Participants' accounts on the payment date therefor
with payments in amounts proportionate to their respective beneficial interests
in the Debentures represented by the Global Debentures as shown on the records
of DTC, unless DTC has reason to believe that it will not receive payment on
such payment date. Payments by Participants to owners of beneficial interests in
Debentures represented by the Global Debentures held through such Participants
will be the responsibility of such Participants, as is now the case with
securities held for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Debentures represented by the Global Debentures
to pledge such interest to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent
or conversion agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as depository
and a successor depository is not appointed by the Company within 90 days, the
Company will cause Debentures to be issued in definitive form in exchange for
the Global Debentures.
Certificated Debentures. Debentures sold to investors that are
neither Qualified Institutional Buyers nor persons acquiring such Debentures in
compliance with Regulation S under the Securities Act will be issued in
definitive registered form and may not be evidenced by a Global Debenture.
Qualified Institutional Buyers may request that their Debentures be issued in
definitive registered form. In addition, certificated Debentures may be issued
in exchange for Debentures represented by the Global Debentures if no successor
depository is appointed by the Company as set forth above under the paragraph
entitled "Global Debentures; Book-Entry Form."
Restrictions on Transfer; Legends. The Debentures, and the Common
Stock into which they may be converted, are currently subject to certain
transfer restrictions and certificates evidencing the Debentures bear a legend
to such effect.
PAYMENTS OF PRINCIPAL AND INTEREST
The Indenture requires that payments in respect of the Debentures
(including principal, premium, if any, and interest) held of record by DTC
(including Debentures evidenced by the Global Debentures) be made in same day
funds. Payments in respect of the Debentures held of record by holders other
than DTC may, at the option of the Company, be made by check and mailed to such
holders of record as shown on the register for the Debentures.
GOVERNING LAW
The Indenture and Debentures will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
state's conflicts of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries may maintain deposit accounts and
conduct other banking transactions with the Trustee in the ordinary course of
business.
ABSENCE OF PUBLIC MARKET; TRANSFER RESTRICTIONS
There is no existing market for the Debentures and there can be no
assurance as to the liquidity of any markets that may develop for the
Debentures, the ability of the holders to sell their Debentures or at what price
holders of the Debentures will be able to sell their Debentures. Future trading
prices of the Debentures will depend upon many factors including, among other
things, prevailing interest rates, the Company's operating results, the
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<PAGE> 45
price of the Common Stock and the market for similar securities. The Initial
Purchasers have informed the Company that they intend to make a market in the
Debentures offered hereby; however, the Initial Purchasers are not obligated to
do so and any such market making activity may be terminated at any time without
notice to the holders of the Debentures. The Debentures have been designated for
trading in the PORTAL Market; however, the Company does not intend to apply for
listing of the Debentures on any securities exchange.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal
income tax consequences relating to an investment in the Debentures as of the
date hereof. This discussion is based on existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated
thereunder, judicial decisions and administrative rulings, all of which are
subject to change or alternative construction with possible retroactive effect.
This summary does not discuss other federal taxes (such as federal estate and
gift taxes) or any state, local or foreign tax considerations, nor does it
purport to address all federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules, such as
Non-U.S. Holders (as defined below), life insurance companies, tax-exempt
organizations, dealers in securities or currency, banks or other financial
institutions, investors who directly or indirectly own 5% in value of the
outstanding stock of the Company, investors whose functional currency is not the
U.S. dollar, or investors that hold the Debentures as part of a hedge, straddle
or conversion transaction. In addition, this summary is generally limited to the
Debentures and the Common Stock into which the Debentures are convertible which
are held as "capital assets" within the meaning of Section 1221 of the Code. The
Company will not seek a ruling from the Internal Revenue Service (the "IRS")
with regard to the United States federal income tax treatment relating to an
investment in the Debentures (or the Common Stock into which the Debentures are
convertible) and, therefore, there can be no assurance that the IRS will agree
with the conclusions set forth below.
For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of the Debentures or Common Stock that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, and (iv) a trust if (a)
a U.S. court is able to exercise primary supervision over the trust's
administration and (b) one or more U.S. persons have the authority to control
all of the trust's substantial decisions. The term "Non-U.S. Holder" shall mean
the beneficial owner of the Debentures or Common Stock other than a U.S. Holder.
PERSONS CONSIDERING THE PURCHASE OF THE DEBENTURES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO
THEIR PARTICULAR SITUATIONS. THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL
ASPECTS OF FEDERAL, STATE, LOCAL OR FOREIGN TAXATION THAT MAY BE RELEVANT TO AN
INVESTOR'S DECISION TO PURCHASE THE DEBENTURES.
OWNERSHIP OF THE DEBENTURES
Interest on Debentures. Interest paid on Debentures will be taxable
to a U.S. Holder as ordinary interest income at the time that such interest is
accrued or (actually or constructively) received in accordance with the U.S.
Holder's methods of tax accounting. The Company is obligated to pay liquidated
damages to holders of Debentures in certain circumstances. The Company believes
that any such payments should be treated as subject to an "incidental
contingency" for purposes of the original issue discount rules because the
amount of any such payments, if required to be made, is expected to be
insignificant relative to the total expected amount of remaining payments on the
Debentures, and accordingly, if such payments are required to be made, such
amounts should be taxable to holders as payments of interest. The Company
expects that the Debentures will not be issued with original issue discount
("OID") within the meaning of the Code.
Constructive Dividend. Certain corporate transactions, such as
distributions of assets to holders of the Common Stock, may cause a deemed
distribution to the U.S. Holders of the Debentures if the conversion price or
conversion ratio of the Debentures is adjusted to reflect such corporate
transaction. Adjustments to the conversion price or conversion ratio, however,
made pursuant to a bona fide, reasonable adjustment formula which has the effect
of preventing the dilution of the interest of the U.S. Holders of such
securities, generally will not be
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<PAGE> 46
considered to result in a deemed distribution. In the event of a deemed
distribution, such deemed distribution will be taxable as a dividend, return of
capital, or capital gain in accordance with the earnings and profits rules
discussed below under "Dividends on Shares of the Common Stock" and U.S. Holders
may recognize income as a result of an event pursuant to which they receive no
cash or property to be used to pay the related income tax. Holders of the
Debentures are advised to consult their tax advisors with respect to the
potential of taxable deemed dividend distributions upon such conversion price or
conversion ratio adjustment.
Sale or Exchange of Debentures or Shares of the Common Stock. In
general, a U.S. Holder of Debentures will recognize gain or loss upon the sale,
redemption, retirement or other disposition of the Debentures measured by the
difference between the amount of cash and the fair market value of any property
received (except to the extent attributable to the payment of accrued interest,
which will generally be taxable as ordinary income) and such holder's adjusted
tax basis in the Debentures. A U.S. Holder's tax basis in Debentures generally
will equal the cost of the Debentures to the holder increased by the amount of
market discount, if any, previously taken into income by the holder or decreased
by any bond premium theretofore amortized by the holder with respect to the
Debentures. In general, each U.S. Holder of the Common Stock into which the
Debentures have been converted will recognize gain or loss upon the sale,
exchange, redemption, or other disposition of the Common Stock under rules
similar to those applicable to the Debentures. Special rules may apply to
redemptions of the Common Stock which may result in the amount paid being
treated as a dividend. Subject to the market discount rules discussed below, the
gain or loss on the disposition of the Debentures or shares of Common Stock will
be capital gain or loss and will be long-term gain or loss if the Debentures or
shares of Common Stock have been held for more than one year at the time of such
disposition. For the basis and holding period of shares of Common Stock, see
discussion under "Conversion of Debentures." With respect to U.S. Holders who
are individuals, the maximum tax rates on any capital gain recognized on such
disposition of the Debentures or shares of Common Stock held for more than 18
months, or held for more than one year but for not more than 18 months, are 20
percent and 28 percent, respectively.
Conversion of Debentures. A U.S. Holder of Debentures will not
recognize gain or loss on the conversion of the Debentures into shares of Common
Stock. The U.S. Holder's tax basis in the shares of Common Stock received upon
conversion of the Debentures will be equal to the holder's aggregate basis in
the Debentures exchanged therefor (less any portion thereof allocable to cash
received in lieu of a fractional share). The holding period of the shares of
Common Stock received by the U.S. Holder upon conversion of Debentures will
generally include the period during which such holder held the Debentures prior
to the conversion. Cash received in lieu of a fractional share of Common Stock
should be treated as a payment in exchange for such fractional share rather than
as a dividend. Gain or loss recognized on the receipt of cash paid in lieu of
such fractional shares generally will equal the difference between the amount of
cash received and the amount of tax basis allocable to the fractional shares.
Special rules for the conversion of the Debentures into shares of Common Stock
may apply if a U.S. Holder converts after a record date for the payment of
interest but prior to the next succeeding interest payment date (for instance,
the fair market value of Common Stock received which is attributable to accrued
interest may be taxable as ordinary interest income in certain circumstances).
U.S. Holders should consult their own tax advisors regarding the tax
consequences of converting the Debentures into shares of Common Stock.
Market Discount. The resale of Debentures may be affected by the
"market discount" provisions of the Code. For this purpose, the market discount
on a Debenture will generally be equal to the amount, if any, by which the
stated redemption price at maturity of the Debenture immediately after its
acquisition exceeds the U.S. Holder's tax basis in the Debenture. Subject to a
de minimis exception, these provisions generally require a U.S. Holder of a
Debenture acquired at a market discount to treat as ordinary income any gain
recognized on the disposition of such Debenture to the extent of the "accrued
market discount" on such Debenture at the time of disposition. In general,
market discount on a Debenture will be treated as accruing on a straight-line
basis over the term of such Debenture, or, at the election of the U.S. Holder,
under a constant yield method. A U.S. Holder of a Debenture acquired at a market
discount may be required to defer the deduction of a portion of the interest on
any indebtedness incurred or maintained to purchase or carry such Debenture
until the Debenture is disposed of in a taxable transaction, unless the U.S.
Holder elects to include accrued market discount in income currently. If a U.S.
Holder acquires a Debenture at a market discount and receives Common Stock upon
conversion of the Debenture, the amount of accrued market discount with respect
to the converted Debenture through the date of conversion will be treated as
ordinary income upon the disposition of the Common Stock.
Dividends on Shares of Common Stock. Distributions on shares of
Common Stock will constitute dividends for United States federal income tax
purposes to the extent of current or accumulated earnings and
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<PAGE> 47
profits of the Company as determined under United States federal income tax
principles. Dividends paid to U.S. Holders that are United States corporations
may qualify for the dividends-received deduction. To the extent, if any, that a
U.S. Holder receives distributions on shares of Common Stock that would
otherwise constitute dividends for United States federal income tax purposes but
that exceed current and accumulated earnings and profits of the Company, such
distributions will be treated first as a non-taxable return of capital reducing
the U.S. Holder's basis in the shares of Common Stock. Any such distributions in
excess of the U.S. Holder's basis in the shares of Common Stock will generally
be treated as capital gain.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO NON-U.S. HOLDERS
Interest on Debentures. Generally, interest paid on the Debentures to
a Non-U.S. Holder will not be subject to United States federal income tax if:
(i) such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder; (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all classes of stock of the Company entitled to vote and is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) the beneficial owner, under
penalty of perjury, certifies that the owner is not a United States person and
provides the owner's name and address. For this purpose, the Non-U.S. Holder of
Debentures would be deemed to own constructively the Common Stock into which it
could be converted. If certain requirements are satisfied, the certification
described in clause (iii) above may be provided by a securities clearing
organization, a bank, or other financial institution that holds customers'
securities in the ordinary course of its trade or business. Under recently
adopted United States Treasury regulations, which generally are effective for
payments made after December 31, 1998, subject to certain transition rules, the
certification described in clause (iii) above may also be provided by a
qualified intermediary on behalf of one or more beneficial owners (or other
intermediaries), provided that such intermediary has entered into a withholding
agreement with the Internal Revenue Service and certain other conditions are
met. A Non-U.S. Holder that is not exempt from tax under the rules described
above will generally be subject to United States federal income tax withholding
at a rate of 30% unless the interest is effectively connected with the conduct
of a United States trade or business, in which case the interest will be subject
to the United States federal income tax on net income that applies to United
States persons generally. Non-U.S. Holders should consult applicable income tax
treaties, which may provide different rules.
Sales or Exchange of Debentures or Shares of Common Stock. A Non-U.S.
Holder generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of the Debentures or shares of
Common Stock unless (i) the gain is effectively connected with the conduct of a
trade or business within the United States by the Non-U.S. Holder, or (ii) in
the case of a Non-U.S. Holder who is a nonresident alien individual and holds
the Common Stock as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other circumstances are
present. To the extent that the amount of cash and the fair market value of any
property received upon the sale or other disposition of the Debentures or shares
of Common Stock is attributable to the payment of accrued interest, in the case
of a sale or other disposition of the Debentures, or is deemed a dividend
distribution, in the case of a sale or other disposition of shares of Common
Stock, the Non-U.S. Holder may be subject to tax on such cash and property as
described above under "Non-U.S. Holders -- Interest on Debentures," or as
described below under "Non-U.S. Holders -- Dividends on Shares of Common Stock,"
respectively. The amount withheld pursuant to these rules will be creditable
against such Non-U.S. Holder's United States federal income tax liability and
may entitle such Non-U.S. Holder to a refund upon furnishing the required
information to the Internal Revenue Service. Non-U.S. Holders should consult
applicable income tax treaties, which may provide different rules.
Conversion of Debentures. A Non-U.S. Holder generally will not be
subject to United States federal income tax on the conversion of a Debenture
into shares of Common Stock. To the extent a Non-U.S. Holder receives cash in
lieu of a fractional share on conversion, such cash may give rise to gain that
would be subject to the rules described above with respect to the sale or
exchange of a Debenture or shares of Common Stock.
Dividends on Shares of Common Stock. Generally, to the extent any
distribution with respect to the shares of Common Stock are treated as a
dividend (as described above under "U.S. Holders -- Dividends on Shares of
Common Stock"), a Non-U.S. Holder will be subject to United States federal
income tax withholding at a rate of 30% unless the dividend is effectively
connected with the conduct of trade or business within the United States by the
Non-U.S. Holders, in which case the dividend will be subject to the United
States federal income tax on net income that applies to United States persons
generally (and, with respect to corporate holders, the branch profits
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<PAGE> 48
tax under certain circumstances). Non-U.S. Holders should consult any applicable
income tax treaties, which may provide for a lower rate of withholding or other
rules different from those described above. A Non-U.S. Holder (and in the case
of Non-United States Holders that are treated as partnerships or are otherwise
fiscally transparent entities, partners, shareholders or other beneficiaries of
such Non-United States Holders) may be required to satisfy certain certification
requirements in order to claim a reduction of or exemption from withholding
under the foregoing rules.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Information reporting and backup withholding may apply
to payments of interest or dividends on or the proceeds of the sale or other
disposition of the Debentures or shares of Common Stock made by the Company with
respect to certain noncorporate U.S. Holders. Such U.S. holders generally will
be subject to backup withholding at a rate of 31% unless the recipient of such
payment supplies a taxpayer identification number, certified under penalties of
perjury, as well as certain other information, or otherwise establishes, in the
manner prescribed by law, an exemption from backup withholding. Any amount
withheld under backup withholding is allowable as a credit against the U.S.
holder's federal income tax, upon furnishing the required information.
Non-U.S. Holders. Generally, information reporting and backup
withholding of United States federal income tax at a rate of 31% may apply to
payments of principal, interest and premium (if any) to Non-U.S. Holders if the
payee fails to certify that the holder is a Non-U.S. person or if the Company or
its paying agent has actual knowledge that the payee is a United States person.
The 31% backup withholding tax generally will not apply to dividends paid to
foreign holders outside the United States that are subject to 30% withholding as
discussed above or that are subject to a tax treaty that reduces such
withholding.
The payment of the proceeds on the disposition of Debenture or shares
of Common Stock to or through the United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
unless the owner provides the certification described above or otherwise
establishes an exemption. The proceeds of the disposition by a Non-U.S. Holder
of Debentures or shares of Common Stock to or through a foreign office of a
broker will generally not be subject to backup withholding. However, if such
broker is a U.S. person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income from all sources
for certain periods is from activities that are effectively connected with a
United States trade or business, information reporting will apply unless such
broker has documentary evidence in its files of the Non-U.S. Holder's foreign
status and has no actual knowledge to the contrary or unless the Non-U.S. Holder
otherwise establishes an exemption. Both backup withholding and information
reporting will apply to the proceeds from such dispositions if the broker has
actual knowledge that the payee is a U.S. Holder.
Recently adopted United States Treasury regulations, which generally
are effective for payments made after December 31, 1998, subject to certain
transition rules, alter the forgoing rules in certain respects. Those
regulations provide presumptions under which a Non-United States Holder is
subject to information reporting and backup withholding at the rate of 31%
unless the Company receives certification from the holder of non-U.S. status.
Depending on the circumstances, this certification will need to be provided (i)
directly by the Non-United States Holder, (ii) in the case of a Non-United
States Holder that is treated as a partnership or other fiscally transparent
entity, by the partners, shareholders or other beneficiaries of such entity, or
(iii) certain qualified financial institutions or other qualified entities on
behalf of the Non-United States Holder.
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<PAGE> 49
SELLING SECURITYHOLDERS
The Debentures were originally issued by the Company in a private
placement on October 17, 1997 to Smith Barney Inc., Credit Suisse First Boston
Corporation and Lehman Brothers Inc. (the "Initial Purchasers") and were
simultaneously sold by the Initial Purchasers, in transactions exempt from the
registration requirements of the Securities Act, to persons reasonably believed
by such Initial Purchasers to be "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) and outside the United States in offshore
transactions in reliance on Regulation S under the Securities Act. The Selling
Securityholders may from time to time offer and sell pursuant to this Prospectus
any or all of the Debentures and Conversion Shares. The term "Selling
Securityholder" includes the holders listed below and the beneficial owners of
the Debentures and their transferees, pledgees, donees or other successors.
The following table sets forth information with respect to the
Selling Securityholders and the respective principal amount of Debentures
beneficially owned by each Selling Securityholder that may be offered pursuant
to this Prospectus. Except as otherwise indicated, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their securities. Such information has been obtained from the Selling
Securityholders and the Trustee.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PERCENT OF TOTAL
SELLING SECURITYHOLDERS OF DEBENTURES OWNED OUTSTANDING DEBENTURES
----------------------- ------------------- ----------------------
<S> <C> <C>
Allstate Insurance Company $1,500,000 2.00%
Argent Classic Convertible Arbitrage Fund $2,000,000 2.67%
Argent Classic Convertible Arbitrage Fund, L.P. $1,000,000 1.33%
Arkansas PERS $1,200,000 1.60%
Associated Electric & Gas Insurance Services Ltd. $250,000 *
Bear Stearns & Co., Inc. $937,000 1.25%
Bond Fund Series--Oppenheimer Bond Fund for Growth $4,000,000 5.33%
Catholic Mutual Relief Society of America $300,000 *
Commonwealth Life Insurance--Stock TRAC (TEAMSTERS I) $1,000,000 1.33%
Declaration of Trust for the Defined Benefit Plan of
ICI American Holdings Inc. (1) $680,000 *
Declaration of Trust for the Defined Benefit Plan of
ZENECA Holdings Inc. (2) $470,000 *
Delaware PERS $1,075,000 1.43%
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C> <C>
Delaware State Employees Retirement Fund (3) $2,230,000 2.97%
Donaldson, Lufkin & Jenrette Sec. Corp. $1,225,000 1.63%
1st Source Bank $800,000 *
Forest Fulcrum Fund L.P. $600,000 *
Forest Global Convert Fund Ser A-5 $550,000 *
Forest Global Convert Fund Ser B-2 $50,000 *
Forest Global Convert Fund Ser B-3 $25,000 *
Forest Global Covert Fund Ser B-5 $75,000 *
Fox Family Foundation $50,000 *
Fox Family Portfolio Partnership $125,000 *
General Motors Employees Domestic Group Trust (4) $7,850,000 10.5%
HBK Finance L.P. (5) $2,109,000 2.81%
HBK Securities Ltd (6) $2,341,000 3.12%
Hillside Capital Incorporated Corporate Account (7) $200,000 *
Highbridge Capital Corporation (8) $2,000,000 2.67%
ICI American Holdings Trust $450,000 *
HSBC Securities $1,200,000 1.60%
JMG Convertible Investment $250,000 *
Lincoln National Convertible Securities Fund $2,270,000 3.01%
LLT Limited (9) $25,000 *
Lincoln National Life Insurance $2,695,000 3.59%
Maril & Co. $500,000 *
NALCO Chemical Retirement Trust $200,000 *
New York Life Separate A/C #7 (10) $1,000,000 1.33%
</TABLE>
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<PAGE> 51
<TABLE>
<S> <C> <C>
Offshore Strategies LTD $500,000 *
Paloma Securities L.L.C. $600,000 *
Public Employees' Retirement Association of Colorado $750,000 1.00%
Silverton International Fund Limited $400,000 *
Southport Partners International LTD $250,000 *
Starvest Discretionary $300,000 *
State of Oregon Equity $4,625,000 6.17%
Summer Hill Global Partners, L.P. (11) $50,000 *
Tennessee Consolidated Retirement System $2,000,000 2.67%
The Brown & Williamson Retirement Trust (12) $300,000 *
The J.W. McConnell Family Foundation (13) $420,000 *
The MainStay Funds on behalf of its Convertible Fund series (14) $1,200,000 1.60%
Thebes Ltd. (15) $500,000 *
Thermo Electron Balanced Investment Fund (16) $600,000 *
United National Insurance $105,000 *
Van Kampen American Capital Convertible Securities Fund (17) $640,000 *
Van Kampen American Capital Harbor Fund (17) $3,360,000 4.48%
Walker Art Center $260,000 *
Weirton Trust $670,000 *
Zazove Convertible Fund, L.P. $600,000 *
ZENECA Holdings Pension Trust $450,000 *
</TABLE>
* Less than one percent.
(1) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Declaration of Trust for
the Defined Benefit Plan of ICI American Holdings Inc.
(2) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Declaration of Trust for
the Defined Benefit Plan of ZENECA Holdings Inc.
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<PAGE> 52
(3) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Delaware State Employees
Retirement Fund.
(4) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to General Motors Employees
Domestic Group Trust.
(5) Voting and investment power is shared with HBK Investments LP, which
acts as investment manager to HBK Finance L.P.
(6) Sole voting and investment power is held by HBK Investments LP, which
acts as investment manager to HBK Securities Ltd.
(7) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Hillside Capital
Incorporated Corporate Account.
(8) Voting and investment power is shared with Hybridge Capital
Management, Inc., trading manager of Hybridge Capital Corporation.
(9) Investment power is shared with Forest Investment Management, L.P.
(10) Voting and investment power is shared with MacKay-Shields Financial
Corporation, which acts as investment advisor for New York Life
Separate A/C #7.
(11) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Summer Hill Global
Partners, L.P.
(12) Voting and investment power is shared with MacKay-Shields Financial
Corporation, which acts as investment advisor for The Brown &
Williamson Retirement Trust.
(13) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to The J.W. McConnell Family
Foundation.
(14) Voting and investment power is shared with MacKay-Shields Financial
Corporation, which acts as investment advisor for The MainStay Funds
on behalf of its Convertible Fund series.
(15) Thebes Ltd. is a sole partnership owned by Mary Pappajohn, the spouse
of John Pappajohn, a director of the Company. Mr. Pappajohn disclaims
beneficial ownership of these securities.
(16) Sole voting and investment power is held by Pecks Management Partners
Ltd., which acts as investment advisor to Thermo Electron Balanced
Investment Fund.
(17) Voting and investment power is shared with Van Kampen American
Capital Asset Management, Inc., which acts as investment advisor for
the fund.
Unless otherwise indicated, none of the Selling Securityholders has,
or within the past three years has had, any position, office or other material
relationship with the Company or any of its predecessors or affiliates. Because
the Selling Securityholders may, pursuant to this Prospectus, offer all or some
portion of the Debentures or the Conversion Shares, no estimate can be given as
to the amount of the Debentures or the Conversion Shares that will be held by
the Selling Securityholders upon termination of any such sales. In addition, the
Selling Securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Debentures, in transactions exempt from
the registration requirements of the Securities Act, since the date on which
they provided the information regarding their Debentures. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
The Debentures and the Conversion Shares are being registered to
permit public secondary trading of such securities by the holders thereof from
time to time after the date of this Prospectus. The Company has agreed, among
other things, to bear all fees and expenses incident to its obligation to
register the Debentures and the Conversion Shares.
The Company will not receive any of the proceeds from the offering of
Debentures and the Conversion Shares by the Selling Securityholders. The Company
has been advised by the Selling Securityholders that the Selling Securityholders
may sell all or a portion of the Debentures and Conversion Shares beneficially
owned by
50
<PAGE> 53
them and offered hereby from time to time on any exchange on which the
securities are listed on terms to be determined at the times of such sales. The
Selling Securityholders may also make private sales directly or through a broker
or brokers. Alternatively, any of the Selling Securityholders may from time to
time offer the Debentures or Conversion Shares beneficially owned by them
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, commissions or concessions from the Selling
Securityholders and the purchasers of the Debentures or Conversion Shares for
whom they may act as agent. The aggregate proceeds to the Selling
Securityholders from the sale of the Debentures or Conversion Shares offered by
them hereby will be the purchase price of such Debentures or Conversion Shares
less discounts and commissions, if any.
From time to time, the Selling Securityholders may engage in short
sales, short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
Conversion Shares in connection therewith. From time to time, Selling
Securityholders may pledge their shares pursuant to the margin provisions of
their respective customer agreements with their respective brokers. Upon a
default by a Selling Securityholder, the broker may offer and sell the pledged
shares of Common Stock from time to time.
The Debentures and the Conversion Shares may be sold from time to
time in one or more transactions at fixed offering prices, which may be changed,
or at varying prices determined at the time of sale or at negotiated prices.
Such prices will be determined by the holders of such securities or by agreement
between such holders and underwriters or dealers who may receive fees or
commissions in connection therewith.
The outstanding Common Stock is listed for trading on Nasdaq and the
Conversion Shares have been approved for quotation on Nasdaq. The Initial
Purchasers have advised the Company that they are making and currently intend to
continue making a market in the Debentures. They are not obligated to do so,
however, and any such market making may be discontinued at any time without
notice, in the sole discretion of the Initial Purchasers. The Company does not
intend to apply for listing of the Debentures on any securities exchange or for
quotation through Nasdaq. Accordingly, no assurance can be given as to the
development of liquidity of any trading market that may develop for the
Debentures. See "Risk Factors -- Absence of Public Market; Transfer
Restrictions."
In order to comply with the securities laws of certain states, if
applicable, the Debentures and Conversion Shares will be sold in such
jurisdictions only through registered or licensed brokers or dealers.
In addition, in certain states the Debentures and Conversion Shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The Selling Securityholders and any broker and any broker-dealers,
agents or underwriters that participate with the Selling Securityholders in the
distribution of the Debentures of the Conversion Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of the Debentures or the Conversion Shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
In addition, any securities covered by this Prospectus that qualify
for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold
under Rule 144 or Rule 144A rather than pursuant to this Prospectus. There is no
assurance that any Selling Securityholder will sell any or all of the Debentures
or Conversion Shares described herein, and any Selling Securityholder may
transfer, devise or gift such securities by other means not described herein.
The Debentures were originally sold to Smith Barney, Inc., Credit
Suisse First Boston Corporation and Lehman Brothers Inc. in October 1997 in a
private placement. The Company agreed to indemnify and hold Smith Barney, Inc.,
Credit Suisse First Boston Corporation and Lehman Brothers Inc. harmless against
certain liabilities under the Securities Act that could arise in connection with
the initial sale of the Debentures. The Company and the Selling Securityholders
are obligated to indemnify each other against certain liabilities arising under
the Securities Act.
The Company will use its best efforts to cause the registration
statement to which this Prospectus relates to be declared effective on or prior
to 120 days after the Closing Date and to keep such registration statement
effective for a period ending two years from the Closing Date or such shorter
period that will terminate when no security covered by such registration
statement remains a Transfer Restricted Security. The Company is permitted to
prohibit offers and sales of Transfer Restricted Securities pursuant to this
Prospectus under certain circumstances and subject to certain conditions.
Expenses of preparing and filing the registration statement and all
post-effective amendments will be borne by the Company.
51
<PAGE> 54
LEGAL MATTERS
The validity of the Debentures and the Conversion Shares will be
passed upon for the Company by Gibson, Dunn & Crutcher LLP, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1995 and 1996, for each of the three years in the period ended December 31,
1996, and for the period June 9, 1998 (inception) to December 31, 1996,
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Clonmel Healthcare Ltd. as
of December 31, 1995 and 1996 and for the years then ended, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report of KPMG, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
52
<PAGE> 55
- --------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING SECURITYHOLDER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE AS OF WHICH SUCH
INFORMATION IS GIVEN. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION.
-----------------
TABLE OF CONTENTS
Page
Available Information...................................
Incorporation of Certain
Information by Reference..............................
Prospectus Summary......................................
Risk Factors............................................
Recent Developments.....................................
Ratio of Earnings to Fixed Charges......................
Use of Proceeds.........................................
Business................................................
Description of the Debentures...........................
Certain Federal Income Tax Considerations...............
Selling Securityholders.................................
Plan of Distribution....................................
Legal Matters...........................................
Experts.................................................
====================================================================
- --------------------------------------------------------------------
$75,000,000
FUISZ TECHNOLOGIES LTD.
7% CONVERTIBLE
SUBORDINATED
DEBENTURES
DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION
THEREOF
------------
PROSPECTUS
------------
NOVEMBER 25, 1997
====================================================================
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the offering of the Debentures and the Conversion Shares being
registered, other than discounts and commissions. The Selling Securityholders
will not share any portion of these expenses.
<TABLE>
<S> <C>
Registration Fee.............................................. $ 22,727.27
Nasdaq Fee.................................................... 17,500.00
Printing Expenses............................................. 10,000.00
Legal Fees and Expenses....................................... 30,000.00
Accounting Fees and Expenses.................................. 10,000.00
Transfer Agent and Registrar Fees............................. 5,000.00
Miscellaneous................................................. 5,000.00
-----------
Total.............................................. $100,227.27
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation contains certain
provisions permitted under the General Corporation Law of Delaware relating to
the liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. The Company's Certificate of Incorporation also contains provisions
requiring the Company to indemnify its directors and officers to the fullest
extent permitted by the General Corporation Law of Delaware. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
<PAGE> 57
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by
reference:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF
NUMBER EXHIBIT
------ -------
<S> <C> <C>
4.1* Specimen Common Stock Certificate.
4.2 Indenture, dated as of October 17, 1997, between the
Company and The Bank of New York.
4.3 Registration Rights Agreement, dated as of
October 22, 1997, by and among the Company, Smith
Barney Inc., Credit Suisse
First Boston Corporation and Lehman Brothers, Inc.
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to
legality of the Debentures and Common Stock
registered hereby.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG
25.1 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1.
25.2** Power of Attorney
</TABLE>
* Previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (Registration No.
333-3194), filed with the SEC on April 3, 1996,
incorporated herein by reference.
** Contained on signature page hereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in the post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
II-2
<PAGE> 58
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each 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.
(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 undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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 arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-3
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant 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 city of Chantilly, Commonwealth of Virginia.
FUISZ TECHNOLOGIES LTD.
By: /s/ Richard C. Fuisz, M.D.
----------------------------------------
Richard C. Fuisz, M.D.
Chairman of the Board of Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard C. Fuisz, Kenneth W. McVey and
Patrick D. Scrivens, and each of them, his attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully as to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or any of them,
or their or his substitute or substitutes, may 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 below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard C. Fuisz, M.D. Chairman of the Board of Directors November 25, 1997
-------------------------------
Richard C. Fuisz. M.D.
/s/ Kenneth W. McVey President, Chief Executive Officer of the Company and November 25, 1997
------------------------------- Director (Principal Executive Officer)
Kenneth W. McVey
/s/ Patrick D. Scrivens Executive Vice President, Chief Financial Officer, November 25, 1997
------------------------------- Assistant Secretary and Treasurer (Principal Financial
Patrick D. Scrivens Officer)
/s/ Lars G. Okeson Controller (Principal Accounting Officer) November 25, 1997
-------------------------------
Lars G. Okeson
/s/ John R. Fuisz Director November 25, 1997
-------------------------------
John R. Fuisz
/s/ Antone J. Lazos Director November 25, 1997
-------------------------------
Antone J. Lazos
/s/ Donald E. O'Neill Director November 25, 1997
-------------------------------
Donald E. O'Neill
/s/ John Pappajohn Director November 25, 1997
-------------------------------
John Pappajohn
/s/ Fredrik C. Schreuder Director November 25, 1997
-------------------------------
Fredrik C. Schreuder
</TABLE>
II-4
<PAGE> 60
<TABLE>
<S> <C> <C>
/s/ Daniel Tierney
------------------------------- Director November 25, 1997
Daniel Tierney
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ------ ------- -------------
<S> <C> <C>
4.2 Indenture, dated as of October 17, 1997, between the Company
and The Bank of New York.
4.3 Registration Right's Agreement, dated as of October 22, 1997,
by and among the Company, Smith Barney Inc., Credit Suisse
First Boston Corporation and Lehman Brothers Inc.
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of the
Debentures and Common Stock registered hereby.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG.
25.1 Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939 on Form T-1.
25.2 Power of Attorney.* *
* Contained on the signature page hereto.
</TABLE>
II-5
<PAGE> 1
-----------------------------------------------
FUISZ TECHNOLOGIES LTD.
and
THE BANK OF NEW YORK,
as Trustee
INDENTURE
Dated as of October 22, 1997
$86,250,000
7% Convertible Subordinated Debentures due 2004
-----------------------------------------------
<PAGE> 2
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
- ----------------------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . 1
SECTION 101. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. . . . . . . . . . . . . . . . . . . . . . 7
------------------------------------
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . 8
--------------------------------------
SECTION 104. ACTS OF HOLDERS; RECORD DATES. . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------------
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY. . . . . . . . . . . . . . . . . . . . . . 10
-------------------------------------
SECTION 106. NOTICE TO HOLDERS; WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------------------------
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . . 11
---------------------------------
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . 11
----------------------------------------
SECTION 109. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------------
SECTION 110. SEPARABILITY CLAUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------------
SECTION 111. BENEFITS OF INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------
SECTION 112. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
-------------
SECTION 113. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------
SECTION 114. NO SECURITY INTEREST CREATED. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----------------------------
SECTION 115. LIMITATION ON INDIVIDUAL LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . 12
----------------------------------
ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 201. FORMS GENERALLY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------------
SECTION 202. FORM OF FACE OF SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------------
SECTION 203. FORM OF REVERSE OF GLOBAL SECURITIES AND DEFINITIVE SECURITIES. . . . . . . . . . 17
--------------------------------------------------------------
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. . . . . . . . . . . . . . . . . 28
-----------------------------------------------
ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 301. TITLE AND TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------
SECTION 302. DENOMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. . . . . . . . . . . . . . . . . 29
----------------------------------------------
SECTION 304. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--------------------
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . 30
---------------------------------------------------
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. . . . . . . . . . . . . . . . 38
------------------------------------------------
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. . . . . . . . . . . . . . . . . 39
----------------------------------------------
SECTION 308. PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
---------------------
SECTION 309. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
------------
SECTION 310. COMPUTATION OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-----------------------
SECTION 311. CUSIP NUMBERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-------------
ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . . . 41
---------------------------------------
SECTION 402. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--------------------------
SECTION 403. REINSTATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-------------
SECTION 404. PAYING AGENT TO REPAY MONIES HELD. . . . . . . . . . . . . . . . . . . . . . . 43
---------------------------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE FIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 501. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-----------------
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. . . . . . . . . . . . . . . . 46
--------------------------------------------------
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. . . . . . . . 47
---------------------------------------------------------------
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . . . . . . . . . . . . 48
--------------------------------
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. . . . . . . . . . . 48
-----------------------------------------------------------
SECTION 506. APPLICATION OF MONEY COLLECTED. . . . . . . . . . . . . . . . . . . . . . . . . . 49
------------------------------
SECTION 507. LIMITATION ON SUITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-------------------
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST AND TO
CONVERT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
--------------------------------------------------------------------------------
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 50
----------------------------------
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------------------------
SECTION 511. DELAY OR OMISSION NOT WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . 50
----------------------------
SECTION 512. CONTROL BY HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
------------------
SECTION 513. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-----------------------
SECTION 514. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
---------------------
ARTICLE SIX THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. . . . . . . . . . . . . . . . . . . . . . . 52
-----------------------------------
SECTION 602. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
------------------
SECTION 603. CERTAIN RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
-------------------------
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. . . . . . . . . . . . . . 54
------------------------------------------------------
SECTION 605. MAY HOLD SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-------------------
SECTION 606. MONEY HELD IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-------------------
SECTION 607. COMPENSATION AND REIMBURSEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 54
------------------------------
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS. . . . . . . . . . . . . . . . . . . . . 56
---------------------------------------
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . 56
---------------------------------------
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. . . . . . . . . . . . . . . . 56
-------------------------------------------------
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. . . . . . . . . . . . . . . . . . . . . 57
--------------------------------------
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. . . . . . . . . . . 58
-----------------------------------------------------------
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. . . . . . . . . . . . . . . . 58
-------------------------------------------------
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . . . . . . 58
-----------------------------------
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. . . . . . . . . . . . 60
---------------------------------------------------------
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS. . . . . . . . . . . . . 60
-----------------------------------------------------
SECTION 703. REPORTS BY TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
------------------
SECTION 704. REPORTS BY COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
------------------
SECTION 705. RULE 144A INFORMATION REQUIREMENT. . . . . . . . . . . . . . . . . . . . . . . . 61
---------------------------------
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . . . . . . . . . . 61
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. . . . . . . . . . . . . . 61
----------------------------------------------------
SECTION 802. SUCCESSOR SUBSTITUTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
---------------------
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE NINE SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . 62
--------------------------------------------------
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . 63
-----------------------------------------------
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . 64
------------------------------------
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . 64
---------------------------------
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . 64
-----------------------------------
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . 64
--------------------------------------------------
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . 65
--------------------------------
ARTICLE TEN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. . . . . . . . . . . . . . . . . . . . 65
------------------------------------------
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . . . . . . . . . . . . 65
-------------------------------
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. . . . . . . . . . . . . . . . . 65
-----------------------------------------------
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 67
-----------------------------------
SECTION 1005. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
---------
SECTION 1006. WAIVER OF CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
---------------------------
ARTICLE ELEVEN REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 1101. RIGHT OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
-------------------
SECTION 1102. APPLICABILITY OF ARTICLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
------------------------
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . . 68
-------------------------------------
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. . . . . . . . . . . . . . . . 68
-------------------------------------------------
SECTION 1105. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
--------------------
SECTION 1106. DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
---------------------------
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE. . . . . . . . . . . . . . . . . . . . . 69
-------------------------------------
SECTION 1108. SECURITIES REDEEMED IN PART. . . . . . . . . . . . . . . . . . . . . . . . . . . 70
---------------------------
ARTICLE TWELVE SUBORDINATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 1201. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS. . . . . . . . . . . . . . . . . 70
----------------------------------------------
SECTION 1202. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. . . . . . . . . . . . . . . . . . 70
----------------------------------------------
SECTION 1203. PRIOR PAYMENT TO SENIOR INDEBTEDNESS UPON ACCELERATION OF SECURITIES. . . . . . . 71
--------------------------------------------------------------------
SECTION 1204. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. . . . . . . . . . . . . . . . . . 72
----------------------------------------------
SECTION 1205. PAYMENT PERMITTED IF NO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 72
-------------------------------
SECTION 1206. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. . . . . . . . . . . . 73
-------------------------------------------------------
SECTION 1207. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. . . . . . . . . . . . . . . . . . 73
-------------------------------------------
SECTION 1208. TRUSTEE TO EFFECTUATE SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . 73
-----------------------------------
SECTION 1209. NO WAIVER OF SUBORDINATION PROVISIONS. . . . . . . . . . . . . . . . . . . . . 74
-------------------------------------
SECTION 1210. NOTICE TO TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
-----------------
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. . . . . . . . . . 75
--------------------------------------------------------------
SECTION 1212. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS. . . . . . . . . . . . . 75
--------------------------------------------------------
SECTION 1213. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION OF TRUSTEE'S
RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
------
SECTION 1214. ARTICLE APPLICABLE TO PAYING AGENTS. . . . . . . . . . . . . . . . . . . . . . 75
-----------------------------------
SECTION 1215. CERTAIN CONVERSIONS DEEMED PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . 76
----------------------------------
SECTION 1216. NO SUSPENSION OF REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
-------------------------
</TABLE>
iv
<PAGE> 6
EXHIBIT 4.2
-INDENTURE, dated as of October 22, 1997 between FUISZ TECHNOLOGIES
LTD., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal executive offices
at 3810 Concorde Parkway, Suite 100, Chantilly, VA 22021 and THE BANK OF NEW
YORK, a New York banking corporation, as trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 7%
Convertible Subordinated Debentures due 2004 (herein called the "Securities")
of substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly provided, the
term "generally accepted accounting principles" with respect to any computation
required and permitted hereunder shall mean such accounting principles as are
generally accepted and accepted and adopted by the Company at the date of this
Indenture;
<PAGE> 7
(4) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(5) all references to any law, rule or regulation shall
mean such provision, as such may have been amended, and any successor provision
thereto.
Certain terms used in Articles Twelve, Thirteen and Fourteen are
defined in such Articles.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
The term "Beneficial Owner" is determined in accordance with Rule
13d-3, promulgated by the Commission under the Exchange Act.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means 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 and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated to close by law or executive order.
"Cedel" means Cedel Bank societe anonyme.
"Change in Control" has the meaning specified in Section 1406.
"Closing Date" means October 22, 1997.
"Closing Price" has the meaning specified in Section 1304.
"Commencement Date" has the meaning specified in Section 1304.
2
<PAGE> 8
"Commission" means the Securities and Exchange Commission as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company and which is not subject to redemption by the Company. However,
subject to the provisions of Section 1311, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this Indenture or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which are not subject to redemption by the Company; provided, that if at
any time there shall be more than one such resulting class, the shares of each
such class then so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall principally be
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 Administration.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Current Market Price" has the meaning specified in Section 1304.
"DTC" has the meaning specified in Section 305.
"Defaulted Interest" has the meaning specified in Section 307.
"Definitive Security" or "Definitive Securities" means a Security or
Securities that are in the form of the Security set forth in Sections 202 and
203 hereof, containing the legend specified for a Definitive Security.
"Depositary" has the meaning specified in Section 305.
3
<PAGE> 9
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Global Security" or "Global Securities" means a Security or
Securities in the form of the Security set forth in Sections 202, 203 and 204
hereof containing the legend specified for a Global Security.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Smith Barney Inc., Credit Suisse First
Boston Corporation and Lehman Brothers Inc.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity thereof or by declaration of
acceleration, redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"144A Global Security" has the meaning specified in Section 201.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Company, and who shall be reasonably
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for the
payment or redemption of
4
<PAGE> 10
which moneys in the necessary amount have been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities; provided, that if such
Securities, or portions thereof, are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture
or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities as to which a Responsible Officer of the
Trustee has actual knowledge of such ownership shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Purchase Agreement" means that certain Purchase Agreement dated
October 17, 1997 between the Company and the Initial Purchasers.
"Record Date" means either a Regular Record Date or a Special Record
Date, as applicable.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
5
<PAGE> 11
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture on the applicable Redemption Date.
"Registration Rights Agreement" means that certain Registration
Rights Agreement dated as of October 17, 1997 between the Company and the
Initial Purchasers.
"Regular Record Date", for the interest payable on any Interest
Payment Date means the March 31 or September 30 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act of 1933,
as amended.
"Regulation S Global Security" has the meaning specified in Section
201.
"Repurchase Date" has the meaning specified in Section 1401.
"Repurchase Event" has the meaning specified in Section 1406.
"Repurchase Price" has the meaning specified in Section 1401.
"Resale Restriction Termination Date" means, with respect to any
Security, the date which is two years after the later of (i) the original issue
date of such Security and (ii) the last date on which the Company or any
Affiliate of the Company was the owner of such Security (or any Predecessor
Security).
"Responsible Officer" means, when used with respect to the Trustee,
an officer or employee of the Trustee assigned and duly authorized by the
Trustee to administer its corporate trust matters.
"Securities Custodian" means the Trustee, as custodian with respect
to the Securities in global form, or any successor entity thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on (a) all indebtedness of the Company for money borrowed, whether
outstanding on the date of execution of the Indenture or thereafter created,
incurred or assumed, except any such other indebtedness that by the terms of
the instrument or instruments by which such indebtedness was created or
incurred expressly provides that it (i) is junior in right of payment to the
Debentures or (ii) ranks pari passu in right of payment with the Debentures,
and (b) any amendments, renewals, extensions, modifications, refinancings and
refundings of the foregoing. For the purposes of this definition,
"indebtedness for money borrowed" when used with respect to the Company means
(i) any obligation of, or any obligation guaranteed by, the Company for the
repayment of borrowed money (including without limitation fees, penalties or
other obligations in respect thereof), whether or not evidenced by bonds,
debentures, notes or other written instruments, (ii) any deferred payment
obligation of, or any such obligation guaranteed by, the Company for the
6
<PAGE> 12
payment of the purchase price of property or assets evidenced by a note or
similar instrument, and (iii) any obligation of, or any such obligation
guaranteed by, the Company for the payment of rent or other amounts under a
lease of property or assets which obligation is required to be classified and
accounted for as a capitalized lease on the balance sheet of the Company under
generally accepted accounting principles.
"Shelf Registration Statement" means the Registration Statement with
respect to the Debentures and the Common Stock the Issuer is required to file
pursuant to the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Termination of Trading" has the meaning specified in Section 1406.
"Trading Day" has the meaning specified in Section 1304.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 305 hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Vice President", when used with respect to the Company means any
vice president, whether or not designated by a number or a word or words added
before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates
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and opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual or firm signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual or such firm, he has or they have made such examination or
investigation as is necessary to enable him or them to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and
(4) statement as to whether, in the opinion of each such
individual or such firm, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any Person may certify to
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certification or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate of public officials or upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments, whether in
their original or facsimile form, are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote
on any action, authorized or permitted to be given or taken by Holders. If not
set by the Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such vote, prior
to such vote, the record date for any such action or vote shall be the 30th day
(or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first solicitation or vote, as
the case may be. With regard to any record date, only the Holders on such date
(or their duly designated proxies) shall be entitled to give or take, or vote
on, the relevant action. Notwithstanding the foregoing, the Company shall not
set a record date for, and the provisions of this paragraph shall not apply
with respect to, any Act by the Holders pursuant to Section 501, 502 or 512.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer therefor or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the principal amount of
such Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of such
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principal amount.
SECTION 105. Notices, Etc., to Trustee and Company.
Any Act of Holders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or at any other address
previously furnished in writing to the Holders and the Company by the
Trustee; or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company, addressed to it at the address of its
principal executive offices specified in the first paragraph of this
instrument or at any other address previously furnished in writing to
the Trustee by the Company.
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; two Business Days after
being deposited in the mail, first class postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by nationally recognized overnight air courier
guaranteeing next day delivery.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if made, given, mailed or otherwise furnished or filed in writing to
each Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date (if any), and not earlier
than the earliest date (if any), prescribed for the giving of such notice.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if personally
delivered; two Business Days after being deposited in the mail, first class
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by nationally
recognized overnight air courier guaranteeing next day delivery.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
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SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act or another provision that would be
required or deemed under such Act to be a part of and govern this Indenture if
this Indenture were subject thereto, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Trustee shall bind each of their respective successors and assigns, whether so
expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the Holders of Securities and, with respect to priority of payment
as provided in Article Twelve, the holders of Senior Indebtedness, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and, except as may otherwise be required by mandatory
provisions of law, the Securities shall be governed by and construed in
accordance with the laws of the State of New York, but without regard to the
principles of conflicts of laws thereof.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security or the last date on which a Holder has the
right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal and premium if any, or conversion of the
Securities 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
Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such
last day for conversion; provided, that no interest shall accrue for the
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period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, to the next succeeding Business Day.
SECTION 114. No Security Interest Created.
Nothing in this Indenture or in the Securities, express 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
or may be located.
SECTION 115. Limitation on Individual Liability.
No recourse under or upon any obligation, covenant or agreement
contained in this Indenture or in any Security, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, either directly or through the Company,
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 this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall
attach to, or is or shall be incurred by, the incorporators, shareholders,
officers or directors, as such, of the Company or any successor Person, or any
of them, because of the creation of the indebtedness hereby authorized, or
under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any Security or implied therefrom; and that any and all
such personal liability of every name and nature, either at common law or in
equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, shareholder, officer or director, as
such, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any Security or implied therefrom, are hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issuance of such Security.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with any organizational document, any applicable law or with
the rules of any securities exchange on which the Securities are listed or as
may, consistently herewith, be determined by the Company officers executing
such Securities, as evidenced by their execution of the Securities.
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The Securities issued in definitive form shall be substantially in
the form set forth in Section 202 hereof.
Unless issued in definitive form, Securities issued and sold in
reliance on Rule 144A shall be issued in the form of one or more global
securities (the "144A Global Security"), the face of which shall be
substantially in the form set forth in Section 202 hereof and the reverse of
which shall be substantially in the form set forth in Section 203 hereof, which
144A Global Security shall be deposited on behalf of the holders of the
Securities represented thereby with the Trustee, as custodian for the
Depositary, and registered in the name of the nominee of the Depositary, duly
executed by the Company and authenticated as provided for herein.
Securities offered and sold outside the United States in reliance on
Regulation S shall be issued in the form of one or more global securities (the
"Regulation S Global Security"), the face of which shall be substantially in
the form set forth in Section 202 hereof and the reverse of which shall be
substantially in the form set forth in Section 203 hereof, which Regulation S
Global Security shall be deposited on behalf of the holders of the Securities
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 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 Securities and the Closing Date (the "Restricted
Period"), beneficial interests in the Regulation S Global Security 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 the Euroclear System
and Cedel acting for and on behalf of them, unless delivery is made though the
144A Global Security in accordance with the certification requirements hereof.
During the Restricted Period, interests in the Regulation S Global Security may
be exchanged for interests in the 144A Global Security or for Definitive
Securities only in accordance with the certification requirements described in
Section 305 below.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee or the
Securities Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof.
The Definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or
may be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. Form of Face of Security.
LEGENDS FOR GLOBAL SECURITY:
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UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY 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 SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY 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.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHO IS OR WHO THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
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REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES PROVIDED THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE AND SUBJECT TO ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY AFTER THE
RESALE RESTRICTION TERMINATION DATE.
LEGENDS FOR DEFINITIVE SECURITY:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHO IS OR WHO THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
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FOREGOING CASES PROVIDED THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE
AND SUBJECT TO ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS SECURITY AFTER THE RESALE
RESTRICTION TERMINATION DATE.
FUISZ TECHNOLOGIES LTD.
7% Convertible Subordinated Debentures due 2004
No. ________ $____________
Fuisz Technologies Ltd., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to __________________________,
or its registered assigns, the principal sum of ________________ Dollars on
October 15, 2004 and to pay interest thereon from the date of initial issuance
of Securities pursuant to the Indenture or from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on April 15 and October 15 in each year, commencing April 15,
1998 at the rate of 7% per annum, until the principal hereof is paid or made
available for payment and promises to pay any liquidated damages which may be
payable pursuant to Section 4 of the Registration Rights Agreement on the
Interest Payment Dates. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 31 or September 30 (whether or not
a Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture. Notice of a Special Record Date shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date. Payment of
the principal of and premium, if any, and interest on this Security will be
made (i) in respect of Securities held of record by the Depositary or its
nominee in same day funds on or prior to the respective payment dates and (ii)
in respect of Securities held of record by Holders other than the Depositary or
its nominee in same day funds at the office or agency of the Company maintained
for that purpose pursuant to Section 1002 of the Indenture, in each case in
such coin or currency of the United States of America as of the time of payment
is legal tender for payment of public and private debts; provided, however,
that at the option of the Company payment of interest in respect of Securities
held of record by Holders other than the Depositary or its nominee may be made
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.
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Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: FUISZ TECHNOLOGIES LTD.
--------------------
By
--------------------------
Attest:
------------------------
SECTION 203. Form of Reverse of Global Securities and Definitive
Securities.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 7% Convertible Subordinated Debentures due 2004
(herein called the "Securities"), limited in aggregate principal amount to
$86,250,000 (including Securities issuable pursuant to the Initial Purchasers'
over-allotment option, as provided for in the Purchase Agreement dated October
17, 1997 between the Company and the Initial Purchasers), issued and to be
issued under an Indenture, dated as of October 22, 1997 (herein called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and
delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time following
the date of initial issuance of Securities pursuant to the Indenture and on or
before the close of business on October 15, 2004, or in case this Security or a
portion hereof is called for redemption, then in respect of this Security or
such portion hereof until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the close of business on the
second business day preceding the Redemption Date, to convert this Security (or
any portion of the principal amount hereof which is $1,000 or an integral
multiple thereof), at the principal amount hereof, or of such portion, into
fully paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of Common Stock at a conversion price equal to
$13.25 principal amount for
17
<PAGE> 23
each share of Common Stock (or at the current adjusted conversion price if an
adjustment has been made as provided in the Indenture) by surrender of this
Security, duly endorsed or assigned to the Company or in blank, to the Company
at its office or agency maintained for that purpose pursuant to Section 1002 of
the Indenture, accompanied by written notice to the Company in the form
provided in this Security (or such other notice as is acceptable to the
Company) that the Holder hereof elects to convert this Security, or if less
than the entire principal amount hereof is to be converted, the portion hereof
to be converted, and, in case such surrender shall be made during the period
from the opening of business on any Regular Record Date next preceding any
Interest Payment Date to the close of business on such Interest Payment Date
(unless this Security or the portion thereof being converted has been called
for redemption), also accompanied by payment in funds acceptable to the Company
of an amount equal to the interest payable on such Interest Payment Date on the
principal amount of this Security then being converted. Subject to the
aforesaid requirement for payment and, in the case of a conversion after the
Regular Record Date next preceding any Interest Payment Date and on or before
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security) of record at such Regular Record Date to receive an
installment of interest (with certain exceptions provided in the Indenture), no
payment or adjustment is to be made upon conversion on account of any interest
accrued hereon or on account of any dividends on the Common Stock issued upon
conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional share the Company
shall pay a cash adjustment as provided in the Indenture. The conversion price
is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party or the sale or transfer of all or substantially all of
the assets of the Company, a supplemental indenture shall be executed and
delivered to the Trustee, which supplemental indenture shall provide that this
Security, if then outstanding, will be convertible thereafter, during the
period this Security shall be convertible as specified above, only into the
kind and amount of securities, cash and other property receivable upon the
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which this Security might have been converted immediately
prior to such consolidation, merger, sale or transfer (assuming such holder of
Common Stock failed to exercise any rights of election and received per share
the kind and amount received per share by a plurality of non-electing shares).
The Securities are subject to redemption upon not less than 30 and
not more than 60 days' notice by mail, at any time on or after October 19,
2000, as a whole or in part, at the election of the Company, at the Redemption
Prices set forth below (expressed as percentages of the principal amount), plus
accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning October 15, in the
year indicated (October 19, in the case of 2000), the redemption price shall
be:
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
---- ----- ---- -----
<S> <C> <C> <C>
2000 104.00% 2002 102.00%
2001 103.00% 2003 101.00%
</TABLE>
18
<PAGE> 24
In certain circumstances involving the occurrence of a Repurchase
Event (as defined in the Indenture), the Holder hereof shall have the right to
require the Company to repurchase this Security at 100% of the principal amount
hereof, together with accrued interest to the Repurchase Date, but interest
installments whose Stated Maturity is on or prior to such Repurchase Date will
be payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
The indebtedness evidenced by this Security is, in all respects,
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness, and this Security is issued subject to the provisions of
the Indenture with respect thereto. Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination so provided, and (c) appoints
the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal
of all the Securities may be declared due and payable in the manner and with
the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the
time Outstanding, and, under certain limited circumstances, by the Company and
the Trustee without the consent of the Holders. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the times, place and rate,
and in the coin or currency, herein prescribed or to convert this Security as
provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security
19
<PAGE> 25
is registrable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of and any premium and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in fully registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange except as provided in the Indenture, and the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, except as provided in this Security, whether or not
this Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.
20
<PAGE> 26
[FORM OF CONVERSION NOTICE]
TO FUISZ TECHNOLOGIES LTD.
The undersigned registered owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion hereof (which is
$1,000 or a multiple thereof) designated below, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for a fractional share and any Security representing
any unconverted principal amount hereof, be issued and delivered to the
registered owner hereof unless a different name has been provided below. If
this Notice is being delivered on a date after the close of business on a
Regular Record Date and prior to the close of business on the related Interest
Payment Date, this Notice is accompanied by payment in funds acceptable to the
Company, of an amount equal to the interest payable on such Interest Payment
Date on the principal of this Security to be converted (unless this Security
has been called for redemption). If shares or any portion of this Security not
converted are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. Any
amount required to be paid by the undersigned on account of interest
accompanies this Security.
Dated:
-------------------------
-------------------------
Signature
Signature(s) must be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations
and credit unions with membership in an approved signature
guarantee medallion program) pursuant to S.E.C. Rule 17Ad-15, if
shares of Common Stock are to be delivered, or Securities to be
issued, other than to and in the name of the registered owner.
- -------------------------
Signature Guarantee
21
<PAGE> 27
Fill in for registration of shares of Common Stock if they are to
be delivered, or Securities if they are to be issued, other than
to and in the name of the registered owner:
- -------------------------
Signature Guarantee
- -------------------------
(Name)
- -------------------------
(Street Address)
- -------------------------
(City, State and zip code)
(Please print name and address)
Register: _____ Common Stock
_____ Securities
(Check appropriate line(s))
22
<PAGE> 28
Principal amount to be converted (if less
than all):
--------------------------------------------
Social Security or other Taxpayer
Identification Number of owner
23
<PAGE> 29
[ASSIGNMENT FORM]
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
---------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- -------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date: Your signature:
-------------------------- ------------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee:
-----------------------------------------------------------
The signature to this assignment should be guaranteed by an
stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee
medallion program) pursuant to S.E.C. Rule 17Ad-15.
24
<PAGE> 30
[FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES]
CERTIFICATE FOR EXCHANGE OR TRANSFER
Re: 7% Convertible Subordinated Debentures due 2004
This Certificate relates to $_________ principal amount of Securities
held in *____________ book-entry or *____________ definitive form by _________
(the "Transferor").
The Transferor(1):
[] has requested the Trustee by written order to deliver
in exchange for its beneficial interest in a Global Security held by the
Depositary a Security or Securities in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Security (or the portion thereof indicated
above); or
[] has requested the Trustee by written order to deliver
in exchange for its Security or Securities a beneficial interest in a Global
Security held by the Depositary in a principal amount equal to the aggregate
principal amount of such Security or Securities; or
[] has requested the Trustee by written order to
exchange or register the transfer of a Security or Securities.
In connection with such request and in respect of each such security,
the Transferor does hereby certify to the Company and the Trustee that
Transferor is familiar with the Indenture relating to the above captioned
Debentures and, as provided in Section 305 of such Indenture, the transfer of
this Security does not require registration under the Securities Act (as
defined below) because*:
[] Such Security is being acquired for the Transferor's
own account, without transfer (in satisfaction of Section 305(b)(ii)(A) or
Section 305(f)(i)(A) of the Indenture).
[] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A or pursuant to an
exemption from registration in accordance with Regulation S under the
Securities Act (in satisfaction of Section 305(b)(ii)(B), Section 305(c)(i),
Section 305(d)(i), Section 305(f)(i)(B), Section 305(g)(iii) or Section
305(h)(iii) of the Indenture). An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act accompanies
this Certificate (in satisfaction of Section 305(b)(ii)(B), Section 305(c)(i),
Section 305(d)(i), Section 305(f)(i)(B), Section 305(g)(iii) or Section
305(h)(iii) of the Indenture).
[] Such Security is being transferred in accordance with
Rule 144 under the Securities Act, or pursuant to an effective registration
statement under the Securities Act (in satisfaction of Section 305(b)(ii)(B),
Section 305(f)(i)(B) or Section 305(k)(ii) of the Indenture).
- -------------------
1 Check applicable box.
25
<PAGE> 31
If such Security is being transferred in accordance with Rule 144 under the
Securities Act, an opinion of counsel to the effect that such transfer does not
require registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(b)(ii)(B), Section 305(f)(i)(B) or Section
305(k)(ii) of the Indenture).
[] Such Security is being transferred in reliance on and
in compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, 144 or Regulation S under the Securities
Act. An opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(b)(ii)(C) or Section 305(f)(i)(C) of the
Indenture).
[] You are entitled to rely upon this certificate and
you are irrevocably authorized to produce this certificate or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
--------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------
Date:
----------------------------------------
26
<PAGE> 32
[OPTION OF HOLDER TO ELECT PURCHASE]
If you wish to have this Security purchased by the Company pursuant
to Section 1401 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security (which is $1,000 or an
integral multiple thereof) purchased by the Company pursuant to Section 1401 of
the Indenture, state the amount you wish to have purchased:
$____________________
Date: Your Signature(s):
------------------- -------------------------
Tax Identification No.:
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:
-----------------------------------------------------------
The signature to this option of holder to elect purchase
should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature
guarantee medallion program) pursuant to S.E.C. Rule
17Ad-15.
27
<PAGE> 33
SECTION 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By
---------------------------------
Authorized Signatory
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $86,250,000
(including $11,250,000 aggregate principal amount of Securities that may be
sold to the Initial Purchasers by the Company upon exercise of the
over-allotment option granted pursuant to the Purchase Agreement), except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305,
306, 906, 1108, 1302 or 1405.
The Securities shall be known and designated as the "7% Convertible
Subordinated Debentures due 2004" of the Company. Their Stated Maturity shall
be October 15, 2004 and they shall bear interest at the rate of 7% per annum,
from the date of initial issuance of Securities pursuant to this Indenture or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, as the case may be, payable semi-annually on April 15 and
October 15, commencing April 15, 1998, until the principal thereof is paid or
made available for payment.
The principal of and premium, if any, and interest on the Securities
shall be payable (i) in respect of Securities held of record by the Depositary
or its nominee in same day funds on or prior to the respective payment dates
and (ii) in respect of Securities held of record by Holders other than the
Depositary or its nominee in same day funds at the office or agency of the
Company maintained for such purpose pursuant to Section 1002; provided,
however, that at the option of the Company payment of interest to Holders of
record other than the Depositary may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
28
<PAGE> 34
The Securities shall be subject to the transfer restrictions set forth
in Section 305.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
The Securities shall be subject to repurchase at the option of the
Holder as provided in Article Fourteen.
SECTION 302. Denominations.
The Securities shall be issuable only in fully registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President or one of its
Vice Presidents, under its corporate seal or a facsimile thereof reproduced
thereon attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall either at one time or from time to time pursuant
to such instructions as may be described therein authenticate and deliver such
Securities as in this Indenture provided and not otherwise. Such Company Order
shall specify the amount of Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated, and shall
certify that all conditions precedent to the issuance of such Securities
contained in this Indenture have been complied with. The aggregate principal
amount of Securities Outstanding at any time may not exceed the amount set
forth above except as provided in Section 306.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and is entitled to
the benefits
29
<PAGE> 35
of the Indenture. The Trustee may appoint an Authenticating Agent pursuant to
the terms of Section 614.
SECTION 304. Temporary Securities.
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the Definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities. Every such temporary Security shall be executed
by the Company and shall be authenticated and delivered by the Trustee upon the
same conditions and in substantially the same manner, and with the same effect,
as the Definitive Security or Securities in lieu of which it is issued.
Not including Global Securities, if temporary Securities are issued,
the Company will cause Definitive Securities to be prepared without
unreasonable delay. After the preparation of Definitive Securities, the
temporary Securities shall be exchangeable for Definitive Securities upon
surrender of the temporary Securities at any office or agency of the Company
designated pursuant to Section 1002, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Securities the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor one or more Definitive Securities of a like principal amount of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as
Definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
(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 designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided. At all reasonable
times the Security
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Security(ies).
(b) With respect to the transfer and exchange of Definitive
Securities, when Definitive Securities are presented to the Security Registrar
with the request (x) to register the transfer of the Definitive Securities or
(y) to exchange such Definitive Securities for an equal principal amount of
Definitive Securities of other authorized denominations, the Security Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met; provided, however, that the
Definitive Securities presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied
by a written instruction
30
<PAGE> 36
of transfer in form satisfactory to the Security
Registrar duly executed by the Holder thereof or by its
attorney, duly authorized in writing; and
(ii) shall, in the case of Transfer
Restricted Securities that are Definitive Securities, be
accompanied by the following additional information and
documents, as applicable:
(A) if such Transfer Restricted
Security is being delivered to the Security
Registrar by a Holder for registration in the
name of such Holder, without transfer, a
certification from such Holder to that effect
(in substantially the form of Exhibit A hereto);
or
(B) if such Transfer Restricted
Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act) in reliance on Rule
144A under the Securities Act or pursuant to an
exemption from registration in accordance with
Rule 144 or Regulation S under the Securities
Act or pursuant to an effective registration
statement under the Securities Act, a
certification to that effect (in substantially
the form of Exhibit A hereto) and, in the case
of a transfer in accordance with Rule 144A, Rule
144 or Regulation S under the Securities Act, an
Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(C) if such Transfer Restricted
Security is being transferred in reliance on
another exemption from the registration
requirements of the Securities Act, a
certification to that effect (in substantially
the form of Exhibit A hereto) and an Opinion of
Counsel reasonably acceptable to the Company to
the effect that such transfer is in compliance
with the Securities Act.
(c) The following restrictions apply to any transfer of a
Definitive Security for a beneficial interest in a 144A Global Security. A
Definitive Security may not be exchanged for a beneficial interest in a 144A
Global Security except until and upon satisfaction of the requirements set forth
below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Security is a
Transfer Restricted Security, certification,
substantially in the form of Exhibit A hereto, that such
Definitive Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Regulation S and an
Opinion of Counsel reasonably acceptable to the Company
to the effect that such transfer is in compliance with
the Securities Act; and
31
<PAGE> 37
(ii) whether or not such Definitive Security
is a Transfer Restricted Security, written instructions
directing the Trustee to make, or to direct the
Securities Custodian to make, an endorsement on the 144A
Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the
144A Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the 144A Global
Security to be increased accordingly. If no 144A Global Securities are then
outstanding, the Company shall execute and, upon receipt of an authentication
order in the form of a Company Order in accordance with Section 303, the
Trustee shall authenticate a new 144A Global Security in the appropriate
principal amount.
(d) The following restrictions apply to any transfer of a
Definitive Security for a beneficial interest in a Regulation S Global
Security. A Definitive Security may not be exchanged for a beneficial interest
in a Regulation S Global Security except until and upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a
Transfer Restricted Security, certification,
substantially in the form of Exhibit A hereto, that such
Definitive Security is being transferred in accordance
with Regulation S and an Opinion of Counsel reasonably
acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act; and
(ii) whether or not such Definitive Security
is a Transfer Restricted Security, written instructions
directing the Trustee to make, or to direct the
Securities Custodian to make, an endorsement on the
Regulations Global Security to reflect an increase in the
aggregate principal amount of the Securities represented
by the Regulation S Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Regulation S Global
Security to be increased accordingly. If no Regulation S Global Securities are
then outstanding, the Company shall execute and, upon receipt of an
authentication order in the form of a Company Order in accordance with Section
303, the Trustee shall authenticate a new Regulation S Global Security in the
appropriate principal amount.
(e) The transfer and exchange of Global Securities or
beneficial interests therein shall be effected through the Depositary, in
accordance with this Indenture (including the restrictions on transfer set forth
herein) and the procedures of the Depositary therefor.
(f) With respect to the transfer of a beneficial interest in a
144A Global Security or a Regulation S Global Security for a Definitive
Security:
(i) Any person having a beneficial interest
in a 144A Global
32
<PAGE> 38
Security or a Regulation S Global Security may upon
request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Trustee of
written instructions or such other form of instructions
as is customary for the Depositary or its nominee on
behalf of any person having a beneficial interest in a
144A Global Security or a Regulation S Global Security
constituting a Transfer Restricted Security only, and
receipt by the Trustee of the following additional
information and documents (all of which may be submitted
by facsimile):
(A) if such beneficial interest is
being transferred to the person designated by
the Depositary as being the beneficial owner, a
certification from such person to that effect
(in substantially the form of Exhibit A hereto);
or
(B) if such beneficial interest is
being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an
exemption from registration in accordance with
Rule 144 or Regulation S under the Securities
Act or pursuant to an effective registration
statement under the Securities Act, a
certification to that effect from the transferor
(in substantially the form of Exhibit A hereto)
and, in the case of a transfer in accordance
with Rule 144A, Rule 144 or Regulation S under
the Securities Act, an Opinion of Counsel
reasonably acceptable to the Company to the
effect that such transfer is in compliance with
the Securities Act; or
(C) if such beneficial interest is
being transferred in reliance on another
exemption from the registration requirements of
the Securities Act, a certification to that
effect from the transferee or transferor (in
substantially the form of Exhibit A hereto) and
an Opinion of Counsel from the transferee or
transferor reasonably acceptable to the Company
to the effect that such transfer is in
compliance with the Securities Act, then the
Trustee or the Securities Custodian, at the
direction of the Trustee, will cause, in
accordance with the standing instructions and
procedures existing between the Depositary and
the Securities Custodian, the aggregate
principal amount of the Global Security to be
reduced and, following such reduction, the
Company will execute and, upon receipt of an
authentication order in the form of a Company
Order in accordance with Section 303, the
Trustee will authenticate and deliver to the
transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a 144A Global Security or a
Regulation S Global Security pursuant to this Section 305
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. The Trustee
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shall deliver such Definitive Securities to the persons in
whose names such Securities are so registered.
(g) With respect to the transfer of a beneficial interest in a
Regulation S Global Security for a beneficial interest in a 144A Global
Security, any person having a beneficial interest in a Regulation S Global
Security may upon request exchange such beneficial interest for an interest in a
144A Global Security. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary or its
nominee on behalf of any person having a beneficial interest in a Regulation S
Global Security constituting a Transfer Restricted Security only, and receipt by
the Trustee of the following additional information and documents (all of which
may be submitted by facsimile):
(i) instructions given in accordance with
the procedures of Euroclear or Cedel, the Depositary and
the Securities Custodian, as the case may be, from or on
behalf of a beneficial owner of an interest in the
Regulations S Global Security directing the Trustee, as
transfer agent, to credit or cause to be credited a
beneficial interest in the 144A Global Security in an
amount equal to the beneficial interest in the Regulation
S Global Security to be exchanged or transferred,
(ii) a written order given in accordance with
the procedures of Euroclear or Cedel, the Depositary and
the Securities Custodian, 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
(iii) a certification from the transferor (in
substantially the form of Exhibit A hereto) to the effect
that such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A
under the Securities Act and an Opinion of Counsel
reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act,
then the Trustee, as transfer agent, shall promptly deliver 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 Security by the aggregate principal amount of the
beneficial interest in such Regulation S Global Security to be exchanged or
transferred, and the Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, concurrently with such reduction, increase
or reflect on its records an increase of the principal amount of the 144A
Global Security by the aggregate principal amount of the beneficial interest in
the Regulation S Global Security 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 144A Global Security equal to the
reduction in the principal amount of the Regulation S Global Security.
(h) With respect to the transfer of a beneficial interest in a
144A Global Security for a beneficial interest in a Regulation S Global
Security, any person having a beneficial interest
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in a 144A Global Security may upon request exchange such beneficial interest
for an interest in a Regulation S Global Security. Upon receipt by the Trustee
of written instructions or such other form of instructions as is customary for
the Depositary or its nominee on behalf of any person having a beneficial
interest in a 144A Global Security constituting a Transfer Restricted Security
only, and receipt by the Trustee of the following additional information and
documents (all of which may be submitted by facsimile):
(i) instructions given in accordance with
the procedures of the Depositary and the Securities
Custodian, as the case may be, from or on behalf of a
holder of a beneficial interest in the 144A Global
Security, directing the Trustee, as transfer agent, to
credit or cause to be credited a beneficial interest in
the Regulation S Global Security in an amount equal to
the beneficial interest in the 144A Global Security to be
exchanged or transferred,
(ii) a written order given in accordance with
the procedures of the Depositary and the Securities
Custodian, as the case may be, containing information
regarding the Euroclear or Cedel account to be credited
with such increase and the name of such account, and
(iii) a certification from the transferor (in
substantially the form of Exhibit A hereto) to the effect
that such beneficial interest is being transferred in
accordance with Regulation S and an Opinion of Counsel
reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act,
then the Trustee, as transfer agent, shall promptly deliver 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 144A Global Security by the aggregate principal amount of the beneficial
interest in such 144A Global Security to be so exchanged or transferred from
the relevant participant, and the Trustee, as transfer agent, shall promptly
deliver 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 such Regulation S Global Security by the aggregate principal amount
of the beneficial interest in such 144A Global Security 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 Security
equal to the reduction in the principal amount of such 144A Global Security.
(i) Notwithstanding any other provisions of this Indenture
(other than the provisions set forth in subsection (j) of this Section 305), a
Global Security 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.
(j) The following relates to the authentication of Definitive
Securities in absence
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of the Depositary. If at any time: (i) the Depositary for the Securities
notifies the Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Securities and a successor Depositary for the Global
Securities is not appointed by the Company within 90 days after delivery of
such notice; or (ii) the Company, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of Definitive Securities under
this Indenture, then the Company will execute, and the Trustee, upon receipt of
a Company Order in accordance with Section 303 requesting the authentication
and delivery of Definitive Securities, will authenticate and deliver Definitive
Securities in an aggregate principal amount equal to the principal amount of
the Global Securities, in exchange for such Global Securities.
(k) (i) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) UNLESS SUCH OFFER, SALE OR OTHER TRANSFER IS (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO IS OR
WHO THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT
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TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES PROVIDED THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND
SUBJECT TO ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE THEN HOLDER OF THIS
SECURITY AFTER THE RESALE RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to
Rule 144 under the Securities Act or an effective
registration statement under the Securities Act
(including the Shelf Registration Statement) or on or
after the Resale Restriction Termination Date:
(A) in the case of any Transfer
Restricted Security that is a Definitive
Security, the Security Registrar shall permit
the Holder thereof to exchange such Transfer
Restricted Security for a Definitive Security
that does not bear the legend set forth above
and rescind any restriction on the transfer of
such Transfer Restricted Security; provided,
however, that with respect to a transfer made in
reliance upon Rule 144 or an effective
registration statement, the Holders thereof
shall certify in writing to the Security
Registrar that such request is being made
pursuant to Rule 144 or an effective
registration statement (such Certification to be
substantially in the form of Exhibit A hereto)
and, in the case of a transfer made in reliance
upon Rule 144, shall be accompanied by an
Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in
compliance with the Securities Act; and
(B) any such Transfer Restricted
Security represented by a Global Security shall
not be subject to the provisions set forth in
(i) above (such sales or transfers being subject
only to the provisions of Section 305(e)
hereof); provided, however, that with respect to
any request for an exchange of a Transfer
Restricted Security that is represented by a
Global Security for a Definitive Security that
does not bear a legend, which request is made in
reliance upon Rule 144 or an effective
registration statement, the Holder thereof shall
certify in writing to the Security Registrar
that such request is being made pursuant to Rule
144 or an effective registration statement (such
certification to be substantially in the form of
Exhibit A hereto) and,
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in the case of a transfer made in reliance upon
Rule 144, shall be accompanied by an Opinion of
Counsel reasonably acceptable to the Company to
the effect that such transfer is in compliance
with the Securities Act.
(l) At such time as all beneficial interests in a Global
Security have either been exchanged for Definitive Securities, redeemed,
repurchased or cancelled, such Global Security shall be returned to or retained
and cancelled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for Definitive
Securities, redeemed, repurchased or cancelled, the principal amount of
Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security, by the Trustee or the
Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(m) All Definitive Securities and Global Securities issued
upon any registration of transfer or exchange of Definitive Securities or
Global Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Definitive Securities or Global Securities surrendered upon such registration
of transfer or exchange.
(n) To the extent requested by the Trustee, all Securities the
transfer, exchange and/or registration of which is effectuated pursuant to this
Section 305 shall be accompanied by an Officers' Certificate of the Company,
certifying that such transfer, exchange and/or registration is authorized by
the Company and permitted hereunder.
To permit registrations of transfer and exchanges, the Company shall
execute and the Trustee shall authenticate Definitive Securities and Global
Securities at the Security Registrar's request.
No service charge to a Holder shall be made for any registration of
transfer or exchange of Securities except as provided in Section 306. The
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
304, 906, 1108 or 1302 not involving any transfer.
The Company or the Security Registrar shall not be required (i) to
issue, register the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Securities selected for redemption under Section 1104
and ending at the close of business on the day of such mailing or (ii) to
register the transfer of or exchange any Definitive Security or beneficial
interest in any Global Security so selected for redemption in whole or in part,
except the unredeemed portion of any Definitive Security being redeemed in
part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
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If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding. The Trustee may charge the Company
for the Trustee's expenses in replacing such Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest. Payment
of interest will be made (i) in respect of Securities held by the Depositary or
its nominee, in same day funds on or prior to the respective Interest Payment
Dates and (ii) in respect of Securities held of record by Holders other than
the Depositary or its nominee, in same day funds at the office of the Trustee
in New York, New York or at such other office or agency of the Company as it
shall maintain for that purpose pursuant to Section 1002, provided, however,
that, at the option of the Company, interest on any Security held of record by
Holders other than the Depositary or its nominee may be paid by mailing checks
to the addresses of the Holders thereof as such addresses appear in the
Securities Register.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
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(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest which shall be
fixed in the following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant to
the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on such Regular Record Date provided,
however, that Securities so surrendered for conversion shall (except in the
case of Securities or portions thereof called for redemption) be accompanied by
payment in funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount being surrendered
for conversion. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Security which is converted, interest
whose Stated Maturity is after the date of conversion of such Security shall
not be payable.
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SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer, exchange or conversion shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be returned to the Company.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. CUSIP Numbers.
The Company in issuing the Securities 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 Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, 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 FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
expressly provided for in this Article Four), and the Trustee, upon Company
Request at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
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(1) either
(A) all Securities theretofore authenticated
and delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306 and (ii) Securities for
whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered
to the Trustee for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one year, or
(iii) are to be called for redemption
within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,
or
(iv) are delivered to the Trustee
for Conversion in accordance with Article Thirteen,
and the Company, in the case of (i), (ii), (iii) or (iv)
above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for
the purpose an amount in cash sufficient (without
consideration of any investment of such cash) to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation for
principal and premium, if any, and interest to the date
of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be; provided that the
Trustee shall have been irrevocably instructed to apply
such amount to said payments with respect to the
Securities;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
following rights or obligations under the Securities and this Indenture shall
survive until otherwise terminated or discharged hereunder: (a) Article
Thirteen, Article Fourteen and the Company's obligations under Sections 304,
305, 306, 1002 and 1003, in each case with respect to any
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Securities described in subclause (B) of Clause (1) of this Section, (b) this
Article Four, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder, including the obligations of the Company to the Trustee
under Section 607, and the obligations of the Trustee to any Authenticating
Agent under Section 614 and (d) if money shall have been deposited with the
Trustee pursuant to subclause (B) of Clause (1) of this Section, the rights of
Holders of any Securities described in subclause (B) of Clause (1) of this
Section to receive, solely from the trust fund described in such subclause (B),
payments in respect of the principal of, and premium (if any) and interest on,
such Securities when such payment are due.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003 and
Section 506, all money deposited with the Trustee pursuant to Section 401 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
premium, if any, and interest for whose payment such money has been deposited
with the Trustee. All moneys deposited with the Trustee pursuant to Section
401 (and held by it or any Paying Agent) for the payment of Securities
subsequently converted shall be returned to the Company upon Company Request.
SECTION 403. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article Four by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Four until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust with respect to the Securities;
provided, however, that if the Company makes any payment of principal of or any
premium or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
the Securities to receive such payment from the money so held in trust.
SECTION 404. Paying Agent to Repay Monies Held.
Upon the satisfaction and discharge of this Indenture, all monies
then held by any Paying Agent for the Securities (other than the Trustee)
shall, upon written request of the Company, be repaid to the Company or paid to
the Trustee, and thereupon such Paying Agent shall be released from all further
liability with respect to such monies.
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ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body);
(1) default in the payment of the principal of or
premium, if any, on any Security at its Maturity, whether or not
such payment is prohibited by the provisions of Article Twelve;
or
(2) default in the payment of any interest upon any
Security when it becomes due and payable, whether or not such
payment is prohibited by the provisions of Article Twelve, and
continuance of such default for a period of 30 days; or
(3) failure to provide timely notice of a Repurchase
Event as required in accordance with the provisions of Article
Fourteen; or
(4) default in the payment of the Repurchase Price
in respect of any Security on the Repurchase Date therefor in
accordance with the provisions of Article Fourteen, whether or
not such payment is prohibited by the provisions of Article
Twelve; or
(5) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other than
a covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(6) default under one or more bonds, debentures,
notes or other evidences of indebtedness for money borrowed by
the Company or any Subsidiary or under one or more mortgages,
indentures or instruments under which there may be issued or by
which there may be secured or evidenced any indebtedness for
money borrowed by the Company or any Subsidiary, whether such
indebtedness now exists or shall hereafter be created, which
default individually or in the aggregate shall constitute a
failure to pay the principal of indebtedness in excess of
$5,000,000 when due and
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payable after the expiration of any applicable grace period with
respect thereto or shall have resulted in indebtedness in excess
of $5,000,000 becoming or being declared due and payable prior to
the date on which it would otherwise have become due and payable,
without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period
of 30 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities a written notice specifying
such default and requiring the Company to cause such indebtedness
to be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default"
hereunder; or
(7) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company or any Subsidiary in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company or any Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Company or any Subsidiary under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or
any Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90
consecutive days; or
(8) the commencement by the Company or any
Subsidiary of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated
a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial
part of its property, or the making by it of a general assignment
for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due,
or the taking of corporate action by the Company or any
Subsidiary in furtherance of any such action.
Upon receipt by a Responsible Officer of the Trustee of any Notice of Default
pursuant to this Section 501, a record date shall automatically and without any
other action by any Person be set for the purpose of determining the Holders of
Outstanding Securities entitled to join in such Notice of Default, which record
date shall be the close of business on the day the Trustee receives such Notice
of Default. The Holders of Outstanding Securities on such record date (or
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their duly appointed agents), and only such Persons, shall be entitled to join
in such Notice of Default, whether or not such Holders remain Holders after
such record date; provided, that unless such Notice of Default shall have
become effective by virtue of the Holders of the requisite principal amount of
Outstanding Securities on such record date (or their duly appointed agents)
having joined therein on or prior to the 90th day after such record date, such
Notice of Default shall automatically and without any action by any Person be
canceled and of no further force or effect.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than as specified in subparagraph (7)
or (8) of Section 501) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal plus
any interest accrued on the securities to the date of declaration shall become
immediately due and payable. If an Event of Default specified in subparagraph
(7) or (8) of Section 501 occurs and is continuing, then the principal of,
premium, if any, and accrued and unpaid interest, if any, on all of the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder of
Securities.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of and premium, if any, on any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest
is lawful, interest upon overdue interest at the rate borne by
the Securities, and
(D) all sums paid or advanced by the Trustee and
each predecessor Trustee, their respective agents and counsel
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and each predecessor
Trustee, their respective agents and counsel;
and
(2) all Events of Default, other than the nonpayment of
the principal of,
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premium, if any, and interest on the Securities that has become due solely by
such declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission and waiver shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of any declaration of acceleration, or
any rescission and annulment of any such declaration, pursuant to this Section
502, a record date shall automatically and without any other action by any
Person be set for the purpose of determining the Holders of Outstanding
Securities entitled to join in such declaration, or rescission and annulment,
as the case may be, which record date shall be the close of business on the day
the Trustee receives such declaration, or rescission and annulment, as the case
may be. The Holders of Outstanding Securities on such record date (or their
duly appointed agents), and only such Persons, shall be entitled to join in
such declaration, or rescission and annulment, as the case may be, whether or
not such Holders remain Holders after such record date; provided, that unless
such declaration, or rescission and annulment, as the case may be, shall have
become effective by virtue of Holders of the requisite principal amount of
Outstanding Securities on such record date (or their duly appointed agents)
having joined therein on or prior to the 90th day after such record date, such
declaration, or rescission and annulment, as the case may be, shall
automatically and without any action by any Person be canceled and of no
further force or effect.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any
interest on any Security when such interest becomes due and
payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the
principal of or premium, if any, on any Security at the
Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and premium, if any, and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal and premium, if any, and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee
and each predecessor Trustee, their respective agents and counsel, and any
other amounts due the Trustee or any predecessor Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid and may
prosecute any such proceeding to judgment or final decree, and may enforce the
same against the Company (or any other obligor upon the Securities) and collect
the moneys adjudged or decreed to be payable in the manner
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provided by law out of the property of the Company (or any other obligor upon
the Securities), wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have the claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder 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 Holders, to pay to the Trustee any amount due it and
each predecessor Trustee for the reasonable compensation, expenses,
disbursements and advances of the Trustee and each predecessor Trustee and
their respective agents and counsel, and any other amounts due the Trustee
under Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and may be a member of the
Creditors' Committee.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such 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 and each predecessor
Trustee and their respective agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
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SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium,
if any, or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To payment of all amounts due the Trustee under
Section 607;
SECOND: Subject to Article Twelve, to the holders of
Senior Indebtedness;
THIRD: To the payment of the amounts then due and unpaid
for principal of and premium, if any, and interest on the
Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on such
Securities for principal and premium, if any, and interest,
respectively; and
FOURTH: The balance, if any, to the Company or any other
Person or Persons determined to be entitled thereto upon
provision of an Officer's Certificate or other evidence
reasonably satisfactory to the Trustee by the Company or such
other person verifying such entitlement.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities;
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it being understood and intended that no one or more holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of a repurchase pursuant to Article Fourteen, on the
Repurchase Date) and to convert such Security in accordance with Article
Thirteen and to institute suit for the enforcement of any such payment and
right to convert, and such rights shall not be impaired without the consent of
such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
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SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities 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
(1) such direction shall not be in conflict with any rule
of law or with this Indenture; and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction; and
(3) subject to the provisions of Section 601, the Trustee
shall have the right to decline to follow any such direction if the
Trustee in good faith shall determine that the action so directed
would involve the Trustee in personal liability or would be unduly
prejudicial to Holders not joining in such direction.
Upon receipt by the Trustee of any such direction, a record date
shall automatically and without any other action by any Person be set for the
purpose of determining the Holders of Outstanding Securities entitled to join
in such direction, which record date shall be the close of business on the day
the Trustee receives such direction. The Holders of Outstanding Securities on
such record date (or their duly appointed agents), and only such Persons, shall
be entitled to join in such direction, whether or not such Holders remain
Holders after such record date; provided, that unless such direction shall have
become effective by virtue of Holders of the requisite principal amount of
Outstanding Securities on such record date (or their duly appointed agents)
having joined therein on or prior to the 90th day after such record date, such
direction shall automatically and without any action by any Person be canceled
and of no further force or effect.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or premium, if
any, or interest on any Security, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the consent
of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
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SECTION 514. Undertaking for Costs.
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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company, in any suit instituted by the Trustee, a suit by a Holder pursuant to
Section 508, or a suit by a Holder or Holders of more than 10% in principal
amount of the outstanding Securities.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided
by this Indenture and the Trust Indenture Act for securities issued pursuant to
indentures qualified thereunder. Except as otherwise provided herein,
notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability or risk in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity satisfactory
to it against such risk or liability is not reasonably assured to it. Whether
or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section. The Trustee
shall not be liable (x) for any error of judgment made in good faith by a
Responsible Officer or Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts or
(y) with respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of not less than a majority in
aggregate principal amount of the Securities at the time Outstanding relating
to the time, method and place of conducting any proceeding or any remedy
available to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture. Prior to the occurrence of an Event of Default
and after the curing or waiving of all Events of Default which may have
occurred: (i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture and in the Trust Indenture
Act, and the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Indenture and in
the Trust Indenture Act, and no implied covenants or obligations shall be read
in to this Indenture against the Trustee; and (ii) in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions therein, upon any
statements, certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture and believed by the Trustee to be genuine
and to have been signed or presented by the proper party or parties; but in the
case of any such statements, certificates or options which by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform on their face to the
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requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein). If a
default or 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 thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder of
which it has actual knowledge as and to the extent provided by the Trust
Indenture Act; provided, however, that in the case of any default of the
character specified in Section 501(5), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely
and shall be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, whether in its original or facsimile
form, believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the
Company mentioned herein shall be sufficiently evidenced by a Company Request
or Company Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of
this Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely conclusively upon an Officers'
Certificate;
(d) the Trustee may consult with counsel
and the written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) before the Trustee acts or refrains
from acting with respect to any matter contemplated by this Indenture, it may
require an Officers' Certificate or an Opinion of Counsel, which shall conform
to the provisions of Section 102, and the Trustee shall be protected and shall
not be liable for any action it takes or omits to take in good faith and
without gross
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negligence in reliance on such certificate or opinion;
(g) the Trustee shall not be required to
give any bond or surety in respect of the performance of its power and duties
hereunder;
(h) the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(i) 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
with due care by it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificate of authentication, shall be taken as the statements of
the Company, and the Trustee and any Authenticating Agent assume no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee and any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee or any Paying Agent in trust hereunder need
not be segregated from other funds except to the extent required by law. The
Trustee or any Paying Agent shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (including its services
as Security Registrar or Paying Agent, if
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so appointed by the Company) as may be mutually agreed upon in writing by the
Company and the Trustee (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on
behalf of it in connection with the performance of its duties under any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel and all other persons not
regularly in its employ) except to the extent any such expense, disbursement or
advance may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and each predecessor Trustee
(each an "indemnitee") for, and to hold it harmless against, any and all loss,
liability, claim, damage or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of this Indenture or the trusts hereunder and its duties hereunder (including
its services as Security Registrar or Paying Agent, if so appointed by the
Company), including enforcement of this Section 607 and including the costs and
expenses of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Company shall defend any claim or threatened claim asserted
against an indemnitee for which it may seek indemnity, and the indemnitee shall
cooperate in the defense unless, in the reasonable opinion of the indemnitee's
counsel, the indemnitee has an interest adverse to the Issuer or a potential
conflict of interest exists between the indemnitee and the Company, in which
case the indemnitee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel; provided that the Company shall
only be responsible for the reasonable fees and expenses of one law firm (in
addition to local counsel) in any one action or separate substantially similar
actions in the same jurisdiction arising out of the same general allegations or
circumstances, such law firm to be designated by the indemnitee.
As security for the performance of the obligations of the Company
under this Section 607, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the Holders of particular Securities,
and the Securities are hereby subordinated to such prior lien. The obligations
of the Company under this Section to compensate and indemnify the Trustee and
any predecessor Trustee and to pay or reimburse the Trustee and any predecessor
Trustee for expenses, disbursements and advances, and any other amounts due the
Trustee or any predecessor Trustee under Section 607, shall constitute an
additional obligation hereunder and shall survive the satisfaction and
discharge of this Indenture.
When the Trustee or any predecessor Trustee incurs expenses or
renders services in connection with the performance of its obligations
hereunder (including its services as Security Registrar or Paying Agent, if so
appointed by the Company) after an Event of Default specified in Section 501(7)
or (8) occurs, the expenses and the compensation for the services are intended
to constitute expenses of administration under any applicable bankruptcy,
insolvency or other similar federal or state law to the extent provided in
Section 503(b)(5) of Title 11 of the United States Code, as now or hereafter in
effect.
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SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that (i) is eligible pursuant to the Trust Indenture Act to act as such,
(ii) has (or, in the case of a corporation included in a bank holding company
system, whose related bank holding company has) a combined capital and surplus
of at least $50,000,000 and (iii) has an office where it provides corporate
trust services, or at which it is authorized to receive notices hereunder, in
the Borough of Manhattan, The City of New York, or a designated agent. If such
Person publishes reports of conditions at least annually, pursuant to law or to
the requirements of a Federal or state supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee required by Section 611 shall not have been delivered to the resigning
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section
608 after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for the
last six months, or
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
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(3) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security 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.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee and such successor Trustee shall comply with the applicable
requirements of Section 611. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
shall be appointed by Act of the Holders of a majority in principal amount of
the Outstanding Securities delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 611
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with 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 the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents acceptable
to and at the expense of the Company which shall be authorized to act on behalf
of the Trustee to authenticate Securities issued upon original issue and upon
exchange, registration of transfer, partial conversion or partial redemption or
pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a Person organized and
doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent 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 an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Person succeeding to
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the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such Person shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof 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 such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail notice of such
appointment by first-class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment under this Section shall become vested
with all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible to act as such under
the provisions of this Section.
Any Authenticating Agent by the acceptance of its appointment shall
be deemed to have represented to the Trustee that it is eligible for
appointment as Authenticating Agent under this Section and to have agreed with
the Trustee that: it will perform and carry out the duties of an
Authenticating Agent as herein set forth, including among other things the
duties to authenticate Securities when presented to it in connection with the
original issuance and with exchanges, registrations of transfer or redemptions
or conversions thereof or pursuant to Section 306; it will keep and maintain,
and furnish to the Trustee from time to time as requested by the Trustee,
appropriate records of all transactions carried out by it as Authenticating
Agent and will furnish the Trustee such other information and reports as the
Trustee may reasonably require; and it will notify the Trustee promptly if it
shall cease to be eligible to act as Authenticating Agent in accordance with
the provisions of this Section. Any Authenticating Agent by the acceptance of
its appointment shall be deemed to have agreed with the Trustee to indemnify
the Trustee against any loss, liability or expense incurred by the Trustee and
to defend any claim asserted against the Trustee by reason of any acts or
failures to act of such Authenticating Agent, but such Authenticating Agent
shall have no liability for any action taken by it in accordance with the
specific written direction of the Trustee.
The Trustee shall not be liable for any act or any failure of the
Authenticating Agent to perform any duty either required herein or authorized
herein to be performed by such person in accordance with this Indenture.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
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THE BANK OF NEW YORK,
As Trustee
By
-----------------------------
As Authenticating Agent
By
-----------------------------
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished.
Notwithstanding the foregoing, so long as the Trustee is the Security
Registrar, no such list shall be required to be furnished.
SECTION 702. Preservation of Information; Communication to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act or otherwise in accordance with this
Indenture.
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SECTION 703. Reports by Trustee.
(a) Not later than 60 days following each May 15, the Trustee
shall transmit to Holders such reports concerning the Trustee and its actions
under this Indenture as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided, that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
SECTION 705. Rule 144A Information Requirement.
If at any time prior to the Resale Restriction Termination Date the
Company is no longer subject to Section 13 or 15(d) of the Exchange Act and the
Securities are not eligible for resale pursuant to Rule 144(k), the Company
will furnish to the Holders or beneficial holders of the Securities and
prospective purchasers of the Securities designated by the Holders of the
Securities, upon their request, information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act until the earlier of (i) the date
on which the Securities and the underlying Common Stock are registered under
the Securities Act or (ii) the Resale Restriction Termination Date.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease all or substantially all of its
properties and assets to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, all or substantially all of the properties and
assets of the Company shall be a corporation, partnership or trust, shall be
organized and validly
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existing under the laws of the United States of America, any State thereof or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto (which shall not require consent of the Holders), executed
and delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and premium, if any, and interest on all
the Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Section 1311;
(2) immediately after giving effect to such transaction,
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing;
(3) such consolidation, merger, conveyance, transfer or
lease does not adversely affect the validity or enforceability of the
Securities; and
(4) the Company or the successor Person has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been complied
with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of all or
substantially all of the properties and assets of the Company in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except
in the case of a transfer by lease, the predecessor Person shall be relieved of
all obligations and covenants under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution and the provisions hereunder, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to cause this Indenture to be qualified under the
Trust Indenture Act; or
(2) to evidence the succession of another Person to the
Company and the
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assumption by any such successor of the covenants of the Company herein and in
the Securities; or
(3) to add to the covenants of the Company for the
benefit of the Holders or an additional Event of Default, or to surrender any
right or power conferred herein or in the Securities upon the Company; or
(4) to secure the Securities; or
(5) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Section 1311; or
(6) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the Securities; or
(7) to cure any ambiguity, to correct or supplement any
provision herein or in the Securities which may be defective or inconsistent
with any other provision herein or in the Securities, or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this Indenture;
provided, that such action pursuant to this Clause (7) shall not adversely
affect the interests of the Holders in any material respect and the Trustee may
rely upon an opinion of counsel to that effect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or
any installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Security or any premium or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or adversely affect the right to convert any
Security as provided in Article Thirteen (except as permitted by Section
901(5)), or modify the provisions of Article Fourteen, or the provisions of
this Indenture with respect to the subordination of the Securities, in a manner
adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section
513 or Section 1006,
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except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent
of the Holder of each Outstanding Security affected thereby; provided, however,
that this Clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant changes
in this Section and Section 1006, or the deletion of this proviso, in
accordance with the requirements of Section 901(6).
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture.
The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which adversely affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and executed by the
Company and (at the specific direction of the Company) authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
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SECTION 907. Notice of Supplemental Indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to Section 902, the Company shall transmit to
the Holders a notice setting forth the substance of such supplemental
indenture.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of and
premium, if any, and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in New York, New York an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer, where Securities may be
surrendered for exchange or conversion and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in New
York, New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of and premium, if any, or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal and
premium, if any, or interest so becoming due until such sums shall be paid to
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such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
on or prior to 11:00 a.m. (New York City time) on each due date of the
principal of and premium, if any, or interest on any Securities, deposit with a
Paying Agent a sum in same day funds sufficient to pay the principal and any
premium and interest so becoming due, such sum to be held as provided by the
Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee or
the Company to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (i) comply with the provisions of the
Trust Indenture Act and this Indenture applicable to it as a Paying Agent and
hold all sums held by it for the payment of principal of or any premium or
interest on the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided; (ii) give the Trustee written notice of any default by the
Company (or any other obligor upon the Securities) in the making of any payment
in respect of the Securities; and (iii) at any time during the continuance of
any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities, and account for any funds
disbursed.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
The Trustee shall not be liable for any act or failure to act of
any Paying Agent (other than the Trustee acting in such capacity) to perform
any duty either required herein or authorized herein to be performed by such
person in accordance with this Indenture.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of and premium,
if any, or interest on any Security and remaining unclaimed for two years after
such principal and premium, if any, or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in New York,
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New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture (without regard
to any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section1005, if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in full force
and effect.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, in
whole or from time to time in part, at any time on or after October 19, 2000,
at the Redemption Prices specified in the form of Security herein before set
forth, together with accrued interest, to the Redemption Date.
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SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company as permitted
by any provision of this Indenture shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter period shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed. In case of any redemption at the election of the
Company of all of the Securities, the Company shall, at least 45 days prior to
the Redemption Date fixed by the Company (unless a shorter period shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date.
SECTION 1104. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed
(so far as may be) to be the portion selected for redemption. Securities which
have been converted during a selection of Securities to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such selection. In
any case where more than one Security is registered in the same name, the
Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Security.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to the Trustee and to each Holder of Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall state:
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(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Securities are
to be redeemed, the identification (and in the case of partial
redemption of any Securities, the principal amounts) of the
particular Securities to be redeemed,
(d) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that (unless the Company shall default in payment of
the Redemption Price) interest thereon will cease to accrue on
and after said date,
(e) the conversion price, the date on which the
right to convert the Securities to be redeemed will terminate and
the place or places where such Securities may be surrendered for
conversion, and
(f) the place or places where such Securities are to
be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request received
by the Trustee at least 45 days prior to the Redemption Date, by the Trustee in
the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
At or prior to 9:00 a.m. (New York City time) on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in same day funds sufficient to
pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on, all the Securities or portions
thereof which are to be redeemed on that date other than any Securities called
for redemption on that date which have been converted prior to the date of such
deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held
in trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment
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of the Redemption Price and accrued interest) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Maturity is on or prior
to the Redemption Date shall be payable to the Holders of such Securities, or
one or more Predecessor Securities, registered as such at the close of business
on the relevant Record Dates according to their terms and the provisions of
Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company maintained for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, at all times and
in all respects, the indebtedness represented by the Securities and the payment
of the principal of and premium, if any, and interest on each and all of the
Securities are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding, relative to the Company or to its creditors, as such, or to a
substantial part of its assets, or (b) any proceeding for the liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or (c) any
general assignment for the benefits of creditors or any other marshalling of
assets and liabilities of the Company, then and in any such event the holders
of Senior Indebtedness shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all Senior Indebtedness; or
provision shall be made for such payment in money or money's worth, before
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the Holders of the Securities are entitled to receive any payment or
distribution of any kind or character, whether in cash, property or securities,
on account of principal of or premium, if any, or interest on the Securities,
and to that end the holders of Senior Indebtedness shall be entitled to
receive, for application to the payment thereof, any payment or distribution of
any kind or character, whether in cash, property or securities, including any
such payment or distribution which may be payable or deliverable by reason of
the payment of any other indebtedness of the Company being subordinated to the
payment of the Securities, which may be payable or deliverable in respect of
the Securities in any such case, proceeding, dissolution, liquidation or other
winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall, at or prior to the time of such payment
or distribution, have been made known to the Trustee or such Holder, as the
case may be, then and in such event such payment or distribution shall be paid
over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include securities of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, which are
subordinated in right of payment to all Senior Indebtedness which may at the
time be outstanding to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially as an
entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, general assignment for the benefit of creditors or marshalling
of assets and liabilities of the Company for the purposes of this Section if
the Person formed by such consolidation or into which the Company is merged or
which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article Eight.
SECTION 1203. Prior Payment to Senior Indebtedness upon Acceleration of
Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts due on or in
respect of such Senior Indebtedness, or provision shall be made for such
payment in money or money's worth, before the Holders of the Securities are
entitled to receive any payment
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(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) by the Company on account of the principal of or premium, if any,
or interest on the Securities or on account of the purchase or other
acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or such Holder,
as the case may be, then and in such event such payment shall be paid over the
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1202 would be applicable.
SECTION 1204. No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any
default in the payment of principal of or premium, if any, or interest on any
Senior Indebtedness beyond any applicable grace period with respect thereto, or
in the event that any event of default with respect to any Senior Indebtedness
shall have occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, unless and until such
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled, or (b) in the
event any judicial proceeding shall be pending with respect to any such default
in payment or event of default, then no payment (including any payment which
may be payable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Securities) shall be made by
the Company on account of the principal of or premium, if any, or interest on
the Securities or on account of the purchase or other acquisition of
Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or such Holder,
as the case may be, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1202 would be applicable.
SECTION 1205. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or other
winding up, general assignment for the benefit of creditors or other
marshalling of assets and liabilities of the Company referred to in Section
1202 or under the conditions described in Section 1203 or 1204, from making
payments at any time of principal of and premium, if any, or interest on the
Securities, or (b) the application by the Trustee of any money deposited with
it hereunder to the payment of or on account of the
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principal of and premium, if any, or interest on the Securities or the
retention of such payment by the Holders, if, at the time of such application
by the Trustee, it did not have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 1206. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due on or in respect of
Senior Indebtedness, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article (equally and ratably
with the holders of all indebtedness of the Company which by its express terms
is subordinated to other indebtedness of the Company to substantially the same
extent as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of and premium, if any, and
Interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would otherwise be entitled except for the provisions
of this Article, and no payments over pursuant to the provisions of this
Article to the holders of Senior Indebtedness by Holders of the Securities or
the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 1207. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and premium, if any, and interest on
the Securities as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders
of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1208. Trustee to Effectuate Subordination.
Each holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
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SECTION 1209. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i)Change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii)Sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii)Release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv)Exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 1210. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section at least four Business Days
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of
and premium, if any, or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power
and authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to the
contrary which may be received by it within four Business Days prior to such
date.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee
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may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 1211. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this
Article.
SECTION 1212. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if
it shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other Person cash, property or
securities to which holders of Senior Indebtedness shall be entitled by virtue
of this Article or otherwise. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article, and no
implied covenants or obligations with respect to the holders of Senior
Indebtedness shall be read into this Article against the Trustee.
SECTION 1213. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1214. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to
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and including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition to or
in place of the Trustee; provided, however, that Section 1213 shall not apply
to the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 1215. Certain Conversions Deemed Payment.
For the purposes of this Article only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with Article
Thirteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of
the principal of such Security. For the purposes of this Section, the term
"junior securities" means (a) shares of any class of capital stock of the
Company and (b) securities of the Company which are subordinated in right of
payment to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Securities are so subordinated as provided in
this Article. Nothing contained in this Article or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the right, which is absolute and unconditional, of the Holder of
any Security to convert such Security in accordance with Article Thirteen.
SECTION 1216. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of the Securities to take any action to accelerate the
maturity of the Securities pursuant to the provisions described under Article
Five and as set forth in this Indenture or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article of the holders, from time to time, of Senior Indebtedness to receive
the cash, property or securities receivable upon the exercise of such rights or
remedies.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Security or any portion of the principal
amount thereof which equals $1,000 or any integral multiple thereof may be
converted at any time after the date of initial issuance of Securities under
this Indenture at the principal amount thereof, or of such portion thereof,
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100 of a share) of Common Stock, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right shall expire at the close of business on October 15, 2004. In
case a Security or portion thereof is called for redemption, such conversion
right in respect of the Security or portion so called shall expire at the close
of business on the second
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business day preceding the applicable Redemption Date, unless the Company
defaults in making the payment due upon redemption. A Holder of Securities is
not entitled to any rights of a holder of Common Stock until such Holder has
converted such Securities to Common Stock, and only to the extent such
Securities are deemed to have been converted to Common Stock under this Article
Thirteen.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $13.25 per
share of Common Stock. The conversion price shall be adjusted in certain
instances as provided in paragraphs (a), (b), (c), (d), (e), (f) and (i) of
Section 1304.
SECTION 1302. Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Security shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained pursuant
to Section 1002, accompanied by written notice to the Company in the form
provided in the Security (or such other notice as is acceptable to the Company)
at such office or agency that the Holder elects to convert such Security or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted. Securities surrendered for conversion during the
period from the opening of business on any Regular Record Date next preceding
any Interest Payment Date to the close of business on such Interest Payment
Date shall (except in the case of Securities or portions thereof which have
been called for redemption) be accompanied by payment in funds acceptable to
the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount being surrendered for conversion. Except as
provided in the immediately preceding sentence and subject to the fourth
paragraph of Section 307, no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Securities surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion.
Securities shall be deemed to have been converted immediately prior
to the close of business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Securities as Holders shall cease, and the Person
or Persons entitled to receive the Common Stock issuable upon conversion shall
be treated for all purposes of the record holder or holders of such Common
Stock as and after such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction
of a share, as provided in Section 1303.
In the case of any Security which is converted in part only, upon
such conversion the Company shall execute and the Trustee shall authenticate
and deliver to the Holder thereof, at the expense of the Company, a new
Security or Securities of authorized denominations in aggregate principal
amount equal to the unconverted portion of the principal amount of such
Security.
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SECTION 1303. Fractions of Shares.
No fractional share of Common Stock shall be issued upon conversion
of Securities. If more than one Security shall be surrendered for conversion
at one time by the same Holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the Closing Price
(as hereinafter defined) at the close of business on the day of conversion (or,
if such day is not a Trading Day (as hereafter defined), on the Trading Day
immediately preceding such day).
SECTION 1304. Adjustment of Conversion Price.
(a) In case the Company shall pay or make a dividend or other
distribution on the Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of
the Company which dividend or distribution includes Common Stock, the
conversion price in effect at the opening of business on the day following the
date fixed for the determination of shareholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such conversion
price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purpose of
this paragraph (a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company. The
Company shall not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company.
(b) Subject to paragraph (g) of this Section, in case the
Company shall pay or make a dividend or other distribution on the Common Stock
consisting exclusively of, or shall otherwise issue to all holders of the
Common Stock, rights or warrants entitling the holders thereof to subscribe for
or purchase shares of Common Stock at a price per share less than the Current
Market Price (determined as provided in paragraph(h) of this Section) on the
date fixed for the determination of shareholders entitled to receive such
rights or warrants, the conversion price in effect at the opening of business
on the day following the date fixed for such determination shall be reduced by
multiplying such conversion price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
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treasury of the Company. The Company shall not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the conversion
price in effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall 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 subdivision or combination
becomes effective.
(d) Subject to the last sentence of this paragraph (d) and to
paragraph (g) of this Section, in case the Company shall, by dividend or
otherwise, distribute to all holders of the Common Stock evidences of its
indebtedness, shares of any class of its capital stock, cash or other assets
(including securities, but excluding any rights or warrants referred to in
paragraph (b) of this Section, excluding any dividend or distribution paid
exclusively in cash and excluding any dividend or distribution referred to in
paragraph (a) of this Section), the conversion price shall be reduced by
multiplying the conversion price in effect immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
such distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in paragraph (h) of this Section) 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 evidences of indebtedness, shares of capital stock,
cash and other assets to be 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 such date. If the Board of Directors determines the fair market
value of any distribution for purposes of this paragraph (d) by reference to
the actual or when-issued trading market for any securities comprising part or
all 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 paragraph (h) of this Section, to the extent possible. For purposes of this
paragraph (d), any dividend or distribution that includes shares of Common
Stock, rights or warrants to subscribe for or purchase shares of Common Stock
or securities convertible into or exchangeable for shares of Common Stock shall
be deemed to be (x) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than such shares of
Common Stock, such rights or warrants or such convertible or exchangeable
securities (making any conversion price reduction required by this paragraph
(d)) immediately followed by (y) in the case of such shares of Common Stock or
such rights or warrants, a dividend or distribution thereof (making any further
conversion price reduction required by paragraph (a) and (b) of this Section,
except 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 paragraph (a) of this Section), or
(z) in the case of such convertible or exchangeable securities, a dividend or
distribution of the number of shares of Common Stock as would then be issuable
upon the conversion or exchange thereof, whether or not the conversion or
exchange of such securities is subject to any conditions (making any further
conversion price reduction required by paragraph (a) of this Section, except
the shares deemed to constitute such
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dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
paragraph (a) of this Section).
(e) In case the Company shall, by dividend or otherwise, at
any time distribute to all holders of the Common Stock cash (excluding any cash
that is distributed as part of a distribution referred to in paragraph (d) of
this Section or in connection with a transaction to which Section 1311 applies)
in an aggregate amount that, together with (A) the aggregate amount of any
other distributions to all holders of the Common Stock made exclusively in cash
within the 12 months preceding the date fixed for the determination of
shareholders entitled to such distribution and in respect of which no
conversion price adjustment pursuant to this paragraph (e) has been made
previously and (B) 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) as of such date of determination of
consideration payable in respect of any tender offer by the Company or a
Subsidiary for all or any portion of the Common Stock consummated within the
12 months preceding such date of determination and in respect of which no
conversion price adjustment pursuant to paragraph (f) of this Section has been
made previously, exceeds the greater of (I) 12.5% of the product of the Current
Market Price (determined as provided in paragraph (h) of this Section) on such
date of determination times the number of shares of Common Stock outstanding on
such date or (II) the Company's retained earnings on the date fixed for
determining the stockholders entitled to such distribution the conversion price
shall be reduced by multiplying the conversion price in effect immediately
prior to the close of business on such date of determination by a fraction of
which the numerator shall be the Current Market Price (determined as provided
in paragraph (h) of this Section) on such date less the amount of cash to be
distributed at such time 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 after such
date.
(f) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall be consummated and
such tender offer shall involve 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) as of the last time (the
"Expiration Time") that tenders may be made pursuant to such tender offer (as
it shall have been amended) that, together with (A) 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 Time of the other consideration paid in respect of any other
tender offer by the Company or a Subsidiary for all or any portion of the
Common Stock consummated within the 12 months preceding the Expiration Time and
in respect of which no conversion price adjustment pursuant to this paragraph
(f) has been made previously and (B) the aggregate amount of any distributions
to all holders of the Common Stock made exclusively in cash within the 12
months preceding the Expiration Time and in respect of which no conversion
price adjustment pursuant to paragraph (e) of this Section has been made
previously, exceeds the greater of (I) 12.5% of the product of the Current
Market Price
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(determined as provided in paragraph (h) of this Section) immediately prior to
the Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time or (II) the Company's
retained earnings as of the Expiration Time, the conversion price shall be
reduced by multiplying the conversion price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be (x) the product
of the Current Market Price (determined as provided in paragraph (h) of this
Section) immediately prior to the Expiration Time times the number of shares of
Common Stock outstanding (including any tendered shares at the Expiration Time
minus (y) the fair market value (determined as aforesaid) of the aggregate
consideration payable to shareholders upon consummation of such tender offer
and the denominator shall be the product of (A) such Current Market Price times
(B) such number of outstanding shares at the Expiration Time minus the number
of shares accepted for payment in such tender offer (the "Purchased Shares"),
such reduction to become effective immediately prior to the opening of business
on the day following the Expiration Time; provided, that if the number of
Purchased Shares or the aggregate consideration payable therefor have not been
finally determined by such opening of business, the adjustment required by this
paragraph (f) shall, pending such final determination, be made based upon the
preliminarily announced results of such tender offer, and, after such final
determination shall have been made, the adjustment required by this paragraph
(f) shall be made based upon the number of Purchased Shares and the aggregate
consideration payable therefor as so finally determined.
(g) The reclassification of Common Stock into securities which
include securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 1311 applies) shall be deemed
to involve (i) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of shareholders entitled
to such distribution" within the meaning of paragraph (d) of this Section), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
paragraph (c) of this Section).
Rights or warrants issued by the Company to all holders of the Common
Stock entitling the holders thereof to subscribe for or purchase shares of
Common Stock (either initially or under certain circumstances), which rights or
warrants (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, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events ("Trigger Event"), shall for purposes
of this Section 1304 not be deemed issued until the occurrence of the earliest
Trigger Event. If any such rights or warrants, including any such existing
rights or warrants distributed prior to the date of this Indenture are subject
to subsequent events, upon the occurrence of each of which such rights or
warrants shall become exercisable to purchase different securities, evidences
of indebtedness or other assets, then the occurrence of each such event shall
be deemed to be such date of issuance and record date with respect to new
rights or warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the event of
any distribution (or deemed distribution) of rights or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under this
Section 1304 was made, (1) in the case of any such rights or warrant which
shall all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to
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such distribution or Trigger Event, as the case may be, as though it were a
cash distribution, equal to the per share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Price shall
be readjusted as if such rights and warrants had not been issued.
Notwithstanding any other provision of this Section 1304 to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash
or other assets (including, without limitation, any rights distributed pursuant
to any stockholder rights plan) shall be deemed not to have been distributed
for purposes of this Section 1304 if the Company makes proper provision so that
each holder of Securities who converts a Security (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 conversions, the amount and kind
of such distributions that such holder would have been entitled to receive if
such holder had, immediately prior to such determination date, converted such
Security into Common Stock.
(h) For the purpose of any computation under this paragraph
and paragraphs (b), (d) and (e) of this Section, the current market price per
share of Common Stock (the "Current Market Price") on any date shall be deemed
to be the average of the daily Closing Prices for the 5 consecutive Trading
Days selected by the Company commencing not more than 20 Trading Days before,
and ending not later than, the date in question; provided, however, that (i) if
the "ex" date for any event (other than the issuance or distribution requiring
such computation) that requires an adjustment to the conversion price pursuant
to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after the 20th
Trading Day prior to the date in question and prior to the "ex" date for the
issuance or distribution requiring such computation, 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, (ii) if
the "ex" date for any event (other than the issuance or distribution requiring
such computation) that requires an adjustment to the conversion price pursuant
to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after the "ex"
date for the issuance or distribution requiring such computation and on or
prior to the date 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 (iii) if the
"ex" date for the issuance or distribution requiring such computation is on or
prior to the date in question, after taking into account any adjustment
required pursuant to clause (ii) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value on the date in question (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraph (d) or (e) of this
Section, 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 the purpose of any computation
under paragraph (f) of this Section, the Current Market Price on any date shall
be deemed to be the average of the daily
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Closing Prices for the 5 consecutive Trading Days selected by the Company
commencing on or after the latest (the "Commencement Date") of (i) the date 20
Trading Days before the date in question, (ii) the date of commencement of the
tender offer requiring such computation and (iii) the date of the last
amendment, if any, of such tender offer involving a change in the maximum
number of shares for which tenders are sought or a change in the consideration
offered, and ending not later than the Expiration Time of such tender offer;
provided, however, that if the "ex" date for any event (other than the tender
offer requiring such computation) that requires an adjustment to the conversion
price pursuant to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or
after the Commencement Date and prior to the Expiration Time for the tender
offer requiring such computation, 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. The closing price for any
Trading Day (the "Closing Price") shall be the last reported sales price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either
case on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq Stock Market's National Market or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on such
National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose. For purposes of
this paragraph, the term "Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are generally not
traded on the applicable securities exchange or in the applicable securities
market and the term "'ex' date," (i) 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
Prices were obtained without the right to receive such issuance or
distribution, (ii) 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 (iii) when used with respect
to any tender offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the last time that tenders
may be made pursuant to such tender offer (as it shall have been amended).
(i) The Company may make such reductions in the conversion
price, in addition to those required by paragraphs (a), (b), (c), (d), (e) and
(f) of this Section, (i) to the extent permitted by law, by any amount for any
period of at least 20 days or (ii) as it considers to be advisable (as
evidenced by a Board Resolution) in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients or, if that is not possible, to diminish any income taxes
that are otherwise payable because of such event.
(j) No adjustment in the conversion price shall be required
unless such adjustment (plus any other adjustments not previously made by
reason of this paragraph (j)) would require an increase or decrease of at least
1% in the conversion price; provided, however, that any adjustments which by
reason of this paragraph (j) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
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(k) Notwithstanding any other provision of this Section 1304,
no adjustment to the conversion price shall reduce the conversion price below
the then par value per share of the Common Stock, and any such purported
adjustment shall instead reduce the conversion price to such par value. The
Company hereby covenants not to take any action to increase the par value per
share of the Common Stock.
SECTION 1305. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 1304 and shall prepare an Officers' Certificate signed
by the Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed (with a copy to the Trustee) at each
office or agency maintained for the purpose of conversion of Securities
pursuant to Section 1002; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall forthwith be
prepared, and as soon as practicable after it is prepared, such notice shall be
mailed by the Company to all Holders at their last addresses as they shall
appear in the Security Register. In the case of any adjustment pursuant to
Section 1304(i)(i), such notice shall be mailed at least 15 days before the
date the reduced conversion price shall take effect and shall state the reduced
conversion price and the period it will be in effect.
SECTION 1306. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in
cash or (ii) exclusively in cash in an amount that would require a conversion
price adjustment pursuant to paragraph (e) of Section 1304; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights (excluding shares of
capital stock or option for capital stock issued pursuant to a benefit plan for
employees, officers or directors of the Company); or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of
any consolidation, merger or share exchange to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
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(e) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the outstanding shares of Common Stock (or shall
amend any such tender offer to change the maximum number of shares being sought
or the amount or type of consideration being offered therefor);
then the Company shall cause to be filed (with a copy to the Trustee) at each
office or agency maintained pursuant to Section 1002, and shall cause to be
mailed to all Holders at their last addresses as they shall appear in the
Security Register, at least 21 days (or 11 days in any case specified in clause
(a), (b) or (e) above) prior to the applicable record, effective or expiration
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or granting of
rights or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record who will be entitled to such dividend,
distribution, rights or warrants are to be determined, (y) the date on which
such reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto).
Neither the failure to give any such notice nor any defect therein shall affect
the legality or validity of any action described in clauses (a) through (e) of
this Section 1306.
SECTION 1307. Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the authorized but unissued Common Stock or out of
the Common Stock held in treasury, for the purpose of effecting the conversion
of Securities, the full number of shares of Common Stock then issuable upon the
conversion of all outstanding Securities. Shares of Common Stock issuable upon
conversion of outstanding Securities shall be issued out of the Common Stock
held in Treasury to the extent available.
SECTION 1308. Taxes on Conversions.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
SECTION 1309. Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be fully paid and
nonassessable and, except as
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provided in Section 1308, the Company will pay all taxes, liens and charges
with respect to the issue thereof.
SECTION 1310. Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.
SECTION 1311. Provisions of Consolidation, Merger or Sale of Assets.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock) or any sale or
transfer of all or substantially all of the assets of the Company, the Person
formed by such consolidation or resulting from such merger or which acquires
such assets, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 1301, to convert such Security
only into the kind and amount of securities, cash and other property, if any,
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such Security might have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming such holder of Common Stock (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be (a "Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same
for each share of Common Stock held immediately prior to such consolidation,
merger, sale or transfer by other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("nonelecting share"), then for the purpose of this Section the kind
and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each nonelecting share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
nonelecting shares). Such supplemental indenture shall provide for adjustments
which, for events subsequent to the effective date of such supplemental
indenture, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. The above provisions of this Section
shall similarly apply to successive consolidations, mergers, sales or
transfers.
SECTION 1312. Trustee's Disclaimer.
The Trustee and any other conversion agent shall not at any time be
under any duty or responsibility to any holder of Securities to determine
whether any facts exist that may require any adjustment of the conversion price
or notice thereof, or with respect to the nature or extent or calculation of
any such adjustment when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
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same and shall be protected in relying upon the Officers' Certificate with
respect thereto which the Company is required to file with the Trustee pursuant
to Section 1305. 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 Security; and the
Trustee and any other conversion agent make no representations with respect
thereto or any actions or omission by the Company in such regard. 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
Thirteen.
The Trustee shall not be under any responsibility to determine or
verify the correctness of any provisions contained in any supplemental
indenture executed pursuant to Section 1311, but may accept as conclusive
evidence of the correctness thereof, and shall be protected in relying upon,
the Officers' Certificate with respect thereto which the Company is obligated
to file with the Trustee pursuant to Section 1311.
ARTICLE FOURTEEN
Right to Require Repurchase
SECTION 1401. Right to Require Repurchase.
In the event that there shall occur a Repurchase Event (as defined in
Section 1406), then each Holder shall have the right, at such Holder's option,
to require the Company to purchase, and upon the exercise of such right, the
Company shall, subject to the provisions of Section 1203, purchase, all or any
part of such Holder's Securities on the date (the "Repurchase Date") that is 30
days after the date the Company gives notice of the Repurchase Event as
contemplated in Section 1402(a) at a price (the "Repurchase Price") equal to
100% of the principal amount thereof, together with accrued and unpaid interest
to the Repurchase Date.
SECTION 1402. Notice; Method of Exercising Repurchase Right.
(a) On or before the 15th day after the occurrence of a
Repurchase Event, the Company, or at the written request of the Company
received by the Trustee at least 40 days prior to the Repurchase Date, the
Trustee (in the name and at the expense of the Company), in its capacity as
tender agent (for which services it shall be reasonably compensated), shall
give notice of the occurrence of the Repurchase Event and of the repurchase
right set forth herein arising as a result thereof by first-class mail, postage
prepaid, to the Trustee and to each Holder of the Securities at such Holder's
address appearing in the Security Register. The Company shall also deliver a
copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the event constituting the Repurchase Event and the
date thereof,
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(2) the Repurchase Date,
(3) the date by which the repurchase right must be
exercised,
(4) the Repurchase Price, and
(5) the instructions a Holder must follow to exercise a
repurchase right.
No failure of the Company to give the foregoing notice shall limit
any Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Repurchase
Event.
(b) To exercise a repurchase right, a Holder shall
deliver to the Company (or an agent designated by the Company for such purpose
in the notice referred to in (a) above) and to the Trustee on or before the
close of business on the Repurchase Date (i) written notice of the Holder's
exercise of such right, which notice shall set forth the name of the Holder,
the principal amount of the Security or Securities (or portion of a Security)
to be repurchased, and a statement that an election to exercise the repurchased
right is being made thereby, and (ii) the Security or Securities with respect
to which the repurchase right is being exercised, duly endorsed for transfer to
the Company. Such written notice shall be irrevocable. If the Repurchase Date
falls between any Regular Record Date and the next succeeding Interest Payment
Date, Securities to be repurchased must be accompanied by payment from the
Holder of an amount equal to the interest thereon which the registered Holder
thereof is to receive on such Interest Payment Date.
In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Company shall on the Repurchase Date pay or cause to be
paid in cash to the Holder thereof the Repurchase Price of the Security or
Securities as to which the repurchase right had been exercised. In the event
that a repurchase right is exercised with respect to less than the entire
principal amount of a surrendered Security, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance in the
name of the Holder a new Security or Securities in the aggregate principal
amount of the unrepurchased portion of such surrendered security.
SECTION 1403. Deposit of Repurchase Price.
On or prior to the Repurchase Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money in same day funds sufficient to pay the Repurchase Price of the
Securities which are to be repaid on the Repurchase Date.
SECTION 1404. Securities Not Repurchased on Repurchase Date.
If any Security surrendered for repurchase shall not be so paid on
the Repurchase Date, the principal shall, until paid, bear interest to the
extent permitted by applicable law from the Repurchase Date at the rate per
annum borne by such Security.
88
<PAGE> 94
SECTION 1405. Securities Repurchased in Part.
Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unrepurchased portion of the principal of the Security so
surrendered.
SECTION 1406. Certain Definitions.
For purposes of this Article:
(a) A "Repurchase Event" shall have occurred upon the
occurrence of a Change in Control or Termination of Trading after the date of
this Indenture and on or prior to October 15, 2004.
(b) A "Change in Control" shall occur when :
(i) all or substantially all of the Company's
assets are sold as an entirety to any person or related group
of persons;
(ii) there shall be consummated any consolidation
or merger of the Company (A) in which the Company is not the
continuing or surviving corporation (other than a
consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed
into or exchanged for the same consideration) or (B) pursuant
to which the Common Stock would be converted into cash,
securities or other property, in each case, other than a
consolidation or merger of the Company in which the holders of
the Common Stock immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of
the total voting power of all classes of capital stock
entitled to vote generally in the election of directors of the
continuing or surviving corporation immediately after such
consolidation or merger in substantially the same proportion
as their ownership of Common Stock immediately before such
transaction;
(iii) any person, or any persons acting together
which would constitute a "group" for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates
thereof, shall beneficially own (as defined in Rule 13d-3
under the Exchange Act) at least 50% of the total voting power
of all classes of capital stock of the Company entitled to
vote generally in the election of directors of the Company; or
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<PAGE> 95
(iv) at any time during any consecutive two-year
period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together
with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of 66-2/3% of the
directors then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of the
Company then in office; or
(v) the Company is liquidated or dissolved or
adopts a plan of liquidation or dissolution.
(c) A "Termination of Trading" shall occur if the Common
Stock (or other common stock into which the Securities are then convertible) is
neither listed for trading on a U.S. national securities exchange nor approved
for trading on an established automated over-the-counter trading market in the
United States.
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<PAGE> 96
This instrument may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this 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.
FUISZ TECHNOLOGIES LTD.
By
--------------------------------
Name:
Title:
Attest:
- ---------------------------------------
THE BANK OF NEW YORK,
as Trustee
By
--------------------------------
Name:
Title:
Attest:
- ---------------------------------------
<PAGE> 97
EXHIBIT A
[FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES]
CERTIFICATE FOR EXCHANGE OR TRANSFER
Re: 7% Convertible Subordinated Debentures due 2004
This Certificate relates to $_________ principal amount of Securities
held in *____________ book-entry or *____________ definitive form by _________
(the "Transferor").
The Transferor(2):
[] has requested the Trustee by written order to deliver
in exchange for its beneficial interest in a Global Security held by the
Depositary a Security or Securities in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Security (or the portion thereof indicated
above); or
[] has requested the Trustee by written order to deliver
in exchange for its Security or Securities a beneficial interest in a Global
Security held by the Depositary in a principal amount equal to the aggregate
principal amount of such Security or Securities; or
[] has requested the Trustee by written order to
exchange or register the transfer of a Security or Securities.
In connection with such request and in respect of each such security,
the Transferor does hereby certify to the Company and the Trustee that
Transferor is familiar with the Indenture relating to the above captioned
Debentures and, as provided in Section 305 of such Indenture, the transfer of
this Security does not require registration under the Securities Act (as
defined below) because*:
[] Such Security is being acquired for the Transferor's
own account, without transfer (in satisfaction of Section 305(b)(ii)(A) or
Section 305(f)(i)(A) of the Indenture).
[] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A or pursuant to an
exemption from registration in accordance with Regulation S under the
Securities Act (in satisfaction of Section 305(b)(ii)(B), Section 305(c)(i),
Section 305(d)(i), Section 305(f)(i)(B), Section 305(g)(iii) or Section
305(h)(iii) of the Indenture). An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act accompanies
this Certificate (in satisfaction of Section 305(b)(ii)(B), Section 305(c)(i),
Section 305(d)(i), Section 305(f)(i)(B), Section 305(g)(iii) or Section
305(h)(iii) of the Indenture).
- -----------------------
2 Check applicable box.
A-1
<PAGE> 98
[] Such Security is being transferred in accordance with
Rule 144 under the Securities Act, or pursuant to an effective registration
statement under the Securities Act (in satisfaction of Section 305(b)(ii)(B),
Section 305(f)(i)(B) or Section 305(k)(ii) of the Indenture). If such Security
is being transferred in accordance with Rule 144 under the Securities Act, an
opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(b)(ii)(B), Section 305(f)(i)(B) or Section
305(k)(ii) of the Indenture).
[] Such Security is being transferred in reliance on and
in compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, 144 or Regulation S under the Securities
Act. An opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(b)(ii)(C) or Section 305(f)(i)(C) of the
Indenture).
[] You are entitled to rely upon this certificate and
you are irrevocably authorized to produce this certificate or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
-----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
Date:
-----------------------------
A-2
<PAGE> 1
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of October 17, 1997
relating to up to
$86,250,000 in Aggregate Principal Amount
of 7% Convertible Subordinated
Debentures due 2004
by and between
Fuisz Technologies Ltd.
and
Smith Barney Inc.,
Credit Suisse First Boston Corporation
and
Lehman Brothers Inc.,
as Initial Purchasers
================================================================================
<PAGE> 2
This Registration Rights Agreement (the "Agreement") is made
and entered into as of October 17, 1997, by and between Fuisz Technologies
Ltd., a Delaware corporation (the "Company"), and Smith Barney Inc., Credit
Suisse First Boston Corporation and Lehman Brothers Inc. (the "Initial
Purchasers"), who will purchase up to $ 86,250,000 in aggregate principal
amount of 7% Convertible Subordinated Debentures due 2004 (the "Debentures") of
the Company (including up to an additional $ 11,250,00 aggregate principal
amount that may be purchased by the Initial Purchasers pursuant to their
over-allotment option) pursuant to the Purchase Agreement dated October 17,
1997 (the "Purchase Agreement"), between the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in the
Purchase Agreement. All defined terms used but not defined herein shall have
the meanings ascribed to them in the Indenture (as defined herein).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Closing Date: The date on which all the Debentures are first
sold by the Company to the Initial Purchasers pursuant to the Purchase
Agreement.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, par value $.01 per share, of
the Company.
Damages Payment Date: With respect to the Debentures or the
Common Stock, as applicable, each Interest Payment Date as defined in the
Indenture.
Effectiveness Target Date: As defined in Section 4.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, to be dated as of October 22, 1997,
among the Company and The Bank of New York, as trustee (the "Trustee"),
pursuant to which the Debentures are to be issued, as such Indenture is amended
or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
Preliminary Prospectus: As defined in Section 3(g).
Prospectus: The prospectus included in the Shelf Registration
Statement, as amended or supplemented by any Prospectus Supplement with respect
to the terms of the offering of any portion of the Transfer Restricted
Securities (as defined herein) covered by the Shelf Registration Statement and
by all other amendments and supplements to the prospectus, including
post-effective amendments, and all material which may be incorporated by
reference into such prospectus.
<PAGE> 3
Prospectus Supplement: As defined in Section 5(b).
Record Holder: (i) With respect to any Damages Payment Date
relating to the Debentures, each Person who is registered on the books of the
registrar for the Debentures as the holder of Debentures on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur and (ii) with respect to any Damages Payment Date relating to the
Common Stock, each Person who is a holder of record of such Common Stock
fifteen days prior to the Damages Payment Date.
Registration Expenses: As defined in Section 6(a).
Shelf Registration Statement: As defined in Section 3(a)
hereof.
TIA: The Trust Indenture Act of 1939, as amended, as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each Debenture and share of
Common Stock of the Company issuable upon conversion of a Debenture, until each
such Debenture or share (i) has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement covering it, (ii) is distributed to the public pursuant to Rule 144
or (iii) may be sold or transferred pursuant to Rule 144(k) (or any similar
provisions then in force) under the Securities Act or otherwise.
Underwriter: Any underwriter, placement agent, selling
broker, dealer manager, qualified independent underwriter or similar securities
industry professional.
Underwritten Registration or Underwritten Offering: An
offering in which securities of the Company are sold to an Underwriter or with
the assistance of such Underwriter for reoffering to the public on a firm
commitment or best efforts basis.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities
entitled to the benefits of this Agreement are the Transfer Restricted
Securities.
(b) Holders of Transfer Restricted Securities. A Person
is deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities as a Record Holder or,
in the event the Record Holder is the Depository Trust Company or a nominee
thereof, through a direct or indirect participant therein.
SECTION 3. SHELF REGISTRATION
(a) Subject to the provisions of Section 5 hereof, the
Company shall cause to be filed with the Commission on or prior to 60 days
after the Closing Date, a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement") on Form S-1 or Form S-3, if
the use of such form is then available and as determined by the Company, to
cover resales of Transfer Restricted Securities by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. In order for their Transfer
Restricted Securities to be included in the Shelf Registration Statement, the
Holders of such Transfer Restricted Securities shall have provided the
representations required pursuant to Section 3(g) hereof. The Company shall
use its reasonable best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission on or prior to 120 days after the
Closing Date. The Company shall use its reasonable best efforts to keep such
Shelf Registration Statement continuously effective for a period ending two
years from the Closing Date or such shorter period that will terminate when
each of the Transfer Restricted Securities covered by the Shelf Registration
Statement shall cease to be a Transfer Restricted Security (the earlier of such
dates, the "Withdrawal Date"). The Company further agrees to use its
reasonable best efforts to
2
<PAGE> 4
prevent the happening of any event that would cause the Shelf Registration
Statement to contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or to be not effective and usable for resale of the
Transfer Restricted Securities during the period that such Shelf Registration
Statement is required to be effective and usable.
Upon the occurrence of any event that would cause the Shelf
Registration Statement (i) to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) to be not effective and
usable for resale of Transfer Restricted Securities during the period that such
Shelf Registration Statement is required to be effective and usable, the
Company shall as promptly as practicable file an amendment to the Shelf
Registration Statement, in the case of clause (i), correcting any such
misstatement or omission, and in the case of either clause (i) or (ii), use its
best efforts to cause such amendment to be declared effective and such Shelf
Registration Statement to become usable as soon as practicable thereafter.
Notwithstanding anything to the contrary in this Section 3,
subject to compliance with Sections 4 and 5(b), if applicable, the Company may
prohibit offers and sales of Transfer Restricted Securities pursuant to the
Shelf Registration Statement at any time if (A) (i) it is in possession of
material non-public information, (ii) the Board of Directors of the Company
determines (based on advice of counsel) that such prohibition is necessary in
order to avoid a requirement to disclose such material non-public information
and (iii) the Board of Directors of the Company determines in good faith that
disclosure of such material non-public information would not be in the best
interests of the Company and its shareholders or (B) the Company has made a
public announcement relating to an acquisition or business combination
transaction including the Company and/or one or more of its subsidiaries (i)
that is material to the Company and its subsidiaries taken as a whole and (ii)
the Board of Directors of the Company determines in good faith that offers and
sales of Transfer Restricted Securities pursuant to the Shelf Registration
Statement prior to the consummation of such transaction (or such earlier date
as the Board of Directors shall determine) is not in the best interests of the
Company and its shareholders (the period during which any such prohibition of
offers and sales of Transfer Restricted Securities pursuant to the Shelf
Registration Statement is in effect pursuant to clause (A) or (B) of this
subparagraph (a) is referred to herein as a "Suspension Period"). A Suspension
Period shall commence on and include the date on which the Company provides
written notice pursuant to Section 5(d) hereof to Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement that offers
and sales of Transfer Restricted Securities cannot be made thereunder in
accordance with this Section 3 and shall end on the date on which each Holder
of Transfer Restricted Securities covered by the Shelf Registration Statement
either receives copies of a Prospectus Supplement contemplated by Section 5(b)
or is advised in writing by the Company that offers and sales of Transfer
Restricted Securities pursuant to the Shelf Registration Statement and use of
the Prospectus may be resumed.
(b) None of the Company nor any of its security holders
(other than the Holders of Transfer Restricted Securities in such capacity)
shall have the right to include any of the Company's securities in the Shelf
Registration Statement.
(c) If the Holders of a majority of the Transfer
Restricted Securities sold to the Initial Purchasers under the Purchase
Agreement so elect (with holders of Common Stock constituting Transfer
Restricted Securities being deemed to be Holders of the aggregate principal
amount of Debentures converted into such Common Stock for purposes of such
calculation), an offering of Transfer Restricted Securities pursuant to the
Shelf Registration Statement may be effected in the form of an Underwritten
Offering. The Holders of the Transfer Restricted Securities to be registered
shall pay all underwriting discounts and commissions of such Underwriters.
(d) If any of the Transfer Restricted Securities covered
by the Shelf Registration Statement are to be sold in an Underwritten Offering,
the Underwriter(s) that will administer the offering will be selected by the
Holders of a majority of the outstanding Transfer Restricted Securities to be
included in such Underwritten Offering (with holders of Common Stock
constituting Transfer Restricted Securities being deemed to be Holders of the
aggregate principal amount of Debentures converted into such Common
3
<PAGE> 5
Stock for purposes of such calculation); provided, however, that such
Underwriter(s) shall be reasonably satisfactory to the Company.
(e) Each Holder whose Transfer Restricted Securities are
covered by a Shelf Registration Statement filed pursuant to this Section 3
agrees, upon the request of the Underwriter(s) in any Underwritten Offering,
not to effect any sale or distribution of securities of the Company of the same
class as the securities included in such Shelf Registration Statement, for a
period of up to 90 days beginning on the date any such Underwritten Offering
made pursuant to such Shelf Registration Statement commences, to the extent
timely notified in writing by such Underwriter(s).
(f) The Company agrees not to effect any public or
private offer, sale or distribution of Securities of the same quality and
nature as the Transfer Restricted Securities to be registered in an
Underwritten Offering during the 90-day period beginning on the date any such
Underwritten Offering made pursuant to the Shelf Registration Statement
commences, to the extent timely notified in writing by the Underwriter(s)
(except as part of such registration, if permitted, or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such Forms), unless
the Underwriter(s) shall consent in writing to a shorter period of time.
(g) No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless such Holder has advised the Company
in writing that such Holder intends to offer and sell Transfer Restricted
Securities under the Shelf Registration Statement (any such Holder, a "Selling
Holder") and furnishes to the Company in writing, within 10 business days after
receipt of a request therefor, such information as the Company may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus (a "Preliminary Prospectus") included
therein.
SECTION 4. LIQUIDATED DAMAGES
(a) If (i) the Shelf Registration Statement is not filed
with the Commission on or prior to 60 days after the Closing Date, (ii) the
Shelf Registration Statement has not been declared effective by the Commission
within 120 days after the Closing Date (the "Effectiveness Target Date"), or
(iii) the Shelf Registration Statement is filed and declared effective but
shall thereafter cease to be effective (without being succeeded immediately by
an additional registration statement filed and declared effective) or useable
for resale for a period of time (including any Suspension Period) which shall
exceed 60 days in the aggregate in any 12-month period during the period
beginning on the Closing Date and ending on the Withdrawal Date (each such
event referred to in clauses (i) through (iii), a "Registration Default"), the
Company will pay liquidated damages to each Holder of Transfer Restricted
Securities who has complied with such Holder's obligations under this
Agreement. The amount of liquidated damages payable during any period during
which a Registration Default shall have occurred and be continuing is that
amount which is equal to one-quarter of one percent (25 basis points) per annum
per $1,000 principal amount of Debentures or $2.50 per annum per 75.472 shares
of Common Stock (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) constituting Transfer Restricted
Securities for the first 90-days during which a Registration Default has
occurred and is continuing and 50 basis points per annum per $1,000 principal
amount of Debentures or $5.00 per annum per 75.472 shares (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities for all additional days during which a Registration Default has
occurred and is continuing. The Company shall notify the Trustee and the
Initial Purchasers within three business days after each and every date on
which a Registration Default occurs. All accrued liquidated damages shall be
paid to Record Holders by wire transfer of immediately available funds or by
federal funds check by the Company on each Damages Payment Date. Following the
cure of all Registration Defaults, liquidated damages will cease to accrue with
respect to such Registration Default.
All of the Company's obligations in respect of the payment of
liquidated damages set forth in the preceding paragraph which are outstanding
with respect to any Transfer Restricted Security at the time such security
ceases to be a Transfer Restricted Security shall survive until such time as
all such
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<PAGE> 6
liquidated damages with respect to such security shall have been paid in full.
The parties hereto agree that the liquidated damages provided
in this Section 4 constitute a reasonable estimate of the damages that will be
incurred by Holders of Transfer Restricted Securities by reason of the failure
of the Shelf Registration Statement to be filed, declared effective or to
remain effective, as the case may be.
SECTION 5. REGISTRATION PROCEDURES
In connection with the Shelf Registration Statement, the
Company will use its best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution or disposition thereof, and pursuant
thereto the Company will as expeditiously as possible after the Closing Date:
(a) on or prior to the date 60 days after the Closing
Date, prepare and file with the Commission a Shelf Registration Statement
relating to the registration on Form S-1 or Form S-3, if the use of such form
is then available and as determined by the Company, for the sale of the
Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof and shall include all financial statements
required to be included or incorporated by reference therein; cooperate and
assist in any filings required to be made with the NASD and use its reasonable
best efforts to cause such Shelf Registration Statement to become effective and
approved by such governmental agencies or authorities as may be necessary to
enable the Selling Holders to consummate the disposition of such Transfer
Restricted Securities; provided, however, that before filing a Shelf
Registration Statement or any Prospectus, or any amendments or supplements
thereto, the Company will furnish to the Initial Purchasers, the Selling
Holders and the Underwriter(s), if any, copies of all such documents proposed
to be filed (except that the Company shall not be required to furnish any
exhibits to such documents, including those incorporated by reference, unless
so requested by an Initial Purchaser, Holder or Underwriter in writing), and
the Company will not file any Shelf Registration Statement or amendment thereto
or any Prospectus or any supplement thereto to which (i) the Initial Purchasers
or the Underwriter(s), if any, shall reasonably object or (ii) if there are no
Underwriters, the Initial Purchasers or the Selling Holders owning a majority
of the outstanding Transfer Restricted Securities shall reasonably object (with
holders of Common Stock constituting Transfer Restricted Securities being
deemed to be Holders of the aggregate principal amount of Debentures converted
into such Common Stock for purposes of such calculation), in each such case
within five business days after the receipt thereof. An Initial Purchaser, the
Selling Holder or Underwriter, if any, shall be deemed to have reasonably
objected to such filing if the Shelf Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
which misstatement or omission is specifically identified to the Company in
writing within such five business days;
(b) prepare and file with the Commission such amendments
and post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective for the applicable
period set forth in Section 3(a) hereof; cause the Prospectus to be
supplemented by any required supplement thereto (a "Prospectus Supplement"),
and as so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under the Act
in a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Shelf Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Shelf Registration
Statement, Prospectus or Prospectus Supplement;
(c) if reasonably requested by the Holders of Transfer
Restricted Securities, or if the Transfer Restricted Securities are being sold
in an Underwritten Offering, the Underwriter(s) of such Underwritten Offering,
promptly incorporate in the Prospectus, any Prospectus Supplement or
post-effective amendment to the Shelf Registration Statement such information
as the Underwriters and/or the Holders of Transfer Restricted Securities being
sold agree should be included therein relating to the plan
5
<PAGE> 7
of distribution of the Transfer Restricted Securities, including, without
limitation, information with respect to the principal amount of Debentures
and/or the number of shares of Common Stock being sold to such Underwriter(s),
the purchase price being paid therefor and any other terms with respect to the
offering of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus, Prospectus Supplement or
post-effective amendment as soon as practicable after the Company is notified
of the matters to be incorporated in such Prospectus, Prospectus Supplement or
post-effective amendment;
(d) advise the Initial Purchasers, the Underwriter(s), if
any, and Selling Holders promptly and, if requested by such Persons, to confirm
such advice in writing, (i) when the Prospectus or any Prospectus Supplement or
post-effective amendment to the Shelf Registration Statement has been filed,
and, with respect to the Shelf Registration Statement or any post-effective
amendment thereto, when the same has become effective, (ii) of any request by
the Commission for amendments to the Shelf Registration Statement or amendments
or supplements to the Prospectus or for additional information relating
thereto, (iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (iv) if at any
time the representations and warranties of the Company contemplated by
paragraph (l)(i) below cease to be true and correct, and (v) of any Suspension
Period or of the existence of any fact and the happening of any event that
makes any statement of a material fact made in the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of any
additions to or changes in the Shelf Registration Statement or the Prospectus
in order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the Shelf
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company shall use their reasonable best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(e) furnish to each Initial Purchaser, each Holder and
each of the Underwriter(s), if any, without charge, at least one copy of the
Shelf Registration Statement, as first filed with the Commission, and of each
amendment thereto (excluding documents incorporated by reference therein and
exhibits thereto unless requested by such Initial Purchaser, Holder or
Underwriter);
(f) deliver to each Initial Purchaser, each Selling
Holder and each of the Underwriter(s), if any, without charge, as many copies
of any Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto as such Persons may reasonably request; and, subject to the
Company's rights under this Agreement to prevent or suspend offers, sales
and/or the use of any such Preliminary Prospectus and Prospectus, the delivery
of such copies shall constitute the Company's consent to the use of such copies
of the Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto by each of the Selling Holders and each of the
Underwriter(s), if any, in connection with the public offering and the sale of
the Transfer Restricted Securities covered by any Preliminary Prospectus and
the Prospectus or any amendments or supplements thereto;
(g) prior to any public offering of Transfer Restricted
Securities, cooperate with the Selling Holders, the Underwriter(s), if any, and
their respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or Underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdiction of the Transfer Restricted Securities covered
by the Shelf Registration Statement; provided, however, that the Company shall
not be required (i) to register or qualify as a foreign corporation where it is
not now so qualified or (ii) to take any action that would subject it to the
service of process in suits, other than as to matters and transactions relating
to the Shelf Registration Statement, in any jurisdiction where it is not now so
subject;
(h) cooperate with the Selling Holders and the
Underwriter(s), if any, to facilitate
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<PAGE> 8
the timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends; and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the Underwriter(s), if any, may
request at least two business days prior to any sale of Transfer Restricted
Securities;
(i) use its best efforts to cause the Transfer Restricted
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other United States federal or state governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or the
Underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (g) above;
(j) if any fact or event contemplated by clause (d)(v)
above shall exist or have occurred, prepare a post-effective amendment or
supplement to the Shelf Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer Restricted
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein not misleading;
(k) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement and provide the Trustee under the Indenture and/or the transfer agent
for the Common Stock with certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust Company;
(l) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as may
reasonably be required in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to the Shelf Registration
Agreement, in connection with an Underwritten Registration, and (i) make such
representations and warranties to the Selling Holders and the Underwriter(s),
in form, substance and scope as they may reasonably request and as are
customarily made by issuers to Underwriters in primary Underwritten Offerings
and covering matters including, but not limited to, those set forth in the
Purchase Agreement; (ii) obtain opinions of counsel for the Company and updates
thereof in customary form and covering matters reasonably requested by the
Underwriter(s) of the type customarily covered in legal opinions to
Underwriters in connection with primary Underwritten Offerings addressed to
each selling Holder and the Underwriter requesting the same and covering the
matters as may be reasonably requested by such Holders and Underwriters; (iii)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the selling Holders of
Transfer Restricted Securities and the Underwriters requesting the same, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to Underwriters in connection with primary
Underwritten Offerings; (iv) set forth in full or incorporate by reference in
the underwriting agreement the indemnification provisions and procedures of
Section 7 hereof with respect to all parties to be indemnified pursuant to said
Section; and (v) deliver such documents and certificates as may be reasonably
requested by the Selling Holders or the Underwriter(s) of such Underwritten
Offering to evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement entered into by the Company
pursuant to this clause (l). The above shall be done at or prior to each
closing under such underwriting agreement, as and to the extent required
thereunder;
(m) make available at reasonable times and in a
reasonable manner for inspection by a representative of the Holders of the
Transfer Restricted Securities, any Underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and any attorney or
accountant retained by such selling Holders or any of the Underwriters, all
financial and other records, pertinent corporate documents and properties of
the Company and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Holder, Underwriter, attorney
or accountant in connection with such Shelf Registration Statement prior to its
effectiveness, provided, however, that such representatives, attorneys or
accountants shall agree to keep confidential (which agreement shall be
confirmed in writing in advance to the Company if the Company shall so request)
all information, records
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<PAGE> 9
or documents made available to such persons which are not otherwise available
to the general public unless disclosure of such records, information or
documents is required by court or administrative order (of which the Company
shall have been given prior notice and an opportunity to defend) after the
exhaustion of all appeals therefrom, and to use such information obtained
pursuant to this provision only in connection with the transaction for which
such information was obtained, and not for any other purpose;
(n) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act, for the twelve-month period (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to Underwriters in a firm commitment or best efforts
Underwritten Offering or (ii) if not sold to Underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Shelf Registration Statement;
(o) cause the Indenture to be qualified under the TIA,
and, in connection therewith, cooperate with the Trustee and the Holders to
effect such changes to the Indenture as may be required for such Indenture to
be so qualified in accordance with the terms of the TIA; and execute and use
its best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes and all other forms and documents required to
be filed with the Commission to enable such Indenture to be so qualified in a
timely manner;
(p) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Shelf Registration Statement
at the earliest possible moment;
(q) cause all Transfer Restricted Securities covered by
the Shelf Registration Statement to be listed on each securities exchange or
quotation system on which similar securities issued by the Company are then
listed if requested by the Holders of a majority of the outstanding Transfer
Restricted Securities (with holders of Common Stock constituting Transfer
Restricted Securities being deemed to be Holders of the aggregate principal
amount of Debentures converted into such Common Stock for purposes of such
calculation) or the Underwriters, if any; and cause the Debentures covered by
the Shelf Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate principal
amount of such Debentures or the Underwriters; and
(r) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation by
any Underwriter (including any "qualified independent Underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading or necessary to cause
such Shelf Registration Statement not to omit a material fact with respect to
such Holder necessary in order to make the statements therein not misleading.
Each Holder agrees that the information furnished by such Holder specifically
for inclusion in any Shelf Registration Statement will not contain any
misstatement of material fact or omit to state a material fact necessary in
order to make such information not misleading.
Each Holder agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company of the existence
of any fact of the kind described in Section 5(d)(v) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings with respect to the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities current at the time of receipt of such notice.
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<PAGE> 10
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of
or compliance with this Agreement (the "Registration Expenses") will be borne
by the Company, regardless of whether a Shelf Registration Statement becomes
effective, including without limitation:
(i) all registration and filing fees and expenses
(including any filings made with the NASD);
(ii) fees and expenses of the Company's compliance with
federal securities or state blue sky laws;
(iii) expenses of printing (including, without limitation,
expenses of printing or engraving certificates for the Transfer
Restricted Securities in a form eligible for deposit with Depository
Trust Company and of printing the Prospectus and any Preliminary
Prospectus), messenger and delivery services and telephone;
(iv) reasonable fees and disbursements of counsel for the
Company and for the Holders of the Transfer Restricted Securities
(subject to the provisions of Section 6(b) hereof);
(v) fees and disbursements of all independent certified
public accountants of the Company (including the expenses of any
special audit and "cold comfort" letters required by or incidental to
the preparation and filing of a Shelf Registration Statement and
Prospectus and the disposition of Transfer Restricted Securities);
(vi) fees and expenses associated with any NASD filing
required to be made in connection with the Shelf Registration
Statement, including, if applicable, the fees and expenses of any
"qualified independent Underwriter" (and its counsel) that is required
to be retained in accordance with the rules and regulations of the
NASD; and
(vii) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange or quotation system in
accordance with Section 5(q) hereof.
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company. The Holders of Transfer Restricted
Securities shall bear the expense of any broker's commission or Underwriter's
discount or commission.
(b) In connection with the Shelf Registration Statement,
the Company will reimburse the Selling Holders for the reasonable fees and
disbursements of not more than one counsel chosen by the Selling Holders owning
a majority of the outstanding Transfer Restricted Securities (with holders of
Common Stock constituting Transfer Restricted Securities being deemed to be
Holders of the aggregate principal amount of Debentures converted into such
Common Stock for purposes of such calculation).
Notwithstanding the provisions of this Section 6(b), each
Holder of Transfer Restricted Securities shall pay all Registration Expenses to
the extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i)
each of the Initial Purchasers, (ii) each Holder, (iii) each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any of the Initial Purchasers or any Holder (any of the persons
referred to in this clause (iii) being hereinafter referred to as a
"controlling person") and (iv) the respective
9
<PAGE> 11
officers, directors, partners, employees, representatives and agents of any of
the Initial Purchasers or any Holder or any controlling person (any person
referred to in clause (i), (ii), (iii) or (iv) may hereinafter be referred to
as a "Non-Company Indemnitee"), to the fullest extent lawful, from and against
any and all losses, claims, damages, liabilities and judgments caused by any
untrue statement or alleged untrue statement of a material fact contained in
the Shelf Registration Statement, Prospectus or Preliminary Prospectus (or any
amendments or supplements thereto), including any document incorporated by
reference therein, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except, with respect to any Non-Company
Indemnitee, insofar as such losses, claims, damages, liabilities or judgments
(1) are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to the
Company by such Non-Company Indemnitee expressly for use therein or (2) with
respect to any Preliminary Prospectus, result from the fact that such
Non-Company Indemnity sold Transfer Restricted Securities to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the final Prospectus, as amended or supplemented, if the
Company shall have previously furnished copies thereof to such Non-Company
Indemnitee in accordance with this Agreement and the final Prospectus, as
amended or supplemented, would have corrected such untrue statement or
omission.
(b) In case any action shall be brought against any
Non-Company Indemnitee, based upon the Shelf Registration Statement,
Prospectus, or Preliminary Prospectus (or any amendments or supplements
thereto), and with respect to which indemnity may be sought against the
Company, such Non-Company Indemnitee shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses; provided, however,
that the omission so to notify the Company shall not relieve the Company from
any liability that it may have to any Non-Company Indemnitee (except to the
extent that the Company is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). Such Non-Company
Indemnitee shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of counsel
shall be paid by such Non-Company Indemnitee, unless (i) the employment of such
counsel shall have been specifically authorized in writing by the Company, (ii)
the Company shall have failed to assume the defense and employ counsel or (iii)
the named parties to any such action (including any impleaded parties) include
both such Non-Company Indemnitee and the Company and it would be inappropriate
for the same counsel to represent such Non-Company Indemnitee and the Company
(in which case the Company shall not have the right to assume the defense of
such action on behalf of such Non-Company Indemnitee, it being understood,
however, that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for the Non-Company Indemnitees, which firm shall be
designated in writing by the Non-Company Indemnitees and whose fees and
expenses reasonably incurred shall be reimbursed as they are incurred). The
Company shall not be liable for any settlement of any such action effected
without the written consent of the Company, but if settled with the written
consent of the Company, the Company agrees to indemnify and hold harmless any
Non-Company Indemnitee from and against any amounts payable pursuant to such
written consent in connection with such settlement. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the Company and a Non-Company Indemnitee shall
have requested the Company to reimburse such Non-Company Indemnitee for such
fees and expenses of counsel as incurred, the Company agrees that it shall be
liable for any settlement of any action effected without its written consent if
(i) each settlement is entered into more than 30 business days after the
receipt by the Company of the aforesaid request and (ii) the Company shall have
failed to reimburse such Non-Company Indemnitee in accordance with such request
for reimbursement prior to the date of such settlement. The Company shall not,
without the prior written consent of such Non-Company Indemnitee, effect any
settlement of any pending or threatened proceeding in respect of which such
Non-Company Indemnitee is or could have been a party and indemnity could have
been sought hereunder by such Non-Company Indemnitee, unless such settlement
includes an unconditional release of such Non-Company Indemnitee from all
liability on claims that are the subject matter of such proceeding.
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<PAGE> 12
(c) Each Holder of Transfer Restricted Securities agrees
to indemnify and hold harmless (i) the Company, (ii) each of the Initial
Purchasers, (iii) each other Holder, (iv) any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, any of the Initial Purchasers and each other Holder and (v) the
respective officers, directors, partners, employees, representatives and agents
of each of the parties referred to in clauses (i), (ii), (iii) and (iv), to the
same extent as the foregoing indemnity from the Company to each of the
Non-Company Indemnitees, but only with respect to information relating to such
Holder that was furnished in writing by such Holder expressly for use in the
Shelf Registration Statement (or any amendment or supplement thereto). In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sales
of the Transfer Restricted Securities giving rise to such indemnification
obligation.
(d) If the indemnification provided for in this Section 7
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to herein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments in such proportion as is appropriate
to reflect the relative fault of the indemnifying party, on the one hand, and
the indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party, on the one hand, and the indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party, on the one hand, or the
indemnified party, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, each of the Initial Purchasers and each Holder of
Transfer Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The losses, claims, damages, liabilities or judgments of an
indemnified party referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim prior to the indemnifying
party's assumption of the defense thereof or subsequent thereto to the extent
permitted by the second sentence of Section 7(b) hereof. Notwithstanding the
provisions of this Section 7, none of the Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total amount received by such Holder with respect to the sale of Transfer
Restricted Securities exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 7(d) are several in proportion to the respective principal amount of
Notes held by each of the Holders hereunder and not joint.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any
of the Debentures or shares of Common Stock that are Transfer Restricted
Securities remain outstanding and during any such period in which the Company
is not subject to Section 13 or 15(d) of the Exchange Act, to make available to
any Initial Purchaser or any beneficial owner of the Debentures or shares of
such Common Stock in connection with any sale thereof and any prospective
purchaser of such Debentures or Common Stock from such Initial Purchaser or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144A.
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<PAGE> 13
SECTION 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Offering
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements, (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements and (c) furnishes the Company in writing information
in accordance with Section 3(g) and agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
any person controlling the Company within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the extent contemplated by Section 7(c).
SECTION 10. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering pursuant to Section 3(c) and
3(d).
SECTION 11. MISCELLANEOUS
(a) Remedies. Each Holder of Transfer Restricted
Securities, in addition to being entitled to exercise all rights provided
herein, and as provided in the Purchase Agreement and granted by law, including
recovery of damages, will be entitled to specific performance of such Holder's
rights under this Agreement. Each Holder of Transfer Restricted Securities
agrees that the Company shall be entitled to exercise all rights provided
herein, and as provided in the Purchase Agreement and granted by law, including
recovery of damages and specific performance against such Holder. The Company
and the Selling Holders agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any of them of the
provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on
or after the date of this Agreement enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders of Transfer
Restricted Securities hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any other agreements.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the outstanding Transfer Restricted
Securities affected by such amendment, modification, supplement, waiver or
departure (with holders of Common Stock constituting Transfer Restricted
Securities being deemed to be Holders of the aggregate principal amount of
Debentures converted into such Common Stock for purposes of such calculation).
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of Transfer
Restricted Securities whose securities are being sold pursuant to such Shelf
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Transfer Restricted Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Transfer
Restricted Securities being sold, in each case calculated in accordance with
the provisions of Section 3(c).
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder of Transfer Restricted
Securities, at the address set forth on
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<PAGE> 14
the records of the registrar under the Indenture, with a copy to the
registrar; and
(ii) if to the Company or an Initial Purchaser,
initially at its address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in
accordance with the provisions of this Section.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder of Transfer Restricted Securities unless
and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder; and provided further that nothing herein shall be
deemed to permit any assignment, transfer or any disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Transfer Restricted Securities, in
any manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement and by
taking and holding such Transfer Restricted Securities such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICTS OF LAW RULES THEREOF.
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(j) Entire Agreement. This Agreement together with the
other Operative Documents (as defined in the Purchase Agreement) is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FUISZ TECHNOLOGIES LTD.
By:
-------------------------------
Name:
Title:
SMITH BARNEY INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
BY: SMITH BARNEY INC.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
November 25, 1997
C 30501-00016
Fuisz Technologies Ltd.
14555 Avion Parkway
Chantilly, VA 22021
Re: Proposed Registered Offering of Convertible Subordinated
Debentures and Shares of Common Stock Issuable upon Conversion
Thereof
Ladies and Gentlemen:
We have acted as counsel for Fuisz Technologies Ltd., a Delaware
corporation (the "Company"), in connection with the registration by the Company
on Form S-3, Registration Statement (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), filed with the
Securities and Exchange Commission (the "Commission") on November 25, 1997. The
Registration Statement covers $75,000,000 in principal amount of the Company's
7% Convertible Subordinated Debentures due 2004 (the "Debentures") and shares
(the "Shares") of the Company's common stock, par value $0.01 per share,
issuable upon conversion of the Debentures, each to be sold by certain selling
holders of the Debentures.
We have examined the original, or a photostatic or certified copy,
of such records of the Company, certificates of officers of the Company and of
public officials and such other documents as we have determined relevant and
necessary as the basis for the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon our examination mentioned above, subject to the
assumptions stated and relying on statements of fact contained in the documents
that we have examined, and subject to
<PAGE> 2
Fuisz Technologies Ltd.
November 25, 1997
Page 2
receipt from the Commission of an order declaring the Registration Statement
effective and compliance with applicable state securities laws, we are of the
opinion that the Shares have been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm appearing on the cover
of the Registration Statement and under the caption "Legal Matters" in the
Prospectus that forms a part of the Registration Statement. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act or the General Rules
and Regulations of the Commission.
Very truly yours,
GIBSON, DUNN & CRUTCHER LLP
ROM/SSS
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
------------------------- ------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss before income taxes $ (14,057) $ (908) $ (6,806) $ (3,271) $ (6,613) $ (6,707) $ (3,981)
=========== =========== =========== ========== =========== =========== ===========
Fixed charges:
Interest 92 4 4 280 273 43 38
Interest factor of rent expense 172 127 174 127 113 71 47
----------- ----------- ----------- ---------- ----------- ----------- -----------
Total fixed charges 264 131 178 407 386 114 85
----------- ----------- ----------- ---------- ----------- ----------- -----------
Earnings before fixed charges $ (13,793) $ (777) $ (6,628) $ (2,864) $ (6,227) $ (6,593) $ (3,896)
=========== =========== =========== ========== =========== =========== ===========
Ratio of earnings to fixed charges * * * * * * *
=========== =========== =========== ========== =========== =========== ===========
</TABLE>
* The ratio of earnings to fixed charges is computed by dividing fixed
charges into income before income taxes plus fixed charges. Fixed charges
include interest expense and that portion of net rental expense (one-third)
deemed representative of the interest factor. The ratio of earnings to
fixed charges is computed using pre-tax income. On this basis, earnings
before fixed charges for the years ended December 31, 1992, 1993, 1994,
1995, and 1996 and for the nine months ended September 30, 1996 and 1997
were not adequate to cover fixed charges by $3,896, $6,593, $6,227,
$2,864, $6,628, $777 and $13,793, respectively
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report, dated February 24, 1997, on our audits of the
consolidated financial statements of Fuisz Technologies Ltd. as of December 31,
1995 and 1996, and for each of the three years in the period ended December 31,
1996, and for the period June 9, 1988 (inception) to December 31, 1996, which
report is included in the Company's 1996 Annual Report on Form 10-K. We also
consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
McLean, Virginia
November 25, 1997
<PAGE> 1
EXHIBIT 23.3
[KPMG LETTERHEAD]
Consent of Independent Chartered Accountants
The Board of Directors
Clonmel Healthcare Limited
We consent to the incorporation by reference in the Form S-3 Registration
Statement dated 25 November 1997 of Fuisz Technologies Limited of our report
dated 30 April 1997 except for note 27 which is at 30 September 1997 with
respect to the consolidated balance sheets of Clonmel Healthcare Limited and
subsidiaries as of 31 December 1996 and 1995 and the related consolidated profit
and loss accounts and cash flow statements for each of the years in the two year
period ended 31 December 1996, which report appears in the Form 8-K of Fuisz
Technologies Limited dated 3 October 1997.
/s/ KPMG
KPMG
Chartered Accountants
Dublin, Ireland
25 November 1997
<PAGE> 1
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF REGULATION S-T
================================================================================
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)
- --------------------------------------------------
FUISZ TECHNOLOGIES LTD.
(Exact name of obligor as specified in its charter)
Delaware 52-1579474
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
3810 Concorde Parkway, Suite 100
Chantilly, Virginia 22021
(Address of principal executive offices) (Zip code)
----------------------
7% Convertible Subordinated Debentures due 2004
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT
HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939
(THE "ACT") AND 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New
York (formerly Irving Trust Company) as now in effect,
which contains the authority to commence business and a
grant of powers to exercise corporate trust powers.
(Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and
Exhibit 1 to Form T-1 filed with Registration Statement No.
33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4
to Form T-1 filed with Registration Statement No.
33-31019.)
6. The consent of the Trustee required by Section 321(b) of
the Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE> 3
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF REGULATION S-T
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 21st day of November, 1997.
THE BANK OF NEW YORK
By: /S/THOMAS E. TABOR
--------------------------
Name: Thomas E. Tabor
Title: Assistant Treasurer
<PAGE> 4
Exhibit 7
- -------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................35,352,045
LESS: Allowance for loan and
lease losses ..............625,042
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
-----------
Total assets ......................... $57,514,958
===========
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ......11,213,657
Interest-bearing .........15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing .........596,369
Interest-bearing .........15,737,901
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
-----------
Total liabilities .................... 52,937,421
-----------
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion adjustments .................. ( 12,272)
-----------
Total equity capital ................ 4,577,537
-----------
Total liabilities and equity
capital ........................... $57,514,958
===========
</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
<PAGE> 6
EXHIBIT 7
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.
-
Alan R. Griffith |
J. Carter Bacot |
Thomas A. Renyi | Directors
-
- ------------------------------------------------------------------------------
